In an increase of 81 percent on year, Luminor Bank posted a net profit of €53.2 million in the second quarter of 2023, the Baltic bank headquartered in Tallinn announced this week.
This improvement in net profits was driven principally by an improvement in net interest income as the bank grew loans to customers and reference interest rates increased after years of extraordinarily low rates and limited profitability, Luminor said in a press release.
Operating expenses, meanwhile, increased by 72 percent as the bank invested in its IT systems and processes. Luminor also incurred a credit loss allowance, compared to a net reversal last year, and a higher tax expense after Lithuania introduced a temporary bank tax. The Baltic bank retained the profit it generated in the second quarter, however.
Compared with the second quarter of 2022, the bank's cost to income ratio improved by 7 percentage points to 55.5 percent, and it generated an increased annualized return on equity of 12.8 percent.
Luminor's liquidity and capital positions are strong, the bank reported, noting that as of the end of the second quarter in June, its Common Equity, Tier 1 and Total Capital Ratios, including net profit for the period, stood at 22.9 percent.
The second quarter saw limited demand for new loans and a marginal decrease in deposits as customers responded to a prevailing economic environment and higher reference interest rates. Nonetheless, non-performing loans remained at just 1.2 percent of the bank's gross lending.
During the quarter, Luminor made additional investments in its IT platform and strengthened its organization, as well as took further steps to realize its environmental, social and corporate governance (ESG) ambitions; its efforts were also recognized by the Latvian Institute of Corporate Sustainability and Responsibility's Sustainability Index 2023.
"The long-term outlook for the Baltic region is strong, and we look forward to the year ahead with confidence," said Luminor Bank CEO Peter Bosek, commenting on the second quarter results. "Luminor is here to improve the financial health of our customers and our home countries, and to support their growth. In so doing, we will maintain our strong financial standing, exercise prudent risk management and fulfill our wider obligations."
Headquartered in Tallinn with branches in Latvia and Lithuania, Luminor Bank AS was established in 2017 on the basis of the Baltic operations of Nordea and DNB.
Currently the third-largest bank operating in Estonia, its majority stakeholder is the Blackstone Group.
Editor: Aili Vahtla