Release Date: October 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Bank of Siauliai AB (FRA:ZH5, Financial) reported a strong net profit of over EUR 20 million for the third quarter, contributing to a total of nearly EUR 64 million for the first nine months of 2024.
- The bank achieved an 18% year-on-year growth in its loan portfolio, driven by strong corporate lending and a significant increase in market share across all business segments.
- The bank revised its dividend payout policy to 50% and initiated share buyback programs, positively impacting its share price performance.
- The bank's digitalization efforts have been successful, with the introduction of an online bond subscription platform and strong performance in pension funds.
- The Lithuanian economy is performing well, with a projected GDP growth of 2.3% for the year, low inflation, and high consumer confidence, which benefits the bank's operations and growth prospects.
Negative Points
- Operating expenses decreased by 14% due to a one-off windfall tax in the previous quarter, but the overall cost environment remains inflationary.
- Impairment losses increased due to higher new lending volumes, impacting the bank's financials.
- Net interest income saw a slight decrease of 2% quarter-on-quarter, influenced by increased cost of funding.
- The bank's capital markets performance was weaker due to seasonal headwinds, affecting its overall financial results.
- The bank had to temporarily restrict new mortgage applications due to overwhelming demand, indicating potential capacity or risk management challenges.
Q & A Highlights
Q: Could you provide insights into Siauliu Bankas' market share growth in corporate banking and business loans?
A: Vytautas Sinius, CEO, explained that despite a sluggish European market, Siauliu Bankas has seen strong business development in Lithuania. The bank's growth is driven by well-diversified business clients, particularly in the manufacturing sector, and the ability to adapt to changing economic conditions. The main growth driver has been mid-sized clients, with a focus on sectors like manufacturing, construction, and real estate.
Q: What is the bank's strategy regarding mergers and acquisitions (M&A)?
A: The bank is not planning any transformational M&A in the short to medium term. The focus is on organic growth and integrating recent acquisitions. Future M&A will likely be bolt-on acquisitions that fill competency gaps or enhance product offerings, such as merchant acquiring businesses or supplementary services for corporate clients.
Q: Why were there restrictions on issuing new mortgages, and what is the current status?
A: Vytautas Sinius, CEO, stated that due to a strong pipeline and underestimated growth in the second and third quarters, the bank temporarily restricted new mortgage applications to manage risk. However, the situation is now managed, and the bank has resumed accepting new mortgage applications.
Q: Why did Siauliu Bankas decide to issue AT1 instruments?
A: Tomas Varenbergas, Head of Investment Management Division, explained that issuing AT1 instruments is part of the bank's strategy to enhance capital efficiency. These instruments improve the bank's CET1 ratio, allowing for better use of equity for growth or shareholder distributions.
Q: Does the bank plan to market its equity story more actively and attend roadshows?
A: The bank is already actively participating in conferences and meeting investors to promote its equity story. They are working with international investment banks to expand equity research coverage and plan to attend more conferences in the future to enhance their marketing efforts.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
