2013-05-07
This year the banks increased their loan portfolio, but earned less from the interest
In the first quarter of this year, the banks and branches of foreign banks operating in Lithuania increased the loan portfolio, however, with the decrease of the main source of income—interest income—the banks’ profit, excluding the contributions of one-off factors, decreased.
“Although lending is growing moderately, the smaller profit of banks is due to the dropping interest income. The net interest margin of banks is currently at its lowest in recent years,” said Vitas Vasiliauskas, Chairman of the Board of the Bank of Lithuania. The net interest margin of banks is the difference between interest received by the banks for invested assets, and interest paid to depositors and other creditors.
In Q1 2013 the profits of the banking sector amounted to LTL 372.8 million, however, such a result was mostly impacted by the profit earned by AB Swedbank in selling their life insurance block of shares. Having eliminated the impact of this transaction and the profits of other banks received from subsidiary companies, in Q1 the banking sector’s profits, before taxes and provisions, compared to Q1 2012, decreased by 9.3 per cent—to LTL 186 million.
This year six banks and six branches of foreign banks operated profitably, while one bank and two foreign bank branches operated at a loss.
A large share of the banks’ assets was made up of a loan portfolio that exhibited stable growth for the fourth quarter in a row. In Q1 2013, compared to the the same period in 2012, the sum of loans from banks increased by 5.4 per cent, and on 1 April amounted to LTL 54.3 billion.
The annual deposit growth rate equalled 14.4 per cent and on 1 April amounted to LTL 45.7 billion. The deposits of non-residents on 1 April in the banking sector were only 3.5 per cent of all deposits.
As of 1 April 2013 all banks, excluding the insolvent AB Ūkio bankas, complied with the prudential requirements for banking activities. The banking sector’s capital adequacy ratio, according to 1 April 2013 data, was equal to 15.6 per cent. Over the quarter this indicator increased 1.2 percentage points, mostly because the majority of banks allocated the profit earned in 2012 not for payment of dividends, but to increase capital.
Seeking to support the comparability of data, the influence of the results of AB Ūkio bankas was eliminated from the banking sector indicators, since the conclusions of the inspections of Ūkio bankas performed in December 2012–January 2013 showed that the financial statements submitted by this bank did not reflect their real situation.
The Bank of Lithuania, till now having provided only summarized data of the banking sector’s activities, has decided to publish information about the main banking activity indicators and compliance with prudential requirements for banking activities.
Information about foreign bank branches will only be revealed in a consolidated manner, since a competent institution is responsible for supervision of banks that have established a branch.
Detailed information about banking activities can be found in the review (449.4 KB download icon) (449.4 KB download icon)and Q1 2013 (71 KB download icon) and 2012 (70.8 KB download icon) bank indicator summary on the Bank of Lithuania website.