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Bosnia and Herzegovina’s banking sector: Facts & Figures

Updated September 2018 – For earlier editions of Facts & Figures click here

In 2017, according to preliminary data, nominal GDP growth in Bosnia and Herzegovina accelerated to 1.05% compared to 2016 and was €15.9 billion (consumption-based GDP; the share of household consumption in total GDP is about 76%).

Supported primarily by consumption and to some extent by public investment, GDP increased by 2,8% in 2017; and the still favourable external environment is expected to support growth acceleration in 2018. The unemployment rate in 2017 was 39.5%, an improvement compared to 2016 (41.7%) with a tendency to further improvement. The population of Bosnia and Herzegovina is 3.5 million.

Public debt was 40.7% of GDP in 2017, whereas in 2016 it was 43.7%. Gross debt in 2017 declined vs 2016 year end by 6% or €400 million. Bosnia and Herzegovina (BiH) foreign debt in 2017 decreased in comparison to 2016 year end by 8% or €371 million.  Inflation was 1.3% and increased compared to 2016 year end.

The BiH financial system is dominated by commercial banks. Currently 23 banks operate on the market.

As Bosnia and Herzegovina consists of two entities: Federation of BiH and Republic of Srpska. There are two supervising bodies for the banking sector: Banking Agency of Federation of BiH and Banking Agency of Republic of Srpska.

In 2017, the banking sector proved to be a generator of business in the BiH economy. Total bank assets amounted to €14.5 billion and grew by 8% compared to the previous year. Total deposits in BiH amounted to €10.8 billion and had increased by 12.2%. Deposits of legal entities increased by 21% and deposits of individuals by 5.8%.

The growth of loans was 7.1% compared to the previous year, whereas loans to legal entities grew by 7.5%, while loans to individuals grew by 6.6%. Total loans amounted to €9 billion, whereas loans to individuals amounted to €4.7 billion.

The increase in deposits and loans enabled the increase of economic activity throughout the country.

All banks ended 2017 with historically good results. The banking system of BiH ended the year with a net profit that was 51% higher than that end 2016 (after taxes). This is the best result achieved so far.

Such profitability positively influenced all the indicators: return on assets, return on equity, and most importantly for the capital adequacy ratio, which in all banks is considerably above the regulatory requirement. With its reorganisation which included a significant reduction in operating costs and a reduction in interest rates on loans up to 15%, banks have a significant impact on improving the overall economic situation in the country. Great attention is paid to reducing costs, through cost optimisation, business reorganisation, and investment in digitisation as a new opportunity to generate revenue.

As for the payment systems in BiH the number of transactions increased by 2.7% compared to the previous year whereas the value of these transactions is 8.8% higher than in 2016.

The ten largest BiH banks participated in 71% of payment transactions, an increase when compared to that of 2016 (70% in 2016). Their transaction volumes increased by 5.8%, while the total value of transactions increased by 17.7%. In 2017, a total value of interbank transactions was 8.8% higher than the previous year.

At the same time, intrabank transactions were worth 28% more than in the previous year.

The ratio between intrabank transactions and intra-banking transactions was:

  • 45% of interbank transactions and
  • 55% of intrabank transaction

The total number of active cards in 2017 was above two million. Card transactions on POS terminals increased by 8% on the previous year. The use of ATMs and POS terminals is as follows: POS 29%, ATM 71%.

Contributor: Berislav Kutle

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