At the end of 2020, there were 26 banks operating independently from other banks in Serbia. At the end of 2021, there were 23 such banks. A few merger processes are still ongoing and will lead to that number shrinking to just 19 before the end of 2022.
This significant banking sector consolidation started in December 2017, with Hungary’s OTP acquiring Serbian Vojvodanska Banka, followed by OTP’s acquisition of the French Societe Generale in September 2019, and the merger of the Serbian branch of OTP Bank and Vojvodanska Banka in May 2021.
The consolidation continued with the Slovenian NLB acquiring an 88.28% stake in Komercijalna Bank in December 2020, whilst the Greek Eurobank absorbed Serbian Direktna Banka at the end of 2021. Also, on July 1, 2021, state-owned Banka Postanska Stedionica concluded its fusion with MTS Banka. Then Eurobank and Direktna Bank merged into one single entity in December 2021.
Russia’s Sberbank sold its local branch to the Serbian AIK bank in March 2022. And, in April 2022, the merger of Komercijalna Bank and the Slovenian NLB bank took place. Finally, one more French banking group – Credit Agricole – abandoned the Serbian market in April 2022, when Raiffeisen acquired the Serbian branch of the Credit Agricole banking group.
The aforementioned acquisitions did not affect Banca Intesa’s position as the market leader with EUR 6.3 billion in assets. However, UniCredit fell to third place in terms of asset value, after OTP’s merger with Vojvodjanska Banka and Societe Generale, and kept losing its market share in 2022 due to the acquisition of Komercijalna Bank by NLB.
The list of important banks in Serbia in terms of their market share at the end of 2021 consisted of nine banks, with the remaining 14 banks having a market share below 5% each.
However, according to statistical market data valid as of December 31, 2021, by analyzing the cost-income ratio (CIR) and the profit-average equity (ROAE) in the banking sector, it could be concluded that Serbia’s banking sector still has a large potential for further consolidation.
As of December 31, 2021, Banca Intesa, OTP, and Unicredit, as sector-leading banks, have an average CIR of 61%, with ROAE in the range of 7.5%, 9.4%, and 10.4% for Unicredit, OTP, and Intesa, respectively. According to the median CIR and ROAE market ratios – which are 68% and 7.6% – banks below these figures would be considered underperformers.
On December 31, 2021, 16 out of the 23 banks have their ROAE below 7.6%, while 18 out of those 23 banks have a CIR above 68%. Such high CIR ratios indicate a great potential for optimization of costs through further M&A activities leading towards the lowering of their CIR and an increase in the banks’ ROAE.
In light of the above, we expect the consolidation trend we are seeing in the Serbian banking sector to continue.
By Milos Velimirovic, Managing Partner, SOG Law Firm