Slovenian Banks See Profit Dip Amid Increased Provisions, Loan Growth Strong

Slovenian banks experienced a notable dip in profitability during the first four months of 2024, with pre-tax profits falling by 14.6% to 249 million euros compared to the previous year. The Bank of Slovenia attributes this decrease primarily to lower net income and a substantial rise in net impairments and provisions, which nearly doubled year-on-year.

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The decrease in profit is a consequence of both reduced net income and increased net impairments and provisions.

Despite the profit reduction, the Slovenian banking system remains robust. Profits are still above the long-term average, and the system's resilience is high, with stable outlooks. The increase in impairments and provisions, alongside higher operational costs partly due to the guarantee scheme, significantly impacted earnings. Non-interest income also saw a slight decrease.

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The business of the Slovenian banking system remains relatively successful, as bank profits remain above the long-term average and the resilience of the banking system remains high with stable prospects.

On the other hand, the banking sector saw positive trends in deposits and loans. Household deposits saw solid inflows, reaching 29.3 billion euros by the end of April, a 6.5% increase from the previous year. This growth is supported by high employment and real wage increases. Loans to the non-banking sector also expanded, with a 10.7% year-on-year growth, far surpassing the European average of 3.7%. This expansion is largely driven by household lending, including mortgages and consumer loans.

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This is the highest growth since November 2022 and significantly exceeds the European average, which is 3.7 percent.

The quality of bank investments remains stable, with the share of non-performing exposures (NPE) at a steady 1.6%. This stability reflects favorable labor market conditions and the generally sound financial standing of households. The total assets of banks reached 58.2 billion euros by the end of April, a 6% increase year-on-year.

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The stable share of NPE among the population continues to reflect favorable conditions in the labor market and the generally good financial position of households.