Serb Raiffeisen Unit to Focus on Consumer Loans, Petrovic Says

Raiffeisen Banka AD, a unit of Raiffeisen SEE Region Holding GmbH, will focus on Serbia’s underdeveloped consumer market as bad loans plague corporate lending, Deputy Chief Executive Officer Zoran Petrovic said.

“Serbia still ranks low by household lending versus the gross domestic product indicator, and that’s where we see room for growth even though unemployment is still high,” Petrovic said in an interview in Belgrade yesterday. “In the corporate sector, the space is very restricted because of a big share of bad loans and a weak economic recovery after a recession.”

Premier Ivica Dacic’s eight-month-old Cabinet wants to narrow the fiscal gap to 3.6 percent of GDP from 6.7 percent in 2012, lead the economy out of its second recession in three years and bring down unemployment of around 25 percent.

Bad loans account for 19.9 percent of the total credit portfolio in Serbia, making banks reluctant to lend, especially when investments in government securities offer higher returns, Petrovic said.

“The reality is such that we can hardly expect banks to give a boost to economic growth, considering that Europe is still in recession, that capital requirements on banks are significantly increased and that some banks in Serbia come from countries severely hit by the economic crisis,” he said.

Policy Relaxation

Even if the dinar weakens in response to “expected monetary-policy relaxation” in Serbia, the impact will be offset by unchanged monetary policies by the European Central Bank and the U.S. Federal Reserve and their low base rates, Petrovic said.

“Any surplus bank liquidity will continue to flow toward government securities and the National Bank of Serbia as bad loans remain high,” Petrovic said.

Raiffeisen Banka, ranked fourth among 33 lenders by assets in the Balkan nation according to central bank data, wants to increase its dinar-denominated loan portfolio because of ample dinar liquidity and doesn’t plan to issue a local-currency bond this year, he added.

Foreign banks held 74 percent of $32.7 billion of banking assets in Serbia at the end of September.

Before it's here, it's on the Bloomberg Terminal.