The Slovenia Times

Covid-19 slashes combined H1 profit of banks by two-thirds y/y


Revenue from interest and non-interest sources alike has been dropping, while the cost of impairments and provisions has increased. In the first six months of the year, Slovenian banks reported a combined profit of EUR 132 million before tax, two thirds less than the year before.

The central bank has ascribed the declining profitability to extremely disadvantageous trends in revenue as well as expenditure.

Net revenue from interests has gone down by 3.6%, while net non-interest revenue is more than 25% lower than last year. At the same time, interest expenditure of banks has risen by 4.6%.

Moreover, Banka Slovenije says that the poor economic situation has driven up impairments and provisions, which amounted to EUR 98 million in the first half of the year, the equivalent of 16.5% of the banks' revenue.

The combined total assets of banks have increased to EUR 43.2 billion at the half-year mark, which was 7.7% more than a year ago. The banks' assets in their central bank accounts have increased by EUR 1.6 billion, in June alone by EUR 638 million.

Meanwhile, the shock that followed as the pandemic reached Slovenia slowed the growth in loans to the non-banking sector significantly. In June it was at 1.8% year-on-year, which was 4 percentage points less than in December 2019.

The drop was affected above all by fewer loans to companies and households, the central bank said in its most recent report about the operation of Slovenian banks.

After an above-average increase in loans to companies seen in March, these have been falling for three consecutive months, while year-on-year growth in loans dropped to 0.6% by the end of June.

The growth in loans to households has been dropping since the start of the year and most significantly since Slovenia declared epidemic in mid-March, reaching 1.8% in June.

The growth of consumer loans has stalled the most, while the growth in housing loans has also grown slower.

Meanwhile, non-profitable exposure has been capped under EUR 1 billion, even dropping by 0.1 percentage points.

Growth of non-banking sector deposits continued to increase significantly, reaching 9.9% by the end of June compared to the same time last year.

The growth of household deposits reached 10.2%, which the central bank attributed to lower spending by households, holiday bonuses and state funds designed to mitigate the effects of the Covid-19 crisis.

Meanwhile, the growth of deposits by companies reached 13.6%, with deposits totalling EUR 7.3 billion. The biggest growth was seen in on-demand deposits which also represent three-quarters of all company deposits.

Combined capital adequacy quotient dropped to 18% in the first quarter of the year, while CET1 quotient dropped to 16.3%. The central bank said that this was a one-off effect and that the situation will become clearer in the coming months.


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