Impact of Global Financial Crisis on Banking Profitability: The Case of Serbia

The global financial crisis has been threatening the banking world since 2007. The erosion of profits and rising losses of banks have been the inevitable consequence of this crisis. "The decline in bank profits was a global phenomenon" (BIS, 2009). Consequential decline in profitability during 2008 was dramatic (ECB, 2009). A significant reduction in profitability was also recorded in the countries of Southeastern Europe (SEE), as well as in countries of Central and Eastern Europe (CEE). The exception is Serbia, whose banking sector achieved remarkable growth of ROA and ROE profitability in 2008 - for over 20% compared to last year, though the banks from Serbia were among the most successful in Europe in 2007. Investigation of this paradox represents the topic of this work. The plan of the article is accommodated to this topic: 1. the global financial crisis and banking profitability; 2. banking profitability in Southeastern Europe (2005-2008); 3. paradoxical growth of banking profitability in Serbia during the crisis; 4. conclusion.