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Banks were more active in lending to businesses in 2011, while halted operations of SNORAS made corrections to record high deposit figure

January 25, 2012

In the second half last year, for the first time since 2009, the amount of new loans to private enterprises exceeded the flow of repaid loans.

Preliminary estimate showed the portfolio of loans to businesses contracted in the first half of 2011 by approximately LTL 0.7 billion, although in the period between July to December new bank loans to private enterprises were by LTL 0.3 billion higher than the flow of repaid loans.

“The estimated breakthrough in bank lending to private businesses materialized in the middle of the summer driven mainly by the growth in borrowing appetite of businesses and a slight easing of lending requirements. However, the above signs of recovery should be treated with caution. Businesses that were gaining momentum recently and credits to them are to be affected by sentiments and expectations in Europe, which are very contradictory at the present time,” Governor of the Bank of Lithuania Vitas Vasiliauskas said.

Unfortunately, improved lending in some sectors in the second half last year did not compensate for more passive first months. Last year, the amount of loans to private enterprises decreased approximately by LTL 0.4 billion (1.5%) to LTL 27.4 billion.

In 2011, total portfolio of loans by domestic banks declined by LTL 0.8 billion (1.4%) to LTL 57.5 billion, a markedly less fall compared to 2009 and 2010 when the loan portfolio contracted respectively by LTL 9.9 billion and LTL 3.2 billion.

The loan burden melted in 2011 thanks to natural entities. The amount of loans to them went down over the year by LTL 0.8 billion (3.3%) to LTL 24.4 billion. Repayment of consumer and other than housing loans by natural entities had the largest impact on the said change. The portfolio of the said loans contracted by LTL 0.7 billion (15%) to LTL 4.4 billion. Only a slight change was observed in the portfolio of housing loans, which decreased by LTL 0.1 billion (0.5%) to LTL 19.7 billion.

A decrease was also observed last year in lending by financial institutions. Their portfolio contracted by LTL 0.3 billion (13.7 %) to LTL 2.5 billion.

The overall decline in banking loan portfolio was partially compensated by an increase of approximately LTL 0.5 billion (36%) to LTL 1.9 billion in the amount of loans to government institutions and a hike of LTL 0.3 billion (27.83%) to nearly LTL 1.5 billion in the portfolio of loans to enterprises managed by general and local governments.

The last year changes in loans were calculated based on the assumption that the loan portfolio of AB bankas SNORAS remained unchanged since mid-November.

The suspension of AB bankas SNORAS’s activities had an impact on the deposit market statistics. A record high (over LTL 45,8 billion) deposit amount was fixed in the domestic banking sector last September.

Preliminary data showed that deposits in the domestic banking system excluding AB bankas SNORAS grew between 31 December 2010 to 31 November 2011 by approximately LTL 0.3 billion (0.7%) to LTL 39.4 billion.

December 2011 was different from other months because of the payment of deposit insurance compensations: deposits in other banks jumped approximately by LTL 3.7 billion (9.5%) to LTL 43.1 billion in the last month of 2011 .

The amount of deposit insurance compensations paid to private individuals and enterprises in December maid up approximately LTL 3.2 billion), therefore according to preliminary estimate net growth in deposits during the last month in 2011 is lower than LTL 0.5 billion.

“The deposit growth at the end of the year is in the usual run of things. However, the further growth of deposits in other domestic banks after the activities of AB bankas SNORAS were suspended shows the country residents’ belief that the risk is kept under control. All domestic banks keep operating on an even keel and comply with the set requirements,” Vasiliauskas summarized.

More detailed information about the activities of the domestic banking sector will be released by the Bank of Lithuania in February.