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Montenegro

Summary Details:

  • iconS&P Rating: B+
  • iconMoody's Rating: Ba3
  • iconFitch Rating: N/A
  • iconDepository Insurance: EUR 50,000
  • iconIncome Tax: 5%
  • iconCorruption Index: 76
  • iconPeace Index: 55
  • iconDate Modified: Jun-2015

Syndicated Analyses:

BBC "Documents tarnish Montenegro's EU bid" 29-May-2015:
An investigation by the BBC and the Organised Crime and Corruption Reporting Project (OCCRP) has uncovered documents which cast serious doubt on plans for the tiny Balkan nation of Montenegro to join the European Union. Montenegro is an official candidate to join the EU and accession talks begin next month. This is despite concerns about allegations of political and financial corruption, which have led to the country being described as a "mafia state" - a claim which is forcibly rejected by the Montenegrin government.
Montenegro's former Prime Minister, Milo Djukanovic, who is still president of the country's ruling party, was investigated by the Italian anti-mafia unit and faced charges over a billion-dollar cigarette smuggling operation based in Montenegro. Those charges were eventually dropped in 2009. As head of state, Mr Djukanovic had diplomatic immunity.
The handling of key privatisations, as the former Yugoslav country emerged from decades of communism, has caused widespread anger as Montenegrins have seen bills for services like electricity soar. Thousands have taken to the streets, marching under yellow banners, accusing their political leaders of looting the country. They are demanding that Mr Djukanovic is put on trial. Vanya Calovic, leader of an anti-corruption opposition movement, told the BBC: "Everyone is closing their eyes on the fact the country, government, executive, all parts of the power are linked to organised crime."
It faced UN sanctions and turned to large scale smuggling of American cigarettes into Europe. They were distributed by Italian mafia, which is why the Italians launched their investigation. It found that Montenegro earned hundreds of millions of dollars a year from the trade. After the break-up of Yugoslavia, Prime Minister Djukanovic became an ally of the West. In 2006, the United Nations recognised Montenegro as an independent state and the prime minister embarked on a series of privatisations.
After the crisis in Greece there will be concerns about any lack of transparency in Montenegrin finances. The influential American publication, Foreign Affairs, described Montenegro as a "mafia state" earlier this year.
Standard & Poor's "Republic of Montenegro 'B+/B' Ratings Affirmed On Economic Growth Potential; Outlook Stable" 15-May-2015:
We anticipate that Montenegro's economy will grow an average of 3.4% over 2015-2018 supported by an increase in investment activity. We are therefore affirming our 'B+/B' ratings on Montenegro. The stable outlook eflects a balance of risks from worsening external, fiscal, and general government debt metrics against the country's growth potential over the coming 12 months.
Our ratings on Montenegro are constrained by the country's relatively low income levels (we estimate per capita GDP at $6,200 in 2015), high external indebtedness relative to peers, and the lack of monetary policy flexibility arising from the country's unilateral adoption of the euro.
The construction of the Bar-Boljare highway has just started and we expect this project will support economic growth over the next five years. While on one hand we expect net imports to increase, on the other hand we anticipate investment activity, especially in the tourism and energy sector, will pick up strongly.
Downside risks to our growth forecast could materialize if large-scale investment projects, including the highway, were to stall, or if a deep recession in Russia greatly affected Montenegro's economy through lower tourism receipts. According to our projections, Montenegro's general government debt is set to rise further, peaking at 73% of GDP in 2018.
Domestic companies continue to face tight lending conditions demonstrated by high interest rate spreads. High, yet declining, nonperforming loans (16.7% of total loans at end-March 2015) further weigh on banks' appetite to lend. Credit growth was negative last year, but we expect it to pick up as the economy gains steam. This trend may be further helped by the recent granting of three new bank licenses, which may lead to interest rate spreads declining as well as implementation of the socalled Podgorica Approach, a process intended to foster voluntary out-of-court restructuring of nonperforming loans.
Despite increased cooperation with the European Central Bank (ECB), the country is not part of the eurozone (European Economic and Monetary Union) and Montenegrin banks have no access to ECB liquidity facilities. The government's policy options are further constrained by shrinking domestic credit and a relatively undeveloped capital market.
We could lower the ratings on Montenegro if: • The country's fiscal metrics deteriorate further than we currently envisage. This could result from cost overruns related to the highway construction, further costs incurred in relation with legal proceedings and restructuring at KAP, the aluminum plant, or a loosening of the fiscal stance, potentially from expenditure overruns from lower levels of government. • The country finds it harder to roll over its external debt. • Large-scale FDI projects stall or do not materialize at all, as this would depress Montenegro's growth prospects.
Moody's Corporation "Moody's changes outlook on Montenegro's Ba3 rating to negative, affirms rating" 31-Oct-2014:
The key drivers of the outlook change are: 1) The adverse impact on the government's debt metrics of the mostly loan-funded, EUR809 million (about 23.8% of GDP) Bar-Boljare highway's priority section construction over the next four years; 2) The expected erosion in the country's fiscal and external shock absorption capacity, due to high fiscal deficits in excess of 6% of GDP over the next four years, higher gross borrowing requirements and increased exteral imbalances. The Ba3 rating affirmation reflects the country's high revenue generation capacity with a revenue-to-GDP ratio above 40%, and favourable average funding costs which support debt affordability indicators.
Wikileaks Global Intelligence Files "Greece Should Stay in Euro Even in Default, Montenegro Says" 03-Mar-2013:
Montenegro's banking industry is still recovering from the global recession, the International Monetary Fund said in a May report. The "euroization" of the banking sector "limits the ability of the central bank to provide liquidity support to lenders, said the IMF, which called for the application of"conservative" capital and liquidity requirements.
Wikileaks Public Library of US Diplomacy "The Global Economic Crisis Hits Montenegro" 01-Apr-2009:
Montenegrins, historically distrustful of the banking system (reftel A), have been withdrawing deposits rapidly in the wake of the global crisis. In the last six months, roughly 300 million Euros -- a decrease of 6.5 percent since early 2008 -- in deposits have been withdrawn, putting aditional pressure on the liquidity of the domestic banking system.

Banks table:

Size RankSort DescBank NameSort DescAssets in thousands EURSort DescProfits in thousands EURSort DescS&P RatingSort DescTop RateSort DescView
1Crnogorska Komercijalna Banka572,032-908N/A2%View
2NLB Montenegrobanka516,6895,476N/A3.75%View
3Societe Generale Montenegro380,8015,714N/A2.8%View
4Erste Bank AD Podgorica376,8845,968N/A2.2%View
5Prva banka CG276,313520N/A4.4%View