Profit and loss account of credit institutions as at 30 June 2016

The CSSF estimates profit before provisions of the Luxembourg banking sector at EUR 3,040 million for the first half of 2016. Compared to the same period in 2015, profit before provisions thus increased by 1.5%.

The development of the profit and loss accounts of credit institutions in Luxembourg results from the increase in banking income (+3.2%) which is mainly due to the interest-rate margin and other net income.

The increase of the banking income results from a positive development of the interest-rate margin (+8.6%) and of other net income (+5.5%) whereas the net commissions received declined by 3.5% as compared to the same period in 2015. In the context of low, or even negative, interest rates, the interest-rate margin remains down for most banks of the financial centre. The sharp rise year-on-year is only attributable to a limited number of credit institutions and results from aspects which are specific to these banks. The fall of net commissions received concerned over half of the banks in Luxembourg. The drop of these net commissions received, which mainly result from asset management activities on behalf of private and institutional clients, is linked to the less favourable stock market environment as compared to the previous year.

Other net income recorded an increase (+5.5%) as compared to the same period last year. This item is very volatile due to its composition. The rise recorded at the end of June 2016 as against the same period in 2015 is mainly attributable to non-recurring factors specific to a limited number of banks of the financial centre.

General expenses rose by 5.1% over a year. This rise is linked to other general expenses which increased by 8.3% as well as to staff costs which increased by 2.1% over a year. This increase in general expenses concerns most of the banks of the financial centre and reflects not only the investments in new technical infrastructures but also expenses to be borne by banks in order to comply with a more complex regulatory framework. The growth in staff costs is linked to the positive development in banking employment which went up from 25,669 people in June 2015 to 26,233 people in June 2016 (+564).

As a result of the above-mentioned developments, profit before provisions increased by 1.5% year-on-year.

Profit and loss accounts as at 30 June 2016