"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," it said in a release.
Investments in its IT systems and processes contributed to an increase of 39% in operating expenses for the quarter.
Luminor's third quarter net profit was 65.1 million euros – an improvement of 62.75%, as compared to the third quarter of 2022 which 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."
Latvia has yet to introduce a similar windfall tax on banks, but discussions are ongoing about doing so and the substantial profit level would tend to make such a move more likely.
Compared to the third quarter of 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%. 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: “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.”
Bosek will resign effective June 30, 2024 to become Chief Executive Officer of Erste Group Bank AG.
Luminor’s Q3 2023 interim report can be found HERE.
