The National Bank of the Republic of Macedonia held its 13th session today, at which the Report on the Banking System and the Banking Supervision in the Republic of Macedonia in the first half of 2010 and the Semiannual Report, January - June 2010, were discussed and adopted.

Skopje, 14 October 2010

Press release of the NBRM

The National Bank of the Republic of Macedonia held its 13th session today, at which the Report on the Banking System and the Banking Supervision in the Republic of Macedonia in the first half of 2010 and the Semiannual Report, January - June 2010, were discussed and adopted.

In the Report on the Banking System and the Banking Supervision in the Republic of Macedonia in the first half of2010 it was concluded that in the first half of 2010 the banks in the Republic of Macedonia continued with their sound and more cautious operating, which is manifested through the preserving of the risk level within the controlled frames, as well as maintenance of relatively high liquidity and stable solvency.

In the first half of 2010, acceleration in the growth dynamics of the total banks' activities was registered. On June 30, 2010, the total assets of the banking system reached Denar 182.3 million. In comparison with the end of 2009, it registered an increase of 5.1%.

The credit risk remained dominant in the banks operating. The slow recovery pace of both the corporate and the households sector, followed by the still limited refunding sources, had negative influence on their capability for debt servicing towards the banks. The share of the exposure classified in the risk categories "C", "D" and "E" in the total exposure to credit risk, registered an increase of 0.5 percentage points in comparison with December 31, 2009 and on June 30,2010 it equaled 8.6%. The share of the non-performing credits in the total credits increased by one percentage point and at the end of June it reached 10.1%. Also, the indicator for the level of coverage of the exposure classified in the categories "C", "D" and "E" with allocated impairment and special reserve, deteriorates and on June 30,2010 it equaled 79.6% (semiannual decrease of 2.8 percentage points).

  In the first six months of 2010, the liquidity of the banking system improved. On June 30, 2010, the banks liquid assets reached Denar 76,358 million (annual growth of 53.3%). They provide satisfactory level of coverage of the households' deposits and short-term liabilities of 56.2% and 41.3%, respectively.

The banks' profitability is still lower in comparison with the previous years. The total banks' gain in the first six months of 2010 equaled Denar 497 million, which is less by 23% compared to the same period of 2009. The rates of both, the return on assets and the return on equity, registered further drop and the end of June they equaled 0.4% and 3.2%, respectively (on June 30,2009 these rates equaled 0.5% and 4.3%, respectively).

The banks continued to maintain high solvency position. On June 30,2010, the capital adequacy ratio at the level of the banking system reached 16.5% (by two times more than the legally prescribed minimum of 8%). According to the stress-test simulations conducted by the National Bank, the banking system and individual banks show relative resistance to the influence of the possible external shocks. 

The Semiannual Report states that within January - June 2010 period the macroeconomic ambient for implementation of the monetary policy was relatively favorable. The positive trends on the foreign exchange market, commenced in the second half of the previous year, continued also in the first half of this year and together with the improved forecasts for the external sector created space for further monetary policy relaxation. Within this period, NBRM decreased the basic interest rate in five occasions, by totally 3.5 percentage points, reducing to 5% in June.

The favorable movements on the foreign exchange market are result of the favorable trends in the external sector, which are in line with the recovery of the global economy and the more stable expectations. The deficit on the balance of payments' current account, in the first six months of the year reduced to 1.7% of GDP, compared to 6.6% in the first half of the previous year. It is mainly due to the narrowing of the trade deficit and the higher inflows from private transfers. In the first half of 2010, increase in the gross foreign reserves of Euro 110.8 million was registered, and at the end of June they equaled Euro 1,708.4 million.

In the second half of 2010, the inflation remained low and stable and it equaled 0.8%. The increase in the consumer prices are primarily due to the higher prices of energy sources, as well as the administrative increase in the price of electricity and heating energy from the beginning of the year. The economic activity in the first half of 2010 registered real drop of 0.4%, which fully arises from the registered real drop in GDP of 1.1% in the first quarter. In the second quarter, favorable movements were generally registered, given a real growth of 0.4% in the GDP, which indicates gradual recovery of the economy.

Within the banking sector, in the first half, the trend of growth in the deposit potential and the credit activity in the first quarter continued. In June, the total deposits, compared to the end of the previous year, went up by 8.3%, with the new saving in the first half of the year representing 94% of the savings growth in the entire 2009. From the aspect of the deposits, the depositors again prefer to save in domestic currency. The widening of the sources of financing, the stabilized macroeconomic environment and the monetary policy relaxation, since the second quarter, resulted in acceleration in the annual growth in the banks' credit activity. The credits extended to the private sector at the end of the first half of 2010 are higher by 4% relative to the end of the previous year. The new crediting in the first half exceeds the amount of credits placed during the entire previous year. Observed from the aspect of the sector, the enterprises and the households' credits increased relative to the end of the previous year by 4.6% and 3%, respectively. Dominant role in the crediting growth accounted for credits of the corporate sector, with a share of about 70%. In order to revive the credit activity, the banks' interest rates reduced. Thus in June the Denar and the foreign currency lending interest rate equaled 9.6% and 7.3%, respectively, which is a decrease of 0.7 percentage points and 0.3 percentage points, respectively. Simultaneously, the Denar and the foreign currency deposit interest rate equaled 7% and 3.1%, i.e. they are lower compared to the end of the previous year by 0.5 and 0.3 percentage points, respectively.

Governor's Office