THE SLOVAK banking sector reported after-tax profits of €321.7 million for the first seven months of 2012, a drop of 34.9 percent compared with the same period of 2011. Net interest income dwindled by 1.7 percent to €1.028 billion. Formation of reserves and provisions rose slightly too, but banks attribute the drop in profitability mainly to the introduction of a special bank levy, the SITA newswire wrote.
The banks have been paying a special levy at a rate of 0.4 percent on corporate deposits since the start of 2012. But parliament has extended the basis on which they pay the existing special levy. Since September 1 banks have also had to pay the levy on private individuals’ deposits. The government expects the measure to bring in additional income of €27.5 million this year and an extra €110 million next year. This was designed to be a temporary measure and will end once banks have paid a total of €1 billion.
The National Bank of Slovakia (NBS) does not have a rosy outlook as far as the prospects for bank profits go.
“The prospects for development of profitability of the banking sector are rather negative during the months to come,” the central bank wrote in its report about the financial market for the first half of 2012. According to it, most of the trends which negatively impact bank profitability will persist and several of them will become even more visible.
According to preliminary data, last year’s taxed profit of the banking sector in Slovakia increased by about onethird to nearly €672 million. However, according to the Slovak Banking Association, an important component of banks’ profit was one-off income. After its deduction, net profit of the banking sector last year was around €503 million, which was approximately the same as in 2010.
1. Oct 2012 at 0:00 | Compiled by Spectator staff