Last year, financial institutions operating in Lithuania earned a profit of 468 million euros, the highest since the country regained independence. This year, profits are expected to be even higher, reaching around 1 billion euros, reports LRT.lt. In 2022, the Lithuanian banking sector’s profit was almost 140 million euros, 42.7 percent higher than in 2021, according to the Bank of Lithuania.
“This is due to various exceptional circumstances. First, in the middle of last year, the European Central Bank started to raise key interest rates. Lithuanian banks’ portfolios are dominated by floating interest rate loans. Therefore, the impact of rising interest rates is reflected not only in new loans but also in the overall loan portfolio,” said Gediminas Šimkus, head of the Bank of Lithuania. “In addition, the Lithuanian banking system has excess liquidity. This reduces the incentive to react more quickly by raising interest rates on deposits,” he added. According to Šimkus, banks’ profits continue to grow this year. “As we can see from the first two months of this year, this growth continues to be accelerated and significant,” he said.
The Bank of Lithuania estimates that credit institutions could earn profits of more than 1 billion euros in 2024 due to higher interest rates and high liquidity. In response, Lithuania’s central bank, together with the Finance Ministry, is proposing a solidarity tax on banks for the next two years, which could raise around 510 million euros in taxes from financial institutions. The largest banks in Lithuania by assets are Swedbank with 17.8 billion euros, SEB with 13.3 billion euros, Revolut with 10.2 billion euros, and Šiaulių bankas with 4.1 billion euros.
There are currently 19 banking sector players in Lithuania, including 13 banks and six branches of foreign banks.
