Press release

Profit and loss account of credit institutions as at 31 March 2016

Press release 16/27

The CSSF estimates profit before provisions of the Luxembourg banking sector at EUR 1,305 million for the first quarter of 2016. Compared to the same period in 2015, profit before provisions thus decreased by 17.7%.

The development of profit and loss accounts of credit institutions in Luxembourg results from the decrease in banking income (-9%) whose origin lies mainly in the other net income.

The drop in banking income is due to a negative development of net commissions received as well as other net income whereas the interest-rate margin increased by 7.6% as compared to the same period in 2015. In the context of low or even negative interest rates, the interest-rate margin remains bearish for most banks of the financial centre. The strong growth in comparison to last year does only result from a limited number of credit institutions and can be explained by factors specific to banks. The decrease in net commissions received was observed in over half of the banks in Luxembourg. The reduction in this income, which is largely due to asset management activities on behalf of private and institutional clients, is linked to the negative stock market context in the first quarter of this year, while the financial markets experienced a significant increase in the first quarter of 2015.

The other net income have substantially declined (-40.4%) as compared to the same period last year. This item exhibits high volatility due to its composition. The drop observed at the end of March 2016 compared to the same period in 2015 is only due to a limited number of banks of the financial centre and results from non-recurrent factors.

General expenses rose by 1% over a year. This growth is linked to the other general expenses (increasing by 3.9%), whereas the staff costs fell by 1.7% over a year. The increase concerns most banks of the financial centre and reflects not only investments in new technical infrastructures, but also the expenses to be borne by the banks to comply with a more complex regulatory framework.

As a result of the above-mentioned developments, profit before provisions decreased by 17.7% year-on-year.

Profit and loss account as at 31 March 2016

1 In order to better reflect the trends of the different income sources of the banks, the dividends received have been reclassified from interest-rate margin to other net income. This reclassification appropriately reflects the existing relation between the assets valued at fair value and the distribution of relating dividends.