Luminor says it improved its net interest income in Q4 2023, after years of lower interest rates and limited profitability as a result.

Commenting on the results, Luminor Bank CEO, Peter Bosek, said: "We have delivered a solid performance in the fourth quarter and strengthened our strong liquidity and capital positions, which is testament to the hard work of our teams to support our customers."

The bank says it generated increased pre-tax profit of €51.7 million in Q4 2023, a 10.7 percent rise on the same quarter in 2022.

However, net profit for the period was 59.3 percent lower than the same period last year, at €16.4 million, mainly due to higher bank taxes being introduced in Latvia and Lithuania.

Bosek said that "While we remain confident in the long-term outlook for the Baltic region, we are alert to the short-term uncertainty," adding that the last quarter saw focus on efficiency gains and investments.

Pre-tax profit up in 2023 as a whole

Year-on-year pre-tax profit grew from €142.4 million in 2022 to €273.2 million in 2023, driven principally by an improvement in net interest income due to increased interest rates.

Net profit rose for the period from €124.7 million in 2022 to €194.7 million in 2023.

Compared with Q4 2022, Luminor says its cost to income ratio increased marginally to 56.7 percent, generating a reduced annualized return on equity of 3.7 percent on a post-tax basis.

At quarter end the bank's liquidity coverage ratio stood at 200.7 percent and its common equity, tier 1 and total capital ratios, including net profit for the period, came to 24.1 percent

Luminor made additional investments in its IT systems and processes in Q4 2023, investments which contributed to an increase of 37 percent in operating expenses for the quarter. Luminor's credit quality remains sees non-performing loans make up 1.9 percent of gross lending.

The bank says it improved its product offering, focused on growing its current account and deposit volumes in Retail Banking, and continued to build its business around its customers, in the final quarter of 2023.

An agreement with the European Investment Bank (EIB) to facilitate additional lending for Baltic SMEs and to support the green transition of the economies was another highlight of Q4 2023.

Sustainalytics, a company that rates the sustainability of listed companies based on their environmental, social and corporate governance performance also awarded the bank the lowest ESG risk rating of any of the major banks in the Baltic region, Luminor says, adding that this was the second time it had been so recognized.

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