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Financial Stability Report – May 2025

Financial stability is developing favourably, but significant uncertainty clouds the outlook

Financial stability is developing favourably, but significant uncertainty clouds the outlook

Uncertainty about the future outlook

  • International trade tensions
  • Sustainability of public finances
  • Geopolitical risks

Lending growth amid falling rates

  • Pick-up in mortgages and housing prices
  • Halt to the decline in corporate lending
  • Credit sensitivity still elevated

High resilience of the financial sector

  • Strong banks´ capital and liquidity positions
  • Confirmed by NBS stress testing and independently by the IMF

Uncertainty about the future outlook

  • International trade tensions
  • Sustainability of public finances
  • Geopolitical risks

Lending growth amid falling rates

  • Pick-up in mortgages and housing prices
  • Halt to the decline in corporate lending
  • Credit sensitivity still elevated

High resilience of the financial sector

  • Strong banks´ capital and liquidity positions
  • Confirmed by NBS stress testing and independently by the IMF

Financial stability remains steady, but its future trajectory is increasingly difficult to foresee

The main risks include international trade tensions, public debt sustainability issues, and geopolitical instability. The most immediate concern is a potential slowdown in foreign demand. Recent financial market volatility further reflects the high level of uncertainty. It seems, however, that these risks have not so far had a direct impact on financial stability in Slovakia.

Falling interest rates have gradually led to recovery

The most notable rebound has occurred in the housing market. The end of the downtrend in housing prices, coupled with falling interest rates, has boosted expectations.

Mortgage lending is also recovering – less sharply than the housing market, but in a relatively stable manner.

Overall corporate lending is seeing the weakest recovery, but it has at least stopped declining. While lending to smaller firms is relatively strong, the commercial real estate (CRE) segment continues to experience a downturn.

Elevated interest rates have not led to a rise in non-performing loans

Non-performing loan ratios remain low across loan categories. The recent improvement in household income growth has temporarily slowed. As for firms, their financial situation weakened in 2024 due to sluggish revenues and rising wage costs. While the CRE segment remains fragile, there are emerging signs of improvement. Even a deterioration in global trade conditions is not expected to pose a systemic risk to Slovakia’s banking sector.

Banks’ resilience remains high due to solid profitability

The domestic banking sector remains highly resilient, with both capital adequacy and liquidity positions near historical highs. This has been confirmed by both NBS stress testing and an independent IMF assessment. Although the sector’s 2024 profit was reduced year-on-year by the impact of a new bank levy, banks remain in good shape. Net interest income continues to underpin sector profitability.

Other topical issues in this edition of the Report:

  • Declining insurer profits due to higher non-life loss ratios
  • The impact of spring turbulence on pension and investment funds
  • The implications of population ageing for Slovakia’s mortgage market