Bank of Lithuania
2020-12-15
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In the third quarter of 2020, Lithuania’s credit unions were actively granting loans (particularly to households), which resulted in a one-third increase in the sector’s profits. Both deposits and its share capital recorded upward trends as well.

“The pandemic has not so far hindered the rapid growth of the credit union sector, yet the negative repercussions of the prevailing uncertainty and loan deferrals may still occur later. That is why it is important to ensure that all sector participants appropriately manage the rising risks related to capital and liquidity,” said Jekaterina Govina, Director of the Financial Market Supervision Service of the Bank of Lithuania.

During the first nine months of 2020, the credit union sector earned €5.1 million in net profits – up by a third year on year (€3.3 million). 52 profitably operating credit unions earned €5.8 million, while eight credit unions incurred a €0.7 million loss. Due to active lending activity, credit unions experienced a 25% increase in their net interest income and a 28% growth in net income from services and commissions.

Over the third quarter, credit unions granted to their members €650 million in loans (€525 million to households and €126 million to businesses). Compared to the previous quarter, loans to natural persons grew by €24.3 million (4.9%), while to legal persons – by €0.1 million (0.1%).

During the reporting period, deposits increased by €67.8 million (9.7%) to €763.4 million, whereas during the same period last year, they grew by €29.8 million (4.8%). Fixed-term and sight deposits rose by 3.9% and 28.8% respectively.

The share capital of credit unions also recorded a rapid growth in the third quarter, rising by €2.3 million (4.5%) to €54.6 million. Such trends were related to the growing capital needs due to increasing lending volumes.

During the period under review, credit union assets grew by 9.1% to reach €888.8 million or 2.5% of the total banking sector assets. Although loans comprised the largest part of credit union assets (73.2%), their share during the third quarter decreased. This was determined by early credit repayments and a lower borrowing demand resulting from the seasonal nature of agricultural activities. Deposits – the main funding source for credit unions – were used to finance 86% of their assets.

With the growth in deposits of credit union members outpacing loans and rising inflows observed in the third quarter of 2020, the liquidity ratio increased as well.

In the reporting period, there were three credit union groups operating within the Lithuanian credit union sector: the Lithuanian Central Credit Union (LCCU) group with 45 members, the United Central Credit Union (UCCU) group with 11 members, and four credit unions undergoing restructuring into specialised banks, comprising a total of 60 credit unions with 162,600 members.

All credit unions, except for one, complied with the set prudential requirements. The country’s central credit unions not only provided financial services to their members but also helped them maintain liquidity, ensured their solvency as well as monitored and assessed the assumed risks.

The latest Review of the Credit Union Sector can be found here (available in the Lithuanian language).