Montenegro’s banking sector is entering a new stage of balance-sheet management as lending growth continues to outpace deposit expansion, reducing the excess liquidity accumulated by banks in previous years. Preliminary data from the Central Bank of Montenegro (CBCG) show that total banking assets reached €8.01 billion at the end of May 2026, representing an increase of 9.23% year-on-year and 1.29% compared with April. At the same time, bank capital increased more rapidly, rising 14.14% year-on-year to €1.08 billion.
Loan Growth Outpaces Deposit Expansion
Montenegrin banks recorded continued credit growth during the period, with total loans increasing 12.29% year-on-year to €5.77 billion. Deposits grew at a slower pace, increasing 5.69% to €5.97 billion.
As a result, the banking sector’s loan-to-deposit ratio increased from 0.91 in May 2025 to 0.97 in May 2026, remaining unchanged compared with April. The ratio indicates that banks are approaching a point where almost the entire domestic deposit base is being deployed through lending activities.
Liquidity Position Remains Above Regulatory Requirements
The increase in lending has not created an immediate liquidity issue for the banking sector. Banks held €1.39 billion in liquid assets at the end of May, while both daily and ten-day liquidity indicators remained above regulatory minimums.
Liquid assets increased by 7.05% during May, although the year-on-year increase was limited to 0.24%. The current balance-sheet trend indicates a transition from a period of high excess liquidity toward greater utilisation of available deposits for credit activity.
Deposit Funding Still Dominates Bank Liabilities
Deposits remain the primary source of bank funding, accounting for 74.49% of total liabilities. Other components include capital accounts at 13.51% and borrowings at 8.45%. The structure shows that Montenegro’s banking system continues to rely mainly on domestic deposits, while borrowing provides an additional funding channel as available liquidity becomes more actively used.
Household and Corporate Lending Drive Credit Exposure
Credit exposure remains concentrated in households and non-financial companies. Together, these sectors represent 79.38% of total bank claims, linking future asset quality closely with developments in household income, employment, construction, tourism and corporate cash flows. The concentration of lending means that changes in economic activity and borrower performance will remain important factors for banks’ future balance-sheet stability.
Higher Capital Supports Further Lending Capacity
Bank capital growth has provided additional protection for the sector. Capital increased faster than both total assets and lending, while maintaining a share of more than 13% of the banking system’s balance sheet. The stronger capital position supports continued credit expansion while preserving capital buffers, provided that loan quality remains stable.
Banks Face Greater Focus on Funding and Deposit Competition
The changing loan-to-deposit balance is increasing attention on funding strategies and pricing conditions. As lending opportunities expand, banks must balance loan growth with maintaining margins and securing stable funding sources.
With the loan-to-deposit ratio approaching one, competition may increasingly focus on attracting and retaining deposits alongside acquiring new borrowers. Montenegro’s banking sector continues to have capacity for expansion, but balance-sheet management is becoming more focused on funding maturity, deposit retention and borrower quality as the next phase of credit growth develops.
