In 2017, the Luxembourg banking sector generated solid banking income, with the interest margin increasing by 3.4%, it was reported in a communiqué published by the regulator on 8 May 2018.

“This favourable development was shared by 59% of Luxembourg banks, resulting in an increase in the volume of activities, an increase in the average yield on assets, and had the impact of negative interest rates for some banks’ institutional clients.”

In addition, after a negative trend in 2016 (-2.5%), net commission income (+ 2.7%) stabilised in 2017. As such, 58% of banks benefited from a very favourable stock market context in relation to their asset management business on behalf of private and institutional clients.

The decrease in banking income (-6.3%) is due to other net income. In 2016, these revenues had risen sharply due to significant capital gains achieved through an exceptional transaction by one bank. Excluding this exceptional effect, other net income would have decreased by 14.1% (instead of 35%), due in particular to a decline in dividends received by certain banks.

Overhead costs were the other contributor to the negative evolution of profit before provisions in 2017.

“The continuous increase in general expenses is a phenomenon observed for the last three years and affects the majority of Luxembourg banks (64%). While part of these overheads is due to investments in new infrastructure, a significant portion of these costs is directly related to banks' compliance to a continuous flow of new accounting and regulatory standards.”

As ever, Delano does not like presenting its readers with pure statistics with little context. Stay tuned, as we hope to bring you further information soon.