ABBL Retail Banking Survey: Assets, Liabilities Up 7.7% in 2021

The Luxembourg Bankers' Association (ABBL) has published the results of its survey, conducted jointly with Luxembourg's financial regulator, the Commission de Surveillance du Secteur Financier (CSSF), on the stability of the retail banking sector in 2021.

In a context that continued to be marked by the aftermath of the COVID-19 pandemic and by a low interest rate environment, the retail banking sector in 2021 was in line with the previous year, according to this survey.

The survey showed an increase in deposits and in the number of loans granted. It also confirmed basic trends such as the increasing use of online services. The figures for employment and the number of customers remained stable.

While the number of customers remained stable (1,192 million), the assets and liabilities (deposits and loans) rose slightly (€97.8 billion, up 7.7% compared to 2020). According to Michael Burch, Chair of ABBL's Retail Banking Cluster, "this development is mainly due to a market effect, but also to the good performance of the credit market, where volumes have indeed increased by 7.4%. Therefore, no negative effects of the pandemic can be observed in this area". The credit market was mainly driven by mortgage loans (88% of volumes, up 9% from 2020).

The survey also showed that customers continued to hold most of their assets in current and savings accounts (80%). "This cautious behaviour may come as a surprise in an environment of historically low or even negative interest rates", noted Jerry Grbic, CEO of ABBL. In this context, it is recalled that the banks had chosen not to pass on negative interest rates to their customers, with a few exceptions, but to take it upon themselves to bear lower margins.

Mr Grbic continued: "This also poses a challenge in the context of financing the ecological transition, innovative sectors or the reindustrialisation of our economies. Indeed, let us remember that public money alone will not be enough to meet these challenges. On the contrary, private investment will also have to be mobilised. To do this, in addition to a certain number of tax incentives, we will also have to continue our efforts in the area of financial education, so that everyone understands that through their choices in terms of mobilising their savings, they can have an impact on society".

Regarding customer behaviour and digitalisation, Michael Burch explained: "COVID-19 confirmed and even accelerated a trend that we have been seeing for a number of years, namely that our customers have become accustomed to using online banking services and now have a certain level of digital maturity". The figures documenting this trend were as follows: 16% drop in withdrawals and 9% drop in transfers made in branches, 7% increase in transfers via e-banking. In general, the use of e-banking services was up by 5% for private clients and 8% for professional clients.

Moreover, the number of branches and automatic teller machines (ATMs) remained fairly stable (231, down 2% for branches; 539, down 4% for ATMs). "These figures show that the coverage of bank branches and ATMs in relation to the number of inhabitants remains high in Luxembourg, compared to the European average", noted Jerry Grbic.

The study conducted by the ABBL on the basis of figures collected by the CSSF covers 90% of the retail banking sector. It comprises retail banking clients, whether they were individuals, professionals (self-employed, liberal professions, etc.) or legal entities (generally small companies). It does not include large companies or private banking clients.