Lietuvos bankų aktyvų ir pasyvų valdymo strategijos ekonomikos nuosmukio sąlygomis ir įtaka paskolų portfelio kokybei
Lithuanian bank assets and liabilities of management strategy for the economic downturn and the impact on the quality of the loan portfolio

Summary/Abstract: The chosen strategy of the bank asset and liability management allows for achievement of banking harmony in the bank’s performance, i.e. the balance in combining its striving for maximalisation of the profit at the same time ensuring its liquidity with the least risk. Research works describe three asset and liability management strategies: zero, positive, negative NII strategies in asset and liability management. Whatever strategy commercial bank applies in its performance, it shows that is able to follow contemporary systemic approach in asset and liability management, what has direct impact not only on the bank’s performance, but also the profit. One of the most important ratios allowing for evaluation of the success of assets and liabilities systemic management in commercial banks, is Net interest income (NII) calculated as the interest difference between sensitive assets and liabilities. Net interest income (NII) shows management strategy chosen by commercial banks, oriented at decreasing the performance risk. Changes in net interest income in performance of commercial banks occur due to the NII between the volume of interest-rate-sensitive assets and the volume of interest-rate-sensitive liabilities. Bigger NII of a commercial bank in absolute terms - bigger change in net interest income during the analyzed period. When choosing the asset and liability management strategy, it is important to choose an optimal balance structure via interest rate cycle, and to keep banking activity concordance If a bank seeks for positive strategy, risk increases, but net interest volume also increases, then the commercial bank is expanding its activities, its interest is growing, the share of interest-insensitive liabilities in the total volume of liabilities is increasing. If a bank chooses the model of asset and liability management strategy oriented at negative (NII), then business cycle is narrowing, interest is decreasing and the share of interest-sensitive liabilities in the total volume of liabilities is increasing, the volume of fixed rate and longer term loans is increasing. Trying to hedge against interest rate fluctuations and instability in the financial market the best option would be zero strategy, because the bigger NII, the higher risk the bank faces. Loan portfolio of a bank is defined as total of all loans issued by a bank classified by certain criteria (type of lending, interest, purpose, etc.), structure of the loan portfolio is determined by amount of the bank‘s capital, size of the bank, target market segment of the bank (business, private households, corporative banking) and other factors. Expected revenue is one of the key factors determining the structure of the bank’s loan portfolio. In the process of formation of the loan portfolio each bank pursues three key objectives: to maximise profit, to maintain the least possible risk level and to increase number of customers. In order to achieve the above key objectives, it’s important to focus not only on formation of the loan portfolio itself, but its effective management as well. Loan portfolio management comprises of all available procedures related with the bank‘s loan portfolio, i.e. planning and formation of the portfolio, regulatory measures applied to credit policy and procedures also continuous control of issued loans and financial status of debtors. One of the most important and complex stage of the loan portfolio management is continuous assessment of issued loans in order to determine the real value of a particular loan or the total portfolio. Correct and appropriately prepared procedures of the loan portfolio management enable the bank to have a „sound“ loan portfolio. All these factors become particularly relevant in view of increased likelihood of economic recession. Cyclical economic changes result in qualitative and quantitative changes in the loan portfolio. Financial crisis that began in the USA in 2007 also had an effect on the economy of Lithuania: the country’s economy has started contracting in the second half of 2008 and Lithuania entered into the economic recession period, which determined changes in the loan portfolio of the Lithuanian bank system. In 2006-2011 a share of loan portfolio in assets of the banks of the Lithuanian banking system accounted for in average 73,70 % per quarter. A share of loan portfolio in assets of the banks has started decreasing since the first quarter of 2009 (drop by 10,22 pp.). As the results of analysis show, the biggest drop in the economic recession period was recorded in the sector of loans issued by financial institutions (37,77 %), and the least – in loans granted to private persons (14,00 %); while a share of loans granted to governmental authorities and state-owned or municipal enterprises increased by 103,15 %. Quality analysis of the loan portfolio of the banks operating in Lithuania over the period of the years 2007-2011 showed that a share of nonperforming loans in the loan portfolio had started increasing since the 4th quarter of 2007 (increase by 0,10 pp.), and comparative weight of nonperforming loans in assets increased by 16,90 pp. in the 3rd quarter of 2011, as compared with the 1st quarter of the same year. In 2007-2011, special provisions increased by 6,31 pp. In 2007 value of the loan portfolio decreased by 416,39 mln. Lt, and in 2011 m. – by 4173,15 mln. Lt. Results of the performed multiple regressive analysis show that changes in the government debt, housing prices and average leveraged loan portfolio in 2006-2011 had the major impact on changes in the above mentioned loan portfolios.

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