BRIEF COMMENTARY ON DEVELOPMENTS IN THE BANKING SECTOR

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2 BRIEF COMMENTARY ON DEVELOPMENTS IN THE BANKING SECTOR The banking system s balance sheet total increased by more than EUR. billion over the first half of the year to stand at EUR. billion in June, up.% in year-on-year terms. After a solid increase of EUR million in loans to the non-banking sector in June, the year-on-year rate of growth improved to.%. Despite an increase of EUR million in loans to non-financial corporations in June, the year-on-year rate of growth remained moderate at.%. Year-on-year growth in household loans remained stable in June, at.%, year-on-year growth in housing loans having stabilised at more than % in the second quarter. Year-on-year growth in consumer loans strengthened again, reaching % in June, as the proportion of fixed-rate loans increases. The increase in consumer loans in the first half of the year was larger than that in housing loans, but the latter remain larger in terms of total stock. Consumer loans account for more than a quarter of total household loans. Deposits by the non-banking sector are continuing to strengthen, primarily as a result of an increase in household deposits, while deposits by non-financial corporations recorded a modest increase. Household deposits increased by EUR million in the first half of the year to EUR. billion, up.% in year-on-year terms. The average maturity of funding is continuing to shorten, as deposit rates remain extremely low. The proportion of sight deposits increased to % of total deposits by the non-banking sector, and.% of total household deposits by the end of June. Non-performing exposures (NPEs) declined by a further EUR million in June to EUR. billion, taking the NPE ratio down. percentage points to.9%. At EUR.9 billion, non-performing loans account for the majority of NPEs; the NPL ratio declined by. percentage points in June to.9%. All the banks were profitable in the first half of the year, generating a pre-tax profit of EUR million at system level. Net interest income and net non-interest income in June were both up in year-on-year terms. The banking system s net release of impairments and provisions strengthened, the cumulative amount for the year reaching EUR million in June. CONTENTS. Main features of banks' performance and financial statements. Bank's interest rates. Quality of the banking system's credit portfolio. Leasing companies' performance Monthly report on bank performance August

3 . MAIN FEATURES OF BANKS PERFORMANCE AND FINANCIAL STATEMENTS Table.: Banking system s assets and liabilities, as at June BALANCE SHEET Stock Breakdow n Stock Breakdow n Stock Breakdow n Grow th in June, % EUR million unless stated, growth rates in % in June in monthly year-on-year Assets,9.,9.,..... Cash in hand, balances at central bank and sight deposits at banks*,.,., Loans to banks at amortised cost (including central bank),.,., domestic banks, foreign banks,.,.,..... short-term loans to banks, long-term loans to banks,.,9.,..... Loans to non-banking sector*,.,., of which non-financial corporations,.,.,..... households,. 9,9. 9,..... government.,9., other financial institutions,9.9,., non-residents, Other financial assets classed as loans and receivables (at amortised cost) Securities / financial assets**,.,., a) Financial assets held for trading, of w hich debt securities held for trading government debt securities held for trading b) Financial assets measured at fair value through P&L not held for trading of w hich debt securities measured at fair value through P&L not held for trading c) Financial assets designated for measurement at fair value through P&L of w hich debt securities designated for measurement at fair value through P&L government debt securities designated for measurement at fair value through P&L d) Financial assets measured at fair value through other comprehensive income, 9., 9., of w hich debt securities measured at fair value through other comprehensive income, 9.,., government debt securities measured at fair value through other comprehensive income,.,9., e) Debt securities at amortised cost,.,., of w hich government debt securities at amortised cost,.,., Interests in subsidiaries, joint ventures and associates Other assets Equity and liabilities,9.,9.,..... Financial liabilities measured at amortised cost (deposits),9.,.,..... a) Financial liabilities to central bank (Eurosystem),9.,., b) Liabilities to banks,.9,., of w hich to domestic banks, of w hich to foreign banks,9.,9., c) Liabilities to non-banking sector (deposits by NBS),.,., of w hich to non-financial corporations,.,9.,..... households,.,.,..... government,9.9, other financial institutions,.,., non-residents., d) Debt securities, e) Other financial liabilities measured at amortised cost***, Provisions Shareholder equity,.,., Other liabilities, BALANCE SHEET TOTAL,9.,9.,..... Notes: * Loans to non-banking sector not held for trading comprise Loans and other financial assets at amortised cost (from A.VI of the Methodology for compiling the recapitulation of the statement of financial position, the category of Loans (and other financial assets) designated for measurement at fair value through profit and loss (from A.III), the category of Loans (and other financial assets) designated for measurement at fair value through other comprehensive income (from A.IV) and the category of Loans (and other financial assets) measured at fair value through other ** Financial assets / securities on the asset side comprise total financial assets from A.II, including loans held for trading, while equities and debt securities other than loans are captured from other categories of financial asset (A.III, A.IV and A.V) *** Includes subordinated debt until December. Under the IFRS 9 methodology, the item of subordinated debt is abolished, and these liabilities are included under liabilities to banks The bank performance data in this publication is based on the banks own book figures, which differ in methodological terms from the published statistics. The data on loans also differs because the data in this publication includes loans to non-residents, applies the net principle (amounts are minus value adjustments), and does not include non-marketable securities. Increase August Monthly report on bank performance

4 Table.: Income statement for, and INCOM E STATEM ENT Breakdow n Jan.-Dec. Breakdow n Breakdow n Breakdow n (EUR million unless stated) Jan.-Jul. Jan.-Jul. Annual grow th, % Jan.- July / Jan.- July Interest income..... Interest expenses Net interest Non-interest income of w hich net fees and commission of w hich net gains/losses on financial assets and liabilities held for trading Gross income,.., Operating costs Net income Net impairments and provisions Pre-tax profit Taxes Net profit Table.: Selected performance indicators jul. jul. in % Jan.-Jul.Jan.-Jul.(last mon.) (last mon.) Profitability Financial intermediation margin* ROA ROE Interest margin on interest-bearing assets Net non-interest income / operating costs Operating costs Labour costs / average assets Other costs / average assets Asset quality Impairments of financial assets / / at amortised cost / gross assets * Gross income / average assets Monthly report on bank performance August

5 . BANKS INTEREST RATES Figure.: Comparison of interest rates on new loans in with those across the euro area, variable (left) and fixed (right) rates, in percentages 9 INTEREST RATES ON CONSUMER LOANS (FIXED) 9 INTEREST RATES ON CONSUMER LOANS (VARIABLE) INTEREST RATES ON HOUSING LOANS (FIXED).. INTEREST RATES ON HOUSING LOANS (VARIABLE) INTEREST RATES ON CORPORATE LOANS OF UP TO EUR MILLION (VARIABLE) 9 INTEREST RATES ON CORPORATE LOANS OF UP TO EUR MILLION (FIXED) INTEREST RATES ON CORPORATE LOANS OF MORE THAN EUR MILLION (FIXED), -month mov.avg. INTEREST RATES ON CORPORATE LOANS OF MORE THAN EUR MILLION (VARIABLE) Note: The following definitions apply to all interest rates in this appendix: ) variable-rate loans comprise loans concluded with a variable interest rate or with an interest rate fixed for less than one year (even if it is fixed for the entire term to maturity); ) fixed-rate loans comprise loans concluded with a fixed interest rate for a period of more than one year. August Monthly report on bank performance

6 Figure.: Comparison of interest rates on new household deposits in with those across the euro area, in percentages INTEREST RATES ON DEPOSITS of up to year, %, % INTEREST RATES ON DEPOSITS of more than year, % (left scale), % (left scale) , ECB Table.: Comparison of interest rates on new variable-rate loans in with those across the euro area, in percentages Loans Household deposits ) ECB Households Corporates up to year over year interest Housing Consumer up to EUR m over EUR m rate EMU SLO EMU SLO EMU SLO EMU SLO EMU SLO EMU SLO Dec Dec Dec Dec Dec Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Note : Household deposits are broken down by maturity, irrespective of the type of remuneration (fixed and variable interest rates are combined). Table.: Comparison of interest rates on new fixed-rate loans in with those across the euro area, in percentages Loans Households Corporates Housing Consumer up to EUR m over EUR m EMU SLO EMU SLO EMU SLO EMU SLO Dec Dec Dec Dec Dec Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun , ECB Monthly report on bank performance August

7 Figure.: Volumes and interest rates on new loans in n banks Short-term corporate loans % New loans by type of remuneration % Fixed and variable interest rates 9% % % % % % % % % % % % % % % % % 9% Tied to EURIBOR Fixed (euros) % % % % % % % Q Q Jun- % % % % % % % Premium over EURIBOR Variable (tied to EURIBOR) Fixed % New loans by type of remuneration Long-term corporate loans % Fixed and variable interest rates 9% % % % % % 9% 9% % % 9% 9% 9% % % % % % % % % Tied to EURIBOR Fixed (euros) % % % % % % % Q Q Jun- % % % % Premium over EURIBOR Variable (tied to EURIBOR) Fixed Long-term housing loans % % New loans by type of remuneration % Fixed and variable interest rates 9% % % % % % % % % % % % % % 9% % % % % % % % % 9% Fixed (euros) Tied to LIBOR (Swiss francs) Tied to EURIBOR % % % % Q Q Jun- % % % Premium over EURIBOR Variable (tied to EURIBOR) Fixed % 9% % % % % % % % % % 9% 9% % % New loans by type of remuneration Tied to EURIBOR Fixed (euros) % % % % % % % % % % Q Q Jun- Long-term consumer loans 9% % % % % % % % % % Fixed and variable interest rates Premium over EURIBOR Variable (tied to EURIBOR) Fixed August Monthly report on bank performance

8 . QUALITY OF THE BANKING SYSTEM S CREDIT PORTFOLIO Table.: Non-performing exposures by client segment Exposures Non-perf orming exposures (NPEs) amount, EUR million breakdown,% amount, EUR million ratio, % Dec. May. Jun. Dec. May. Jun. Dec. May. Jun. Dec. May. Jun. NFCs,,,9.9..9,,,.9.. OFIs,,, Households,9,9, sole traders indiv iduals,,9, Non-residents,,9, Gov ernment,,, Banks and sav ings banks, Central bank,9,, Total,,,...,,99, Table.: Classified claims more than 9 days in arrears by client segment amount, EUR million Classif ied claims breakdown, % Claims more than 9 day s in arrears amount, EUR million ratio, % Dec. May. Jun. Dec. May. Jun. Dec. May. Jun. Dec. May. Jun. NFCs,9,, OFIs,,, Households,9,9, sole traders indiv iduals,,9, Non-residents,,, Gov ernment,,, Banks and sav ings banks, 99, Central bank,9,, Total,,,...,,...9 Table.: Non-performing exposures to non-financial corporations by sector Exposures Non-perf orming exposures (NPEs) NPE ratio (EUR million) (EUR million) Dec. May. Jun. Dec. May. Jun. Dec. May. Jun. Agriculture, f orestry, f ishing, mining..9. Manuf acturing,9,, 9... Electricity, gas, water, remediation,,,... Construction,,,... Wholesale and retail trade,,9, 9... Transportation and storage,,, Accommodation and f ood serv ice.9.9. Inf ormation and communication 9... Financial and insurance activ ities.. 9. Real estate activ ities.. 9. Prof essional, scientif ic and technica,,, Public serv ices Total,,,9,,,.9.. Note: The data on non-performing exposures is calculated on the basis of the banks modified reporting under the Guidelines for implementing the Regulation on reporting by monetary financial institutions in accordance with the CRD IV and the EBA definition published in Commission Implementing Regulation (EU) / (OJ L of February ). Monthly report on bank performance August

9 Table.: Classified claims against non-financial corporations more than 9 days in arrears Classif ied claims Classif ied claims more than 9 day s in arrears Proportion of classif ied claims more than 9 day s in arrears (EUR million) (EUR million) Dec. May. Jun. Dec. May. Jun. Dec. May. Jun. Agriculture, f orestry, f ishing, mining... Manuf acturing,,,... Electricity, gas, water, remediation,,,... Construction,,, 9... Wholesale and retail trade,99,9,... Transportation and storage,9,,9.9.. Accommodation and f ood serv ice 9... Inf ormation and communication... Financial and insurance activ ities... Real estate activ ities Prof essional, scientif ic and technical,,,9.9.. Public serv ices 9... Total,9,,... August Monthly report on bank performance

10 IV. LEASING COMPANIES PERFORMANCE New equipment leasing business continued to grow in the first half of, while new real estate leasing business was again negligible. New equipment leasing business amounted to EUR million over the first six months of the year, up.% in yearon-year terms.leasing companies are still focusing on leasing of cars, and commercial and goods vehicles, which accounted for 9.9% of new equipment leasing business in the first half of. Leasing companies new business is primarily with corporates and households: their new business amounted to EUR 9 million (% of the total) and EUR million (%) respectively in the first half of the year. The positive trend in new equipment business is being reflected in gradual growth in the total stock of leasing business. The stock of leasing business stood at EUR. billion at the end of June, up.% in year-on-year terms, but down.% in quarterly terms. The stock of equipment leasing business stood at EUR.9 billion, and was up in both year-on-year and quarterly terms, by % and % respectively, while the stock of real estate leasing business stood at EUR million, having declined by a further % in quarterly terms. The ongoing increase in the stock of equipment leasing business is primarily attributable to an increase in leasing of commercial and goods vehicles and leasing of cars. The decline in claims more than 9 days in arrears is continuing. The proportion of claims more than 9 days in arrears stood at.% at the end of June, down. percentage points in year-on-year terms. The concentration of claims more than 9 days in arrears increased further: three leasing companies accounted for more than % of the claims more than 9 days in arrears, while one leasing company accounted for % of all arrears. Leasing companies balance sheet total and equity increased. The balance sheet total stood at EUR. billion in June, up.% in year-on-year terms, while equity was up % at EUR million. Leasing companies profitability in terms of ROE declined, as a result of the increase in equity, while total profit was up % in year-on-year terms at EUR million. Monthly report on bank performance August

11 Table IV.: New leasing business by type of leasing and institutional sector New leasing business by type of leasing and institutional sector, EUR million Real estate leasing Equipment leasing NFCs Households Other sectors Rest of world Total NFCs Households Other sectors Rest of world Total ,. Q Q Q Q Q Q Table IV.: Stock of leasing business by type of leasing and institutional sector Stock of leasing business by type of leasing and institutional sector, EUR million Real estate leasing Equipment leasing NFCs Households Other sectors Rest of world Total NFCs Households Other sectors Rest of world Total,.9..., ,.,. 9..., , , , , ,...,. Q ,9.9 Q ,. Q ,9. Q ,...,. Q......,...,9.9 Q......,.9..,9. Table IV.: Leasing business by type of leasing and maturity New leasing business by maturity, EUR million Up to year to years to years Over years Total Equipment Real estate Equipment Real estate Equipment Real estate Equipment Real estate Equipment Real estate All leasing , ,..,. Q Q Q Q Q Q Stock of leasing business by maturity, EUR million Up to year to years to years Over years Total Equipment Real estate Equipment Real estate Equipment Real estate Equipment Real estate Equipment Real estate All leasing..,......,.,.9,..., ,.,.,..., ,.,.,9..., ,..,..., ,..,. Q..9, ,9.9.,. Q. 9., ,..,.9 Q. 9.,......,9. 9.,. Q.., ,..,. Q 9..9,......,9.9.,. Q.., ,9..,. 9 August Monthly report on bank performance

12 Table IV.: Stock of leasing business with non-financial corporations by type of leasing and sector Stock of real estate leasing business with NFCs by sector, EUR million Agri, Elec, gas, Trans, Acco, Fin, Real PSTAs, Public Manuf Construct Trade Info, comms mining water storage food insur estate ASSAs services Total , , Q Q Q Q Q Q Stock of equipment leasing business with NFCs by sector, EUR million Agri, Elec, gas, Trans, Acco, Fin, Real PSTAs, Public Manuf Construct Trade Info, comms mining water storage food insur estate ASSAs services Total Q Q Q Q Q Q Table IV.: Arrears in leasing business with non-financial corporations by type of leasing and sector Agri, mining Manuf Elec, gas, water Construct Trade Trans, storage Acco, food Info, comms Fin, insur Real estate PSTAs, ASSAs Public services Q Q Q Q Q Q Agri, mining Manuf Elec, gas, water Proportion of arrears in real estate leasing business with NFCs by sector, % Proportion of arrears in equipment leasing business with NFCs by sector, % Construct Trade Trans, storage Acco, food Info, comms Fin, insur Real estate PSTAs, ASSAs Public services Q Q Q Q Q Q Overall Overall Overall (all leasing) Overall (all leasing) Monthly report on bank performance August

13 Table IV.: Repossessions by type of leasing and transaction type, and sale of repossessed assets Repossessions (new leasing business), EUR million Finance leases Operating leases Loans Total Real estate Equipment Real estate Equipment Real estate Equipment Real estate Equipment Q Q Q Q Q Q Repossessions (stock of leasing business), EUR million Finance leases Operating leases Loans Total Real estate Equipment Real estate Equipment Real estate Equipment Real estate Equipment Total (all leasing) Total (all leasing) Q Q Q Q Q Q Sale of repossessed items, EUR million Real estate Equipment Total Q... Q... Q... Q... Q... Q... Table IV.: Leasing companies performance and funding Growth, % Q Q Total assets, EUR million,,,9,,9, Shareholder equity, EUR million Net profit, EUR million ROA, % ROE, % Financial and operating liabilities, EUR million,9,,,9,9, liabilities to banks and undertakings in group / total a 9 Investment property, investment property / assets, % Finance expenses from impairments and write-offs, EU August Monthly report on bank performance