2015-12-14
The loan portfolio of banks and foreign bank branches operating in Lithuania, having excluded the contribution of one-off technical factors, grew further and amounted to EUR 16.6 billion at the end of the period. The operations of the banking system were profitable; however, with a fall in net interest income and income from commissions, less profit was earned.
‘Gradual growth in bank lending for both enterprises and households for over half a year suggests that this recovery is sustainable. If the rates of development do not change substantially over the last quarter, this year credit growth will be the strongest since 2008,’ said Vitas Vasiliauskas, Chairman of the Board of the Bank of Lithuania.
Having excluded the contribution of the one-off factor — transaction of the planned sale of part of the business of Danske Bank A/S Lithuania branch and Swedbank, AB, for which permission from the Competition Council is yet to be received — the total amount of the banks’ loan portfolio reached EUR 16.6 billion at the end of Q3, a year-on-year increase of 4.4 per cent. The portfolio of loans to enterprises grew by EUR 295 million (3.9%) over the year — to EUR 7.9 billion, while that to households grew by EUR 398 million (5.7%) — to EUR 7.4 billion. The latter growth was mainly due to an increase of EUR 262 million (4.6%) in the housing loans portfolio, which recorded the highest level since 2010.
While interest rates remain at a record low, deposits with banks keep rising further, although most of them are held not as deposits of agreed maturity, but in current accounts. The total amount of deposits was EUR 16.2 billion at the end of the reporting period, an increase of more than EUR 1.6 billion year on year.
The operations of banks were profitable; however, the total profit for the three quarters this year was the lowest since 2010. Over nine months of 2015, banks and foreign bank branches operating in Lithuania earned EUR 168.6 million in profits, a year-on-year decrease of EUR 10.6 million (–5.9%). This indicator was unfavourably affected by both a decline in net interest income and net income from fees and commissions. The fall in the latter income is still being affected by the loss of income by banks due to currency exchange after the adoption of the euro and cross-border payments in euro having dropped to the price of domestic transfers.
In Q3 2015, seven banks and nine foreign bank branches operated in Lithuania. The recently established TeliaSonera Finance AB Lithuania branch had not been operating yet, while in December 2015, the licence was revoked for AB bankas Finasta after the merge with AB Šiaulių bankas. All banks complied with both the minimum capital adequacy requirement (8.0%) and the requirement including the 2.5 per cent capital conservation buffer requirement, which came into effect on 30 June 2015. The overall capital adequacy ratio of banks, as of 1 October 2015, was 24.3 per cent, an increase from the previous quarter (23.8%). All banks also complied with the requirement of additional capital, necessary for covering risks under Tier 2 (risks which are not covered by the minimum capital adequacy requirements), established following the Supervisory Review and Evaluation Process (SREP). It should be noted, however, that, despite the good state of the banking system’s capital, for some banks, the issue of adequate capital reserve remains relevant; consequently, the Bank of Lithuania devotes considerable attention to the monitoring and assessment of risks assumed by banks.
The Bank of Lithuania publishes information about each bank’s major performance indicators and compliance with prudential requirements. Information about foreign bank branches is only revealed on a consolidated basis, since their supervision is the responsibility of a competent authority supervising the bank which has established a branch. For more information on banking activities in Q3 2015 go to the Banking Activity Review (187.5 KB download icon), the summary of bank indicators and the summary of consolidated indicators published on the website of the Bank of Lithuania.