The regulator explains that the negative evolution in results is down to two main causes: the constant increase in general expenses (+4.2%) and the significant reduction (-44.4%) in other net income. These negative effects were partly offset by the positive result achieved on main banking activities such as banking intermediation and asset management related businesses.

The sharp drop in net income is linked to non-recurring factors specific to a limited number of banks in the financial centre. “For example, the negative evolution of certain banks' exchange differences, closely linked to the development of the Euro/USD exchange rate was a major factor.”

Serge de Cillia, CEO of the Luxembourg Bankers' Association told Delano that the drop was also due to an exceptional transaction that took place in Q1 2017, which inflated net income. As there was no such transaction in Q1 2018, of course it appears like a dramatic decline in income at a first glance. 

According to the CSSF, costs are also rising faster than banking product, up from 53% to 57% year-on-year.