Rising interest rates and growing balance sheets have led to a rise of 20.1 percent in interest income for Luxembourg’s banks in the first quarter, according to data released by financial supervisor CSSF. The improvements however were not enough to counter a decline in non-recurring revenues, which meant overall bank sector profits fell 2.4 percent.
CSSF said that Luxembourg’s 122 banks earned 1.39 billion euro in interest income between January and March, compared to 1.16 billion in the same period a year earlier.
The category ‘other net income’, which includes often volatile non-recurring income such as trading results and divestment results, decreased by 38 percent year-on-year to 358 million euro. Subsequently, the result before provisions and taxes of Luxembourg’s banking sector amounted to 1.29 billion for the first quarter of 2022, a decrease of 2.4 percent compared to the same period last year.
Commission income up 6.9%
Net commission income rose by 6.9 percent, led by services related to wealth management for private and institutional clients, including investment funds. The increase in assets deposited by these clients with credit institutions led in particular to an increase in commissions on asset custody, said CSSF.
Average operating costs for Luxembourg’s banks rose 7.8 percent in the first quarter compared to the same period a earlier. CSSF said 72 percent of the banks reported rising costs.
Developments in the first quarter led to an expense-to-income ratio of 61 percent, according to CSSF. As of 31 March 2022, 21 out of 122 banks had an expense-to-income ratio of more than 100 percent, the supervisor said.