Monthly information on bank performance, November 2017

Governing Board of the Bank of Slovenia discusses the Monthly information on bank performance, November 2017.

The banking system’s total assets remained at EUR 37.3 billion in September, although year-on-year growth in total assets strengthened to 2.9% as a result of a base effect.

Growth in loans to non-financial corporations is continuing to strengthen, despite the relatively low monthly net increases. The year-on-year rate of growth reached 8.1% in September, and a base effect will remain present until November. September’s increase in growth in total loans to the non-banking sector was largely the result of an increase in loans to other financial institutions at one of the banks.

The banks are further increasing their household lending. The stock of loans to households on the banking system’s balance sheet now exceeds the stock of loans to non-financial corporations by almost EUR 1 billion. In the wake of a pronounced increase in consumer confidence, the strengthening of consumer purchasing power and the anticipated further growth in disposable income, there has been a particular increase in approvals of consumer loans, year-on-year growth in which reached 13.6% in September. Growth in housing loans remains stable, and has generally been just over 5% this year. Despite an increase in the stock of debt at banks, household indebtedness indicators remain favourable, and are still lower than in the past. The banks are leaving credit standards on household loans unchanged at the strict levels previously reached.

The importance of deposits by the non-banking sector is continuing to increase: the proportion of total liabilities that they account for stood at 72% in September. The continuing growth in deposits by the non-banking sector is largely attributable to household deposits, but an additional factor in September was a one-off development at one of the banks. Interest rates on new loans remain extremely low, albeit minimally higher at the banks under majority foreign ownership, which for the moment is not causing any significant switching of funds between banks. The trend of shortening average deposit maturity is continuing: sight deposits account for 68% of total deposits by the non-banking sector.

The quality of the credit portfolio as measured by the NPE ratio is improving again in 2017, albeit more slowly in the third quarter. The NPE ratio declined by 1.4 percentage points over the first nine months of the year to stand at 7.1%. The majority of the decline was attributable to a decline in NPEs to corporates, while there have also been notable reductions in NPEs in the non-residents sector. The burden placed on the portfolio of household investments by non-performing claims remains low. 

The banking system’s pre-tax profit over the first nine months of the year stood at EUR 369 million, up 10,4% on the same period last year. This was mainly attributable to the further release of impairments and provisions this year; in the same period last year they had a negative impact on profit. The banking system’s interest income, non-interest income and gross income are all down on the previous year, although the dynamic in interest income is increasingly reflecting the favourable impact of the increase in credit activity, rises in interest rates in the fixed-rate housing loan segment, and a funding structure that remains favourable in cost terms.

The surplus liquidity in the banking sector remains high. The first-bucket liquidity ratio remains very solid. Secondary liquidity accounts for more than a fifth of total assets. The proportion of secondary liquidity accounted for by Slovenian government securities is declining, and had fallen to just under a half by November.

The banking system’s total capital ratio declined slightly in the first half of the year, reaching 20.5% on an individual basis and 18.7% on a consolidated basis in June. The decline in capital adequacy was primarily attributable to an increase in capital requirements, which have increased faster than capital in the wake of growth in lending.

Publication available in Slovene only, on Mesečna informacija o poslovanju bank.