„The banking sector was rather active in crediting Lithuania’s economy and, by maintaining high profitability, contributed to the financing of defence. While the growth of non-performing loans has been kept to a minimum, we are closely monitoring this area and encourage banks to pay due attention. The number of time deposits continued to rise, but residents are still not making full use of the favourable conditions, and interest rates are starting to decrease gradually,“ said Simonas Krėpšta, Member of the Board of Lietuvos bankas (Bank of Lithuania).
In the first quarter of 2024, Lithuania’s banking sector earned a net profit of EUR 260.3 million, nearly EUR 2 million (or 1%) more than in 2023 (EUR 258.4 million). Fourteen financial market participants were profitable and four operated at a loss. The latter incurred a total loss of EUR 3.3 million. According to provisional data, the solidarity contributions paid for the first quarter of 2024 totalled around EUR 83 million. The solidarity contribution for 2024 is projected to amount to approximately EUR 240 million.
Banks’ interest income increased by EUR 293 million (more than 60%) compared to the first quarter of 2023 to EUR 767 million. Interest expenses rose by EUR 148 million (almost four times) to EUR 198 million. Net interest income expanded by nearly EUR 145 million (34%) to EUR 569 million.
In the first quarter of 2024, all deposits increased by EUR 0.6 billion (1.3%) to EUR 51.4 billion, but, after eliminating the Revolut Group’s (mainly active in other European Union countries) impact, they fell by nearly EUR 0.2 billion (0.5%).
In the first quarter of 2024, household time deposits grew by almost EUR 460 million (or 5.9%) to EUR 8.2 billion, and their share increased from 33.6% to 36.3% of household deposits (excluding the Revolut Group since all of its deposits are current).
In the first quarter of 2024, the bank loan portfolio increased by EUR 646 million (2.3%) compared to the fourth quarter of 2023 and amounted to EUR 28.1 billion. Loans to households, which constituted the bulk of the portfolio (43.3%), grew by EUR 278 million (1.9%) to EUR 15.3 billion. The housing loan portfolio increased by EUR 140 million (1.2%) to EUR 11.8 billion, while consumer loans increased by EUR 179.9 million (8.7%) to stand at EUR 2.2 billion.
In the housing loan segment, the share of the three major lenders continued to shrink slightly (down by 0.3 percentage points over the quarter) to 89.3%, while lending for consumption continued to be dominated by banks specialising in this segment.
Loans to non-financial corporations, which accounted for one third of the total portfolio, rose by EUR 175.4 million (1.6%) in the first quarter of 2024 to EUR 11.4 billion, while their annual growth stood at EUR 806 million (7.6%). The bulk of the loans were granted to companies engaged in real estate operations and construction, while lending to merchants contracted.
The quality of the loan portfolio deteriorated slightly over the quarter. The share of non-performing (bad) loans went up by 0.05 percentage points to 1.06%, and their book value was EUR 27.9 million (8.4%) higher than at the beginning of the year. The volume of corporate non-performing loans increased by EUR 17.3 million to EUR 166.4 million (1.6% of commercial loans), while household non-performing loans grew by EUR 10.6 million to EUR 194.6 million (1.3% of household loans).
Banking sector liquidity remained exceptionally high in the first quarter of 2024, with all banks meeting the requirements with a margin. The liquidity coverage ratio (LCR) stood at 405% and was four times above the required minimum of 100%, while the net stable funding ratio (NSFR) stood at 194%, almost twice the required minimum of 100 %. Banks remained well capitalised: the sector’s capital adequacy ratio stood at 20.53% (the benchmark is 8%).
No cyber incidents were recorded in the banking sector in the first quarter of 2024. Banks are continuing their preparations for the implementation of the Digital Operational Resilience Act (DORA) requirements and further strengthening the security and resilience of their IT systems against cyber threats. The DORA Regulation aims to increase the digital operational resilience of the European Union (EU) financial sector by strengthening the ICT and third-country risk management and incident reporting systems of financial entities.
At present, there are 18 commercial banks, including five foreign bank branches operating in Lithuania. Lietuvos bankas, together with the European Central Bank, is currently examining one application for a specialised bank licence.