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Bosnia and Herzegovina’s banking sector: Facts & Figures

Updated September 2019 – For earlier editions of Facts & Figures click here

Bosnia and Herzegovina is a country in Southeastern Europe, located in the Balkan Peninsula, with a population of 3.5 million. It is home to three ethnic constituent peoples, Bosniaks, Serbs, and Croats, plus a number of smaller groups including Jews and Roma. Sarajevo is the capital and largest city.

The convertible mark (konvertibilna marka – KM-BAM) is the national currency, pegged to the euro through a currency board arrangement within the Central Bank of BiH, which has maintained confidence in the currency and has facilitated reliable trade links with European partners (1 EUR = 1,95583 KM).

The IMF estimated Bosnia and Herzegovina’s nominal GDP per capita at almost $5,704 in December 2018, up from about $5,181 in December 2017. Looking ahead, the nominal GDP per capita is projected to stand at $7,731 in 2023. According to the country’s Directorate for Economic Planning, budget revenues rose 8.0% year-on-year to €1.8 billion in Q1 2018, with the strongest positive contribution from the 8.4% year-on-year higher VAT intake, followed by social contributions (up 5.9%) and toll revenues (up 46.4%) after administrative price hikes.

The financial system is dominated by commercial banks with 23 banks operating on the market.

As Bosnia and Herzegovina comprises two entities: Federation of BiH and Republic of Srpska, there are two supervising bodies – two banking agencies for the banking sector: Banking Agency of Federation of BiH and Banking Agency of Republic of Srpska.

Despite great competition, decreased interest rates and modest credit growth, the results of the sector’s operations show profitability that has not been recorded in recent history. All banks achieve historically strong results.

According to preliminary data, as of December 2018, the net profit of banks amounted to 367.1 million KM ($214.8 million), 10% higher than 2017. Total assets of the banking sector amounted to 30.9 billion KM $(18.08 billion), also up by 10% compared to 2017.

Credit growth in the same period was 5.7% higher compared to 2017, while the total value of loans reached the level of KM 19.5 billion ($11.4 billion). Loans to legal entities grew by 4.4% to 10.2 billion KM ($5.9 billion) and loans to individuals by 7.2% to 9.2 billion KM ($5.4 billion).

Deposits grew by 10.5% compared to 2017 and reached KM 21.75 billion ($12.72 billion). Deposits of legal entities had a much higher growth (14.3%) than individuals’ deposits (7.7%).

The increase in deposits and loans enabled the increase of economic activity throughout the country. The growth rate of total loans for 2019 is expected to be around 5.5%, followed by a growth of about 4% in 2020 to 2021.

Contributor: Berislav Kutle Berislav.kutle@ubbih.ba

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