Profit and loss account of credit institutions as at 31 March 2019

The CSSF estimates profit before provisions of the Luxembourg banking sector at EUR 1,012.7 million for the first quarter of 2019. Compared to the previous year, profit before provisions thus significantly dropped by 20.8%.

The deterioration in banks’ profitability found its origins at the level of income (-2.6%) and fees (+11.4%).

As regards income, net interest income fell by 4.4%. Not taking into account the negative impact linked to a bank’s portfolio restructuring, net interest income significantly increased. This increase, experienced by 57% of banks, results from the growth in business volume and the improvement in the average return on assets. Despite the positive development of businesses related to asset management and custody on behalf of private and institutional customers, net fee and commission income slightly decreased (-1.3%).

General expenses continued their steep rise (+11.4%). This rise is linked to other general expenses (+11.7%) as well as to staff costs (+11.0%). The sustained increase of general expenses was the main reason for the negative development of profit before provisions in most of the credit institutions. Consequently, the banks’ profitability deteriorated year-on-year, as evidenced by the cost-to-income ratio which rose from 57% to 65% at the end of the first quarter of 2019.