‘After intensifying crediting last year, banks accelerated the pace this year. The development of business lending added up to stable growth in the resident loan portfolio as well. Looking ahead, new market participants – specialised banks – are also likely to affect credit volumes and increase competition, especially within the small business segment. Specialised banks will be allowed to establish themselves as of the next year; however, we feel an active interest from certain market participants already now,’ says Vytautas Valvonis, Director of the Supervision Service of the Bank of Lithuania.
Over the first three quarters of 2016 the total value of the banks’ loan portfolio boosted by EUR 1.7 bln – twice as much as over the same period year ago – to EUR 18.1 bln as of 1 October. Both businesses and households intensified borrowing.
Deposits with banks continue to increase: at the end of the period, they amounted to EUR 17.4 bln. Businesses stood out in the increase in deposits: the amount of their deposits grew by EUR 473 million (10%) over the quarter, to EUR 5.2 bln as of 1 October. Household deposits remained almost unchanged during the reporting period – their amount picked up by 0.3% – to EUR 10.5 bln.
Bank branches and foreign bank branches earned EUR 177.8 mln in profits over the first nine months – which is a year-on-year increase of 5.5%. The major influence on the banks’ total net profit stemmed from an increase in net interest income and a decline in administrative expenses, as well as one-off factors. Ten banks and foreign bank branches operated at a profit and only three market participants incurred a loss. All banks operating in the country complied with the established capital requirements; however, for some banks the issue of capital strengthening is still relevant.
The domestic banking sector is preparing for significant changes in 2017 that affected bank fees already in 2016. For example, as early as before coming into force of the requirement for the basket of basic payment services, banks, one after another, offered to customers payment plans, which eliminated such faulty practices as fees for the incoming funds. This year, banks’ gross services and commissions income dropped by EUR 1.1 mln (–0.6%) over the three quarters year on year, to EUR 173.5 mln.
The Law on Credit Related to Real Estate will come into force in the middle of the next year; it will enforce general standards for the protection of clients with housing loans. The Law lays down a number of provisions beneficial for clients, related to customer information, comparability of credit standards, prohibition to purchase other bank products on a mandatory basis together with a housing loan.
As of next year, EUR 1 mln will suffice for equity capital instead of EUR 5 mln, required for a conventional bank, in order to establish a specialised bank. Specialised banks will be able to provide nearly all traditional banking services, i.e. to accept deposits, grant loans; however, it will not be able to provide investment services.
