Page 89 - bne IntelliNews SE Outlook Regions 2024

The capital adequacy ratio of all banks in Bosnia (CAR) was 19.5% at end-June, up from 19.3% a year ago, and remained well above the statutory minimum of 12%. The CAR was slightly higher than the 19.4% in the previous quarter.
The banking sector's liquidity slightly decreased in annual terms as the ratio of liquid assets to total assets stood at 28.8% at end-June versus 29.6% a year ago. In quarterly terms, the ratio decreased from 29.4%.
The sector’s profitability, measured by the return on average equity (ROAE), which indicates the banks’ efficiency in using their capital, increased to 15.9% at end-June from 11.8% a year ago, while at end-March it stood at 17%.
The share of non-performing loans (NPLs) declined to 4.1% of total credits in the second quarter of 2023 from 5.2% a year earlier, and was also lower compared to the 4.2% at the end of first quarter.
In 2023-2025, as the economic activity is expected to improve, along with stabilisation of energy prices, more intense lending activity could be expected. According to the Directorate of Economic Planning (DEP), loans likely increased by 5.5% on average in 2023.
In 2024-2026, the DEP expects that lending activity will increase by between 6.3% and 7% per year with the share of corporate loans rising compared to the previous two years. The DEP also expects that deposits will return to growth after the decline in 2022 and the first half of 2021 with the growth seen at 5.6% in 2023 and between 8.5% and 9% in 2024-2026.
Potential risks are related to new financial shocks, economic changes in Bosnia’s trading partners, which would lead to a decline of foreign trade, industrial production, investments and final consumption. These negative developments would lead to lower demand for new loans, an increase in interest rates on loans and a continued decrease in household deposits.
5.2.3 Industry
Bosnia’s industrial sector was hit by the Russian war in Ukraine since the second half of 2022 and that trend continued through 2023. As the war is expected to continue in 2024, it will continue impacting the country’s industry.
The Directorate for Economic Planning (DEP) estimated that in 2023-2026 a gradual economic stabilisation could be expected both globally and locally. However, in Bosnia the reform progress will also affect the industry’s performance. Improving the business environment in the country would boost the investment in new capacities. If the authorities carry out the necessary reforms, Bosnia’s industrial output could increase by between 2.2% and 4.8% in the next three years.
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