Evaluation of Financial Performance of Banking Sector: Evidence from Bosnia and Herzegovina, Croatia, Serbia and Slovenia

Abstract

The objective of this study is to compare the financial performance of the banking sector in some ex- Yu countries: Bosnia and Herzegovina, Croatia, Slovenia and Serbia for period from 2005 to 2010. Banking sector of Yugoslavia was strong but because of the weakness and the collapse all these characteristics disappeared. The financial performance of banks is study on the basis of some selected financial variables and ratios, such as return on asset, return on equity, capital adequacy ratio, share of non-performing loans in total loans, participation of deposits, assets and loans in Gross Domestic Product of the country. All of the indicators improved in period until the beginning of the global crisis, but with the first signs of crisis the conditions in entire economy worsen as well as the situation in the banking sector. Data show that banking system of these countries suffers from problems largely influenced by its huge debt to IMF, political situation, financial crisis, internal situation and other political factors. The authorities of banking system in selected countries took some measures in order to improve financial position and to slowdown the negative consequences of the global crisis. Keywords: Banks, ROA, ROE, Non-performing loans, Reforms, Crisis