2013-08-05
In the first quarter of 2013 bank profits dropped due to decreased interest income
With the decrease in the most important income of banks — net interest — in the first quarter of 2013, this year the profits of the banking sector continued to decrease. In the second quarter, when the UniCredit group halted operations in Lithuania, the loan portfolio, which has grown over the year, decreased.
“The development of the banking system in the first half-year was stable, and the withdrawal of UniCredit Group did not significantly influence the financial sector. Due to the prevailing low interest rate environment because of the decisions of the European Central Bank, and with lending slowly recovering, bank income from interest continued to decrease. Such tendencies already affected and can continue to affect the profitability ratios in the near future,” says Vitas Vasiliauskas, Chairman of the Board of the Bank of Lithuania.
In the first quarter of 2013 the profits of the banking system amounted to LTL 550.3 million. Having eliminated profit from transactions related to bank subsidiary companies, the profit of the whole sector, before taxes and provisions, compared to 2012 in the same period, decreased by 12.7 per cent — to LTL 378.6 million. In the first half-year the activities of six banks and six branches of foreign banks have been profitable, while one bank and three foreign bank branches operated at a loss.
At the end of the second quarter banks managed LTL 75.6 billion in assets. The largest share of the portfolio of loans granted to customers over the first half-year of 2013 increased by 2.0 per cent (LTL 1.05 billion) and as of 1 July accounted for LTL 53.9 billion. Although the loan portfolio was 0.7 per cent less that in the first quarter of 2013, this was, to a large extent, due to the aforementioned decision of UniCredit group to discontinue operations in Lithuania.
In the second quarter, banks credited leasing companies as well as public and local enterprises. The loan portfolio of this segment increased by 8 and 2.1 per cent, respectively. For the first time after a four year break, compared to the earlier quarter, a growth of 0.2 per cent, or LTL 43.4 million was recorded for the housing loan portfolio.
Over the first quarter deposits in the banking system grew 4.2 per cent, and on 1 July amounted to LTL 45.7 billion. Although in the second quarter the overall amount of the deposits decreased by LTL 275 million the amount of just deposits by individuals increased by LTL 200 million and reached LTL 26.8 billion. From the increasing volume of funds held by people in banks, it is clear that they trust the country’s banking system, however, small interest change the deposit structure: the share of time deposits decreases.
On 1 July 2013 all banks performed the prudential requirements for banking activities. The capital adequacy ratio of the banking sector remains high — 15.6 per cent. The liquidity ratio on 1 July 2013 reached 39.3 per cent and was by 9 percentage points higher than required.
The Bank of Lithuania, since the last quarter publishes summarized data and every bank’s information about the main banking activity indicators and compliance with prudential requirements for banking activities.
Information about foreign bank branches is revealed only in a consolidated manner, since a competent institution, having established a branch, is responsible for their supervision.
Detailed information about banking activities can be found in the review (458.8 KB download icon).