Cumulative inflation in the last three years amounts to 24 percent, and money itself has lost its value by that much, while the current annual rate is 2,1 percent. Citizens hold record sums of money in banks of over two billion euros, of which only 18 percent are termed, and less than two percent are termed for more than three years.
"Vijesti" talked to representatives of banks, the stock market and the real estate market about whether citizens can protect the value of their money and how.
The maximum interest on term deposits is four percent, which is above the current annual inflation rate of 2,1 percent. The problem is that there are very few time deposits, and thus most citizens lose the value of their money.
Only six companies distribute dividends on the Montenegro Stock Exchange, the domestic bond market is not developed, and although they can participate in regional and international markets, very few Montenegrin citizens do so because they are not sufficiently informed.
The interlocutor of "Vijesti" from the real estate market says that the prices of apartments, business premises and land are at an extremely high level, and that there are still sales. He states that it is uncertain how long prices will be able to rise, that is, whether those who buy now will preserve and increase the value of their money, because an average square meter in Podgorica already costs as much as two and a half average net earnings.
Secretary General of the Association of Banks of Montenegro Bratislav Pejaković says that the reason for the increase in deposits is the growth of trust in banks that has been building for decades, as well as the increase in wages, the growth of the economy, foreign direct investments (FDI) and remittances from abroad from emigrants and seafarers, as well as increased inflationary returns.
He says that the increase in deposits is based on the propensity to save, as well as that the Deposit Protection Fund and the Sanitation Fund, which have more than 200 million euros for eventual intervention - funds allocated by commercial banks through premiums, offer additional security for savings in banks.
Pejaković states that the total capital of banks increased by 21,4 percent last year, and that deposits increased by ten percent.
"The data indicate the stability of the deposit base, but the structure is not what we would like to support credit activity. Demand deposits of the resident population amount to EUR 1,663 billion, or about 82%, while deposits up to one year represent over 90% of this category of deposits. On the other hand, the total amount of funds placed with the population at the end of September 2024 is over 1,884 billion euros. Now put yourself in the position of a bank that needs to place funds in this category, where there is a very small percentage of short-term loans, i.e. the requests are mostly more than 5 years old. Therefore, there is a risk of maturity mismatch that is well covered through the capitalization of banks and quality assessment during placement, where we have, along with the growth of the loan portfolio, a decrease in NPLs (harder to collect loans) in banks," said Pejaković.
He states that long-term deposits can earn interest of up to 4% per annum.
"It is the highest return on a euro deposit in the region and beyond, while the average interest on demand deposits is around 0,21 percent at the system level, which is a reflection of over 90% of demand deposits and low interest on that category of deposits. The growth of deposits of natural persons or citizens continues to support a high level of consumer pessimism, which, given the long-term negative trends in the labor market, is a reflection of insecurity, as well as geopolitical trends, sometimes limited information that would indicate an alternative way of preserving value, but above all increased propensity to save and a strong preference for safety, rather than higher returns that require an adequately high risk. The funds that are with the banks are available at all times and do not depend on market movements, as we have with some securities, both in terms of the requested amount, and adequate demand for realization. Banks are very important in our bank-centric financial system from the point of view of providing adequate support for economic growth and development, in order to speed up convergence with EU countries," said Pejaković.
Director of the Montenegro Stock Exchange Milena Vučinić when asked by "Vijesti" whether citizens who have open-ended deposits in banks of almost 1,7 billion euros have ideas and opportunities to invest it, he says that they may have ideas, but that they do not have enough information on how to invest their surplus funds, such as that a kind of inertness is probably also present.
"Citizens and companies are provided with simple access to domestic and global capital markets through domestic participants in the capital market, and are given the opportunity to trade financial instruments both on the Montenegro Stock Exchange and on European and global stock exchanges. Therefore, the Montenegrin capital market allows investing in various financial instruments, both in the country and abroad, so that in this way citizens and companies are given the opportunity to diversify their investments, and to manage surplus funds and current liquidity, that is, they are provided with a wide spectrum of possibilities for placing deposits, and creates an opportunity for a kind of protection against inflation", said Vučinić.
She believes that the culture and attitude towards managing personal finances should change in Montenegro.
"The financial literacy of young people should be improved, numerous activities are already being undertaken in this field, in order to highlight the need for early inclusion of young people in the world of financial markets, which would be a prerequisite for their faster economic independence", Vučinić believes. When asked how borrowing by the state, municipalities or companies could be encouraged through the issuance of notes on the stock exchange, which citizens could also buy, Vučinić said that the stock exchange has these possibilities and that it offers a transparent and safe process. "The stock exchange through the website also allows the interested public, during trading, which starts at 09.30 and lasts until 14 p.m., insight into the state of supply, the state of demand for bonds, data on the number of concluded transactions, the price, as well as the amount of traded bonds," she said. Vucinic. Last year's dividend was shared by six companies - Jugopetrol worth 1,09 euros net per share, Telekom 10,2 cents, Port of Kotor 44 cents, CGES 5,81 cents, PLC Morača 17,9 cents and Građevinski supervision and laboratory tests of two euros per action.
Surplus invested in real estate, huge space for bonds
Broker and investment advisor from "Bull & Bear" Alexander Jovovich he told "Vijesti" that the growth of citizens' deposits in domestic banks is the result of several factors.
"First of all, loss of confidence in the capital market, small number of quality securities (HoV) for investment on the domestic capital market, then insufficient financial literacy of the domestic population, underdeveloped fund industry, non-existence of pension funds, etc. This definitely favors domestic banks, which collect these funds relatively cheaply and invest in HoV, primarily bonds and short-term notes, and in this way have made extra profits in recent years. This situation also favors the real estate market because, due to the lack of alternative investment opportunities, part of the money ends up on the real estate market, and we are witnessing record real estate prices in Podgorica, but also in the rest of Montenegro," said Jovović.
He says that there is definitely a huge space for governments and private companies to borrow through the capital market by issuing bonds.
"The infrastructure for that exists, but it is necessary to reduce the transaction costs to a reasonable level and work much harder to promote those opportunities and raise the level of financial literacy of the population," said Jovović.
Foreigners have confidence, they keep 825 million in banks
In addition to domestic deposits in Montenegrin banks, as natural persons, foreign citizens also have deposits.
"Percentage-wise, the largest share of deposits by client category refers to deposits of residents in the amount of 36 percent, while in second place are deposits of non-resident natural persons with 14,5 percent. In recent years, there has been an evident growth in both the percentage participation and the nominal amount of deposits of non-residents, so that natural persons with foreign status today keep more than 825 million euros in our banks, which indicates the quality of work of Montenegrin banks, both from the aspect of security, the quality of the interest that are offered in our system, as well as the possibility of investing in foreign securities in value through bank custody services", said Pejaković.
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