BOSNIA AND HERZEGOVINA’S BANKING SECTOR, DYNAMICS OF ITS PROFITABILITY COMPONENTS

Authors

  • Драган С. Јовић, M.Sc. Central Bank of Bosnia and Herzegovina

Keywords:

banking sector, profitability, Du pont analysis, Bosnia and Herzegovina.

Abstract

Period from 2000 to 2005 saw a significant change in profitability of Bosnia and Herzegovina’s banking sector and its components.

Indicator of operational efficiency, return on income (ROI) takes positive value for the first time in 2003.

Parallel to gradual increase in operational efficency, asset utilization efficiency is deacreasing. In 2005 asset utilization is for 42% lower compared with 2000 year’s level and it amounts to 0,09.

Most important determinant of return on asset’s growth is operational efficiancy’s growth which eliminates drop in asset utilization. In 2005 return on asset is 0,89%.

In period 2000–2005 equity multiplier increased for 116%. At the end of 2005 there are 10,90 units of asset which stand against one unit of equity.

Return of asset’s growth and multiplier increasing lead to big change in return on equity. In 2000 ROA was -8,29% and in 2005 is 9,69%.

Resources for the further growth should be sought at the first place in prevention of decrease in asset utilization efficency and in its gradul growth as well as in aditional growth of operational efficency.

Too much emphasis on leverage i. e. further growth of multiplier could lead to growth of systematic risk.

In the scenario of loss high leverage transforms itself in negative return on equity.

The best approximation of the long term development tendency of equity mulitiplier is linear trend according to which the multiplier’s value in 2008 should be 14,30.

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References

Ћировић, Милутин: Банкарство, Економски факултет, Београд, 1995.

Жижић, M; Ловрић, M; Павличић, Д: Методи статистичке анализе, Савремена администрација, Београд, 1992.

Критерији за интерно рангирање банака од стране Агенције за банкарство Републике Српске, Управни одбор АзБРС УО – 90/03.

Извјештаји о стању банкарског сектора Републике Српске за период 1999–2005. год, Агенција за банкарство Републике Српске, Бањалука, 2005.

Информација о стању банкарског система ФБиХ за период 1999– 2005. год, Агенција за банкарство ФБиХ, Сарајево, 2006.

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Published

2008-06-30

How to Cite

Јовић, Д. С. (2008). BOSNIA AND HERZEGOVINA’S BANKING SECTOR, DYNAMICS OF ITS PROFITABILITY COMPONENTS. Acta Economica, 6(8), 199–213. Retrieved from http://ae.ef.unibl.org/index.php/AE/article/view/257

Issue

Section

Professional article