Credit: CSSF
The Commission de Surveillance du Secteur Financier (CSSF) has measured the profit before provisions of the Luxembourg banking sector in 2019 at €4.738 million.
As of 31 December 2019, Luxembourg credit institutions recorded a profit before provisions of €4.738.6 million. In comparison with the previous year, earnings before provisions fell by 6.4%.
On the revenue side, the interest margin increased by 7.7% compared to 2018. A majority of credit institutions experienced a positive development of the interest margin thanks to the increase in the volume of activities and improving the average rate of return on assets. More than half of the banks now apply negative interest rates on deposits collected from institutional financial customers.
Net commission income increased by 2.7% over one year, mainly reflecting the positive development of depositary banks on behalf of investment funds and, for a limited number of banks, the transfer of activities to Luxembourg due to Brexit.
The evolution of other net income remained characterised by high volatility dominated by non-recurring results with a very limited number of banks. The main reasons for this drop in 2019 were, in order of importance, a decrease in capital gains made on securities portfolios and a decrease in dividends received.
Regarding charges, two thirds of banks experienced an increase in their general expenses over a year. However, the magnitude of this increase (+8.4%) was mainly due to the mobilisation of the human and technical resources necessary to manage the banking activities transferred to a few credit institutions in Luxembourg due to Brexit. This increase affected both other general expenses (+8.0%) and personnel costs (+ 8.7%). If the Brexit effect were disregarded, the total overhead costs would decrease slightly, given the decrease in the number of banks to 125 as of 31 December 2019.
The above developments led to a continuous deterioration in the expense-to-income ratio, which fell from 57% to 61% at the end of 2019.
