In 3Q23, Luminor maintained its strong liquidity and capital positions, and invested for the future while improving its efficiency. Luminor’s credit quality remains robust with non-performing loans at 1.3% of gross lending.
Luminor continued to invest in its future capacity and capabilities in 3Q23, maintaining its strong focus on supporting its customers and delivering on its strategy to capitalise on the strong long-term growth outlook for the Baltic region.
The third quarter saw limited demand for new loans and a marginal decrease in deposits as customers responded to the prevailing economic environment and higher reference interest rates. Luminor focused on supporting its customers as it continued to execute its strategy. Luminor grew its balances of term deposits and raised the rates of interest it paid. In Corporate Banking, Luminor grew its loans to businesses and was once again the leading arranger of new debt securities offered by Baltic corporate issuers.
In line with its strategy, Luminor made additional investments in its IT systems and processes and strengthened its organisation - a focus that will continue in the coming quarters. These investments contributed to an increase of 39% in operating expenses for the quarter. Luminor took several further steps to realise its ESG ambitions including strengthening its governance and risk policies, deepening its assessment of ESG risks, and improving data capture.
Third quarter net profit was 65.1 million EUR. This improvement of 62.75%, as compared to the third quarter of 2022, was driven principally by an improvement in net interest income as reference interest rates increased after years of extraordinary low rates and limited profitability. Luminor incurred a small credit loss allowance, as compared to a net reversal last year, and a higher tax expense, after Lithuania introduced a temporary bank tax. The bank retained the profit it generated in the quarter.
As compared to the third quarter 2022 the bank’s cost to income ratio improved by 9.5 percentage points to 48.6% and it generated an increased annualised return on equity of 14.9%. Luminor’s liquidity and capital positions are strong. At quarter end the bank’s Liquidity Coverage ratio was 176.2% and its Common Equity, Tier 1 and Total Capital Ratios, including net profit for the period, were 23.9%.
Luminor Bank CEO, Peter Bosek, said:
“Luminor is here to improve the financial health of our customers and our home countries, and to support their growth. In so doing, we will maintain our strong financial standing, exercise prudent risk management, and fulfil our wider obligations.
In the third quarter, we continued to invest for the future, building our capacity and capabilities. We focused on improving our customer experience while raising our efficiency and strengthened further our capital positions. This will ensure we are well set-up to navigate the prevailing macroeconomic environment. The long-term outlook for the Baltic region is strong, and we look forward to the year ahead with confidence.”
Luminor’s Q3 2023 interim report can be found HERE.