Monthly report on bank performance in August 2018
Governing Board of the Bank of Slovenia discusses the Monthly report on bank performance in August 2018
- Growth in loans to non-financial corporations remained moderate, despite a slight increase. Growth in housing loans remained stable, while the high growth in consumer loans strengthened even further.
- The relatively high growth in household deposits has continued, although the average maturity is still shortening as sight deposits increase.
- The banking system generated a pre-tax profit of EUR 323 million in the first half of this year, up more than a quarter on the same period last year. The release of impairments and provisions has strengthened.
The banking system’s balance sheet total increased by EUR 0.5 billion over the first half of the year to reach EUR 38.5 billion in June, up 3.3% in year-on-year terms. Growth in deposits by the non-banking sector is the largest factor in the growth in the balance sheet total. On the investment side, there has been an increase in loans to the non-banking sector, households in particular. Household loans accounted for a quarter of the banking system’s total assets in June.
Year-on-year growth in loans to the non-banking sector increased to 5.6% in June. June’s increase in loans to non-financial corporations was larger than those in the previous months of this year, but growth nevertheless remained moderate at 2.5%. The banks slightly eased their credit standards on corporate loans, and improved their loan terms. Corporate demand for loans continued to increase, particularly for the purpose of financing investment. In terms of the increase over the first half of the year and the overall stock, loans to non-financial corporations remain behind household loans.
Household loans increased to EUR 9.7 billion in the first half of the year, to end June up 6.7% in year-on-year terms. Year-on-year growth in housing loans was stable in the second quarter of 2018 at more than 4%, while year-on-year growth in consumer loans strengthened again, to 12%. Demand for consumer loans was slightly more pronounced, while the banks slightly eased their credit standards, mainly on account of competition. The proportion of housing loans and consumer loans with fixed interest rates is continuing to increase.
Growth in deposits by the non-banking sector reached 5.7% in June. There was a modest increase in deposits by non-financial corporations in the first half of the year, but the year-on-year rate of growth remains high. Household deposits remain the most important source of funding, and accounted for 47% of total liabilities in June. Year-on-year growth in household deposits increased over the first half of the year, reaching 6.4% in June. The average maturity of deposits by the non-banking sector has continued to shorten, the increase in deposits having been driven by an increase in sight deposits as long-term deposits recorded a net decline. The proportion of sight deposits had increased to 71% of total deposits by the non-banking sector by the end of June, and 73.2% of total household deposits.
The banks’ non-performing exposures (NPEs) declined by a further EUR 100 million in June to EUR 2.1 billion, taking the NPE ratio down 0.3 percentage points to 4.9%. At EUR 1.9 billion, non-performing loans account for the majority of NPEs (the NPL ratio stood at 6.9% in June, down 0.4 percentage points in monthly terms). The decline in NPEs in the first half of the year was primarily attributable to a decline in NPEs to corporates, in absolute terms and in terms of the ratio: NPEs to corporates in June were down EUR 302 million on December 2017 at EUR 1.4 billion, the NPE ratio thus declining by 2.4 percentage points to 10.6%.
Slovenian banks generated a pre-tax profit of EUR 323 million over the first half of the year, up a quarter on the same period last year. Gross income was up 5.9% on the same period last year, as a result of increases in net interest income and net non-interest income. After a long period of decline, net interest income has been recording positive year-on-year growth since May. The ongoing growth in lending was a significant factor in the increase in interest income, which over the first half of the year was down only minimally on the same period last year. The growth in net interest income brought a slight improvement in the net interest margin, which stood at 1.83%, unchanged from the first half of last year. The overall net release of impairments and provisions in the banking system strengthened further, and amounted to EUR 53 million in the first half of the year. Impairments of financial assets accounted for 3.1% of the gross balance sheet total in June.
The banking system’s liquidity position remains favourable. Liquid assets account for 31% of the balance sheet total. The banks have a solid amount of the pool of eligible collateral available, which could be used in the event of major liquidity needs. The banking system’s liquidity coverage ratio is well above the regulatory requirement.