Šiaulių Bankas Group results for the H1 2023

• In H1, Šiaulių Bankas Group earned EUR 43.3 million of unaudited net profit
• Corporate and private clients demand for financing remains high, with the loan portfolio increasing by over EUR 150 million to EUR 2.8 billion
• Interest in investment and savings products is growing rapidly, with the term deposit portfolio increasing by more than 30% to EUR 1.22 billion
• Moody’s has upgraded Šiaulių Bankas rating to Baa1, highest in the Bank’s history
• EUR 50 million subordinated bond issue will support the Group’s continued sustainable and efficient growth
• In H1, the number of the Bank’s shareholders increased by more than 1.2 thousand and reached almost 20 thousand

“The markets are still dominated by central banks and the changing interest rate environment, but demand for financing remains high in both the corporate and private segments. Favourable interest rates are also encouraging people to place term deposits and more actively look for savings and investment solutions. We aim to maintain the momentum and plan to focus on the review of the Bank’s strategy and the implementation of the transaction with INVL in the upcoming quarters. We believe that together we can create even more value for both investors and clients,” said Vytautas Sinius, CEO of Šiaulių Bankas.

In H1, Šiaulių Bankas Group earned EUR 43.3 million of unaudited net profit (47% more than a year ago, when the profit amounted to EUR 29.5 million). Profit for the Q2 was EUR 24.1 million and increased by 34% compared to the profit of EUR 18.1 million for the same period last year.

The operating revenue grew rapidly in H1 - compared to the same period of 2022, net interest income increased by 60% and reached EUR 75.5 million, net fee and commission income increased by 6% and reached EUR 9.6 million.

The Group made provisions of EUR 2.6 million in the Q2 and EUR 5.3 million since the beginning of the year. The updated risk assessment of individual exposures had a significant impact on provisioning. At the end of the half-year, the loan portfolio’s cost of risk (CoR) reached 0.4% and is in line with the target (compared to 0.2% in the corresponding period of the previous year).

The Group’s cost-to-income ratio (excluding the impact of client portfolio of SB Draudimas) stood at 35.1% at year-end (43.4% in the corresponding period of the previous year) and the return on equity was 19.4% (14.7% last year). The capital and liquidity position continues to remain sustainable and prudential ratios are being met by a wide margin, with a liquidity coverage ratio (LCR) of 225%* and a capital adequacy ratio (CAR) of 19.6%*.

Corporate and Private Client Financing

Despite the continuing uncertainty and macroeconomic environment still showing no signs of improvement in Lithuania and key export markets, we continue to see strong demand for financing from our clients. Over EUR 740 million worth of new credit agreements were signed in H1, almost 9% more than in the corresponding period last year. The Bank Group’s total loan and leasing portfolio grew by 4% (EUR 100 million) in Q2 and by 6% (EUR 157 million) since the beginning of the year, reaching EUR 2.8 billion.

Almost 15% more business financing loans (worth EUR 438 million) were issued compared to the first half of the previous year. The corporate finance portfolio grew by 3% (EUR 40 million) in Q2 and 5% (EUR 63 million) since the beginning of the year and reaches EUR 1.45 billion.

Although the volume of new loan applications remains high, the first half of the year has been characterised by a decline in the volume of sales of mortgage financing, which is also seen in the overall mortgage market. In total, contracts worth EUR 96 million were signed during the half-year (21% less than in H1 2022). The mortgage loan portfolio grew by 5% (EUR 36 million) in Q2 and by 10% (EUR 68 million) since the beginning of the year, reaching EUR 732 million.

The consumer finance market remains highly competitive, but active and visible advertising and the availability and attractiveness of services have led to a significant increase in business volumes. Almost 24% more consumer loans (worth EUR 112 million) were issued compared to the first half of the previous year. The consumer finance portfolio grew by 10% (EUR 25 million) in Q2 and by 17% (EUR 40 million) since the beginning of the year, reaching EUR 269 million.

Demand for financing of energy efficiency projects remains very high. In Q2 alone, SB Modernizavimo Fondas signed multi-apartment building renovation contracts for EUR 57 million (325 projects worth a total of EUR 218 million were financed since the company’s inception). Clients continue to take a keen interest in green mortgage loans, which has led to an increase in demand for these loans.

Daily Banking

The number of clients and their activity is steadily increasing. The same trend is with the Bank’s new solutions offered - the number of clients authenticated or onboarded for the Bank’s services by remote means continues to grow, as does the number of users of regularly updated electronic channels.

In Q2, 8.5 thousand new private and business clients started using the Bank’s services, and since the beginning of the year, more than 16 thousand have joined the Bank. The number of active clients is growing, while the number of subscribers to stable commission-generating service plans has remained similar at 190 thousand.

With consumption remaining at a high level, demand for credit cards has been strong, with a 9% quarter-on-quarter and 35% year-on-year increase in the number of credit cards issued, while the total number of payment cards issued has decreased to 175 thousand cards.

Saving and Investing

Demand for both investment and savings products is growing rapidly, with the term deposit portfolio growing by more than 30% to EUR 1.22 billion since the beginning of the year. Interest rates on deposits are one of the main reasons driving the interest in the Bank's term deposits. The Bank’s total client deposit portfolio amounts to almost EUR 2.9 billion. In response to clients’ needs to save on their own, the Bank has offered a new instrument for saving and investing for the future – 3rd pillar pension funds.

The high inflationary environment continues to encourage clients to direct their savings into the Bank’s investment products - the value of clients’ investments in the Bank has been growing and exceeded EUR 1.7 billion, which is almost double the value at the beginning of the year.

The transaction to merge the Bank’s and Invalda INVL’s retail businesses is progressing smoothly and is expected to be completed by the end of the year. Preparations are underway to ensure the best experience for employees, clients and investors. In Q2, the review of the Group’s strategy for 2024 - 2026 was launched to create a strong next-generation financial services provider.

In June, Moody’s upgraded Šiaulių Bankas rating to Baa1 and affirmed the stable outlook on long-term deposit ratings. This is the highest rating in the Bank’s history and a confidence-boosting indicator for both investors and clients entrusting their funds to the Bank.

In Q2, the Bank successfully placed a 10-year subordinated bond issue of EUR 50 million in the international financial markets, which attracted more investor attention than expected. The funds raised will help the Bank to maintain its lending volumes to Lithuanian businesses, to achieve an efficient capital structure, to meet the requirements of the supervisory authority and to maintain the continuity of its dividend policy. In the second half of this year, as in the previous year and in 2021, the Bank plan to issue bonds to meet the Bank’s MREL requirements.

In May, Lithuanian companies (Invalda INVL, Tesonet Global and Willgrow) increased their shareholdings in Šiaulių Bankas, following the implementation of the second series of the transaction with the European Bank for Reconstruction and Development (EBRD). There is still a year left to complete the share acquisition processes, and to this day, out of 18% of the shares sold by the EBRD, settlement of transactions for 12% have already taken place. In H1, the total number of the Bank’s shareholders increased by more than 1.2 thousand and reached almost 20 thousand.

*  - forecast data

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