Against a backdrop of high uncertainty and increasing cyber threats, banks actively lent to residents and businesses
In the third quarter of 2022, the banking sector continued to actively lend to businesses and residents, making the most of its income from these activities. Household deposits continued to increase, but the annual growth rate reduced. Since the outbreak of russia’s war against Ukraine, there has been an increase in various cyberattacks.
“In the economic environment which is clouded by uncertainty, banks maintained active and consistent lending to the country’s businesses and residents. This year, we are witnessing an increase in cyberattacks that could threaten the availability of financial services. While cyberattacks have been poorly coordinated and had little impact, it is essential that commercial banks continue to pay the necessary attention to cybersecurity,” says Simonas Krėpšta, Member of the Board of the Bank of Lithuania.
The assets of seven banks, which have recently started their activities, including those with a specialised bank licence, almost doubled over the year. The reorganisation of the Revolut Group and its consolidation into a bank had a significant impact on the banking sector’s performance (assets, deposits and other indicators). At the end of December, it was recognised by the Board of the Bank of Lithuania as a systemically important institution.
All banks comply with prudential requirements, and sector indicators further demonstrate banks’ resilience to potential challenges. Despite a more gloomy economic outlook, a greater negative impact on the quality of the loan portfolio has not been recorded yet, however cyber incidents have intensified since the launch of russia’s war against Ukraine.
Customer deposits increased by €2.4 billion (6.1%) to €42.2 billion in the third quarter of 2022. Household deposits (the impact of Revolut Bank, UAB excluded) expanded by €1.4 billion (4.3%) during the third quarter. Their volume grew for the second consecutive quarter, and the annual growth rate slowed to 5.4%.
The loan portfolio amounted to €25.6 billion at the end of the third quarter, representing a quarter-on-quarter increase of €1.4 billion (5.7%).
Loans to households rose by €476 million (3.7%) quarter on quarter to stand at €13.4 billion. Housing loans increased by €317 million (3%) to €10.7 billion during the third quarter. Accordingly, the consumer loan portfolio grew by €128 million (10.3%) to €1.4 billion.
Business loans rose by €772 million (7.8%) to €10.7 billion during the quarter. The largest increase was observed in loans to enterprises operating in electricity, gas, steam supply and air conditioning, wholesale and retail trade as well as real estate activities.
After eliminating the effect of the reorganisation of the Revolut Group, the profits of the banking sector amounted to €323.6 million, i.e. €73.2 million or 29.2% higher than during the corresponding period in 2021. This is mostly due to a significant increase in net interest income.
Banks still maintain a widening gap between interest income and expenditure, i.e. the growth of interest on deposits is much slower than that of interest on loans. In the context of rapidly growing profitability of banking activities and high annual inflation, which has a negative impact on consumers, especially socially vulnerable groups, the Bank of Lithuania addressed commercial banks, urging them to be socially responsible financial institutions and to seek that no group of financial service users is excluded from key financial services and that their availability is constantly increased. The Bank also suggested reducing the fees for financial services (especially the key ones).
13 banks in Lithuania currently hold a banking or a specialised bank licence, while six banks operate as a foreign bank branch. The Bank of Lithuania, in cooperation with the European Central Bank, is examining one application for a specialised bank licence.
Each quarter, the Bank of Lithuania publishes information about each bank’s key performance indicators and compliance with prudential requirements on its website. This information is available here.