12 <strong>Annual</strong> <strong>Report</strong> <strong>2010</strong> currency loans still accounted for a very high 68% of lending, their share was down from over 70% in 2009. Government credit programmes contributed significantly to boosting GDP in <strong>2010</strong>. Subsidised lending to businesses and private individuals amounted to around RSD 200 billion (EUR 1.9 billion) 8 to provide subsidised loans to businesses and private individuals. With credit markets functioning more normally, these programmes are being phased out. Loan portfolio quality was once again the main factor influencing the profitability of the banking sector. Non-performing loans continued on their upward trend, rising to RSD 273 billion (EUR 2.6 billion) or 16.9% of the total loan portfolio, compared to 15.7% or RSD 202 billion (EUR 2.11 billion) at the end of 2009. The percentage of non-performing business loans increased to 21.8% (2009: 20.9%). At the same time, total provisions covered non-performing loans by a factor of 134%. The capital adequacy ratio of the Serbian banking sector remained high at 19.9%, well above the regulatory minimum of 12%. Total deposits amounted to RSD 1,505 billion (EUR 14.3 billion) at the end of <strong>2010</strong>, making up 59% of total liabilities. Private households accounted for 52%, followed by enterprises (24%) and non-residents (12%). 79% of total deposits were denominated in foreign currency (70% in EUR). Sight deposits and short-term savings continued to predominate. Despite continuing recovery in banking sector profitability, 11 banks representing 17% of the sector’s assets recorded losses totalling RSD 9.1 billion (EUR 86.3 million ). The downward trend in banking staff numbers continued. <strong>Bank</strong>s generally remained very liquid in <strong>2010</strong>, and invested RSD 144 billion (EUR 1.36 billion) in government RSD securities with maturities of less than a year. <strong>ProCredit</strong> Performance Despite the unsettled macroeconomic environment, characterised by high inflation, sharp depreciation of the local currency and frequent changes in regulations, <strong>ProCredit</strong> <strong>Bank</strong> continued to support businesses in their efforts to recover from the impact of the financial crisis. The bank maintained its leading position in financing long-term investments by very small, small and medium-sized enterprises, especially through its participation in the government’s anti-crisis programme. Within the framework of a strategic partnership with KfW, the bank drew on a new credit line set up to finance investments in energy efficiency, thus confirming its long-term commitment to supporting projects that contribute to development, undertaken not only by enterprises but also by private individuals and households. <strong>ProCredit</strong> <strong>Bank</strong> is still the market leader in providing financial services to individual agricultural producers, and will continue to focus on financing the advancement of Serbia’s agricultural production. In the year under review, the bank succeeded in retaining its market share in lending, while achieving a moderate increase in outstanding loan volume. Loan portfolio quality remained higher than the sector average. On the deposit side, the bank is recognised as the institution that offers its customers stability and long-term security for their savings, rather than trying to woo them with high interest rates. Our clients’ confidence in the bank’s strategic positioning and in its shareholders’ solidity was demonstrated by the consistent level of deposits during the year. In order to further enhance its quality of service, <strong>ProCredit</strong> <strong>Bank</strong> redesigned its business model based on a more comprehensive approach to meeting the different needs of each and every client. This necessitated a thoroughgoing reorganisation of its business processes and internal structures, including the creation of new departments and improvements to its branch network with a view to increasing efficiency. Following these important changes, the bank is now even better positioned to serve as a reliable and flexible business partner for very small, small and medium-sized enterprises, as well as agricultural producers and private individuals. By offering sophisticated, tailored services and sound advice, our highly trained professional 8 Ministry of economy and regional development, Republic of Serbia, http://www.merr.gov.rs/sr/ c/programi-i-projekti/krediti-ublazavanje-efekatasvetske-ekonomske-krize/106
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