© Gaël Arellano/ RTL
Luxembourg's State and Savings Bank reported a record net profit of €400.8 million for 2023, defying market uncertainties and a troubled real estate sector thanks to effective interest rate strategies and forward-looking investments in cyber security and digital innovation.
2023 has been a very fruitful year for the Spuerkees. The management committee and the chairman of the board of directors on Wednesday announced a record net profit of €400.8 million. 2023 was a year marked by crises, inflation, and market uncertainties, and in Luxembourg it was particularly the real estate and construction sectors that were affected.
For a bank whose business assets lie in these sectors, one might assume that its profits would have been adversely affected. However, Doris Engel, appointed to the Spuerkees management committee in 2018, notes that the impact of rising interest rates "obviously played a role". While acknowledging their influence, Engel also highlights the impact of the period leading up to the successive increases in the European Central Bank's key interest rates.
"The situation was turned inside out", admits Engel, reflecting on the period when the ECB introduced negative interest rates. "We have never offered negative rates at Spuerkeess, and we paid the price for it", she adds, viewing it as a logical correction. "We have regained our margin compared to what has happened in recent years."
Françoise Thoma, CEO of the bank, explained that while interest rates had "a significant impact," the financial result "was not an end in itself." She emphasised the necessity of preparing for the future and highlighted that this "record" profit would contribute to realising crucial projects in the years to come. She notably cited investments in cyber security, the digitisation of Spuerkeess' distribution channels, and the modernisation and opening of new branches.
The strong turnover achieved by the State and Savings Bank will enable the institution to establish new provisions, maintain a high level of equity, and uphold the institution's AA rating. "We are part of a select club of very well-rated banks", she was quick to add. The CEO also emphasised the importance of investing in their staff to "retain talent." The project of "decentralised" sites to allow cross-border employees to avoid constant traffic issues was also mentioned.
Despite the generally positive news, some shadows still loomed. The bank only concluded 2,450 real estate loans in 2023, half as many as in previous years, confirmed Romain Wehles, the commercial director at the financial institution. Spuerkeess also grappled with numerous debt restructurings to assist struggling developers.
These figures, however, do not raise concerns for the management of Spuerkeess, which remains confident in its long-term strategy. Olivier Wantz, head of the risk management department, acknowledges, however, that there will be a need for "additional provisions for risks in 2024". This perspective is shared by the bank's CEO, who emphasised that "the banking industry today requires heightened caution".
Despite the stagnation faced by the construction market, Thoma is anticipating a slight recovery in 2024. She underscored the significance of "a real estate market that contributes to the country's financial health". Based on available data, the market of existing housing is displaying promising signs. Alongside the assistance set to be approved by the Chamber of Deputies, this could potentially set off a shift in the situation. That's the perspective held by the management committee of the bank.
