Šiaulių Bankas Group results for the year 2022

• Šiaulių Bankas Group earned unaudited net profit of EUR 63.6 million last year, or 15% more than in 2021
• Loan portfolio increased by 25% year-on-year to over EUR 2.6 billion
• Proactive increase in deposit rates led to strong growth in the term deposit portfolio, while the total deposit portfolio grew by 4% to EUR 2.8 billion
• Agreement was signed with Invalda INVL to merge retail businesses

Overview of Key Performance Indicators

“Just starting to recover from the pandemic, the economy has been hit again by the outbreak of the war. Despite external factors such as rising energy prices, volatility on the stock exchanges or increases in base interest rates, Šiaulių Bankas was able to sustainably adhere to its strategic goals and be closer to its clients throughout the year. The bank’s strong client-oriented position was also reflected in the results of a mystery shopper survey performed by Dive Lietuva, which revealed that Šiaulių Bankas provides the best service to clients visiting the bank’s branches. And this is not the only award in 2022 – The Banker magazine, published by the business daily The Financial Times, named us the best bank of the year in Lithuania,” said Vytautas Sinius, CEO of Šiaulių Bankas.

Šiaulių Bankas Group earned unaudited net profit of EUR 63.6 million in 2022 (15% more than in 2021). Net profit for Q4 was EUR 16.5 million (49% more than in Q4 2021). Operating profit before impairment losses and income tax amounted to EUR 81.5 million (+14% compared to 2021 – EUR 71.3 million).

Mainly due to strong growth in lending volumes, net interest income increased by 32% year-on-year to EUR 106.8 million. A steady increase in the number of clients and their activity increased net service and commission income by 9% to EUR 18.7 million.

The impact of the assessment of specific client exposures led to provisions of EUR 2.5 million in Q4 and EUR 5 million for the year (compared to provisions of EUR 4.1 million in 2021). The cost of risk (CoR) for the loan portfolio in 2022 was at the same level as in 2021 at 0.2%.

The Group’s cost to income ratio (excluding the impact of client portfolio of SB Draudimas) increased slightly during the year and stood at 43.2% at year-end (42.8% in the previous year) and the return on equity increased to 15.2% (14.3% last year). Capital and liquidity position remains sound and prudential regulations are met with the solid buffers – the liquidity coverage ratio (LCR) is 194%^*, and the capital adequacy ratio (CAR) is 16.1%^*.

Overview of Business Segments

Corporate and Private Client Financing

The year 2022 was characterised by a very strong growth in both corporate and private client financing, with the value of the loan portfolio increasing by 5% in Q4 and by as much as 25% over the year, to over EUR 2.6 billion. More than EUR 1.5 billion worth of new lending agreements were signed last year, i.e., one third more than in 2021.

Corporate lending volumes increased steadily during the year, with new business credit agreements worth almost EUR 0.8 billion signed during the year (21% more than in 2021). The value of the portfolio increased by 4% in Q4 and by 18% year-on-year (to EUR 1.4 billion). Credit risk indicators remained strong in Q4, and the results of the annual loan portfolio review did not have adverse effect on them. The non-performing business loan portfolio declined throughout the year and stood at EUR 58 million at the end of 2022 (-10% year-on-year).

Despite decrease in housing loan sales in Q4 (compared to the first three quarters of the year), mainly due to the general economic situation, rising energy prices, high inflation, or rising base interest rates, the housing loan portfolio grew by 9% in Q4, and by as much as 46% in 2021, and exceeded EUR 660 million. New housing loan agreements were signed for EUR 255 million (30% more than in 2021).

In Q4, people were more cautious about their ability to borrow for consumption and more restrained in planning their purchases. Universal credit, i.e., loan for a wide range of needs, is noticeably growing in popularity. In total, consumer credit agreements were signed for almost EUR 190 million during the year, i.e., 48% more than in 2021.The consumer financing portfolio grew by 4% in Q4 and by 34% for the whole of 2022, reaching almost EUR 230 million.

As the volume of applications for financing energy-efficient projects remains high, in Q4, the Bank offered a green housing loan for those who want to live more sustainably and who are looking for a new home for the purpose of buying the most energy-efficient housing on more favourable terms.

SB Modernizavimo Fondas continues to perform well, but due to a significant increase in construction prices and fewer projects ready for financing on the market, agreements for the modernisation of multi-apartment buildings have been signed for a total amount of EUR 107 million (17% less than in 2021).

Daily Banking

Last year, net service and commission income grew to EUR 18.7 million, an increase of 9% compared to 2021. Income grew in all the main fee and commission income groups – payments, cash transactions, accounts administration and investment services. More than 10 thousand new private and corporate clients started using the Bank’s services in 2022, bringing the total number of clients to 340 thousand. The number of clients subscribing to service plans generating stable commission income grew by 9% to 188 thousand.

The number of payments and turnover from payment cards, as well as the number of payment cards themselves, is growing, reaching 176 thousand, i.e., 2% more than a year ago. Among them, the fastest growing demand is for credit cards, the number of which grew by 33% year-on-year.

The past year has seen a strong focus on digitisation and new, more user-friendly smart solutions. Throughout the year, the Bank developed its digital channels in line with customer needs, expanding the number of services in the internet bank and the mobile application. For example, remote client identification and remote bank account opening have been introduced. The number of clients served this way is also steadily increasing.

Over the year, the Bank has been recognised both in Lithuania and abroad. The Banker, a magazine published by the British business daily The Financial Times, has announced that the award for the best bank in Lithuania has once again gone to the Bank. In awarding the Best Bank in Lithuania award, The Banker’s experts highlighted the Bank’s achievements in client service. Another important assessment was revealed by the results of a mystery shopper survey commissioned by Dive Lietuva, which showed that the Bank is the best in Lithuania in terms of face-to-face client service. The Bank achieved a 100% face-to-face client service quality indicator, the best result among the six banks participating in the survey and 3.4 percentage points ahead of the banking sector average of 96.6%. According to Dive Lietuva, the Bank has been ranked among the top three best-serving banks in Lithuania for the last six years when mystery shopper surveys have been carried out (since 2017).

Saving and Investing

The deposit portfolio grew by 4% over the year (EUR 114 million) to almost EUR 2.8 billion at the end of the year. Demand deposits, which make up the bulk of the portfolio, increased by 1% or EUR 10 million, while the term deposit portfolio grew by 12% or EUR 104 million. This increase in the term deposit portfolio is due to the proactive increase in interest rates to meet client needs in a rising base rate environment.

Clients are increasingly directing their savings towards the Bank’s saving and investment products, with commission income from securities-related services reaching almost EUR 4 million during the year (up 18% compared to 2021). Despite the volatile financial markets, the value of client securities in the Bank’s custody continued to grow and exceeded EUR 0.9 billion at the end of the year.

In Q4, the Bank successfully placed an additional EUR 85 million bond issue to institutional investors, paying an annual interest at the rate of 1.047%. With a tap issue the amount of the total outstanding bonds increased from EUR 75 million to EUR 160 million. The additional bonds were issued at a yield to maturity of 6.4%. The bonds issued will help the Bank to meet future MREL requirements, while strengthening the liability structure and broadening the investor base.

Merger of Retail Businesses

At the end of the year, the Bank and Invalda INVL signed an agreement to merge part of their retail businesses. Following the transaction, Šiaulių Bankas Group, in addition to the financial services it already provides, will be managing second- and third-pillar pension and investment funds in Lithuania and will expand its life insurance business. The transaction aims to create a new-generation modern, client-oriented financial market participant that will increase competition and create value for the Lithuanian economy. Successful closing of the transaction requires the fulfilment of all the necessary conditions, the obtaining of all the necessary permissions and the preparation and implementation of an integration plan. On 1 February 2023, the Competition Council of the Republic of Lithuania already gave its authorisation. The aim is to close the transaction by the end of 2023. In the meantime, the Bank’s strategy for 2024–2026 is to be updated.

* – forecast data

Šiaulių Bankas invites shareholders, investors, analysts and other stakeholders to join the presentation of financial results and current events of 2022 at a webinar scheduled on 1 March 2023 at 4:00 PM (EET). The presentation will be held in English. For more information click here.