After contracting 3.5% in 2009, Serbia’s economy staged a rather modest recovery in the next two years, growing 1% in 2010 and 1.9% in 2011 according to European Bank for Reconstruction and Development (EBRD) estimates. Too modest for the country's banking sector, it would appear, as its average non-performing loan (NPL) ratio climbed from 15.7% at the end of 2009 to 19.3% two years later.
However, the headline numbers hide a sharp divergence between retail and corporate banking. NPLs in retail banking are less than 8.5%, which is reasonably healthy by the standards of the Balkan region. But the rate for corporate loans, which constitute 53% of total sector loan portfolios, is more than 23% – one of the highest in the region.
