2025-10-07
Banking sector in the first half of 2025: expanding loan and deposit portfolios, decline in profitability ratios
The Lithuanian banking sector continued to grow in the first half of the year, increasing lending to households and businesses and attracting more deposits. The sector is profitable and well capitalised, however, profitability ratios continues to decline due to strong asset growth and lower interest rates.
“During this period, the banking sector growth was mainly driven by the expansion of one participant’s activities. Together with the European Central Bank, we are making sure that it is sustainable. Less significant banks are characterised by higher credit risk assumed, and further capital increases are particularly important for some of them,” says Julita Varanauskienė, Deputy Chair of the Board of Lietuvos bankas.
The Lithuanian banking sector earned a profit of €537 million in the first half of the year, up by €16.7 million compared to the same period in 2024 (€521 million). This development was mainly due to Revolut’s active expansion across European Union (EU) countries, which led to a 2.3-fold increase in its profits to nearly €103 million. 17 banks and foreign bank branches were profitable, while 2 operated at a loss. All loss-making banks incurred a total loss of €2.3 million. The total profit of three systemically important banks decreased by €30.9 million (8.3%) in the first half of 2025 to stand at €343.9 million, whereas the total profit of less significant banks went up by €5.5 million to nearly €7.5 million.
Banks’ profitability ratios continued to decline on the back of strong asset growth. The return on assets fell and stood at 1.38% at the end of the first half of 2025 (1.65% a year ago), while the return on equity was 18.78% (21.39% a year ago). The cost-to-income ratio, which reflects operational efficiency, stood at 44.29% as of 30 June 2025, having deteriorated by 0.7 percentage points over the year.
Net fee and commission income rose by €284 million (50%) to €854 million. However, after eliminating the significant contribution of the Revolut Group, the income grew by €10.4 million (7%). The performance of banks was reduced by a further increase in administrative and other operating costs, which rose by €22.5 million (6.6%) compared to the first half of 2024, after removing the significant contribution of the Revolut Group.
At the end of the first half, deposits held with banks totalled nearly €68 billion, representing a year-on-year increase of almost 30% Lithuanian resident deposits amounted to nearly €25 billion, while non-resident deposits equalled €27 billion. The latter rose by €3.5 billion (14.9%) over the second quarter. One bank’s intensive expansion across various EU countries played a major role in this growth.
According to the data of Lietuvos bankas, average interest rates on new household time deposits in euro held with Lithuanian financial institutions decreased from 2.12% to 1.88% over the quarter, while those on new corporate time deposits in euro fell from 2.26% to 1.84% (by comparison, average interest rates on new loans decreased from 5.11% to 4.77%). The average interest rates paid by European financial institutions for new resident time deposits were 1.81%, which is lower than in Lithuania, and those for new corporate time deposits were 1.94%, i.e. higher than in Lithuania.
Banks’ loan portfolio grew by almost €2 billion (6%) in the second quarter of 2025, reaching €35 billion, almost a fifth higher than in the second quarter of last year (€29.3 billion).
Loans granted to households increased by €876 million (5%) in the second quarter, to stand at €18.6 million. This was fuelled by the household loan portfolio which grew by €467 million (3.6%) to €13.5 billion. Consumer loans rose by €189 million (5.8%) to €3.5 billion. The growth of this portfolio was triggered mainly by loans granted to non-Lithuanian residents.
Corporate loans expanded at a similar pace (5%) and amounted to €13.6 billion. A significant growth was recorded in financing to companies engaged in electricity, gas, steam supply and air-conditioning activities (€181 million), real estate activities (€149 million), and administrative and support service activities (€80 million). However, most loans were granted to companies active in real estate activities (€3.7 billion), and wholesale and retail trade (€2.3 billion).
The quality of loans remained robust. The share of non-performing (bad) loans decreased: in the second quarter it fell by 0.03 percentage points, making up 0.82% of total loans. As the household loan portfolio expanded, its share of bad loans decreased to 1.09%. The share of corporate bad loans went up by 0.02 percentage points to 1.2%.
The banking sector continued to be well capitalised, although its capital adequacy ratio declined from 24.7% to 22.9% in the second quarter (the benchmark is 8%). Top-tier capital instruments continue to dominate in the banks operating in Lithuania. All banks met liquidity requirements with a relatively large margin, and the liquid asset reserves were significant. The liquidity coverage ratio (LCR) increased from 359% to 468% over the quarter, more than four times the benchmark.
At present, there are 19 banks, including 6 foreign bank branches, operating in Lithuania. Revolut Holdings Europe UAB, the largest player in the banking sector (at the highest level of consolidation), increased its market share by a further 2.7 percentage points over the quarter, to 33.5%. Swedbank, AB held 24.7% of the market in terms of assets and AB Artea bankas (former AB Šiaulių bankas) held 6.2% of the market. These four largest banks are directly supervised by the ECB. Foreign bank branches accounted for 14.6% of the banking sector assets, with the Lithuanian branch of Luminor Bank AS holding the largest share.
Quarterly information about each bank’s key performance indicators and compliance with prudential requirements is available on Lietuvos bankas’ website.