2018-10-01
The banking sector continued to expand in the second quarter of this year. Banks earned profit and complied with their prudential requirements. The Bank of Lithuania is actively seeking to attract new market participants – together with the European Central Bank, it is currently assessing four applications for a specialised bank licence.
“Lithuania’s banking sector is continuing the previously-initiated consolidation processes. In order to reduce concentration within the sector, the Bank of Lithuania actively seeks to attract new market participants, which would be beneficial to consumers. To this end, we are maintaining close dialogue with potential entrants of the banking sector that applied for a specialised bank licence. We hope that our efforts will bear fruit already this year,” said Renata Bagdonienė, Director of the Prudential Supervision Department at the Bank of Lithuania.
In the second quarter of 2018 bank assets were boosted by the significant increase in the loan portfolio. On a quarter-on-quarter basis, the assets of the banking system grew by €551 million (2.1%), to €26.7 billion. Loan growth was financed with new deposits and previously attracted funds.
The net value of the portfolio of loans granted to bank customers increased by €1 billion (5.5%), to €19.9 billion. This was largely influenced by additional lending to corporates and big business clients. Household crediting, including housing loans, was also on a rise.
Following the usual contraction in deposits at the start of the year, the amount of deposits increased rather significantly. As at 1 July 2018, customers held €20.4 billion in deposits with banks, a hike of €575 million (2.9%) if compared to the last quarter. Household deposits recorded the highest increases. This was driven by the rising household and business income during the first half of the year.
Over the first half of 2018, operations within the domestic banking sector were profitable: banks and foreign bank branches earned almost €180 million in profit, a nearly 16% increase year on year. 11 banks and foreign bank branches operated at a profit and only 1 market participant incurred a loss. Net interest income has remained the main source of income for banks.
All banks operating in Lithuania complied with the established capital and liquidity requirements.
The Banking Activity Review for the second quarter of 2018 will be available here.