The influence of liquidity and profitability on the banking sector performances: The example of Serbia

Abstract

As our country has been opening itself more to foreign capital, foreign banks have brought their paradigm of efficient business methods in the banking system of the Republic of Serbia. This paper shows the seven-year analysis of the time series based on the ratio indicators of liquidity and profitability of the 10 largest banks doing business in the Republic of Serbia for the period between 2010 and 2017. In this research we used data from quarterly reports issued by the National Bank of Serbia and the selection criteria for banks was the amount of total net assets. As the percentage of participating banks' share is 77.1% of the total net assets of all banks operating in the Republic of Serbia, the values obtained approximate the performance of the entire banking system to a very good extent. The objective of this paper is to interpret these indicators in the aim of supporting the decision-making process concerning the credit-based and other finance-based relationships with clients so as to demonstrate whether monitoring of monetary authorities needs to be raised to a higher level, assuming that in the observed period the banking system of the Republic of Serbia was stable.

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