Luminor delivered an improved performance in 4Q23, strengthening its strong liquidity and capital positions and investing for the future.
Luminor generated increased pre-tax profit of 51.7 million EUR in the fourth quarter, a 10.7% increase on the comparative prior year period. Profit for the period was 59.3% lower than the same period last year at 16.4 million following the introduction of higher taxes in Latvia and Lithuania.
Year-on-year pre-tax profit grew from EUR 142.4 million in 2022 to EUR 273.2 million in 2023, driven principally by an improvement in net interest income due to increased interest rates. As new taxes were introduced in Latvia and Lithuania, net profit increased for the period from EUR 124.7 million in 2022 to EUR 194.7 million in 2023.
In the fourth quarter, Luminor 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 Corporate Banking, Luminor once again supported the development of Baltic capital markets leading transactions across a number of sectors. The bank signed an agreement with the European Investment Bank to facilitate additional lending for Baltic SMEs and support the green transition of the economies. Sustainalytics recognised Luminor’s progress when they awarded the bank the lowest ESG risk rating of any of the largest banks in the Baltic region for the second time.
The bank improved its net interest income in the fourth quarter as interest rates increased after years of extraordinary low rates and limited profitability. In line with its strategy, Luminor made additional investments in its IT systems and processes and strengthened its organisation. These investments contributed to an increase of 37% in operating expenses for the quarter. Luminor’s credit quality remains robust with non-performing loans at 1.9% of gross lending.
As compared to the fourth quarter of 2022 the bank’s cost to income ratio increased marginally to 56.7% and it generated a reduced annualised return on equity of 3.7% on a post-tax basis. Luminor’s liquidity and capital positions are strong. At quarter end the bank’s Liquidity Coverage ratio was 200.7% and its Common Equity, Tier 1 and Total Capital Ratios, including net profit for the period, were 24.1%.
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.
“While we remain confident in the long-term outlook for the Baltic region, we are alert to the short-term uncertainty, and during the quarter we maintained our focus on driving efficiencies and continued to invest in our future capability, systems and processes to ensure we can deliver our strategy and improve the financial health of our customers and our home countries.”
Luminor Q423 interim report can be found here.
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