Serbia's consolidated banking system assets, including the central bank, declined 2.1% y/y to RSD 3,894bn ( EUR 33.9bn ) at end-November 2013 after edging up 0.1% y/y the month before dragged down by falling lending activity, central bank (NBS) data showed. The ratio of bank assets to full-year GDP forecast fell to 103.5% at end-November from 117.4% a year ago, according to IntelliNews calculations. Domestic credit, which accounts for 57% of total banking sector assets, shrank 1.8% y/y to RSD 2,202.3bn at end-November, deteriorating from a 0.4% y/y contraction at end-October, due to falling corporate lending. Loans to companies decreased 10% to RSD 1,009.8bn after a 8.7% y/y drop the month before. Retail loans, on the other hand, grew 3.3% y/y to RSD 674.7bn in November accelerating slightly from 3.1% y/y hike in October thanks to higher cash and housing loans. Lending activity has faltered since the second quarter of the year due to falling corporate loans after the end of the government-subsidised lending programme in March. We expect the NBS to continue easing the monetary policy in the coming period after it cut its one-week repo rate to 9.5% from 10% earlier in December. This should help trim borrowing costs and boost private sector credit. In addition, the government also said it will launch a RSD 12bn guarantee fund in order to facilitate corporate financing.
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