The performance of the Slovenian banking system remains relatively good. The international situation continues to be the main source of uncertainty, which is also being reflected in elevated macrofinancial risk and cyber risk. Household deposits are continuing to increase, while deposits by non-financial corporations declined, which is normal for this time of year. Year-on-year growth in loans to the non-banking sector, primarily to households and non-financial corporations, strengthened further. Profit in the banking system is down on the same period last year, but at annual level remains above its long-term average. The banking system’s resilience remains high, with a stable outlook.
Sight deposits continue to make up the majority of deposits by the non-banking sector
In the latest issue of its Report on bank performance, which covers the data for the first third of the year, Banka Slovenije finds that sight deposits continue to make up the majority of deposits by the non-banking sector. Household deposits recorded solid inflows over the first four months of the year. March’s outflows were the exception, when numerous savers utilised their savings to make bond purchases, the government having issued a people’s bond for the third consecutive year. Deposits by non-financial corporations declined over the first four months of the year, which is normal for this period. Firms are repaying loans, and paying dividends to owners and annual leave allowance to employees.
Household lending is strengthening
Year-on-year growth in loans to the non-banking sector stood at 10.7%, higher than in the same period last year. This is the highest rate since November 2022, and is significantly outpacing the euro area average of 3.7%. Household lending remains the most important segment driving this growth, with the monthly volumes of new housing loans and consumer loans both increasing. These developments are being fuelled above all by high employment and real wage growth. Loans to non-financial corporations are up slightly in year-on-year terms, most notably in recent months. Loans to non-residents have also been a significant factor in this year’s growth.
Bank asset quality remains at a similar level to the end of 2025. The NPE ratio is stable at 1.6%, without any major changes across individual customer segments. The stable NPE ratio in the household portfolio continues to reflect the buoyant labour market and the good financial position of the average household.
Profit is down on last year, but return on equity remains good
Pre-tax profit over the first four months of the year was down on the same period last year. The decline in profit is attributable to both a decline in net income and an increase in net impairments and provisions. These were almost double those recorded in the same period last year, but still accounted for just a small share of the disposal of gross income. The solvency and liquidity of the banking system also remain sound.
Macrofinancial risk and cyber risk are prominent
Similarly to previous quarters, Banka Slovenije assesses these two risks as elevated. The main factor in the macrofinancial risk assessment is the war in the Middle East, while cyber risk is mainly worsening on account of the rapid development of extremely advanced AI models that can be used in cyberattacks. Here it should be reiterated that the resilience of the banking system remains high, with a stable outlook.