2011-07-26
Vitas Vasiliauskas: Banks accelerate their activities, however, they have to stay watchful
“We see evident signs of recovery – the banking system is gaining momentum. Currently, however, we are in a stage when the most challenging task is to safeguard favourable tendencies and to provide sustainability of growth”, the Chairman of the Board of the Bank of Lithuania Vitas Vasiliauskas said when presenting the Review of Banking Activities for the second quarter, this year.
As at 1 July 2011, asserts of the banks operating in the country amounted to LTL 81.4 billion. Over the quarter, the said asserts increased by LTL 1.5 billion (1.9%). This increment was determined mostly by the increased funds in other banks.
Loans granted to the clients during the second quarter decreased by LTL 778.5 million (1.3%), i.e. they accounted for LTL 56.9 billion. This change was mostly determined by several large-amount transactions. However, loan portfolio of private enterprises in Lithuania rose by around 1%, and bank crediting liabilities increased by as much as 16% (LTL 0.9 billion). This allows expecting that crediting will became even more intense in the future.
The portfolio of housing loans rose for the first time over more than two years. In the second quarter compared to the first one it increased by LTL 31.7 million, i.e. by LTL 19.79 billion.
During the first half of the year, the banks earned LTL 513.6 million profit while last year, over the same period, the banks incurred a LTL 408.1 million loss. The profit of the first half of this year is only slightly smaller compared to that that the banks usually earned during the economic upturn from 2007 to 2008. Seven banks and five foreign bank branches earned profit; two banks and five foreign bank branches suffered losses.
Improving profit indicators were influenced by decreasing provisions for bad loans since along with the recovering economy more and more loans which previously were considered non-performing were started to be repaid. Moreover, banks received much more net interest income: during the first half of the year they earned over LTL 712 million, i.e. LTL 204 million (40%) more compared to the same period last year.
”The profit growth from interest rates was mostly determined by decreasing bank expenditure for interest rates that they pay for deposits and other financial resources. However, there is no much space for the price of financing resources of the banks to go down, therefore in order to maintain stable interest income or to increase them, the banks should increase the lending”, Vitas Vasiliauskas said.
According to him, the banks will have to continue prudent lending which will also be promoted by the Provisions of Sensible Lending of Banks that the Bank of Lithuania is currently closing to completion. It is of importance to adequately evaluate the already granted loans and to timely set aside provisions for bad loans. In the first quarter, all banks operating in the country complied with the prudential requirements set by the Bank of Lithuania, however, in order to avoid potential threats it is important to strengthen the capital base.
In the first quarter, deposits of customers at the banks decreased; in the second quarter they increased marginally by LTL 83.5 million (0.2%) and amounted to LTL 44.8 billion. Individual deposits increased to the record level, i.e. they amounted to LTL 26.12 billion.