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Eight-month profit of Slovakia's banking sector falls by half

Profit of Slovakia's banking sector was €235.5 million at the end of August, according to figures from the National Bank of Slovakia (NBS), the SITA newswire wrote.

Profit of Slovakia's banking sector was €235.5 million at the end of August, according to figures from the National Bank of Slovakia (NBS), the SITA newswire wrote.

This was a drop of 50 percent from the previous year. Adoption of the euro had an impact on the banks' economic performance which was reflected in a shortfall in revenues from FOREX transactions. The sector's profit from these transactions shrank 74.5 percent to €58.8 million eight months into 2009.

The banks told SITA that the second reason behind their lower profits is their preparation for growth in defaulted loans over the coming months as they are setting aside reserves to cover potential losses. Net formation of reserves in the banking sector grew 183.3 percent y/y to €270.8 million in the monitored period.

The banking sector reported no change in the dominant component of banks' profit which is interest income. While interest income had been regularly growing at a two-digit rate, in August it went up by only 2.4 percent to €1.004 billion.

The central bank ascribes the decrease in profitability to a slower pace of lending, worsened loan portfolio quality, and a shortfall in FOREX revenues. It expects several banks to end 2009 with a net loss. SITA

Compiled by Zuzana Vilikovská from press reports
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