Monthly information on banks performance
Governing Board of the Bank of Slovenia discusses the Monthly briefing on bank performance in 20171.
According to provisional figures, total assets stood at EUR 37.9 billion at the end of December 2017, up 2.4% during the year. The proportion accounted for by loans to the non-banking sector increased, as the proportion accounted for by investments in securities declined. The banks also retained a relatively high proportion of the most liquid assets on their balance sheets. On the funding side, there was a further increase in the proportion accounted for by deposits by the non-banking sector, in the wake of a decline in funding on the financial markets.
Year-on-year growth in loans to the non-banking sector slowed to 4.8% in December. The slowdown was primarily attributable to a base effect from the sharp increase in loans to non-financial corporations in December 2016. Year-on-year growth in loans to non-financial corporations slowed from 7.8% in November to 2.2% in December, which alongside the prevailing base effect was also attributable to a decline in the stock of loans at the end of 2017. In December the proportion of total assets accounted for by loans to non-financial corporations was at one of its lowest levels in history. It stood merely at just over a fifth. The stock was EUR 1.1 billion less than loans to households.
The increase in loans to the non-banking sector as a whole amounted to just under EUR 1 billion in 2017, of which household loans accounted for the majority (60%). After recording high rates during the year, year-on-year growth in household loans slowed in the last few months to stand at 6.8% in December. The slowdown in growth was seen by all types of loan: growth in consumer loans reached 12.9%, while growth in housing loans reached 4.8%. There was a decline in new loans in the final part of the year, particularly fixed-rate loans, and a shortening of the average maturity of long-term loans. While growth in household loans remained relatively high, the banks left their credit standards unchanged at high levels last year after initially tightening them in the first quarter.
Deposits by the non-banking sector increased by EUR 1.4 billion or 5.3% in 2017, two-thirds of which was attributable to household deposits. The sole increase was recorded by sight deposits, which at the end of the year accounted for 68.5% of all deposits by the non-banking sector, and almost half of the banking system’s total assets. Household deposits increased by EUR 938 million or 5.6% in 2017, including a seasonally strong increase of EUR 180 million in December. In the final quarter certain banks raised their average interest rates on new household deposits of more than 1 year, which slightly slowed the contraction in long-term deposits. Growth in corporate deposits at banks remained high last year, as the stock reached EUR 6.1 billion at the end of the year.
The quality of bank investments improved again in 2017. The NPE ratio declined by 2.5 percentage points to reach 6.0% in December, as NPEs declined by just under EUR 1 billion to EUR 2.5 billion. The banks pursued a more intensive approach to non-performing claims against non-residents, primarily through write-offs at the end of the year. The largest stock of NPEs remain those to non-financial corporations, which amounted to EUR 1.7 billion, although there has also been a significant improvement in investment quality in this segment.
The banks were profitable in 2017, and according to provisional figures generated a total pre-tax profit of EUR 441 million, up a fifth on the previous year. All components of income continued to decline: gross income, net income, net interest and non-interest income. However, there was a sharp slowdown in the decline in net interest income in the wake of the increase in lending. The banks generated positive growth in net fees and commission, which is the most important component of net non-interest income. A positive contribution to income on the expense side came from the net release of impairments and provisions, which amounted to EUR 40 million across the banking system over the whole of 2017. Renewed growth in operating costs had a negative impact on income, after several years of falling costs.
The banking system has maintained a large stock of surplus current liquidity, while the sound liquidity position is also being reflected in the maintenance of a high first-bucket liquidity ratio, the high proportion of the pool of eligible collateral that is free, and a ratio of secondary liquidity to total assets of 19.7% in December of last year. The structure of secondary liquidity has continued to shift in the direction of an increase in foreign marketable securities eligible as collateral for Eurosystem operations.
The capital position of the Slovenian banking system remains good, despite a slight decline in capital adequacy over the first three quarters of 2017. The total capital ratio stood at 20.2% on an individual basis and 18.4% on a consolidated basis at the end of September of last year. The gradual decline in capital adequacy is the result of strengthening lending activity, and the associated increase in capital requirements, which are increasing faster than regulatory capital.
Monthly report on bank performance