Profit and loss account of credit institutions as at 30 September 2018

The CSSF estimates profit before provisions of the Luxembourg banking sector at EUR 3,982 million at the end of the third quarter of 2018. Compared to the same period in 2017, profit before provisions thus decreased by 5.3%.

The net interest income continued its upward trend. Over a year, it increased by 7.5%. The main factors which explain this increase are the prolonged application of negative interest rates on deposits collected from institutional customers, an upsurge in activities as measured by the rise in the balance sheets or an improved average return on assets. However, the favourable development of the net interest income was only recorded for half of the banks of the financial centre. Retail banks and private banks in particular registered on average less favourable developments of the net interest income despite a rise in their balance sheet total.

The increase in net fee and commission income (+8.1%) was observed in half of the banks. This increase is largely attributable to the positive development of the activities related to asset management on behalf of private and institutional customers. With the persisting low levels of the interest rates, commissions become an increasingly significant source of income for many banks of the financial centre.

The other net income has substantially declined (-31.9%) as compared to the same period last year. Due to its composition, this item exhibits high volatility and its development is often linked only to non-recurring factors affecting a limited number of banks of the financial centre.

General expenses continued to grow (+6.5%) throughout 2018. This rise is linked to other general expenses (+9.3%) as well as to staff costs (+3.8%). In aggregate terms, general expenses grew faster than banking income thus further reducing the profitability of banks as expressed by the cost-to-income ratio which has risen from 52% to 55% year-on-year.

As a result of the above-mentioned developments, profit before provisions decreased by 5.3% year-on-year.

Profit and loss account as at 30 September 2018