Press release - Monthly information on bank performance, August 2017
Ljubljana, 4. 9. 2017
At its meeting of 29 August 2017 the Governing Board of the Bank of Slovenia discussed the August 2017 Monthly information on bank performance*.
The banking system’s total assets stood at EUR 37.2 billion in June, up 2.3% in year-on-year terms.Total assets declined in June, as a result of a decline in government deposits and deposits by other financial institutions, and further debt repayments on the wholesale markets. The main decline on the investment side was in the banks’ balances at the central bank and claims against other banks. At the same time lending activity to the non-banking sector strengthened further on the investment side.
Growth in loans to the non-banking sector increased to 4.9% in June, as a result of an increase in loans to households and non-financial corporations. Growth in loans to households has continued to increase: year-on-year growth in consumer loans reached 12%, while growth in housing loans has stabilised at 5.2% in recent months. Despite the lower growth, housing loans remain ahead of consumer loans in terms of stock and in terms of half-yearly increase. The proportion of new loans accounted for by fixed-rate loans has continued to increase, while their average maturity at approval is also increasing. A slow upturn in interest rates on loans of this type has been evident in recent months, while variable interest rates remain at the low levels seen previously. Growth in loans to non-financial corporations has undergone a sustained strengthening, the year-on-year rate reaching 5.8% in June.Loans to SMEs in manufacturing increased in particular in the first half of the year.
Growth in deposits by the non-banking sector slowed slightly in June. Growth in household deposits has been slowing since February, but remains solid at 5.5%. Household deposits thus retain their leading role in funding, accounting for 45.7% of the banks’ total liabilities in June. The shift in the average maturity of deposits by the non-banking sector towards sight deposits has continued: they accounted for 66% of total deposits by the non-banking sector at the end of the first half of the year.
The quality of the credit portfolio as measured by the NPE ratio in line with the broader EBA definition has improved again in 2017. The NPE ratio declined by 1 percentage point over the first half of the year to 7.5%. Although the majority of the decline is attributable to a decline in NPEs to corporates, they still account for two-thirds of the banking system’s NPEs. Within the corporate sector, there was a notable improvement over the first six months of the year in the sectors of manufacturing, accommodation and food service activities, construction, and real estate activities.
The growth in lending to the non-banking sector, and within this framework the growth in fixed-rate loans, which have displayed a trend of growth in recent months in the housing loan segment, are being reflected in a slight slowdown in the decline in interest income. A longer period of lending recovery will be required for a more pronounced impact on interest income. The banks are also continuing to see a decline in net non-interest income, while operating costs remain comparable to last year. The net interest margin declined to 1.82% in the first half of this year. The further release of impairments and provisions at system level has made a positive contribution to the banks’ financial result. The banks generated a pre-tax profit of EUR 253 million over the first half of the year, down 10% on the same period last year.
The capital adequacy of the banking system remains favourable. Capital adequacy declined slightly in the first quarter of this year as credit growth brought an increase in capital requirements. The total capital ratio reached 20.6% on an individual basis, and 18.8% on a consolidated basis.
The liquidity position of Slovenian banks remains favourable, which is evidenced in the relatively high first-bucket liquidity ratio, the solid stock of secondary liquidity, and the high proportion of the pool of eligible collateral at the Eurosystem that is free. In the wake of the further shortening of the average maturity of deposits by the non-banking sector, and the resulting increase in the possibility of the sudden need for liquiditys, it is important for the banks to maintain an adequate stock of liquidity and to properly manage it.
*only in Slov. language