Luminor announces 1Q23 results

Luminor announced its 1Q 2023 results, reporting improved business performance and continued robust credit quality, with non-performing loans remaining at 1.2% of gross lending, its lowest ever level.

Luminor focused on supporting its customers as it continued to execute its strategy. The bank improved its offering for Retail Banking customers, maintained its share of new mortgage lending, increased term deposits and grew its active customer base. In Corporate Banking, Luminor was once again the leading underwriter of new debt securities offered by Baltic corporate issuers and saw strong deposit inflows.
 
The bank continued to strengthen its security and regulatory compliance processes, invested to improve its IT and took several further steps to advance its ESG commitments.
 
The first quarter saw reduced demand for new loans and increased deposit balances in the Baltic countries, as customers responded to less certain economic growth and higher reference interest rates. Against this environment, the bank improved net interest income, as interest rates increased after years of extraordinary low rates, and raised its efficiency, which resulted in an increase in net profits.
 
“Despite the economic slowdown, the bank continued to deliver solid financial performance. Last year, following the European Central Bank's decisions in response to the sharp rise in inflation, Euribor rates resumed their upward trend, which continues this year and affects most Latvian borrowers. Correspondingly, there is also a decline in lending market activity. However, Luminor's lending in Latvia increased by EUR 43,3 million to EUR 2.95 billion in the first quarter of this year compared to the same period last year, while our customers' deposits in Latvia increased by EUR 229 million or 8% to EUR 3.08 billion as deposit rates rose. Although our survey shows that most people do not intend to deposit their funds, we see that people are looking for new ways to prevent their financial assets from rapidly losing value, including through deposits. We are also seeing a renewed interest of customers in term deposits," says Kerli Vares, Head of Luminor Latvia.
 
First quarter net profit was 60.3 million EUR, increasing by 49.6% as compared to the fourth quarter of 2022. As the bank invested in its IT systems and processes, operating expenses increased by 37%. Luminor incurred a credit loss allowance, albeit at a lower level than last year, and retained the net profit it generated. The bank’s cost to income ratio improved to 49.9% and it generated an annualised return on equity of 15.2%. Luminor’s liquidity and capital positions are strong. At quarter end the bank’s Common Equity, Tier 1 and Total Capital Ratios, including net profit for the period, were 20.4%.
 
Luminor Bank CEO, Peter Bosek, said: “Our solid performance in the first quarter, including growth in revenue and improved liquidity and capital positions, has enabled continued investment in our IT systems and processes to improve our customer experience. Looking forward, we are confident that despite prevailing uncertainty on economic growth, the outlook for the Baltic region is strong. Underpinned by our strong financial standing and commitment to prudent risk management, Luminor is well placed to deliver on our strategy to improve the financial health of our customers, and our home countries.”
 
Luminor’s Q1 2023 interim report in English can be found here.