Press release - Monthly information on bank performance in May 2017
The Governing Board of the Bank of Slovenia has discussed and approved the Monthly information on bank performance*.
Year-on-year growth in total assets was positive in May for the third consecutive month, although the increase of 1.5% in total assets was primarily the result of an increase in liabilities to the Eurosystem in March and deposits by the non-banking sector, most notably household deposits. On the investment side, the main increase was recorded by liquid assets, while loans to the non-banking sector were less significant.
Year-on-year growth in deposits by the non-banking sector remained solid in May, at 5.8%. Household deposits have accounted for three-quarters of this year’s increase in deposits. Growth in these deposits declined slightly to 5.7%. Sight deposits are continuing to increase, and account for 66% of total deposits by the non-banking sector.
Growth in loans to the non-banking sector is gradually increasing, reaching 3.7% in May. The banks are still increasing their lending activity to households. The stock of household loans in May was up 6.9% or EUR 586 million in year-on-year terms. Growth in consumer loans, which in previous years had been negative for a long period, increased to 11.6%, while growth in housing loans stabilised at just over 5%. Loans to non-financial corporations declined slightly in May, although the year-on-year rate of growth increased to 3.4% as a result of the contraction in loans in the first half of 2016. The net increase in loans to non-financial corporations over the preceding 12 months reached EUR 286 million.
The rising pace of growth in loans has not yet been fully reflected in the breakdown of earnings. The banking system’s gross income is continuing to decline. This is primarily attributable to the decline in net interest income, which at 8.4% is still relatively pronounced. The banks have also seen a decline in net non-interest income, while operating costs remain comparable to the same period last year. The amount of impairments and provisions released by the banks over the first five months of this year was less than in the same period last year, which is adversely affecting this year’s pre-tax profit. The banks generated a pre-tax profit of EUR 210 million over the first five months of the year, down 14% on the same period last year.
The increased pace of credit growth was reflected in a further decline in the proportion of the banks’ portfolio accounted for by non-performing loans. The quality of the credit portfolio as measured by the NPE ratio in line with the broader EBA definition of non-performing exposures has been improving in 2017. The NPE ratio declined by 0.8 percentage points over the first five months of the year to 7.7%. The improvement in the credit portfolio is also evident in exposures to corporates. The NPE ratio for corporates stood at 15.3%, down 1.6 percentage points on December 2016.
The increase in credit growth also brought an increase in capital requirements in the first quarter. The capital adequacy of the Slovenian banking system declined slightly in the first quarter, but nevertheless remained above the euro area average. The total capital ratio of the Slovenian banking system reached 20.6% in March on an individual basis, and 18.8% on a consolidated basis.
The stock of liquidity in the banking system remains relatively high, although as the structure of bank liabilities shifts in the direction of a higher proportion of sight deposits, the need for liquidity is changing. It is important for banks to also adapt to this process by adequately managing their liquidity.
*publication is available only in slov. language http://www.bsi.si/iskalniki/porocila.asp?MapaId=1329