NBS: Slovakia’s Financial Sector Remains Stable Despite Coronavirus Crisis

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the National Bank of Slovakia (illustration picture by TASR)

Bratislava, November 30 (TASR) – Despite the significant impact of the coronavirus crisis on the domestic economy, Slovakia’s financial sector remains stable, according to the financial stability report presented at a news conference by Slovakia’s central bank (NBS) representatives on Monday.

Banks are entering the crisis with a strong capital position. Although their profitability will be significantly weakened by the crisis, banks will be ready to cope with a significantly negative stress scenario, stated the NBS.

According to the NBS’s financial stability department director Marek Licak, the financial situation of households and companies will be decisive for the banking sector. Profits might continue to fall in 2021 as a result of growth in non-performing loans,” said Licak. The banking sector has an adequate capital buffer to cover potential losses and support lending, stated Licak, adding that other sectors haven’t yet been hit by the crisis that much.

The level of failed loans in the household segment is very low for now, stated Licak. Clients who asked for deferral of instalments show higher-risk parameters. Just a small portion of clients expect problems when returning to repayment, however, there are still many households showing a deteriorating financial position. “We expect the volume of non-performing loans to start growing. As many as 1.7 percent of household loans might find themselves at risk of default,” said Licak.

As is the case of households, corporate loans haven’t been failing significantly until now. Instalment deferrals were chiefly provided to companies with worse characteristics.

Licak stressed that as many as 12 percent of companies might be at risk of becoming insolvent by the end of 2021. The number of non-performing loans in banks might thus swell by 6.4 percentage points. He stressed that even more companies would be at risk of insolvency without government support measures.

Licak said that potential losses from loans are estimated between €590-810 million by the end of 2021.

Growth in housing loans in Slovakia didn’t slow down that much despite the crisis, standing at 9.2 percent. “The growth rate decelerated only slightly from February when it amounted to 9.8 percent,” he said. Meanwhile, the growth in consumer loans decelerated as a result of lower demand on the clients’ side.