Serbia’s banking sector is poised for a significant phase as it enters 2026, characterized by robust liquidity levels and a conservative approach to risk-taking. The current landscape shows high sector liquidity with a credit-to-deposit ratio of approximately 80%. Demand for loans, particularly from households, has been increasing, alongside an improved asset quality reflected in a non-performing loan (NPL) ratio of around 2%. By the end of 2025, total lending growth is projected at about 14% year-on-year, although this growth is tempered by cautious lending practices rather than a lack of available funding. According to the European Investment Bank’s CESEE Bank Lending Survey for the second half of 2025, banks in Serbia report sufficient liquidity but maintain strict lending standards, especially for corporate clients.
Forecasting the banking sector’s trajectory into 2026-2027 requires considering various macroeconomic scenarios due to the influence of external factors. Key drivers include demand from the Eurozone for Serbian exports, domestic disinflation trends, funding costs, and how credit risk evolves after a period of favorable conditions. The following scenarios are derived from established metrics as of late 2025.
In the **base case**, Serbia is expected to experience a soft landing where inflation stabilizes, real wages remain positive, and investment activity shows modest recovery. Loan demand will remain strongest in mortgages and consumer loans, with corporate borrowing primarily driven by export-oriented sectors. While banks may slightly relax credit standards, they will continue to prioritize conservative underwriting practices. Total credit growth is anticipated to slow from late-2025 levels but will still be solid, with system lending projected to expand between 9% and 12% in 2026 and between 8% and 11% in 2027. Household lending is expected to grow at rates of 11% to 15% in 2026 and 10% to 14% in 2027, while corporate lending may range from 6% to 9%.
Asset quality in this scenario is likely to stabilize rather than deteriorate sharply. The NPL ratio may rise slightly to between 2.3% and 2.8% by the end of 2026 and further to between 2.5% and 3.2% by the end of 2027, primarily due to small household delinquencies and challenges faced by small and medium-sized enterprises (SMEs). Provisioning levels are expected to increase modestly but remain manageable given the historically low starting point.
Net interest margins (NIM) are projected to compress slightly as market conditions stabilize and competition heightens among banks for prime borrowers. However, this compression is not expected to be severe since Serbian banks predominantly rely on deposits that tend to remain stable. In this base case scenario, NIM is projected at approximately 3.1% to 3.6% in 2026 and around 3.0% to 3.5% in 2027.
Capital adequacy ratios are anticipated to remain comfortably above regulatory requirements throughout this period, with only slight declines expected. The primary factors affecting capital levels will not be credit losses but rather dividend policies and growth in risk-weighted assets (RWAs). Capital buffers are likely to stay stable or decrease marginally as RWAs grow; however, profitability should continue supporting capital even with increased provisioning.
In the **tight case**, characterized by prolonged high rates and weak external demand, banks will maintain liquidity but adopt more restrictive lending practices. In this environment, total credit growth could decelerate to between 5% and 8% in 2026 and further down to between 4% and 7% in the following year. While household credit growth will persist, it may slow significantly due to affordability issues, while corporate lending could face considerable challenges.
The asset quality outlook in this scenario suggests an increase in NPLs, potentially rising to between 2.8% and 3.6% by late-2026 and up to between 3.2% and 4.5% by late-2027 due primarily to stress among SMEs and short-term consumer loans. Banks may respond by increasing provisioning levels while facing pressure on earnings.
Conversely, the **upside case** anticipates faster disinflationary trends alongside improved external demand leading to earlier easing of funding conditions. This scenario would restore confidence among corporate borrowers for both working capital needs and capital expenditures (capex), especially within export-oriented sectors. Total credit growth could remain strong at rates of between 11% and 14% in both years.
In this context, asset quality is likely to hold steady as growth results from improved cash flows rather than lax underwriting practices. NPLs may increase slightly but remain contained within a range of approximately 2.1% to 2.5% by end-2026 and between 2.2% and 2.7% by end-2027.
Overall, regardless of the scenario considered, Serbia’s banking system is not expected to face liquidity constraints but rather challenges related to risk appetite and underwriting discipline. The stability of credit outcomes will depend significantly on macroeconomic developments affecting both domestic and external environments throughout this forecast period.
