The banking sector of Montenegro made a strong contribution to the Montenegrin economy rebound, which was heavily affected by the COVID-19 pandemic in 2020. The banking system in Montenegro maintained stability, high liquidity, preserved profitability, and good capitalisation in 2021 as well. All key balance sheet items recorded an increase on annual level, and so as follows: assets by 14.65 percent, credits by 7.08 percent, and deposits by 24.26 percent; while the capital has recorded a decline of 0.93 percent. At the end of November 2021, monetary assets reached the historic maximum and amounted 1,121.7 million euro. The non-performing loan (NPL) ratio was 5.98 percent.
The loans extended to legal persons amount to 2,023.6 million euro, or 58.21 percent of total loans, while the loans to natural persons make 1,452.8 million euro or 41.79 percent of total loans. This percentage split was rather constant over the observed one-year period. During the same period, loans to natural persons recorded a growth of 2.40 percent, while the lending to legal persons recorded an increase of 10.71 percent. Loans to natural persons with 41.79 percent have a dominant share in the composition of total loans by key recipients; followed by loans to the real sector with 32.84 percent, loans to the Government of Montenegro with 6.18 percent, placements to banks with 13.96 percent, and other loans with 5.23 percent respective shares in total loans. Loans to the real sector (business undertakings, both in private and in state ownership) amount to 1,141.6 million euro and recorded a growth of 1.96 percent year-on-year. Loans in other currencies make 3.61 percent of total loans, while loans to non-residents make 17.77 percent of total loans. Long-term loans, which made 77.97 percent of all loans in the system, are financed dominantly from stable short-term deposits, which make 89.14 percent of total deposits in the system. At the end of November 2021, the average weighted effective interest rate on total loans was 5.69 percent. This rate was 5.82 percent in the same period of 2020.
During 11 months of 2021, total of 617.7 million euro of new loans was approved to legal persons, and these loans recoded a growth of 13.59 percent relative to the same period of 2020, while 349.7 million euro was approved to natural persons, which is approximately 33.33 percent more relative to the same period of 2020. The average weighted effective interest rate on newly approved loans was 5.19 percent, and compared to November 2020 recorded an increase of 0.05 percentage points. Loans to legal persons were extended at the average weighted effective interest rate of 4.26 percent, which is lower by 0.21 percentage points relative to November 2020, while this rate to natural persons was 7.29 percent, which is higher by 0.50 percentage points relative to the same period of 2020.
At the end of November 2021, the deposits of natural persons amounted to 2,039.8 million euro or 48.79 percent in the composition of total deposits, while deposits of legal persons amounted to 2,141.1 million euro or 51.21 percent. A-vista deposits are dominant, and make 74.47 percent of total deposits. The banking system is lacking stable long-term deposit potential. The share of non-resident deposits was significant and was 27.42 percent, while the deposits in other currencies made 6 percent of the total deposits.
Downward trend is also present in case of deposit interest rates. Namely, in November 2021 the deposit average weighted effective interest rate was 0.34 percent and recorded a year- on-year drop of 0.05 percentage points.
The value of the ratio of loans and receivables over deposits was 83.15 percent, which means that there is 704.6 million euro of deposit potential in the system which exceeds receivables underlying the approved loans.