22 December 2017

Press release 17/46

The CSSF estimates profit before provisions of the Luxembourg banking sector at EUR 4,207 million for the first three quarters of 2017. Compared to the same period in 2016, profit before provisions thus decreased by 5.5%.1

The third quarter of 2017 is in line with the broad trends observed in the first half of 2017. Indeed, recurrent income – interest-rate margin and net commissions received – remained firmly on the upside (+4.3%) while general expenses continued to grow (+3.6%).

Interest-rate margin increased by 3.9% on average. This positive development, experienced by 62% of Luxembourg banks, was mainly triggered by the increase in business volume and the passing-on of negative interest rates by certain banks to their institutional customers. The rise of net commissions received (+4.8%) was shared by 55% of Luxembourg banks, chiefly owing to asset management on behalf of private and institutional customers. Nevertheless, this item rose for traditional banking intermediation activities as well.

As a consequence, the negative development observed as regards banking income is due to non-recurrent effects and notably linked to a significant decrease of dividends received for a limited number of credit institutions. Indeed, the item other net income fell sharply compared to the previous year (-19.9%).

The sharp rise in general expenses is notably linked to the sustained increase of the other general expenses. This trend concerned the vast majority of the banks of the financial centre and reflects the investments in new technical infrastructures, charges due to extraordinary events as well as costs to be borne by banks in order to comply with major new accounting standards and regulations that will take effect in the coming months.

As a result of the above-mentioned developments, profit before provisions decreased by 5.5% year-on-year.

Profit and loss account as at 30 September 2017

1 Due to major changes in the banking prudential reporting in 2016 and 2017 (Circular CSSF 15/621), the aggregation scope has been adapted to better reflect the evolution of the profit and loss accounts of Luxembourg banks. Consequently, the figures for September 2016 have been readjusted to reflect a larger aggregation scope which is similar to the new reporting of September 2017.
2 Including dividends received.