Comparative Analysis of the Impact of Balance Sheet Size on Bank Operations in the Republic of Serbia in the Period Before and During the Covid-19 Pandemic

Original scientific paper
Author: Željko Račić, PhD, Branka Paunović, PhD
doi: 10.5937/bankarstvo2104036R
Keywords: banking sector of the Republic of Serbia; size of total assets of banks; liquidity of banks;
profitability of banks; lending of banks; solvency of banks; concentration of banking sector; Covid-19
pandemic; static panel regression models
JEL: G21, M41, C33, C65

Summary: This paper aims to analyze the impact of the size of banks operating in the Republic of Serbia on
the main indicators of their business activity and assess whether the Covid-19 pandemic has changed
the nature and intensity of this impact. The research was conducted on a representative sample of
twenty-three domestic banks. The paper’s conclusions are based on the results of applying static panel
regression models and cover the period from the second quarter of 2014 to the third quarter of 2021.
From the study results, it can be concluded that larger banks reduced lending activities and increased
liquidity during the pandemic compared to smaller banks. This had no impact on their profitability,
meaning that banks achieved higher returns on capital compared to smaller banks, as in the prepandemic
period. In addition, the study found that larger banks reduced the ratio of capital to total
assets during the pandemic compared to smaller banks, but not to the extent that threatened the
banking sector’s stability.

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