Šiaulių Bankas Group earned EUR 11.5 million of unaudited net profit in the Q1
Over EUR 300 million worth of new credit agreements were signed and the loan portfolio increased by EUR 107 million to EUR 2.2 billion
The newly established EUR 275 million multi-apartment buildings modernization fund was launched
Low number of clients face medium or higher dependence on business relations with war-affected countries
Overview of Key Performance Indicators
“It seems that the emerging challenges are becoming a new reality - as soon as we get used to the pandemic, we have to respond to the war in Ukraine, ensure the compliance of increased international sanctions, while not forgetting the main goal of the Group – to provide quality services to its customers. It is gratifying that the volume of financing to clients is increasing, the number of housing credit agreements is reaching new records and in the field of renovation, we are proud to have created a unique financial instrument – the multi-apartment buildings modernization fund of EUR 275 million, which is planned to be used to renovate up to 600 old multi-apartment buildings, thus improving living conditions of 16 000 households,” said Vytautas Sinius, CEO of Šiaulių Bankas.
In the Q1, Šiaulių Bankas Group earned EUR 11.5 million of unaudited net profit (7% less than a year ago, when the profit amounted to EUR 12.4 million). Operating profit before impairment and income tax amounted to EUR 17.1 million, which is by 10% more compared to the same period last year.
The strong growth in lending volumes in recent years and a steady increase in client activity, helped net interest income to grow by 19% YoY to EUR 22 million and net fee & commission income by 9% to EUR 4.5 million.
Due to the tense geopolitical environment and the possible its negative impact on the development of the Lithuanian economy, the Group made provisions of EUR 2.7 million in the Q1. At the end of the quarter, the cost of risk (CoR) of the loan portfolio stood at 0.5% (0.01% in the corresponding period of the previous year).
The Group’s cost to income ratio (excluding the impact of client portfolio of SB Draudimas) increased during the year and stood at 45.4% at year-end (42.4% last year). In the Q1, the return on equity was 11.5% (14.2% in the same period last year). The capital and liquidity position continues to remain strong and prudential ratios are being met with a large reserve - with a liquidity coverage ratio (LCR) of 204%* and a capital adequacy ratio (CAR) of 20%*.
Overview of Business Segments
Corporate and Private Client Financing
Although the start of the year was marked by instability and high volatility, there were positive trends in lending volumes, with the value of the loan portfolio increasing by 5% in the Q1 and by 22% over the year, to more than EUR 2.21 billion. EUR 309 million worth of new credit agreements were signed, an increase of 24% compared to the Q1 2021.
The business finance portfolio grew by 4% in the Q1 and by 12% in the year (to EUR 1.22 billion). The amount of new loans signed was 16% higher than in the Q1 of last year and amounted to EUR 172 million. Due to several non-performing loans from corporate clients, these loans portfolio grew by 10% (i.e., by EUR 6.5 million) to over EUR 70 million.
The Bank monitors the tense geopolitical situation in order to properly and timely assess and identify the potential impact of Russia’s invasion of Ukraine on the Bank’s operations and the quality of its portfolio due to the risks it poses to clients. The Bank has no operations in Russia, Belarus or Ukraine and does not have significant direct exposures in these countries. The Bank considers the secondary risk, i.e., the risk of direct insolvency of clients operating in Lithuania due to the geopolitical situation to be low: the Bank’s largest clients are aware of the threats, the number of clients dependent on business relations with Ukraine and Russia is low, and clients with business relations in the countries mentioned above are reducing their dependence of their income on business transactions. During the Q1, the Bank carried out a client assessment to determine the exposure of its clients to war-affected countries and their impact on credit risk. The results show that clients with medium or higher historical dependence on business relations with war-affected countries account for 5% of the loans portfolio.
Due to the increased uncertainty, at the beginning of the quarter housing loan sales were lower than those recorded at the end of 2021, but already in March an all-time record for new housing loan contracts was reached, with almost EUR 55 million of new contracts signed during the whole quarter (34% more than in Q1 2021). The housing loan portfolio grew by 9% in the Q1 and by 52% YoY to over EUR 497 million.
The high uncertainty has not reduced clients’ need to borrow for consumption, while rising inflation has just encouraged them not to postpone planned purchases, home repairs or improvements. Active advertising, the availability and attractiveness of financing services encouraged clients to borrow. The amount of new loans signed was 42% higher than in the Q1 of last year and amounted to EUR 37 million. The consumer finance portfolio grew by 5% in the Q1 and by 52% YoY to over EUR 179 million.
With a strong focus on the financing of energy efficient projects, the amount of new loan agreements for the modernisation of multi-apartment buildings was signed the same as a year ago – more than EUR 25 million. The newly established EUR 275 million multi-apartment building modernization fund was launched. Investors in the newly established fund are ready to accelerate the renovation of multi-apartment buildings in Lithuania. The first loans from the fund will be signed in May and the fund will be disbursed within two years. The Bank has provided loans in amount of EUR 45 million to the fund and will act as the fund’s manager.
Net fee & commission income grew both QoQ (+3%) and YoY (+9%) to EUR 4.5 million. The quarter was particularly marked by increased client demand for cash transactions and currency exchange operations. New service packages were offered to Ukrainian individuals, such clients increased by around 500 during the quarter, with the total number of clients increasing slightly to 331 thousand. The number of clients subscribing to service plans is growing constantly and reaching 176 thousand (+7% YoY).
As consumption continues to grow and payment cards continue to become more common, demand for credit cards is high - with a 7% QoQ and 36% YoY increase in the number of credit cards issued, while the total number of payment cards issued has remained at a similar level of 175 thousand cards.
In response to client demand, the Bank continues to develop its digital channels and has expanded its internet bank and mobile application services.
Saving and Investing
The geopolitical situation has led to increased monitoring not only of credit risk, but also of the Bank’s liquidity position. There are no negative trends, apart from an increase in cash withdrawals a few days after the start of the invasion, with all liquidity indicators in the target zones. The deposit portfolio declined by 2% during the Q1 to EUR 2.6 billion at the end of March. Demand deposits accounting for most of the portfolio decreased by EUR 7 million, while the term deposit portfolio decreased by EUR 35 million. In the context of very high inflation, clients continue to actively direct their savings into the Bank’s investment products, with commission income from securities-related services amounting to EUR 1.0 million in the Q1 (32% more than in the corresponding period of 2021). The value of client securities held by the Bank, as a custodian, exceeded EUR 750 million.
Even in the period of high uncertainty that have prevailed in recent years, the international rating agency Moody’s Investor Service (Moody’s) has affirmed Bank's previously assigned long-term deposit rating of Baa2 and its positive outlook.
* - forecast data
Šiaulių bankas invites shareholders, investors, analysts and other stakeholders to join its financial results of Q1 2022 and recent developments investor conference webinar scheduled on 4 May 2022 at 4:00 PM (EET). The presentation will be held in English. For more information click here.
Donatas Savickas, CFO
+370 41 595 602, email@example.com