Bank of Lithuania
2018-06-14
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The first quarter of the year was a success for the strengthened and restructured credit union sector, with its profits and the proportion of sustainable capital shares growing.

‘The results suggest further positive effects of the reform enabling this sector to strengthen; nevertheless, central credit unions must take greater care of the stabilisation fund, which could be compared with putting funds aside ‘for rainy days’, said Vytautas Valvonis, Director of the Supervision Service at the Bank of Lithuania.

After changing the structure of the credit union sector, it now comprises three groups: members of the Lithuanian Central Credit Union (51 credit unions), members of the United Central Credit Union (11 credit unions), and five credit unions in the process of restructuring into specialised banks.

At the end of the quarter, assets of both central credit union groups stood at €517.9 million, loans – €314.6 million, deposits accepted - €455.6 million, profits earned – €1.06 million. Assets of all credit unions amounted to €667 million or 2.6% of the banking system’s assets (a year earlier – 2.5%), growing 2.7% from the first quarter of last year. The bulk of them (nearly 60%) were comprised of loans to members (€398 million) the amount of which increased by 14% over the year.

The recovery of loan value, reduced operating expenses and growth in loan revenue enabled credit unions to earn €1.8 million in profits in the first quarter of 2018 (over the same period last year – €0.3 million): 46 credit unions earned €2.2 million in profits, while 21 credit unions incurred €0.4 million losses.

Over the first quarter of this year, residents deposited with credit unions about €12 million, and the amount of deposits grew up to €593 million at the end of the period, a year-on-year increase of 2% (€581 million). Nevertheless, compared to the beginning of the year, deposits with credit unions contracted on the back of a decline in deposits with credit unions of agricultural workers due to the approaching agricultural season and withdrawal of two credit unions in bankruptcy from the market.

By the way, the latter factor led to a one-sixth decline in credit unions’ share capital over the first quarter of 2018, to €46.3 million at the end of the quarter. However, sustainable shares used to cover losses incurred by a credit union accounted for nearly 82% of the share capital, an increase of 13 percentage points from the beginning of the year.  

At the end of the first quarter, the capital adequacy ratio of the credit union system was 13.03% (the required minimum for members of a credit union is 5.25%, for members of a credit union being restructured into a specialised bank – 7.30%), the liquidity ratio – 45.08%  (the required minimum is 30%). All credit unions complied with the above ratios.

As at 1 April 2018, 67 credit unions, with total membership of nearly 160 thousand, operated in Lithuania.