OREANDA-NEWS. February 01, 2010. The 2009 performance results of the domestic banking have been presented at the press conference held in the Bank of Lithuania. When assessing these results, Mr Reinoldijus Sarkinas, Chairman of the Board of the Bank of Lithuania, noted, reported the press-centre of Bank of Lithuania:

- The most important aspect is that the operation of the Lithuanian banking system last year was stable. Crediting operations were performed and sufficient reserves were accumulated. Regardless hard times and the economic situation, not a single domestic bank was in need of help from the central bank or Government. They solved all problems themselves. We are of the opinion that the banks were prepared properly and achieved really sound results in the context of this complicated environment.

Chairman of the Board of the Bank of Lithuania was positive in assessing the bank shareholders attempts in ensuring a stable operation of Lithuania’s commercial banks. He also indicated that the credit institutions supervision complying with international requirements assisted in maintaining stability of the domestic banking system.

With regard to the near future of the sector, Mr Reinoldijus Sarkinas said:

- We expect that this year, at least at the beginning of the year, the banking system will still have to increase specific provisions but not to the amount accumulated last year. We expect that some banks may achieve better performance results than last year.

Also, Chairman of the Board of the Bank of Lithuania noted that interest rates of interbank loans in litas (VILIBOR) had started to decrease at the end of last year and had been approaching and in the future might approach even closer the European interbank offered rate (EURIBOR).

- It suggests the increase of the credibility in litas, talks about the litas devaluation and things like that ceased. Therefore, the interest rate situation is changing - said Mr Reinoldijus Sarkinas.

In reply to a question about ” aspirations to introduce the euro in Lithuania in 2014”, Mr Reinoldijus Sarkinas observed:

- I think it is realistic. Currently the only problem is the state budget deficit which meanwhile exceeds the Maastricht criterion several times. The European Commission requires Lithuania to maintain a 3 per cent budget deficit in 2012. If this happens, decisions needed for the euro introduction in Lithuania might be made in 2013 and this currency would be adopted from 2014.
The press conference participants were presented a comprehensive survey worked out by the Bank of Lithuania of 2009 performance results of credit institutions activities in Lithuania. Mr Reinoldijus Sarkinas stressed its main aspects.

At the end of 2009, according to unaudited data of financial statements, total assets of operating domestic banks made up LTL 84.3 billion and in a year shrank by LTL 5.5 billion or 6.1 per cent. In a year, loans to customers decreased by LTL 10.1 billion or 14.1 per cent and accounted for LTL 61.4 billion. The largest shrinkage was registered in loans to private companies - 17 per cent, while the smallest drop was observed in housing loans - they curtailed only by 2 per cent. An opposite picture was with deposits kept with banks: as on 1 January 2010 they made up LTL 41.1 billion and in year increased by 7.4 per cent or LTL 2.8 billion.

The annual increase of deposits was largely driven by a LTL 1 billion (89%) growth of government authorities funds kept with banks. Deposits of the population rose by LTL 608 million or 2.5 per cent. In a year, the asset share invested abroad expanded from 11.9 per cent to 17.2 per cent. The major share of the banks’ assets is in foreign currency-denominated assets whose share was further growing gradually in 2009 as well. In a year, the asset share in foreign currencies grew by 8.4 percentage points and accounted for 72.9 per cent.

Mr Reinoldijus Sarkinas mentioned that last year all debts to parent banks had decreased by more than LTL 6 billion and as on 1 January 2010 made up LTL 30.9 billion (excluding subordinated loans).

- This is the amount of funds attracted from parent banks to Lithuania’s banks, - explained Mr Reinoldijus Sarkinas.

Chairman of the Board of the Bank of Lithuania characterised the loan quality as well. He noted that loan impairment (according to Mr Reinoldijus Sarkinas , ”later we called this indicator specific provisions for loans” amounted to LTL 4.78 billion or 7.2 per cent of total loans. The largest share of impairment suffered loans to private companies. The impairment of housing loans was equal only to 1.8 per cent.

Mr Reinoldijus Sarkinas indicated that in 2009 all banks had complied with prudential requirements set by the Bank of Lithuania.

Liquidity ratios of the Lithuanian banking system were constantly over 40 per cent. According to the data as on 1 January 2010, the liquidity ratio reached 49.85 per cent. The minimum liquidity ratio set by the Bank of Lithuania has to be 30 per cent. According to the data as on 1 January 2009, the capital adequacy ratio was equal to 14.21 per cent (the requirement is 8%).

In 2009, operation of Lithuania’s banking system experienced losses.

Total loss of the banking system activities reached LTL 2.95 billion (this result was registered when the shareholder of AB SEB bankas covered by additional contributions a part of losses suffered by its subsidiary in 2009).

In 2009, the authorised (registered) capital of the banking system went up by LTL 1 billion and on 1 January 2010 made up LTL 4.6 billion.

Having mentioned this figure, Mr Reinoldijus Sarkinas noted:

- With this amount of capital the banks would be able to comply with the capital adequacy requirement if they undertook LTL 26 billion more of risk-weighted assets or might increase their specific provisions for loans by another 50 per cent.

In his reply to the question on the current policy of bank crediting and on the say that ”it is difficult for a business to get loans”, Mr Reinoldijus Sarkinas observed:

- I don’t support banks and am not saying that all of them are perfect in issuing credits to the economy.

There are such banks which strongly tightened their lending conditions. However, in practice the loan demand has also dropped, it is substantially lower than earlier. Crediting is going on - last year the banks issued new loans in the amount of more than LTL 6 billion. Housing loans remained almost the same.

According to Mr Reinoldijus Sarkinas, the banks have funds for loans, but there must be a demand for them in the economy.

The Chairman of the Board of the Bank of Lithuania also answered other questions given by journalists.

The latest survey of the operations of commercial banks, the Central Credit Union of Lithuania and credit unions is posted under the section “Credit Institutions” of the website of the Bank of Lithuania.