Banking sector: housing and business loan growth recorded in Q1
In Q1 2021, banks operating in Lithuania granted more loans to households for house purchase and loans to businesses, however, the flow of loans has not yet reached the pre-pandemic level. Customer deposits with banks continued to grow.
“Although the economy is recovering, the level of business loans is not yet rising, thus we see a substantial crediting potential in this area. However, owing to the impact of COVID-19 on the economy, uncertainty about loan portfolio quality is still present and may affect the banking sector’s performance indicators,” said Renata Bagdonienė, Director of the Banking and Insurance Supervision Department of the Bank of Lithuania.
In Q1 2021, Lithuania’s banking sector earned a profit of almost €75 million, a year-on-year increase of €10 million (15.3%). Twelve banks and foreign bank branches earned a profit, while four banks incurred a loss. The banks that were unprofitable incurred a total loss of €1.5 million. These market participants started their activities in 2019 or 2020.
Bank capital adequacy level continued to rise. All banks complied with individual capital adequacy requirements set for them, whereas bank liquidity remains very strong. Banking sector assets increased by €568 million (1.5%) to reach €38.3 billion in Q1 2021. The annual change comprised 22.4% or €7 billion.
The loan portfolio amounted to almost €20 billion at the end of the quarter. It went up by €319 million (1.6%) over the quarter, but was lower by €710 million (–3.5%) than a year ago.
Having contracted since the start of the pandemic, the business loan portfolio grew in the period under review by €105 million (1.3%), to €7.9 billion. This development was driven by the increase in liabilities of real estate undertakings of €101 million. Nevertheless, the business loan portfolio decreased by €1.3 billion (–14.5%) year on year.
The household loan portfolio went up by €199 million or 1.8% in Q1 (by €805 million or 7.8% over the year), to €11.1 billion. This was determined by the rise in the housing loan portfolio, which amounted to €9 billion at the end of the quarter. It grew by €209 million (2.4%) over the quarter and by €774 million (9.4%) over the year.
Deposits with banks increased by €726 million (2.3%) over the quarter, to €32.6 billion. The aggregate annual growth totalled €7.2 billion (28.4%). The largest share of deposits (€18.3 billion) consisted of household deposits, which rose by €340 million (1.9%) over the quarter and by €3.4 billion (22.7%) over the year.
However, it has been observed that the annual growth of household and business deposits is starting to slow down, mainly due to the rise in consumption, and this trend may grow stronger in the future.
Currently twelve banks in the country have a banking or a specialised bank licence; six banks operate as a foreign bank branch. The Bank of Lithuania, together with the European Central Bank (ECB), is currently examining eight more applications 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.