Šiauliu Bankas Group results for Q3 2023

• Šiauliu bankas Group earned an unaudited net profit of EUR 24.2 million in Q3 and EUR 65.7 million in the first three quarters of this year
• Maximum amount of dividends for the year 2023 will not exceed 43% of the annual profit of the Group
• The loan portfolio increased by 10% since the beginning of the year to almost EUR 2.9 billion
• SB Modernizavimo Fondas will finance the modernisation of 395 multi-apartment buildings for EUR 275 million
• Deposits from individuals and businesses are growing rapidly, with the deposit portfolio growing by 8% since the beginning of the year to over EUR 3 billion
• The merger of the retail businesses of the Bank and Invalda INVL is expected to be completed on 1 December

"Another quarter dictated by economic volatility and rising interest rates. We have continued our strategy of maintaining the highest deposit rates among the major banks and are now able to offer customers interest rates of up to 4.25% p.a. on irrevocable fixed-term deposits. Rising interest rates have also led to the popularity of an alternative form of financing – bonds. The Bank’s originated bonds are an opportunity for local businesses to combine financing methods to borrow more and for investors to invest.

At the end of the year, we are likely to maintain the same momentum and successfully complete the transaction with Invalda INVL on the merger of retail businesses, after which Šiauliu bankas Group will manage second and third tier pension and investment funds in Lithuania and will expand its life insurance business in the Baltic states. In parallel with the transaction and the Bank’s growth, the strategy is being reviewed and we expect to present it early next year,” said Vytautas Sinius, CEO of Šiauliu bankas.

Šiauliu bankas Group earned an unaudited net profit of EUR 65.7 million in the first three quarters of this year (32% more than a year ago, when the profit amounted to EUR 49.9 million). Profit for the third quarter was EUR 24.2 million, up 33% from EUR 18.1 million last year.

Operating income growth in the first nine months of the year compared to the same period in 2022: net interest income grew by 55% to EUR 116.1 million, while net income from service and commission grew by 4% to EUR 14.6 million.

With the economic situation remaining uncertain, the Bank made additional provisions for loans and other assets of EUR 3.1 million during the quarter, mainly due to the risk assessment of individual exposures. Provisions for the first nine months of the year amount to EUR 8.5 million, compared to EUR 2.4 million year-on-year. At the end of September, the cost of risk (CoR) stood at 0.4% (0.2% in the same period last year).

The Bank Group’s return on equity was 18.9% (16.3% last year), while the cost/income ratio (excluding the impact of SB Draudimas’ customer portfolio) fell to 34.4% at the end of September (40.0% in the same period last year). The capital and liquidity position remains sustainable and prudential ratios are being met by a wide margin, with a liquidity coverage ratio (LCR) of 183%* and a capital adequacy ratio (CAR) of 21.3%*.

To include part of the interim profit for the first half of 2023 in the own funds, it was necessary for the Bank’s Management Board to take a decision on the maximum dividend payment ratio for 2023. Accordingly, the Management Board, assessing the operating environment, the Bank's results for the first three quarters of 2023 decided that the amount of dividends for the year 2023, which will be submitted to the AGM of shareholders of the Bank by the Management Board for the approval, will not exceed 43% of the annual profit of the Group for year 2023.

The final dividend payment ratio for 2023, considering the factual and forecast circumstances, will be decided, and submitted to the AGM of shareholders of the Bank by the Management Board in March 2024.

Overview of Business Segments

Corporate and Private Customer Financing

Portfolios of all financing segments grew in 9 months, while the Bank Group’s total loan and leasing portfolio grew by 4% (EUR 104 million) during the quarter and by 10% (EUR 261 million) since the beginning of the year to reach EUR 2.9 billion. However, against the backdrop of a turbulent outlook for the overall economy and the high cost of borrowing, new contract signings fell, reaching EUR 0.3 billion in the quarter and EUR 1 billion since the beginning of the year, down 7% year-on-year.

With the demand for business finance falling and expectations remaining cautious, the number of business loans signed this year is almost 5% lower than in the same period last year, at EUR 587 million. The corporate finance portfolio grew by 2% (EUR 24 million) during the quarter and by 6% (EUR 87 million) since the beginning of the year to EUR 1.47 billion.

The European Central Bank’s monetary policy is leading to a slowing property market and falling demand for mortgages. Contracts worth EUR 38 million were signed in the third quarter and EUR 134 million since the beginning of the year, 32% less than in the same period last year. The housing loan portfolio grew by 3% (EUR 22 million) during the quarter and by 14% (EUR 90 million) since the beginning of the year to EUR 0.75 billion.

Despite the extremely competitive consumer finance market, new sales volumes managed to grow both in the third quarter and throughout the year. The number of consumer credit agreements signed this year is 17% higher than in the same period last year, amounting to EUR 170 million. The consumer finance portfolio grew by 7% in the third quarter and by 26% from the beginning of the year, reaching EUR 288 million.

The volume of applications and contracts for financing energy efficiency projects remained high: in the third quarter, SB Modernizavimo Fondas concluded contracts for the modernisation of multi-apartment buildings for EUR 56 million, and since the start of its operations, the Fund has signed contracts for the full amount of EUR 275 million raised by Lithuanian and foreign investors. The Fund will improve the living conditions of residents of 395 multi-apartment buildings. As the Bank continues to focus on the rapid renovation of Lithuania’s multi-apartment buildings, work has already started on the establishment of a new multi-apartment building modernisation fund.

Daily Banking

During the third quarter, 7.4 thousand new private and corporate customers started using the Bank’s services, and more than 23.5 thousand since the beginning of the year. As the number of new customers grows, so does the number of people using the service plans, which exceeded 190 thousand. The growth rate of credit cards increased by 6% during the quarter and by 34% during the year (to 35 thousand), while the total number of payment cards issued fell to 172 thousand.

A major focus is on improving the Bank’s internet bank and mobile app. During the third quarter of the year, important changes were introduced (e.g. login with a national identification number instead of a password) and the app was updated for customers using iOS and Android.

Savings and Investments

With the Bank paying attractive interest rates for savings solutions, both individuals and companies are actively choosing the Bank’s fixed-term deposit products. Currently, almost 47% of customers’ funds with the Bank are in fixed-term deposits (EUR 1.4 billion, up more than 50% from the beginning of the year). The total customer deposit portfolio has grown by 8% since the beginning of the year to over EUR 3 billion.

The high inflationary environment continues to encourage customers to direct their savings into the Bank’s investment products, mainly Lithuanian corporate bonds. During the quarter, the Bank arranged 11 corporate bond placements in amount of more than EUR 40 million. The value of customer investments held with the Bank has been growing steadily, reaching EUR 1.8 billion, double the amount at the beginning of the year.

Merger of retail business with Invalda INVL

The merger of the retail businesses of the Bank and Invalda INVL is progressing smoothly and is expected to be completed on 1 December.

The Bank’s asset management company SB Asset Management obtained a management company licence in the third quarter. After the closing date, the company would take over the pension fund and retail investment fund management business for further development. SB Draudimas, the Bank’s insurance company, has set up branches in Latvia and Estonia to properly prepare for the transfer of INVL Life insurance business to Latvia and Estonia.

During the quarter, the Bank also implemented organisational structural changes to ensure the smoothest possible merger, business continuity and preparation for the post-closing organisation of work. The new structure will allow for a clearer division of functions and responsibilities between corporate customer, private customer, and investment management business lines. This transformation is aimed as well at enhancing efficiency and improving overall performance.

* - forecast data

Šiauliu bankas invites shareholders, investors, analysts, and other stakeholders to join its investor conference webinar scheduled on 31 October 2023 at 4:00 PM (EET). The presentation will be held in English. For more information click here.

Additional information:
Donatas Savickas, CFO
 +370 41 595 602, donatas.savickas@sb.lt

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• 2023-3Q EN