Banking sector in the first quarter of 2025: more loans and deposits, lower net interest income

“The banking sector began 2025 on a solid footing, it has further expanded lending while maintaining good loan quality, increased the portfolio of deposits, and remains well capitalised and liquid. Although the sector maintains high profitability, it should be noted that net interest income decreased this year, and bank profitability ratios have been decreasing for some time,” says Julita Varanauskienė, Member and Deputy Chair of the Board of Lietuvos bankas.

Financial performance

The Lithuanian banking sector earned a net profit of €267.3 million in the first quarter of 2025, representing an increase of 2.7% compared to the same period in 2024. 17 financial market participants were profitable and 2 operated at a loss. The latter incurred a loss of €0.5 million in total.

The higher profit of the banking sector in the first quarter, compared to the first quarter of last year, was largely driven by one market participant’s significantly increased profit, resulting from a substantial expansion of its activities in various European Union (EU) countries.

Bank profitability ratios continued to decline on the back of strong asset growth. At the end of March, the return on assets stood at 1.42% (1.67% a year ago), while the return on equity was 18.79% (22.21% a year ago). The cost-to-income ratio, which reflects operational efficiency, stood at 44.90% as of 31 March 2025, having increased (deteriorated) by 2.05 percentage points over the year. 

According to provisional data, the temporary solidarity contribution for the first quarter is projected to be at around €21 million. According to Lietuvos bankas’ estimates, the temporary solidarity contribution for 2025 should amount to around €50 million, and the total contribution for 2023–2025 may reach around €525 million.

Banks’ interest income has also been affected by the decline in interest rates since mid-2024 as a result of decisions taken by the European Central Bank (ECB). The sector’s net interest income decreased by €24 million (4.2%) between January and March 2025, compared with the same period in 2024, to €545.3 million.

Net fee and commission income continued to rise; it grew by nearly €123 million (45.5%) in the first quarter of 2025 to stand at €394 million. However, after eliminating the contribution of the Revolut Group, net fee and commission income increased by only €5.4 million (7.2%).

Assets

At the end of 2024, Revolut Holdings Europe UAB, which became the largest player in the banking sector in terms of assets due to strong growth in other EU countries, further increased its market share by 3.1 percentage points in the first quarter of this year, reaching 30.8%. Swedbank, AB held 25.4% of the market in terms of assets, AB SEB bankas 19.6% and AB Artea bankas (former AB Šiaulių bankas) 6.6% of the market.

The total assets of the other nine banks accounted for only 2.6% of the sector’s assets. Foreign bank branches accounted for 15% of the market, with the Lithuanian branch of Luminor Bank AS holding the largest share.

The assets of the Lithuanian banking sector grew by €4.2 billion (5.7%) over the reporting period, reaching €77.6 billion at the end of March, but after eliminating the contribution of the Revolut Group, the increase amounted to only €0.6 billion (1.2%).

Loans

In the first quarter of 2025, the bank loan portfolio grew by €1.3 billion (4%) to €33 billion. Loans to households, which constituted the bulk of the portfolio (42.3%), grew by €674.2 million (4%) to €17.7 billion.

The housing loan portfolio widened by €355.2 million (2.8%) to €13.1 billion, while that of consumer loans went up by €300.9 million (10.1%) to stand at €3.3 billion. The rapid growth of the consumer loan portfolio was largely driven by loans issued to non-Lithuanian residents, which rose by around 16%. The portfolio of consumer loans to Lithuanian residents grew by approximately 3%.

Loans to non-financial corporations accounted for 31% of the total loan portfolio. During the period under review, this segment grew by €308.9 million (2.4%) to nearly €13 billion.

The quality of bank loans remained robust over the period under review. The share of non-performing loans decreased by 0.05 percentage points to 0.84%. However, as a result of the rapid growth of the overall loan portfolio, their gross carrying amount went up by 2.7% to €354.9 million.

Deposits

In the first quarter of 2025, all deposits increased by €3 billion (4.8%) to stand at €64.2 billion, but after eliminating the contribution of non-resident deposits, deposits went up by €257 million (0.6%). A rise of €0.7 billion (14.6%) in household and public authority deposits and a slight increase of non-financial corporation deposits had the biggest impact on the growth in deposits (after eliminating the contribution of non-resident deposits). Meanwhile, as a result of seasonal effects, household deposits dropped by €347 million (1.4%).

During the period under review, non-resident deposits grew by €2.7 billion (11.4%) to €23.5 billion. This was mainly driven by the continued strong expansion of one banking sector participant’s activities in EU countries. Funding from non-residents has remained stable for other banks, with the share of non-resident deposits holding steady at around 7% of customer deposits over the past three years.

The average interest rates on new euro-denominated deposits with an agreed maturity, held by euro area non-financial corporations and households with Lithuanian monetary financial institutions, decreased from 2.67% in January to 2.18% in March 2025. Meanwhile, the share of time and cumulative deposits in the customer deposit portfolio stopped growing, holding steady at 20.5%.

During the period under review, time and cumulative deposits of households increased by €128 million (1.4%), while their share in the household deposit portfolio went up by 0.9 percentage points to 37% (excluding the Revolut Group as there are only demand deposits). The current deposits of households (excluding the Revolut Group) held with banks amounted to €15.9 billion.

Indicators and challenges for the sector

The capital adequacy ratio of the banking sector went up from 21.9% to 24.7% (the benchmark is 8%) over the quarter, and the sector is well capitalised. The total capital adequacy ratio of the four largest banks under the direct supervision of the ECB rose from 21.9% to 24.8%, and from 20.8% to 22.2% for the other banks. However, capital increases continue to be particularly relevant for some less significant banks.

One of the most pressing challenges faced by banks remains the fight against financial fraud and cyberattacks. Upon assessing the scale of financial fraud and its impact on the financial system, Lietuvos bankas submitted proposals to state institutions for a coordinated response to financial fraud at the national level.

From 17 January 2025, banks and other financial market participants are subject to the Digital Operational Resilience Act. Banks have already started providing updated information on major information and communication technology (ICT) incidents, further strengthening operational resilience by updating their ICT risk management and control systems, conducting security tests, and strengthening control over ICT service providers.

Between January and March 2025, banks were still the target of recurrent cyberattacks. In most cases, banks were disrupted by distributed denial-of-service (DDoS) attacks. The impact of these attacks is usually short-lived and does not pose a threat to data protection. However, there have also been more impactful data encryption attacks.

19 banks, including 6 foreign bank branches, operate in Lithuania. Together with the ECB, Lietuvos bankas is currently assessing two more applications for a specialised bank licence.

Quarterly information about each bank’s key performance indicators and compliance with prudential requirements is available on Lietuvos bankas’ website.

Banking Activity Reviews are published here.

Supervision of financial market participants, Banks