Between 2019 and early 2025, Montenegrin banks saw their gross loans rise by 52%, while deposits increased by 68% (amounting to 2.36 billion euros). The growth rate of deposits outpaced that of loans, leading to a decline in the Loan-to-Deposit (L/D) ratio from 88% in 2019 to 79% in 2024. This trend highlights a need for increased lending and improved risk management, according to analysis by banker..ME.

The majority of the deposits came from residents, with the general population contributing about 2 billion euros and private companies adding 1.47 billion euros. Government deposits decreased, whereas non-residents increased their deposits to 903 million euros.

Interest Rates Remain Elevated

The average effective interest rates (Ppex) on loans stood at a high 6.47% at the start of 2025, whereas deposit rates remained low at 0.25%. The disparity of 6.25% between loan and deposit interest rates contributes to substantial bank profitability, though this could be challenged by intensified competition and changing market dynamics.

Addiko Bank boasts the highest PPEX at 8.46%, while Universal Capital Bank offers the lowest at 4.65%. The largest banks, including CKB, Erste, and NLB, have even reduced their rates to remain competitive.

Asset Growth and Market Share

From 2023 to 2024, the total assets of the banking sector rose by 8% (an increase of 516 million euros). Although most banks reported growth in assets, some experienced declines, highlighting varied trends within the sector. The largest asset growth was recorded by the mortgage bank (18%), followed by Erste (14%) and West (13%).
CKB (26.1%), the mortgage bank (15.1%), and NLB (14.3%) command the highest market shares, with the top four banks collectively holding 68% of the market.

“This indicates a high concentration in the banking sector, which can pose market risks on one hand, while on the other, it enables better risk management and investment capabilities, thus providing an advantage during potential economic instability. The four largest banks also control the majority of the credit portfolio (73.35 percent) and deposit portfolio (66.65 percent) of the entire sector,” the analysis indicates.

The credit portfolio of banks exhibited a positive trend in 2024, increasing by 12.5% (amounting to EUR 425.5 million), alongside a 6% increase in deposits (EUR 326 million). CKB, Erste, and NLB led the growth in both loans and deposits, with Adriatic Bank experiencing the highest loan growth at 43%, while Addiko and Universal reduced their lending activities.
Investments in securities increased by 1%, with mortgage, Erste, CKB, and West leading the way, while NLB and Adriatic curtailed their investments.

Profitability and Income Growth

The net profit for the sector increased by 11% in 2024 (totaling EUR 161.4 million), with interest income rising by 18% (an increase of 42.5 million euros). The top four banks (CKB, NLB, Erste, Mortgage) account for 72% of total interest income.
Fees generated revenue increased by 4%, although several banks (Addiko, Erste, Universal) reported declines.

Bank Capital and ROE

In the previous year, the sector’s capital strengthened by 74.4 million euros, with CKB possessing the largest capital amount (288 million euros). The average Return on Equity (ROE) for 2023 was recorded at 19.3%, with estimates for 2024 nearing 19%. Adriatic Bank boasts the highest ROE at 37.9%, largely due to exchange rate fluctuations, followed by NLB at 22.9%, and Mortgage and West both at 21.8%.

The number of employees in 2024 increased by 8% (197 new hires), while employee costs rose by 13.6%. Adriatic Bank saw the largest increase in workforce at 46%.

“The banking sector experienced strong growth in 2024, fueled by high Euribor rates and low passive interest costs. However, 2025 could see a decline in interest rates, challenges from Montenegro’s entry into the SEPA system (potential reduction in fee revenues), and intensified competition (from developing banks and new players), demanding careful risk management, efficiency, and innovation to maintain profits,” according to the bankers’ analysis.