Household deposits in Montenegro reached €2.47 billion at the end of May 2026, strengthening the domestic funding base of the banking sector while highlighting the continued concentration of savings in short-term accounts. Household deposits increased by 13.44% year-on-year, becoming the largest source of banking-sector funding. The dominance of demand deposits remains a structural feature of the market.
Households Account for Largest Share of Bank Deposits
Household savings represent 41.38% of total deposits held with Montenegrin banks. Other major deposit sources include non-financial companies, which account for 28.44%, and non-residents, whose deposits represent 19.4% of the banking system. Although household deposits increased annually, they declined by 0.73% on a monthly basis at the end of May.
The monthly movement coincided with the beginning of the summer period, when households typically redirect funds toward activities such as travel, property-related spending, consumption and business activity.
Demand Deposits Dominate Household Savings
The maturity structure of household deposits remains focused on immediately available funds. Demand deposits account for 82.9% of household savings, while only 17.1% is held in term deposits. The same pattern is visible across the entire banking sector. Demand deposits make up 84% of total deposits, while term deposits account for 15.72% and escrow funds represent 0.28%.
This structure gives depositors immediate access to their funds but provides banks with less certainty regarding the duration of available financing. Although demand deposits are often stable because they are distributed among a large number of retail customers, they can be transferred or withdrawn without prior notice.
Credit Growth Increases Importance of Stable Funding
The deposit structure is becoming more significant as lending expands faster than available deposits. Total bank lending increased 12.29% year-on-year, more than twice the 5.69% growth in deposits. The banking sector’s loan-to-deposit ratio reached 0.97, indicating that credit expansion is increasingly using available domestic deposit resources.
Low Deposit Returns Encourage Liquidity Preference
Deposit interest rates remain limited, contributing to households’ preference for maintaining liquid funds. The average effective interest rate on all deposits stood at 0.32% in May 2026. Demand deposits generated an average return of 0.03%, while deposits with maturities between three months and one year carried an average rate of 1.72%.
Deposits with maturities between one and three years recorded a higher average return of 2.08%. Even longer-term deposit rates remained below annual consumer-price inflation of 3.6%, meaning depositors committing funds for longer periods continued to face negative real returns.
Foreign Deposit Share Declines
Non-resident deposits decreased during the year, falling from €1.21 billion in May 2025 to €1.16 billion in May 2026. Their share of total deposits declined from 21.4% to 19.4%. The change reduced banks’ dependence on foreign depositors and increased the relative importance of domestic household savings.
Banks Face Need for Longer-Term Funding Sources
The growth of domestic savings supports financial-sector stability, but the current deposit structure remains highly liquid and concentrated in low-remuneration accounts. As lending continues to expand and the difference between loans and deposits narrows, banks are expected to place greater focus on attracting more stable term funding sources.
