The average effective interest rate on outstanding bank loans in Montenegro stood at 6.13% in August, compared with an average effective deposit rate of 0.29%, leaving a spread of 5.84 percentage points between borrowing costs and deposit returns. The difference narrowed from 6.01 percentage points a year earlier but remained substantial. The weighted average effective rate on new loans was higher, reaching 6.35%, an annual increase of 0.54 percentage points.
New corporate lending carried an average effective interest rate of 5.56%, while the corresponding rate for new retail loans was 6.90%.
Deposit remuneration varied according to the type and maturity of savings. Demand deposits paid an average effective rate of just 0.02%, while time deposits with maturities of between one and three years offered 2.03%.
Demand deposits accounted for 85.18% of all deposits in the banking system, keeping the average cost of bank funding low compared with the rates charged on loans.
The interest rate figures do not provide information on bank profitability, credit risk, operating expenses or provisioning. They show the difference between the average remuneration paid to depositors and the interest charged to borrowers across existing and newly issued credit.
