Increase of assets in banking sector in 2007 was mainly due to individuals’ sources, experts say
The increase of assets in the banking sector registered last year was mainly due to individuals’ sources, an analysis conducted by Expert Grup shows.
In 2007 the assets in the banking sector increased by 29%. The advance produced in particular based on the increase by more than 50% of the credit portfolio that was fed by the 35% growth of deposits. According to Expert Grup, the rapid increase in the banking sector is due especially to the growing demand to banking products, in particular as a result of individuals’ boosting liquidity due to remittances that led to the increase of the volume of deposits.
Experts say that individuals who work abroad prefer, in addition to investing money in real estate, to deposit a part of the money in banks. According to BNM data, individuals contributed by an increase by 7.51 percentage points (pp) to the growth of liquidity in the banking sector. In parallel, the essential boost of deposits in the banking system was accompanied by a significant reduction of the contributions by legal persons (8.69 pp down).
According to the analysis, the increase of deposit portfolio was fed in particular by the citizens’ wish to deposit the money and less by the more attractive offer of the banks. It resulted in boosting liquidity in the banking system, allowing banks to provide more loans.
Referring to the growing volume of bank loans, experts note an intensification of the consumer behavior of the population as a loan booster. BNM data show a growing role of consumption loans (the share of which increased by 4.86 pp) and real estate, construction and development loans (+2.18 pp).
On the other hand, corporate and infrastructure development loans evolved more poorly. According to BNM data, agricultural loans registered the most significant reduction in the structure of the loan portfolio of the banking system (-4.81 pp). One of the reasons may be the banks’ reaction to the drought last year. The loans provided to industry and trade registered a reduction by 0.31 pp. Experts say that as a result of the excess inflow of remittances, individuals represent sources generating profit for the banks, however, in the long run the main source of profit for the banking system should be the loans provided to the real sector and the diversification of the loan portfolio into various industries. Appreciating the short and medium term situation, the analysis states a positive development of the banking system. At the same time, the experts are more reserved about a stable development of the banking system in the long term. Expert Grup says that in the circumstance of surplus liquidity it is very important to develop a future clear and secure strategy for the development and monitoring of the loan portfolio. // BASA-Press
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