2016-02-26
Assets of credit unions grew by more than EUR 55 million (9%) over 2015, to EUR 672.6 million. However, the fourth quarter’s losses led to negative annual performance: the sector reported a loss of EUR 0.6 million for 2015.
‘In granting new loans, credit unions assessed more closely the financial status of borrowers and credited their financially more viable members; hence, some of the credit union loan quality indicators improved last year. However, we still see some problems in the field of crediting, of which loans overdue and persisting sustainable capital requirement are major ones. Systemic regulatory changes would help strengthen capital. We expect lawmakers to undertake them during the spring session,’ says Ingrida Šimonytė, Deputy Chair of the Board of the Bank of Lithuania.
After the Seimas Committee on Budget and Finance approved the Conception for Sustainable Operation of Credit Unions, draft legal acts, necessary for the implementation of systemic restructuring of the credit union sector, were submitted to this Committee as early as last year. Once they are approved, an important task will be set for credit unions — to attract sustainable capital, necessary for their stable and credible operation. According to I. Šimonytė, credit unions must immediately start preparing for this.
An increase in both the number of loans overdue for more than 60 days and the loan-to-value ratio raises the greatest concern. It is also important that credit unions do not use assets taken over for their own needs, which means that the expenses of their oversight and sale will still have to be recognised in the future, leading to a fall in credit union profitability.
According to unaudited data, 51 credit unions whose operations were profitable in 2015 earned a profit of EUR 3.2 million, while 23 credit unions that operated at a loss sustained a loss of EUR 3.8 million. The losses were due mainly to the asset depreciation costs incurred (EUR 5.6 million) as well as specific provisions formed.
Income fell in 2015 as well: compared to 2014, the income of credit unions fell by 12.4 per cent. Most of it (almost two-thirds) consisted of interest income. Operating and interest expenses accounted for the largest share of the sector’s expenses (almost half and a fourth respectively).
Increasing membership of credit unions entailed a rise in their share capital of EUR 3.5 million (6.8%) last year, to EUR 54.9 million at the end of the year. The adjusted capital of credit unions, which is important in the assessment of the operating risk assumed, increased slightly as well (5%) — to EUR 57.7 million. For some credit unions, however, strengthening their capital has remained a major task.
Accepted deposits were the major funding source for credit unions last year. In 2015, the deposit portfolio expanded by almost EUR 52 million (9.7%), to EUR 587 million at the end of the year. Time deposits with credit unions, which pay higher interest on them than banks, grew by EUR 21 million (5%) over the year; sight deposits, on which no interest is payable, grew by EUR 31 million (25.7%).
For more information on the operating performance of credit unions for 2015, see the review published on the website of the Bank of Lithuania. Aiming to increase transparency in the domestic financial market, the Bank of Lithuania publishes information on each credit union’s main activity indicators and compliance with prudential requirements in a special summary.
Public Relations Division