The aggregate net profit of commercial banks in Kosovo increased 27.5% y/y to EUR 19mn in January-August, according to central bank data. The rise in net profit is mainly attributed to the decreasing loan loss provisions, which fell 7.2% y/y over the period to EUR 31mn.

In August 2013 alone, the banking sector earned a net profit of EUR 0.9mn as compared to EUR 4.3mn a year earlier. In addition, the sector's cumulative profit after taxes for the twelve-month period ending in August declined 19% y/y to EUR 22.6mn.

The combined expenditures of Kosovo's banking sector totalled EUR 145.4mn in Jan-Aug 2013, which was 0.8% less than in the same period of 2012. The banks' non-interest costs fell 4.5% y/y to EUR 37.5mn (pulled down by the shrinking loan loss provisions). Furthermore, the general and administrative expenses slid 1.5% y/y to EUR 65.5mn.

On the other hand, despite the declining average deposit interest rates, the banks' interest costs grew 3.8% y/y to EUR 42.4mn due to the expanding deposit base.

Meanwhile, the sector's aggregate revenue inched up 0.6% y/y to EUR 166mn in Jan-Aug. Interest income, the banks' main revenue driver, ticked down 0.3% y/y to EUR 133mn. Non-interest income, though, grew to 4.3% y/y EUR 32.8mn (driven by bigger fees and commissions earnings).

The central bank data showed that the assets of Kosovo's nine commercial banks climbed 7.1% y/y to EUR 2.96bn at end-August. In monthly terms, the assets were up 3.8%. The ratio of bank assets to the full-year GDP forecast rose slightly to 54.7% in August 2013 as opposed to 54.4% a year earlier.