Banking Sector of Serbia in the First Half of 2016

BANKING SECTOR OF SERBIA IN THE FIRST HALF OF 2016

Main indicators of macroeconomic environment stJanuary 2016. Estimated population 1 2015 2015 2015 2015 2015 3 7 076 372 36 949 9 381 65 657 103 678 -38 021 real growth 2.5% Banking sector of Serbia in the first half of 2016 Marriages Divorces Live births Deaths Natural increase Quarterly Gross Domestic Product rdquarter 2016 / 3 rdquarter 2015 Gross Domestic Product 2015 real growth 0.8% CPI - COICOP September 2016 / August 2016 decrease -0.6% CPI - COICOP September 2016 / September 2015 growth 0.6% Industrial production September 2016 / September 2015 growth 5.3% External Trade January - September 2016 USD 25326.7 million External Trade January - December 2015 USD 31589.1 million Turnover of goods (in current prices) September 2016 / September 2015 growth 8.0% Turnover of goods (in constant prices) September 2016 / September 2015 growth 8.1% Average salary (Gross salary) Average salary (Net salary) Unemployment rate (Total - persons aged 15+) September 2016 September 2016 I quarter 2016 RSD 64150 RSD 46558 19.0% Unemployment rate (person aged 15-64) I quarter 2016 19.7% Relative poverty line At-risk-of-poverty rate Average monthly individual consumption expenditures per household 2015 2014 2015 RSD 14920 25.4 % RSD 59052 Average monthly individual consumption expenditures per household 2014 (revision data) RSD 58713 Usage of information communications technologies (the households possess a computer) 2016 65.8% Usage of information communications technologies (the households have Internet connection) 2016 64.7% 2

Banking sector of Serbia in the first half of 2016 Structure of Equity No. Item 31.12.2005 31.12.2015 30.06.2016 1. Total number of banks 40 30 30 Majority foreign capital: Number of banks Share in total capital 2. 17 23 82% 22 81% 49 % Share of domestic capital: Number of banks Share in total capital 3. 23 7 8 51 % 18% 19% Source: Association of Serbian Banks The structure of owners equity did not change considerably by the end of first half of 2016 compared to the position in 2015. 3

Banking sector of Serbia in the first half of 2016 Balance Sheet in EUR million A tendency of slowing down of the real growth of financial strength indicators of the banking sector of Serbia, recorded during the previous seven years, continued in 2016 as well. No. Item Curr. 31.12.2015 30.06.2016 Index 1 2 3 4 5 5/4 Total assets (1-3) Operating assets EUR 25,305 101 I 25,059 1. EUR 24,085 24,329 101 2. Fixed assets EUR 711 698 98 Balance sheet size of the banking sector of Serbia, at the end of the first half of 2016, recorded a minimal real growth by 1% compared to the end of the year before. 3. Other EUR 263 278 106 Total liabilities and equity (1-2) EUR 25,059 25,305 101 II 1. Total liabilities EUR 19,969 20,128 101 2. EUR 5,090 5,178 102 Capital Source: Association of Serbian Banks 4

Banking sector of Serbia in the first half of 2016 Currency Structure of Banks Deposit Potential* in EUR million % of share % of share Deposit Curr. 31.12.2015 30.06.2016 Index 1 2 3 4 5 6 5/3 In dinars (transaction and time deposits) EUR 4,485 29.0 4,967 111 31.5 In FX EUR 11,021 71.0 10,816 98 68.5 Total EUR 15,506 100 15,783 102 100 * Position at the end of the period Including the deposits of the corporate, non-corporate and public sector, local self-government, financial sector, retail clients and the state Not including limited deposits (deposits of bankrupt banks and companies, whose utilization is limited) Source: Statistical Bulletin of the NBS, June 2016, www.nbs.rs 5

Banking sector of Serbia in the first half of 2016 Total Bank Loans* position at the end of the period, in EUR million Absolute growth (4-3) Index (4/3) At the end of the first half of 2016 total bank loans retained the same level as at the end of the previous year. Sector Curr. 2015 30.06.2016 1 2 3 4 5 6 Public enterprises EUR 1,409 1,192 - 85 Companies EUR 8,138 8,065 - 99 In the observed period corporate loans recorded a drop by 1% compared to the end of 2015, whereas in the same period retail loans recorded a slight growth by 4%. Retail EUR 6,238 6,497 247 104 Other financial organizations EUR 194 215 21 111 Other (local authorities and non corporate organisations) EUR 276 276 - 100 Total EUR 16,255 16,247 - 100 Average int.rate 5% (deposits 1.6%) * Without the lendings to NBS Source: Statistical Bulletin of the NBS, June 2016 6

Banking sector of Serbia in the first half of 2016 Monetary Policy and Economic Growth Monetary stability indicators (prices and the FX rate), along with the lowering the benchmark interest rate (2014-8.00%, 2015 4.50%, 2016 4.25%), had no impact on the volume of bank loans. As in the past two years, the trends at the domestic credit market were unfavorable in 2016 as well, due to the high credit risk the banks were exposed to. 7

Banking sector of Serbia in the first half of 2016 Position of Non-Performing Loans (NPLs)* (gross accounting value) in EUR million Item Curr. 31.12.2012 31.12.2013 31.12.2015 30.06.2016 Index 1 2 3 4 5 6 6/5 Total loans extended EUR 15,595 13,057 15,783 16,067 101 NPLs EUR 2,757 2,914 3,459 3,259 94 % of share of NPLs in total loans EUR 17.67% 22.32% - 21.91% 20.28% * Position at the end of the period Source: Association of Serbian Banks Share of sectors in NPLs in %: Entrepreneurs 26.96% Companies 19.56% Banks 2.76% Households 10.36% 8

Banking sector of Serbia in the first half of 2016 Capital Adequacy Ratio* and stability idicators Regulatory minimum 2013 2014 2015 30.06.2016 in % 20.9 19.9 20.9 21.6 12 * Position at the end of the period Source: Association of Serbian Banks Capital adequacy ratio at the end of the first half of 2016 amounted to 21.6%, and is still high above the prescribed minimum (12.0%). slowing down of the financial strength and stability indicators of the banking sector of Serbia, recorded during the previous five years, continued in 2016 as well (2015 - ROA 0.3%, ROE 1.6%). The banking sector s balance sheet structure quality indicators, however, at the end of the first half of 2016 still remained satisfactory (capital adequacy ratio 21.6%), along with security (coverage of NPLs by means of loss provisioning 114.7%), and liquidity (liquidity ratio 2.1). 9

Banking sector of Serbia in the first half of 2016 Some data in the field of protection against HighTech malpractice Malpractice present Cards present in the market: Visa, Master Card/Maestro, Diners Club Card, Dina Card, American Express. Law on Security of Information systems introduced 2016 Current work bylaws and creation of Computer Security Incident Response Team as a focal points for further coordination. ASB involvement Committee on Security 2014: Portal for the exchange of information among banks Participate in Development of Strategy for Cyber Security Financial education/information sharing segment of the portal dedicated to citizens Cooperation with other institutions and organizations 10

Banking sector of Serbia in the first half of 2016 Number and activity of cards issued in Republic of Serbia, 2015 Delivered Active* Percentage of active cards** Q Busines s Debit Credit Business Total Debit Credit Business Total Debit Credit All cards 1+2+3 5+6+7 8/4*100 1 2 3 4 5 6 7 8 9 10 11 12 I 5,201,140 936,586 127,396 6,265,122 2,494,638 493,500 80,700 3,068,838 48 53 63 49 II 5,292,783 928,494 134,344 6,355,621 2,548,763 509,850 82,935 3,141,548 48 55 62 49 III 5,276,741 924,618 140,833 6,342,192 2,575,219 503,456 85,635 3,164,310 49 54 61 50 IV 5,349,843 957,566 146,947 6,454,356 2,654,535 516,766 90,805 3,262,106 50 54 62 51 11

Banking sector of Serbia in the first half of 2016 Number and value of transactions with cards issued in the Republic of Serbia at ATMs in the country Value of transactions in RSD mill. Average number Average value in RSD Q Busines s Busines s Debit Credit Total Debit Credit Total Debit Credit Business All cards 1+2+3 5+6+7 1 2 3 4 5 6 7 8 9 10 11 12 I 109,677 2,901 6,608 119,185 5,917 251 158 6,327 7,118 4,435 16,039 7,234 II 123,616 3,214 7,729 134,559 6,557 272 183 7,011 7,190 4,511 16,133 7,319 III 124,596 3,173 8,295 136,064 6,338 252 185 6,775 7,402 4,734 16,891 7,561 IV 132,524 3,112 10,009 145,645 6,556 242 208 7,006 7,473 4,762 17,820 7,686 Total 490,413 12,399 32,641 535,454 6,342 254 183 6,780 7,296 4,611 16,720 7,450 12

Banking sector of Serbia in the first half of 2016 Number and value of transactions with cards issued in the Republic of Serbia at ATMs and POS terminals, 2015 Value of ATM transactions abroad in EUR thousands Value of ATM transactio ns in RSD mill. Number of retail stores with POS t. Number of ATM transactio ns Numb er of ATMs Number of trans. at POS t. Value* of trans. at POS t. Value** of trans.at POS t. abroad Total number of transactions Q Total value* 2+6 9 3+7 10 1 2 3 4 5 6 7 8 I 2,604 17,155,271 128,248 9,063 64,384 29,191,690 56,707 6,721 46,346,961 184,955 II 2,622 19,230,914 146,130 11,570 64,793 32,104,935 64,397 9,204 51,335,849 210,526 III 2,656 19,107,720 151,879 15,816 64,334 33,299,474 68,611 12,519 52,407,194 220,491 IV 2,705 19,845,198 158,089 12,443 65,428 34,876,633 71,304 9,312 54,721,831 229,393 129.472.73 Total 75.339.103 584.346 48.892 261.019 37.756 204.811.835 845.365 2 13