Serbia’s banking sector is entering a new investment phase with historically low levels of problem loans and strong capitalisation, while businesses are confronting higher financing costs. Banking-sector assets stood at RSD 7.353 trillion, equivalent to about €62.6 billion, at the end of July, according to figures presented by the National Bank of Serbia. The share of non-performing loans declined to a historic low of 1.98%. Non-performing housing loans were below 1%, while the sector’s capital adequacy ratio remained above 20% at the end of June. Banks therefore remained substantially above minimum regulatory requirements.
Bank balance sheets strengthen
The latest figures reflect years of declining problem loans, increasing deposits and tighter supervision across Serbia’s banking sector. At the same time, average interest rates on newly issued corporate loans have begun rising again. Both euro-linked and dinar-denominated borrowing became more expensive during the summer, increasing the financing burden for companies planning new investments. The development creates a contrast between banks’ lending capacity and the price businesses must pay to access that financing.
Credit capacity supports corporate lending
The decline in non-performing loans has changed the conditions in Serbia’s credit market. Banks are operating without the legacy burden of high levels of problem assets or weak capital positions, giving them greater balance-sheet capacity to finance manufacturing, infrastructure, energy, commercial property and export-oriented projects. This also provides scope for competition among lenders, particularly when seeking financially stronger corporate borrowers.
Large exporters with predictable cash flows, euro-denominated revenues and established banking relationships are positioned to access financing, while smaller businesses and borrowers with thinner margins, weaker collateral or predominantly dinar revenues face greater sensitivity to lending-rate increases. Even relatively modest changes in borrowing costs can affect the returns generated by their investment projects.
Companies face a capital-intensive investment cycle
Serbian companies are entering the period with significant investment requirements. Manufacturers are investing in automation, energy efficiency and additional production capacity, while exporters face spending needs associated with decarbonisation, environmental compliance and increasingly demanding European supply-chain requirements. Renewable-energy developments, battery-storage projects and industrial self-generation also require substantial amounts of long-term financing.
Infrastructure activity remains strong, with transport, energy and municipal projects generating demand for construction, engineering and related industries. The strength of the banking sector provides a financing base for these investments, although the availability of credit does not by itself determine whether individual projects remain economically viable.
Higher debt costs affect project economics
For companies, the cost of borrowing is becoming an increasingly important consideration. An increase of several tenths of a percentage point can materially change the financing burden on investments funded over seven, 10 or 15 years. For industrial companies, higher interest expenses can extend the payback period for new production lines and automation projects. For renewable-energy developers, more expensive debt can increase the power price required to achieve a targeted return.
For smaller businesses, higher lending rates can determine whether a planned investment can be financed. The distinction is significant because Serbia’s banking sector itself is not showing signs of credit stress. Banks remain liquid and well capitalised, while non-performing loans are at historically low levels. The increasing pressure is instead concentrated on the economics of projects and the affordability of financing for borrowers.
Alternative financing structures gain relevance
Higher commercial borrowing costs could increase the importance of development-bank credit lines, guarantees and blended financing structures. Green finance, export-credit support and investment loans backed by international financial institutions may provide companies with additional mechanisms for reducing the impact of higher commercial borrowing costs. Banks may also expand specialised financing linked to energy efficiency, renewable generation, industrial decarbonisation and export investment.
Competition between lenders could consequently extend beyond conventional corporate loans, with greater emphasis on loan maturity, guarantees, hedging, sustainability-linked structures and financing tailored to specific industries. Serbia’s banking sector enters the investment cycle with record-low non-performing loans and a capital adequacy ratio above 20%, giving banks capacity to support additional credit growth. For companies, however, the strength of bank balance sheets does not eliminate the higher cost of borrowing, making financing conditions an increasingly important factor in investment decisions.
