Montenegro’s banking sector recorded a further improvement in asset quality, with the non-performing loan (NPL) ratio declining to 2.3%, compared with 2.5% in the second quarter and 2.7% at the end of 2025.
The decline coincided with continued growth in commercial-bank lending. Total credit expanded by 12.6% year on year in the second quarter of 2026, before growth slowed to 9.1% in July and reached 9.8% in August. Lending to both households and companies remained positive, supporting domestic demand and business financing.
Low levels of non-performing loans leave banks better positioned to provide financing to viable projects without the burden of a substantial stock of legacy bad assets. This supports financing conditions for infrastructure, tourism and real-estate investment as public and private capital flows increase.
Household lending is growing faster than overall credit. In August, credit to households rose 16.8% year on year, exceeding total lending growth and remaining well above nominal wage growth. Meanwhile, corporate lending growth had slowed to 10%. The differing growth rates place greater importance on the composition of new lending and banks’ underwriting standards. The pace of credit expansion relative to deposits and income will also be relevant to the sustainability of lending growth.
The latest figures from the European Commission indicate that Montenegro’s banks continue to combine credit availability with low NPL levels, with no signs of balance-sheet stress in the data presented. Maintaining asset quality as the country’s investment pipeline expands remains a key consideration for the banking sector.
