Tenth session of the National Bank Council

Today, the National Bank of the Republic of Macedonia Council has held its tenth session and reviewed and adopted the Report on the risks in the banking system of the Republic of Macedonia in the second quarter of 2017, and concluded that in contrast to the downward movements of the banking activities in the first quarter of 2017, in the second quarter of the year their changes are more favorable.

Total assets increased by 0.6%. Deposits, although minimally, also increased on a quarterly basis. The growth of deposits of non-financial entities is primarily due to the solid growth of 7.9% of Denar sight deposits of households, as opposed to corporate deposits which declined. The faster growth of Denar compared to foreign currency household deposits is a signal for gradual restoration of the confidence and renewal of the process of denarization of deposits, which almost stopped in the second quarter of the previous year affected by the domestic political developments in that period. The funds used by parent entities are not relevant source of financing of the activities of the domestic banks, despite their growth in the second quarter. In the second quarter of 2017, banks used portion of liquid assets for enhanced lending. Thus, loans to non-financial entities increased by 2.2%, mostly as a result of long-term loans to households.

Loan portfolio quality registered a slight deterioration in this quarter. Total non-performing loans of the banking system increased by 8.1%. The increase in non-performing loans to total loans ratio was fully concentrated in the corporate loan portfolio, where it rose to 10.6%. The share of non-performing loans in total loans to households remained at the same level of 2.5%, but the continuous growth of non-performing loans in this sector in the last five quarters should not be neglected. The coverage of non-performing loans with own impairment was maintained at a high level of 76.9%.

The liquidity of the banking system remained satisfactory, seen through the relatively stable share of liquid assets in total assets and the satisfactory coverage of short-term liabilities and household deposits with liquid assets.

Profitability and efficiency ratios of the banking system have further improved, remaining at a solid level. However, the profit growth of the banking system in the current year has slowed down compared to the same period in 2016. Amid limited space for further significant cut in deposit interest rates, the contribution of net interest income to profit growth was significantly smaller, compared to the previous years. Banks continue to deliver high rates of return on average equity and average assets of 12.7% and 1.4%, respectively, which is particularly relevant for the process of internal capital formation, since there is almost no capitalization by means of share issues.

Solvency and capitalization ratios of the banking system improved in the second quarter of 2017, which is mostly due to the growth of capital positions, primarily due to the maintenance of the profit generated in 2016. The faster growth of banks' own funds, compared with the risk-weighted assets, improved the capital adequacy ratio to 15.8%.

In summary, the banking system achieved a high level of stability in the second quarter with prospects of further growth, whereby the National Bank will continue to monitor the risks in the banking system and, if necessary, to introduce measures and activities for their mitigation. 

The National Bank of the Republic of Macedonia Council, based on the planned schedule and pace of activities, also adopted the Decision on issuing and the Decision on putting into circulation the collector coin "Capricorn" from the "Zodiac signs" series. The coin will be issued in a denomination of 100 denars, in 7000 pieces.

The Council also discussed other matters within its jurisdiction.

Governor's Office