Monthly report on bank performance, January 2019
Governing Board of the Bank of Slovenia discusses the Monthly report on bank performance in November 2018.
- Growth in loans to the non-banking sector strengthened slightly in November 2018, to 6.1%. Household loans recorded the main increase over the first eleven months of last year, while loans to non-financial corporations recorded a lesser increase.
- Year-on-year growth in household deposits was relatively high in November 2018, at 6.4%. The proportion of total deposits by the non-banking sector accounted for by sight deposits increased to 72%.
- The banking system generated a pre-tax profit of EUR 502 million over the first eleven months of last year.
- The banking system’s capital adequacy had declined by the end of the third quarter, but nevertheless remained at a solid level. The banking system’s liquidity position remains favourable.
Year-on-year growth in the balance sheet total slowed to 1.9% in November 2018. The balance sheet total increased by EUR 159 million to EUR 38.5 billion in November. This was primarily attributable to an increase in liquid forms of asset, and less to an increase in loans to the non-banking sector, while on the liability side the increase was attributable to deposits by the non-banking sector.
Growth in loans to the non-banking sector increased slightly in November 2018, to 6.1%, primarily as a result of a base effect; the stock of loans increased by EUR 44 million. Growth in household loans stood at 7.1%, as consumer loans recorded growth of 11.7%, and housing loans recorded year-on-year growth of 4.7%, similar to the previous month. Year-on-year growth in loans to non-financial corporations remains moderate, at 3.1%. The stock of household loans reached EUR 10 billion in November, almost EUR 1.5 billion more than the stock of loans to non-financial corporations.
The quality of bank investments is continuing to improve. The NPE ratio declined to 4.2% in November, equivalent to NPEs of EUR 1.8 billion. Despite falling fast, the NPE ratio remains high in respect of non-financial corporations (8.9%), particularly in the sectors of real estate activities (21.0%), construction (17.9%) and wholesale and retail trade (16.6%). Despite a fast increase in exposure, the quality of the household portfolio is favourable and improving: the NPE ratio stood at 2.3% for housing loans, and 2.9% for consumer loans in November. With the aim of preventing a reduction in credit standards and a deterioration in this part of the banking system’s portfolio, in November the macroprudential recommendation for housing loans was extended to consumer loans.
Year-on-year growth in deposits by the non-banking sector stood at 5% in November, and is continuing to outpace growth in the balance sheet total. The proportion of total liabilities accounted for by deposits stood at 74%, while the net increase in deposits is sufficient to fund lending activity. Year-on-year growth in household deposits was relatively high, at 6.4%. Sight deposits increased to account for 72% of total deposits by the non-banking sector, and almost 54% of total liabilities.
The banking system generated a pre-tax profit of EUR 502 million over the first eleven months of 2018, up 18% on the same period of 2017. The banking system’s gross income was up 5.5% in year-on-year terms, as a result of increases in both net interest and net non-interest income. Year-on-year growth in net interest income, which has been positive since last May, reached 3.3% in November, as a result of an increase in interest income and a decline in interest expenses. Operating costs over the first eleven months of the year were comparable to those in the previous year, and the net release of impairments and provisions continued (in the amount of EUR 55 million).
The banking system’s liquidity position remains favourable, as the proportions of highly liquid assets and secondary liquidity remained high: together they account for 31% of the balance sheet total. The liquidity coverage ratio is above the regulatory requirement, at 323%.
The banking system’s capital adequacy had declined by the end of the third quarter of 2018, but nevertheless remained at a solid level. The total capital ratio reached 19.8% on an individual basis, and 18.1% on a consolidated basis, and remains above the euro area average. The decline in capital adequacy was attributable to a decline in share capital, as the banking system’s capital requirements remained unchanged at the end of the third quarter of 2018.