THE SLOVAK banking sector increased its profitability in 2013 and further improved its capital adequacy in 2013, with banks doing well thanks especially to sound growth in retail loans, which translated into a boost in net interest income. The National Bank of Slovakia (NBS) wrote this in its analysis of the Slovak financial sector for 2013, the TASR newswire reported.

As for trends in the domestic banking sector, growth in retail loans was the most important, amounting to 10 percent year-on-year - one of the fastest growths in the EU. The growth is attributed to low interest rates and stagnating real estate prices.

In late 2013, the year-on-year decline in the volume of corporate loans slowed down. According to the central bank, the partial revival of the economy contributed to the growth in demand and the halting of the gradual tightening of loan standards and margins from the side of banks.

Banks also saw an increase in retail deposits last year.

Meanwhile, the banking sector also continued to increase its capital adequacy ratio, with the figure going up to 17.2 percent last year, which is above the eurozone’s average.

“Thanks to this level of adequacy of the banks’ own resources as well as to the banks’ ability to generate net interest income, the banking sector would be able to withstand a scenario of unfavourable developments in the economy and on financial markets,” the NBS wrote in the analysis.
The most significant risk for banks continues to lie in the worsening of the quality of the credit portfolio and an increase in expenditures towards credit risk. Growth in domestic demand is also being curtailed by high unemployment.

“But also in this field it was possible to register signals of improvement, especially in the medium- and high-income groups,” wrote NBS.