Banks in Lithuania back in black
08.02.2012, 14:57Lithuanian banking system's net profit surged in 2011 but the growth seems to have been fuelled mostly by technical and accounting reasons, not by expanding lending activity, reports news2biz.
According to the country's central bank Lietuvos bankas, the banks posted a combined unaudited net profit of LTL 1.1bn thus recovering from nearly LTL 0.3bn of losses suffered in 2010. The 2011 result fell short of matching the system's profitability record of 2007 (LTL 1.2bn) but the reasons for a successful year were different: in 2011 profits were generated from reclassified bad loan provisions made during 2009-2010 while in 2007 profits were produced by red-hot lending activity.
Lietuvos bankas notes that the shrinking bad loan provisions demonstrate that the banks may have been too conservative when estimating chances of loan recovery.
Another two significant contributors to high 2011 profits were re-evaluation of investments into newly profitable leasing subsidiaries by two local banks as well as a 14% increase in net interest income that was generated by shrinking deposit interest costs, rather than more active lending.
With the bankrupt Snoras bank eliminated from the equation, the banking system's assets rose by 7% to LTL 79bn (-3% with Snoras).
Credit lending remained subdued although more active than in 2010 (new loans outweighed loan repayments a few months in H2 2011): the total credit portfolio slimmed by 0.3% to LTL 53.9bn (without Snoras).
Lithuanian banking system's net results, in LTL bn:
2011: +1.1
2010: -0.3
2009: -3.0
2008: +0.9
2007: +1.2