The banking system in Montenegro is stable, with all key banking indicators above legally required levels, according to Bratislav Pejaković, General Secretary of the Montenegrin Banking Association.
Capital adequacy stands at around 19%, well above the legal minimum of 8%, while liquidity and deposit stability continue to grow. Banks maintain sufficient liquid assets to cover deposits and obligations, providing security for clients.
Non-performing loans (NPLs) are low at approximately 2.9%, and deposit protection and bank resolution funds are well-funded, serving as safety nets during potential crises. Guaranteed deposits increased by 11% last year, reaching €2.4 billion.
The banking sector faces upcoming regulatory, technological, and economic challenges, including digitalization, sustainability (ESG), cybersecurity, new payment systems, and gender equality in business.
A key focus is the SEPA integration process, with plans to implement a national instant payment system aligned with European standards, preparing for the transition to the full TARGET Instant Payment Settlement (TIPS) system after EU accession.
Bank assets exceeded €7.25 billion last year, nearly matching Montenegro’s estimated GDP, and reached €7.33 billion by May. Total deposits stood at €5.83 billion at year-end, with loans at €4.63 billion, rising to €5.14 billion by May.
Loan growth contributed to increased interest income, disproving claims that banks do not meet economic and consumer needs. Profitability remains below the European average, as the region relies more on interest income from loans rather than investment banking.
Fee and commission income totaled €160.6 million last year, primarily from payment transactions, card and ATM operations, and account maintenance, reflecting regional norms.
Deposits make up over 80% of banking liabilities, with capital at 12.4% and loans at 3.7%. Bank capital grew by 9% last year to nearly €895 million, increasing further to €948 million by May.
Average loan interest rates are around 5.9% annually, with top companies borrowing below 3%. The six-month EURIBOR rate currently stands at 2.033%, helping reduce loan payments with variable rates.
Deposit interest rates offer up to 4% annually, the highest in the eurozone, but the average rate is around 0.28% due to a high share of demand and short-term deposits.
While banks prefer more long-term deposits for easier liquidity management, client preferences shape deposit structures. High liquidity, strong solvency, and well-funded deposit protection and resolution funds assure clients of their deposits’ safety.
Rising deposit interest rates also increase pressure on loan rates. Priority remains lowering loan rates to support economic growth and improve living standards through better investment conditions and income generation.
Future reductions in loan interest rates are expected with increased productivity and reduced business risks.
