Slovak banking sector earnings grow 8.6% y/y in Jan-Sept 2013

By bne IntelliNews November 4, 2013

The aggregate net profit of Slovak commercial banks for the first nine months of 2013 rose 8.6% y/y to EUR 448.9mn, buoyed by a strong growth in the non-interest income, central bank data showed.

The sector’s net non-interest income jumped 16.3% y/y to EUR 450.2mn in Jan-Sept 2013, while the banks' main source of revenue - the net interest income - rose 2.1% y/y to EUR 1.35bn. The robust growth in net non-interest revenue was driven mainly by a 10.2% rise in dividends received and by a 61% drop in costs related to debt securities transactions. Net creation of reserves and provisions for the nine-month period swelled by 53% y/y to EUR 161.5mn.

IntelliNews comment: The aggregate net profit of Slovak commercial banks dropped 27% last year to EUR 488.2mn mainly due to the introduction of a 0.4% special tax on corporate bank deposits as of January 1, 2012, which was extended to cover also retail deposits as of October 2012. Commercial banks’ earnings performance was also negatively affected by historically low interest rates, which, coupled with the weakening lending activity and intense competition between banks for borrowers and depositors, squeezed interest rate margins.

The banking sector’s performance this year has been negatively affected by the hike in the special tax and by the increase in the corporate tax rate from 19% to 23% as of Jan 1, 2013, as well as by sluggish lending activity. On the other hand, those negative factors seem to be counteracted by the strong growth in non-interest income, observed since April. If this trend is maintained, it will have a positive effect on the sector’s full-year earnings. However, we must also note the significant expansion of the net creation of reserves and provisions, which reflects the significant economic slowdown in the country and suggests a risk from escalation of bad debts.

EUR 000 Jan-Sep-2013 Jan-Sep-2012 y/y change
Net interest income 1,346,797.0 1,319,302.0 2.1%
Net non-interest income 450,249.0 387,079.0 16.3%
--ow: gross fee and commission income 477,992.0 452,049.0 5.7%
Net operating profit/loss -173,390.0 -194,113.0 -10.7%
General operating expenses 887,956.0 873,270.0 1.7%
Net creation of reserves and provisions -161 522.0 -114 706.0 40.8%
Profit before tax 574 178.0 524 292.0 9.5%
Net profit 448 854.0 413 335.0 8.6%
Source: National Bank of Slovakia      

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