Rise in net interest income improves profitability in Lithuanian banking system in Q1

The considerable improvement in net interest income (10.4% y/y) in Q1 has contributed to the increase in bank profitability, the central bank said in a statement on Tuesday (Jun 14). Consolidated net profit increased 7.5% y/y to EUR 61mn, data show. There were 11 profitable institutions and 2 which posted losses. Net interest income amounted to EUR 97.2mn in Q1, which stood for an increase of EUR 9.1mn y/y and accounted for 61.4% of total operating income. Interest income continued to decline (-2.3% y/y) in Q1 but was more than offset by the strong drop in interest expenses which drove the improvement in net interest income.

Bank assets stood at EUR 23.5bn at the end of March, rising by a marginal 0.2% since the end of December last year and a more meaningful increase of 3.8% y/y. Bank loans increased 3.7% q/q to EUR 17bn at end-March. The stock of deposits fell by 2.3% q/q to EUR 16.7bn. The decline followed a strong rise in the final quarter of 2015 (EUR 816mn), which was attributed to the payment of end-year bonuses which seem to have been spent in the next three months.

The central bank also noted that the capital adequacy of the banking system was sound. However, it noted, in line with the findings of a previous report on the stability of the financial system, that banks whose capital is of Lithuanian origin have lower capital ratios than banks which are owned by a Nordic state parent institution. This seems to create more difficulties for the first group of banks to source additional capital quickly and inexpensively in case of adverse circumstances.

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