Press release - Latest Economic and financial developments and bank performance
The Governing Board of the Bank of Slovenia discussed and approved the publications Summary of economic and financial developments, May 2016 and Monthly information on bank performance in March 2016.
-Summary of economic and financial developments, May 2016
Publication in english: Summary of economic and financial developments, May 2016
- Monthly information on bank performance in March 2016
The contraction in the Slovenian banking system’s total assets continued in the first quarter of 2016 at a slower pace than in previous years. Total assets stood at EUR 37 billion or 96% of GDP at the end of March. The banks’ liquidity remains high in the context of a continuing contraction in loans, while the average capital adequacy of the banking system is also at a satisfactory level, although there are significant differences between individual banks. Neither the liquidity nor the capital adequacy of the banks represents a limiting factor for increased lending activity.
The slowdown in the contraction in corporate loans, which began in 2015, eased somewhat in the first quarter of this year. The year-on-year contraction in loans stood at -12.8% in March compared with
-19% the previous year. Lending activity remains limited to a great extent by low creditworthy demand from corporates for debt financing. However, the recovering economy and favourable interest rates could spur increased demand for corporate loans.
Growth in loans to households remained low but positive in the first quarter at 0.5%. The low level of indebtedness of households, low interest rates and affordable real estate prices are contributing significantly to growth in housing loans, which were up 1.4% in March. The contraction in consumer loans has been slowing for some time now, with that contraction slightly less than 1% below the positive growth threshold.
The banks’ debt repayments on the wholesale markets strengthened slightly in March due to the maturing of debt securities and the continuing repayment of debt to banks in the rest of the world. March’s decrease in deposits by the non-banking sector was the result of the withdrawal of government deposits. However, the latter did not slow growth in the aforementioned deposits, which reached 3.2%. Household deposits continued to increase and were up by EUR 318 million in the first quarter, with the large domestic banks accounting for more than half of that increase. That growth was the result of sight deposits. The stock of sight deposits is also increasing due to a reduction in short-term and long-term deposits, which are maturing. Savers are not rolling over their deposits due to exceptionally low interest rates, and are instead leaving funds on account. Sight deposits accounted for 59% of total household deposits in March.
The quality of the banks’ credit portfolio is improving. The proportion of claims more than 90 days in arrears fell to 8.2% in the first quarter of 2016, down 2 percentage points on the end of 2015. The proportion of non-performing exposures stood at 10.8% in the first quarter according to the broader EBA definition, which alongside its broader capture of bank investments also includes forborne exposures under non-performing exposures for some time after debtors have begun making regular debt repayments, while a declining trend is also evident. The quality of the portfolio is improving in the most indebted segments, in particular in terms of claims against non-financial corporations and non-residents. The majority of claims more than 90 days in arrears is still accounted for by claims against non-financial corporations, but both the stock and proportion of claims within the aforementioned sector have fallen to the level recorded at the beginning of 2010.
The banks generated a pre-tax profit of EUR 146 million in the first quarter of 2016. An increase in net non-interest income and the continuing release of impairments and provisions have contributed to improving operating results.