Banks, Financial Services, Lithuania, Loan

"The main reason behind the loss-bearing activity of credit unions in 2015 is that the more than EUR 4 million in losses, borne due to the revaluation of debt securities acquired by credit unions, were almost twice as great as the one-off profit received from the revaluation of securities in the first quarter of this year," says Director of the Supervision Service of the Bank of Lithuania Vytautas Valvonis.

The assets of credit unions, with a decrease in deposits in the second quarter of 2015, dropped by EUR 7.6 million and amounted to EUR 622.8 million, or 2.8% of the assets of the banking system (from 2.5% a year ago).

Loans granted to members (EUR 275.8 million) represented the largest share of the assets of credit unions (44.3%). In the second quarter of 2015 the loan portfolio increased by EUR 13.7 million. The ratio of specific provisions formed by credit unions against likely expenses on loan impairment to loans increased by 0.3 p. p. (to 7%). Non-performing loans accounted for more than a fourth of a total of loans.

"The deteriorating quality of the loan portfolio suggests that there is still the need for credit unions to accumulate capital, necessary for amortising likely losses on loan impairment and ensuring stability of operations," notes Valvonis.

According to the data as of 1 July 2015, nearly a third of credit union assets consisted of investments in debt securities. In the second quarter they dropped by almost 16% (to EUR 198.2 million).

With the increase in the number of members of credit unions, the share capital increased by EUR 1.4 million in the second quarter of 2015, amounting to EUR 53.4 million. However, the adjusted capital of credit unions, which is crucial in ensuring compliance by the majority of credit unions with prudential requirements and the requirements of other legal acts, contracted by 3.1% (to EUR 57.1 million). The decrease in adjusted capital resulted from losses incurred by credit unions.