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REPUBLIC OF SERBIA

BANKING SYSTEMPRESENTATION

Nikola Arandjelovic

Member of the Executive BoardAgrobanka a.d. Belgrade

BACEE 15th

ConferenceBudapest, 15 November 2006


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Republic of Serbia Banking System presentation

Data and some comments in the presentation were

used from the National Bank of Serbia (SerbianCentral Bank) Second Quarter Report 2006 named

``BANKING SECTOR IN SERBIA``available at NBS

website address:

www.nbs.yu

as well as banks balance sheets as of June, 302006 published at the same website address.

All sums in the presentation are expressed in

Serbian national currency dinar (CSD)

As of June, 30 2006 1 EUR = 86,00 CSD


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Banking Sector in 2006

1.Structure of the Banking Sector in Serbia

* Central Bank ( National Bank of Serbia-NBS);* commercial banks;

* other financial organizations (postal savings

banks, saving credit organizations and

savings-credit cooperatives), but only untilDec. 2006

when they have to become a bank, merger with another

bank or commence the process of liquidation.

Serbian banks are of general and universal type,

founded as joint-stock companies.


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As of June 30, 2006, 38 banks with NBS operational

licenses were active in Serbia.

In the observed period one bank ( MB bank a.d. Nis) had its

operating license revoked and one bank ( Greek Alpha Bank

Beogradska afilijacija a.d.Beograd) merged with JUbanka.a.d.Beograd under the new name Alpha Bank a.d. Beograd.

12 banks has special license given by NBS and SEC for

broker-dealer operations at the capital market and 4 banks

are licensed to operate as custodial banks.

1.1. Number of Banks

31.12.03 31.12. 04 31.12. 05 30.06.06.

Number of Banks 47 43 40 38

Number of OFOs 1) 14 8 8 8

1) Other financial organizations saving banks, saving-credit organizationsand saving- credit cooperatives

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1.2. Bank`s Organizational Networks

Description Dec.31,

2003.

Dec.31,

2004.

Dec. 31, June 30,

2005. 2006.

Number of business

units

97 124 111 93

Number of branches 292 300 319 393

Number of branch offices 774 1,010 1,067 1.233

Number of counters 302 275 291 257

Total 1,465 1,709 1,788 1.976


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1.3. Number of Employees in the Banking Sector

During six months of 2006, the total number of

employees in commercial banks rose by 1,214 from

25,680 at end of 2005 to 26,894, the number recorded on

June 30,2006.

1.4. Ownership Structure of Banks

As of June 30, 2006, the ownership structure of 38

banks was as follows:18 banks in majority ownership of foreign shareholders

9 banks in majority ownership of domestic physical

and legal entities,

11 banks in majority ownership of Repub. of Serbia. 2)

2) The banks whose greatest shareholder is the Republic of Serbia, as a majoror single shareholder, directly or indirectly.


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2. Market Share

The market share of banks grouped according to balance

sum total as of June 30, 2006 was as follows:

Balance sum level Number of

banks

in CSD million Share (%)

Over 45 bn dinars 6 550.191 54,9

20 - 45 bn dinars 7 211.112 21,1

10 - 20 bn dinars 9 150.708 15,1

5 10 bn dinars 8 60.345 6,0

below 5 bn dinars 8 29.139 2,9

Total 38 1.001.495 100,0


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The share of the 6 largest banks in balance sum

total equaled 55%.

The 13 largest banks had a 76% share in the total

balance sum.

As of June 30, 2006, the overall banking sector

balance sum reached CSD1.001 billion, of which the

share of banks in majority ownership offoreign entities

was CSD 713 billion or71,2%. The share of banks in

majority ownership of the Republic of Serbia wasCSD213 billion or21,3%, while banks in majority

private ownership accounted for CSD 75 billion or

7,5%.


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2.1.Share of top 10 banks as of June,30. 2006in CSD million

Bank Total balan. sum Capital Loans Deposits

1.Raiffeisenbank 143 104 15 618 84 198 111 596

2.Banca Intesa 96 186 11 532 56 511 75 554

3.Hypo Alpe Adria 92 660 9 017 55 004 74 4814.Komercijalna banka 91 254 15 258 51 463 67 434

5. HVB bank 81 123 4 740 35 376 71 189

6. Societe Generale 45 860 4 641 23 674 38 321

7.Vojvodjanska banka 43 935 7 860 * 38 485* 29 680*

8.Alpha bank 38 392 9 481 22 503 24 0399. ProCredit bank 33 560 2 577 20 868 25 421

10. AIK banka Nis 26 938 13 423 21 861 8 244

19. Agrobanka 15 694 2 199 10 299 8 513

TOTAL

* Data for March 2006

1 001 494 154 904 376 942 490 890


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2.2. Market share and rank of top 10 banks as of

June, 30. 2006 for various elements

Bank Assets

Share Rank

Capital

Share Rank

Loans

Share Rank

Deposits

Share Rank

1.Raiffeisenbank 14,3 % 1 17,2 % 1 15,6 % 1 15,3 % 1

2.Banca Intesa 9,6 % 2 4,4% 6 10,4 % 2 10,4 % 2

3.Hypo Alpe Adria 9,3 % 3 5,9 % 5 10,2 % 3 10,2 % 3

4.Komercijalna banka 9,1 % 4 10,2% 2 8,5 % 4 9,3 % 5

5. HVB bank 8,1 % 5 2,7 % 12 6,7 % 5 9,8 % 4

6. Societe Generale 4,6 % 6 3,3 % 10 4,3 % 6 5,3 % 6

7.Vojvodjanska banka 4,4 % 7 3,9 % 7 3,9 % 8 4,2 % 7

8.Alpha bank 3,8 % 8 7,1 % 3 3,3 % 10 3,3 % 9

9. ProCredit bank 3,4 % 9 1,7 % 20 4,1 % 7 3,5 % 8

10. AIK banka Nis 2,7 % 10 8,7 % 3 3,6 % 9 1,1 % 21

19. Agrobanka 1,6 % 19 1,4 % 23 1,9 % 15 1,2 % 20


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3. Privatization in the Banking Sector during 2006

Name of bank Share

capital (in

mill.CSD)

RS

percentage

share 3)

Note

Vojvodjanska

banka a.d. Novi

Sad

7.860 99.43 Negotiations with the National Bank of

Greece on the takeover of controling

stake are under the way

Panonska banka

a.d. Novi Sad

2.475 87.39 By the end of July a sales contract was

signed with Sao Paolo IMI.

Credy banka a.d.

Kragujevac

1,085 72.36 The process of privatization is under

way.

3) The Republic of Serbia (RS) is involved either directly or indirectly.

Indirect participation implies participation through banks in bankruptcy.


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Risks in the Banking Sector

1. Credit Risk

Quality of Assets in the Serbian banking sectorin CSD million

As of

Total

balanceassets

&off-

balance

sheet items

Total

classifiedassets,

calculated

deductibles

Classified assets Share of bad assets

(C


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2. Liquidity Risk

Banks Daily Liquidity Indicators as on June 30, 2006

in CSD million

Banks Gyro-

account

balance

Calculated

required

reserve

Column

difference

(2-3)

Deposited

liquid

funds

surpluses

Daily

liquidity

loans

Total in the

Republic of

Serbia30,878 33,351 - 2,473 2,321 1,190

Out of the total number of banks, 20 of them used required reserve funds

in the total amount of CSD 3,066 million or 9.2% of the total calculated

required reserves. Three banks used daily liquidity loans.

During the period under review, banks` liquidity indicator ranged between

1.05 and 21.88.


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Capital Adequacy (no less than 12%)

The table below shows capital adequacy ratios

for 38 banks operating in first six months of 2006

The average value of adequacy ratio equaled 28,9%

Capital adequacy ratio Number of banks Share in total number

of banks

Up to 12% 2 5,3 %

From 12 to 20% 5 13,1 %

From 20 to 30% 10 26,3 %

Over 30% 21 55,3 %

Total 38 100%


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Profitability Indicators of Banking Sector

Banking

sector

PROFITABILITY INDICATORS Financial

result (in

CSD

million)Grossrevenues/total

assets (%)

Netrevenues

from

interest/

total assets

(%)

Operationalexpenditu-

res/total

assets (%)

Netextraordina-

ry revenues

/total assets

(%)

Operationalexpenditure/

net revenues

from interest

and fees (%)

Dec. 31,03 29.78 5.06 7.66 0.01 90.62 (1.055)

Dec. 31,04 37.72 4.66 6.27 0.02 84.50 (4,989)

Dec. 31,05 33.63 4.47 5.55 - 0.00 80.95 7.271

June 30,06 18.36 2.11 2.80 0.00 88.80 - 3.769


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Main developments in 2006

During the second quarter of 2006, Budapest

Based OTP bank RT has become the owner of89,39% of the share capital of Niska banka a.d.

In the second quarter of 2006, Greek Alpha

Bank a.d. Beogradska afilijacija Beograd

merged with Jubanka a.d. Beograd, changing

the name into Alpha Bank a.d.Beograd.In Q1 2006 the banking sector recorded a

negative financial result in the amount ofCSD

3,770 million,


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During Q1 2006 NBS within its regulatory

competence (control and supervision of bank

operations) issued numerous secondarylegislation in purpose of banking adjustments

to the new Banking Law. All banks operating

in Serbia had obligation to change their

organization, rules and business operations

in accordance with new Law&NBS regulation

and to obtain NBS`s agreements before 1st

October (the date when Banking Law started)


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THANK YOU FOR YOUR

ATTENTION !

PB AGROBANKA a.d. BELGRADE

Nikola Arandjelovic

Member of the Executive Board

E-mail:[email protected]

www.agrobanka.co.yu

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