KORELACIJA PROBLEMATIČNIH KREDITA I PROFITABILNOSTI BANKARSKIH SEKTORA ZEMALJA ZAPADNOG BALKANA
CORRELATION OF PROBLEM LOANS AND PROFITABILITY OF THE BANKING SECTORS IN THE WESTERN BALKAN COUNTRIES

Summary/Abstract: The banking sector of the Western Balkans is very specific and differs greatly from other banking sectors in Central and Eastern Europe. A survey was conducted in the banking sectors in five countries of the Western Balkans, including: Serbia, BiH, Montenegro, Albania and Northern Macedonia in the period from 2013 to 2019. The subject of the analysis is problem loans (NPLs) on the one hand and the level of profitability measured through the indicators of return on assets (ROA) and return on equity (ROE), on the other hand. The level of problem loans came to the fore with the onset of the global financial crisis, which inevitably led to the growth of problem loans, loans whose arrears are over 90 days. Problem loans are an indicator, which tells us how successful the bank's management is in managing and making a profit. The bank's management must strive to improve them so that banks can function and survive in the financial market in competitive market conditions. In this way, banks will be able to achieve positive results in their operations and thus create conditions for long-term growth and development. It will first look at how successful the banking sectors are in solving problems related to the level of problem loans in times of crisis. Second, a comparative analysis of profitability levels between the observed countries will be presented. The aim of this paper is to show the importance of problem loans and the impact on the profitability of banks in the observed region. Pearson's correlation coefficient will be used in the analysis, where the levels of dependence between the observed variables will be determined.

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