Banks, Financial Services, Lithuania, Loan

"Fluctuations of the loan portfolio are usual, the growth of the deposit portfolio is continuing, although is not very rational, while changes in the mortgage market are very insignificant," Kropas said in the report.

He says that indicators in late December are handy as they can be compared with the figures of the previous year and the results can be summarized.

Kropas concluded that there was no borrowing breakthrough, despite the predictions by banks and optimistic participants of the market. Loan portfolio in December shrank by another LTL 614 million (EUR 178 million) and the yearly result was negative, compared to December 2012. Nonetheless, taking into account that the total loan portfolio reached LTL 52 billion (EUR 15 billion) in late 2013, it practically has not changed much in a year.

President of the Association of Lithuanian Banks noted that the deposit crisis is still ongoing.

"Both, companies and natural persons increased the amount of free cash throughout the year, while the banks remained the primary and the most reliable place to store funds. All this despite the declared mistrust, falling interest rates of short-term deposits and forecasts of some commentators," Kropas said.

Only in December companies supplemented their accounts with LTL 814 million (EUR 236 million), while residents with LTL 1 billion (EUR 0.29 billion). Per year, the total deposit portfolio rose by LTL 3.9 billion (EUR 1.1 billion) to LTL 47 billion (EUR 13.6 billion). It is the record amount of deposits in the history of Lithuania's banking. However, almost all of the money is in current accounts and in short-term deposits. So, for the banks it is rather the problem of cash flow than free funds for lending.

According to Kropas, mortgage loan market participants' and some commentators' desire to see a fast improving situation and to form positive expectations is unfounded.

"Just in December the mortgage loan portfolio lost LTL 28 million (EUR 8 million). Although in 2013 it grew by LTL 56 million (EUR 16 million), yet, both figures are completely insignificant, compared to the total value of the portfolio of LTL 19.8 billion (EUR 5.7 billion)," said Kropas.

Fairly calm situation, according to Kropas, enabled the banks to enhance their capital throughout the year and to take care of the quality of their portfolios. Total bank assets grew by LTL 2.9 billion (EUR 0.8 billion) per year and by late December amounted to LTL 76.5 billion (EUR 22 billion).

Kropas says that the results are formally fairly good. However, despite the fairly quiet surface, the banking system is pretty tense internally. There were almost no positive developments changing the banking business and legal environment. Meanwhile, this year there will be several more stimuli which will inevitably have an impact on banking activities.

The introduction of the euro is an important, technically and organizationally complicated process. The banks have already started preparations which will continue throughout the year.

Presidential election means an increased political risk and a several times higher threat that the banks might be blamed for real or imaginary sins, simply in order to attract the attention of voters.