Banque Internationale à Luxembourg reported a net income after tax of €103m in the first half of 2023 compared with €68m in H1 2022, driven by solid revenues from interest rates and commercial activities.

Bil’s assets under management rose to €44.1bn, a slight increase from €43.5bn at the end of last year, according to its , released on Monday 4 September 2023. This growth came mainly from positive market changes, but was partly offset by a small drop in new assets.

Drop in customer deposits and loans

A decline in customer deposits and loans marked the bank’s recent performance. Deposits fell by 6.8% to €19.6bn, down from €21bn at the end of the prior year. This drop was driven largely by attractive interest rates, which have incentivised customers to transfer funds into higher-yielding investments.

Additionally, the loan portfolio experienced a modest contraction of 0.2% to €16.4bn. This was predominantly due to a reduction in mortgage loan originations, influenced by rising interest rates and delays in construction projects, assessed the report.

Revenue boost from commercial activities

Despite challenging economic conditions, commercial activities significantly boosted the bank’s revenue. An additional €65m was earned in this segment in H1 2023, marking a 23% increase compared to June 2022.

Favourable interest rates contributed to a 46% surge in net interest income from these activities. However, it wasn’t all good news, as fees from brokerage and other services declined by 6%.

Financial markets revenue

Financial markets also saw an uptick in revenue, increasing to €37m--a substantial €20m rise compared to June of the previous year. This growth was largely fueled by a favourable interest rate environment, contributing an extra €17m, specifically in banking book management activities.

Furthermore, revenues were bolstered by an uptick in volumes in structured investment products.

Moderate increase in expenses

Total expenditures for the bank rose to €235m, up 4% from €227m in the first half of 2022.

The bulk of this increase (€9m) was accounted for by a rise in staff salaries, resulting from salary indexations.

Additionally, a marginal uptick in general expenses was observed, largely due to transitional costs associated with the implementation of a new core banking system, as well as increased spending on training and marketing initiatives.

Improved financial metrics

The bank’s financial ratios revealed improvement. The cost-to-income ratio was 60.9% in June 2023, an enhancement from 72.4% in the same month the previous year. Excluding non-recurring items, the core cost-to-income ratio stood at 60.4%, compared to a higher 84% in June 2022.

Surge in operating income amid higher risk

The bank witnessed a remarkable surge in its operating income, which soared to €139m from €74m in H1 2022.

This upswing was primarily driven by heightened revenues in commercial activities and financial markets, partially counterbalanced by minor increases in operating expenses.

However, the bank also had to allocate €21m for potential loan losses, contrasting sharply with a €3m reversal in the previous year, indicating a heightened risk profile.

Russia-related credit risks constituted a minimal 0.3% of total exposures as of 30 June 2023, clarified Bil.

As of the close of June 2023, the bank also maintained stable credit ratings from Moody’s and Standard & Poor’s, unchanged from the end of the previous year.

The full report is available .