Other events in Baltic States

During yesterday’s press conference, Reinoldijus Sarkinas, Chairman of the Board of the Bank of Lithuania, presented preliminary performance results of domestic commercial banks for the previous year.

The total unaudited profit of domestic banks in 2007 was LTL 1.154 billion, or 73% more than in 2006. The profit of the banking system of Lithuania has been growing consistently for the sixth consecutive year.

According to the unaudited financial statements (after closing balances) for January 1 this year, total assets of domestic commercial banks and foreign bank branches made up LTL 81 billion, increasing over the year by 37.5%. Total loans granted to customers amounted to LTL 56.7 billion – 46.8% than a year ago. Deposits held with domestic banks totaled LTL 36.8 billion, increasing over the year by 21.5%, of which deposits of individuals made up LTL 22.7 billion – 26.8% up, respectively.

In his review of the major development trends of the banking sector, Sarkinas noted that the steady growth of the national economy for several consecutive years, increasing wages, improving future expectations of the population and growing consumption had an influence on the still large demand for crediting services both among businessmen and the population. The annual growth of loans granted to customers last year was 2.1 percentage points lower than in 2006.

"Such a rapid development of the credit market has certainly increased the risk. However, as compared to the gross domestic product, the loan portfolio amounts to only 62%. It is significantly lower than in the neighboring countries," said Sarkinas. He indicated that the Bank of Lithuania urged commercial banks more than once to manage risks more conservatively and to improve the capital base, and expressed its concern about the rapid credit growth.

Sarkinas also mentioned that loans granted to customers and loans to financial institutions comprised 74% of bank assets. Such high comparative weight of loans in relation to assets had a positive influence on bank profitability, however, it also determines the prevailing role of the assumed credit risk.

When asked by journalists to forecast potential results of the banking system for this year, Sarkinas expressed the opinion that this year bank profits should not increase at such rates as last year.