In the first quarter of 2021, banks operating in Lithuania provided households with more home loans and corporate loans, but the flow of credit has not yet reached pre-pandemic levels. Customer deposits at banks continued to grow.
‘Although the economy is recovering, corporate credit levels are not rising yet, so we see significant credit potential in this area. However, due to the economic impact of COVID-19, there is still uncertainty about the quality of the loan portfolio and it may affect the performance indicators of the banking sector, âsaid Renata BagdonienÄ, director of the Banking and Insurance Supervision Department of the Bank of Lithuania.
In the first quarter of 2021, Lithuania’s banking sector generated a profit of almost 75 million euros, an increase of 10 million euros (15.3%) compared to the previous year. Twelve banks and foreign bank branches made a profit, four banks suffered a loss. The unprofitable banks suffered a total loss of â¬ 1.5 million. These market participants started their activities in 2019 or 2020.
The banks’ equity base has increased further. All banks have met the individual capital requirements set for them, while the banks’ liquidity remains very strong. The assets of the banking sector increased by â¬ 568 million (1.5%) to â¬ 38.3 billion in the first quarter of 2021. The annual change was 22.4% or â¬ 7 billion.
The loan portfolio at the end of the quarter was just under â¬ 20 billion. It rose by â¬ 319 million (1.6%) in the course of the quarter, but was â¬ 710 million (-3.5%) below the previous year’s figure.
The corporate loan portfolio, which has been falling since the beginning of the pandemic, grew by 105 million euros (1.3%) to 7.9 billion euros in the reporting period. This development was driven by the â¬ 101 million increase in real estate company liabilities. Nevertheless, the business loan portfolio decreased by â¬ 1.3 billion (-14.5%) compared to the previous year.
The loan portfolio to private households rose in the first quarter by â¬ 199 million or 1.8% (by â¬ 606 million or 7.8% over the course of the year) to â¬ 11.1 billion. The main reason for this was the increase in the housing loan portfolio, which amounted to â¬ 9 billion at the end of the quarter. It grew by â¬ 209 million (2.4%) over the course of the quarter and by â¬ 565 million (9.4%) over the course of the year.
Bank deposits rose by â¬ 726 million, or 2.3%, to â¬ 32.6 billion over the quarter. The aggregated annual growth was â¬ 7.2 billion (28.4%). The largest share of deposits (â¬ 18.3 billion) was made up of household deposits, which rose by â¬ 340 million (1.9%) over the quarter and by â¬ 3.4 billion (22.7%) over the course of the year.
However, it has been observed that annual growth in household and corporate deposits is slowly slowing down, mainly due to increasing consumption, and this trend could become even stronger in the future.
Twelve banks in the country currently have a banking or specialist banking license; six banks operate as foreign bank branches. The Bank of Lithuania is currently working with the European Central Bank (ECB) to examine eight further applications for a specialist banking license.
Every quarter, the Bank of Lithuania publishes on its website information about the main performance indicators of each bank and compliance with prudential regulations. This information is available here.