Economic downturn caused by coronavirus reflected in bank performance

The banking system is doing business in the harsh environment caused by the Covid-19 epidemic and the lockdown measures, and this is being reflected in bank performance. Growth in household loans has halved, while growth in corporate loans is also gradually slowing. Corporate and household deposits are still increasing, primarily on account of reduced spending, and partly as a result of government payments to alleviate the impact of the epidemic.

Thanks to the government emergency measures, NPEs are not yet increasing, but the ongoing recession is likely to see them rise in the future. The decline in interest income and non-interest income, and the renewed creation of impairments and provisions are reducing bank profitability, and the effect is expected to be even larger in the coming quarters. Following this year’s contraction, the economy is expected to stabilise over the next two years.

Figure: Slovenian banking system’s profit, comparison with the same period last year

Note: The brown bars illustrate the contributions by each income or expense component to the change in profit between the first five months of last year and this year. 

The publication is undergoing translation.