Good day, dear investors. Thank you for joining Šiaulių Bankas' webinar on the third quarter results. Today we will be three presenters: Tomas Varenbergas, who is the head of Investment Management Division, and Tautvydas Marčiulaitis, who is a strategy partner, and myself, Vytautas Šiňauskas, CEO of the bank. Let's get started with the presentation, and we'll start with the key financial strategic highlights. I would say the quarter was strong. The net profit generated was in the range of 20+ million EUR. With that, we reached almost 64 million EUR net profit for nine months with 15.4% return on equity, maintaining rather stable efficiency levels of a cost-to-income ratio of 45.6%, slightly better than our indications in the beginning of the year.
Of course, fourth quarter traditionally will be slightly potentially higher with the cost, so this ratio would be, I hope, somewhere in between those two ranges. We had a strong quarter on the new lending volume growth, and it was mainly through the old business lines, predominantly with corporate lending, and that led to 18% year-on-year growth of loan portfolio. So with that, we made growth of our market share, again, in all business segments. So we made a gain in market share in the Lithuanian market. That also led to a pretty sustainably low cost of risk parameter of 0.31%, and the main impact mainly was coming from new and newly signed loans. The third quarter was also important on the capital efficiency and distribution events. So we have revised our dividend payout policy and increased that up to 15%, and also initiated share buybacks programs.
And yeah, as you saw, that positively impacted our share price performance. And last but not least, we're becoming more and more visible in international markets. So Erste Group initiated coverage of our bank, and they started with a buy recommendation with a target price of EUR 1 per share. So if we move to highlights of particular client segments, so if we talk about the corporate side, so growth was even higher than the average of the portfolio. It was 22% year-on-year, and that led to the volumes of around EUR 400 million of new origination. And that was mainly on all business segments, including energy, manufacturing, retail. Slightly less, we were active on the real estate market, but lending was active in all business segments.
And as I mentioned, that led to a growth of our market share during the first half of the year up to close to 14%, gaining about one percentage point during the sixth month of 2024. Talking about private clients, again, mortgages rebounded strongly after the last year slowed down in the market. So we gained strong growth during this year, about 99% year-on-year. Origination was in the third quarter close to EUR 76 million, and consumer lending was close to EUR 66 million of newly issued loans. Also, we're strengthening our capabilities of cross-selling. So we're actually collecting new direct consents of the clients. So that increase was about 40% from the beginning of the year. And we also, each year, are making a Net Promoter Score index.
This year, we maintained a strong level of 81, which is almost at the same level as last year, and taking into account different types of activities we're doing at previous merger within Invalda Retail, I treat that as a very strong achievement on customer experience dealing with Šiaulių Bankas. And on the investment side, I would say strong origination of bond issuance, so EUR 185 million in the first nine months, and that already has reached our target and overcame this target of the whole year by 16%. And also important investments in our digitization of the service provision. So we made available online bond subscription in our system, so the clients can now easily subscribe for bonds throughout the digital channels. And also strong performance of the pension funds. So pension funds maintained competitive results both in the short and longer-term horizon.
In the third quarter, the returns of second pillar pension funds were highest in seven out of eight life cycle funds. And the four-year fund results were the best in six out of eight life cycle funds. So obviously, strong performance both on the short-term evaluation and on the longer term, which is important for those who are investing into those pension funds. So now over to my colleague Tautvydas, who will overview the macroeconomic situation.
Okay, let's take a quick look at the big picture for the Lithuanian economy. The good news is that our economy is doing really, really well and firing on all cylinders. We are on a track for 2.3% GDP growth this year, which is driven by strong consumption, increasing industrial production, and good agricultural output this summer in Lithuania. Look, what's really positive is that the growth is well diversified and visible across economic sectors in the country. Inflation, which was very high a while back, has largely retreated and is now among the lowest in the Eurozone. You might pick up next year a little bit due to higher excise duties and wage growth, but overall outlook remains very positive, as you can see from the chart in the middle.
So look, this combination of rising GDP, increasing wages, and low inflation is directly impacting consumer confidence, which remains the highest in Europe. And it's not just in theory. We are actually witnessing it firsthand in our bank, where origination volumes are at record high. And it's a nice deal for us for our growth, and it gives us flexibility for pricing strategies and expanding into new sectors. Looking ahead in 2025, we anticipate that this positive economic momentum will continue. The declining interest rates will further stimulate business flexibility and encourage investments. And I guess one last thing worth mentioning is that we had a parliamentary election in Lithuania. Social Democratic Party, as expected, won most seats in the parliament. It's very likely that the center-left coalition will be formed with mainstream parties. As of now, we expect the continuity and do not envision any radical fiscal changes.
So all in all, the economy is doing well, and the outlook remains bright. And now back to Vytautas.
Yeah, let's come back to Šiaulių Bankas' performance. So the snapshot of our performance highlights of the third quarter. So I would say, as I mentioned earlier, the net profit generated is in range of the previous quarter, which is above 20 million EUR. And despite the declining euro bond, we managed to achieve comparable revenue level for the quarter-on-quarter comparison. From events which were different compared to the second quarter, our operating expenses decreased by 14%. And that was mainly one-off effect, which increased our costs in the second quarter due to the windfall tax that was accrued during this quarter. Impairment losses are higher, mainly due to the uptick of the new lending volumes. So our new originated loans influenced the increase of provision that you need to do originating the loans. And also worth mentioning that our total assets in management increased by 20% during this year.
Okay, if we move to the net interest income information, slight decrease quarter on quarter by 2%. Mainly, the positive influences were coming from the newly originated loans, mainly from all business segments. So you can see that on the graph on the bottom. And the negative impact was coming from the increased cost of funding of EUR 2.6 million. And I would say one-off influenced higher cost of funding is that we kept EUR 210 million bond issuance during quarter one, which overlapped with our EUR 300 million senior preferred note issuance, which we have done in the third quarter. I would say in the euro bond dropping environment, we managed to keep asset yield almost flat at 6.4%. And as you see, the line of cost of funding is still growing, but it should peak shortly. And our net interest margin also decrease should be managed as well.
If we move to the loan portfolio development, so already we've touched this topic several times. So overall figures look strong: 8% growth during the quarter and 18% during the last year compared with year-on-year. Strong origination on the corporate banking sector. So the lion's share comes from that: EUR 154 million. The second one is mortgages, or close to EUR 60 million growth. And as you see, the loan portfolio yields remaining relatively stable. A few comments on net fee and commission income. So since we still have comparative basis with Šiaulių Bankas' performance in 2023 without merger results, we have quite substantial growth on a year-on-year basis by 43%. But even without that, we have 9% growth without impact of merger within well retail business. That is also, I would treat as a strong performance in NFCI income.
And renovation income as well showed a strong performance year-on-year basis from EUR 1.4 million in the third quarter 2023 up to EUR 2 million in the last quarter. And the capital markets were a bit weaker, but it's mainly due to seasonal headwinds, which will be different, I believe, next quarters.
Hello everyone, so Tomas Varenbergas is speaking, and I will continue today's our webinar with operating expenses section. Cost discipline is maintained despite the overall inflationary cost environment. We keep our cost-to-income ratio below 45%. We take it as an adjusted one as we treat windfall tax as one of expenses for the bank, as we do not project and forecast any of such tax to be paid going forward. We had to account in Q2 some of the windfall tax for the last year, and that increased our Q2 operating expenses amount, and that was, and it is the key reason why in Q3 we have almost 10% lower operating expenses. This we have some uplift in IT expenses, and that's primarily driven by our investments into IT platform, so that's the expected expenses.
Going forward, we do see that IT will be one of the fastest growing expenses for the bank. Looking to the overall expenses expenditures compared to the last year, Q3, so we do have an increase by more than 40%, but that is explained by our retail M&A transaction that took place in Q4 last year. Let's turn to the asset quality. We keep very good and strong asset quality. Actually, the impairments mainly were driven by the new lending because we have to accumulate on originating loans some of the impairments. It accounted for more than 6 million EUR in the last quarter. The positive thing comes that the improving development of the Lithuanian economy had a favorable impact of a level of impairment, and it's already for the few quarters.
The total amount of cost of risk is close to the 30 basis points, and it's below our targeted level, 50 basis points. Even if you look to our stage two and stage three loans portfolio dynamics, we do see again positive trends. Two reasons that the whole portfolio is increasing. If you look to the stage two, we do have some positions that actually were eliminated from the stage two portfolio. We do have a good dynamics on stage two loans development. Going forward, we do not expect that somehow in the Q4 we will deviate significantly from cost of risk of 30 basis points. On the funding side, we had significant changes in our structure during the Q3. The key funding source, term deposits and demand deposits, are growing steadily.
So during the Q3, we have a 2% growth rate and very healthy growth rate in the ninth month, which is 8%. We have repaid a TLTRO, which is close to EUR 500 million. Just to remind that we took that loan in order to invest these funds into securities, and we just earned the spread between the borrowing cost and our investment revenue. So we have already repaid that, and it's not on our funding structure. We issued our debut euro bond transaction in late August. That was very well accepted by investors. The bank got very high demand for our inaugural issue. So the reason that we went for this issuance is that in October, we have repaid EUR 210 million of our locally placed issue, and it will work for our MREL requirements for meeting the MREL requirements and improving our liquidity position.
Looking to the cost side, so we do see that the cost of funding peaked in the Q3. And if you look to our main funding source, so that deposits, so the cost of deposits started to decline in Q3. Actually, we decreased our term deposits rates in June, and we're making another step. And from next week, even lower rates for term deposits will be paid for to our clients. On capital and on capital ratios and our capital position, so we do see that we have a very robust capital position, which supports our growth and future capital distribution. We have some post-quarter activities with our capital. So we have issued the AT1 debt issue. So it's not still in our capital ratios, but it took place the post-Q3 period. On MREL side, we do have high surplus on our ratio.
The reason behind that is that at the end of September, we got EUR 300 million of a new issue, and still EUR 210 million issue wasn't still repaid. So in overall, we do have a strong position in order to finance our growth and to meet high shareholder distributions. So turning to that part, so yes, we have approved our new dividend policy with a minimum amount of 50% of last year's net earnings. The other part that we are emphasizing, so it's the share buybacks because we do see at the current valuation, the bank is trading that we can enhance the shareholder value. So we already have executed a tender offer in October.
The result that we have achieved, we treat as very good because we didn't see kind of a huge supply from the current investors who want to exit our position as the final tender offer price was above the market price. We are ready to begin share buybacks in a regulated market. We'll start next week on Monday. The share buyback program will last till 24th of January. The bank aims to buy back up to 125K of own shares each trading day. The bank will place orders throughout the trading session. These orders will be able to adjust it if needed. There are some restrictions on the price that the bank can execute its orders. The key message is that bank's orders can't initiate the transactions in the open market.
So the orders that will be placed by the bank will stand on the bid side and will execute orders that are on the ask side. And we'll continue that share buybacks program until the fair value valuation will be achieved. So we believe that we need to close the gap between the bank's valuation and the peer group, which is still in the area of 30%. We believe that the buybacks will increase liquidity in the market and will increase the equity story and its attractiveness for the future and the current our investors. So passing the word to Tomas to.
Okay. Let's spend a few minutes on segmental overview. So corporate client segment is our largest and most profitable segment within the bank, the jewel in our crown. We have a loan book exceeding EUR 2 billion, which is growing and just very well diversified across different industries, as you can see from the chart in the top right-hand side. And it's also very nicely diversified across different regions in Lithuania. It's a high-quality book of business that is characterized by loyalty fees and high collateralization levels, as you can see from the chart in the bottom right-hand side. As we already mentioned a couple of times, we had a record quarter origination levels, you know, record high. In Q3 in corporate banking, we underwrote close to EUR 400 million new loans.
And you know, we've seen that growth across different sectors, including manufacturing, retailing, alternative energy, and not only upsizing our existing clients, but we're also winning new clients from other banks, which helps us to expand our market share. So, you know, to be perfectly honest, we think that the growth will moderate in the future. We'll really like this nice tailwind, which helps our growth and, you know, allows us to be a little bit more flexible about pricing strategies and allows us to expand into new sectors. Moving on to private client segments. The division delivered strong results in Q3. The demand for mortgages and consumer credit remains very high in Lithuania. So you can see from the chart in the top right-hand side, we originated close to EUR 76 million of new mortgages in the last quarter.
That's sort of like double the size compared to the same period last year. Consumer credit, we originated close to 65 million EUR. And you know, during this quarter, we also increased the price a little bit. So despite the price uptick, the origination volume has increased by 11%. The overall loan book increased by 21%. And we also do well in collecting deposits. So you can see our private client deposits increased by 16%. So the division still is going through a transformational phase as we continue to integrate in Valda acquisition. And you know, we continue to transform our sales force. We laid the groundwork for Cross-Sell, and we expect to expand into high-value clients in the future. But we need to do a lot of homework for that, which includes, you know, collecting direct marketing consents, you know, testing new CRM and training our salespeople.
It's not going to happen overnight, but you know, we're investing a lot of time and energy in this division, and we feel good about the achievements to date. Moving on to investment clients division, that's a combination of different businesses, including asset management, which we acquired late last year. It's a life insurance business, it's a custodian business, and it's a leading local capital markets desk. So when we acquired Invalda Retail last year, we knew it's really, really good business, probably one of the best in Baltics, and we proved it to be right. You look into AUM, which increased 25% compared to the same period last year, and it's been driven both by new client inflows as well as strong investment performance. Our pension funds, as Vytautas already mentioned, doing really well.
Seven out of eight pension funds generated best returns in the Lithuanian, you know, pension market last quarter, which is, you know, a strong testament for the team's capabilities and competencies. Then on the right-hand side, you see the quick overview of our life insurance business continues to perform really well and growing steadily. Both AUM and risk under management increased this quarter. So in this business, what we're actively trying to do is we're trying to replace the broker channel, and we're trying to sell more life insurance for our internal sales bankers channels in Salesforce. We're seeing some traction in that regard, and we think that's going to help with the unit economics going forward. And last but not least, As [on] we have a quick overview of our DCM business.
We did, you know, originate close to EUR 31 million of new bonds in the Lithuanian market, which may seem a little bit low, but Q3 usually is slightly slower given we have to see some months. But overall, year-to-date performance is solid. It's, you know, exceeding what we had last year. And you know, we expect the strong growth to continue. We're also investing, you know, in technology to enhance our services. In Q3, we launched an online bond subscription platform, which will help our clients to subscribe to new bond issues for a digital channel. But overall, again, we have it with this business, and we envision to maintain a leading position in Lithuanian DCM market, which at the moment we have 70%-80% of market share. Now, then I'll hand it over to Vytautas.
Thanks. This slide, I believe, pretty well represents our both performance of a business, how the bank runs the business model, and our capital efficiency steps that we've made recently to both the newly announced dividend policy and the share buybacks that are initiated now and already started. As Tomas explained, we'll continue in a few months from now. That had a positive impact on our share price performance, including the intensive growth that we executed during those nine months. Another important thing to mention is about share price, share liquidity. As you can see in the gray color, we have quite a strong peak of trades. That's, I believe, a track to think for many investors to invest in the positions which are more liquid and more traded. Another important milestone, we crossed the EUR 500 million capitalization level.
So we're getting closer to 1 billion bank. And also closing our price-to-book gap with our peers. And even an uplift of share price recently, we still traded in the range of 0.9 to price-to-book value. And last slide from our side today is the events that we are welcoming all of you to meet with us in the nearest future, starting with the Baltics and as well in Prague and Vienna during this year and the beginning of the next one. And definitely please subscribe to our investor relation newsletters if you still don't. And you'll be updated continuously as we present information. So thank you for your attention and wish you a good day and we'll be ready for the Q&A.
Okay, let's switch to the Q&A session. We have a few questions. The first question is about Šiaulių Bankas market share. And the question is, and the comment is that it's visible that you guys are winning market share in corporate banking and business loans. Could you please give us some color on that in Šiaulių Bankas winning new clients, sizing existing clients, the average ticket size increasing on the same? Maybe Vytautas, you want to take that question.
Oh, yeah, sure. It's a good question. And I think in the question there is some already information about the answer of it. So the corporate development was strong despite that the European market is quite sluggish. There's not that strong performance compared to the Lithuanian economy. But I'm really happy about the business development in the Lithuanian economy and business clients is a main driving force for that. So well diversified and overcoming difficulties in the other economies and reorientating them businesses and diversifying due to flexibility and ability to adapt to the situation which is constantly developing in the world. And that allowed us to meet new clients, to extend our relationship with the current ones. But the main driving element of the growth was slightly larger clients, like mid-corp clients, I would say in the range of EUR 10 million or that size.
And predominantly was manufacturing sector, slightly less construction and real estate during those quarters. But I would say diversification of portfolio continues and we're finding new clients in other business segments.
Thank you. The next question is about M&A. Could you please give an example of what kind of strategically important value for you that M&A you would do? So I'll take this question and maybe I'll start with saying that, you know, in the short to medium run, we're not envisioning any transformational M&A. The management team is fully focused on executing on organic growth, you know, integrating in Valda acquisition, extracting cost and revenue synergies. So we may do M&A, but it's likely going to be a bolt-on M&A. And the criteria, you know, we need to have for us to look at those potential acquisitions. One is we need to plug in our existing competency gaps or enrich our product offering. And then number two, it more likely will be an asset-light business.
So just to give you a couple of purely theoretical examples that meet those two criteria. One is merchant acquiring business. Number two, some sort of supplementary services to our corporate banking clients, for instance, you know, tax services or accounting services. And then we have a third question about mortgage applications. Could you please explain what's limiting the issuing of new mortgages? Is there a restriction or you stopped issuing those new mortgages for any other reason? Again, maybe Vytautas, you want to take that question.
Yes, thanks. Yeah, as you saw in our presentation, there was a strong uplift of mortgage origination during the second and third quarter. And the pipeline was very strong. Therefore, coming to the fourth quarter, we saw that our pipeline, as I said, this was extremely strong. And we slightly underestimated the second and third quarter growth on that level. Therefore, we had to make some restrictions of new loan origination and acceptance of applications. The good news that from today we are accepting the new mortgage applications. So the situation is managed and we will be providing the loans both this quarter and no limitations for the new year. So that was temporary. And I think it's fair to inform clients upfront that we are overwhelmed with the applications and need to manage our risk appetite, size of our growth. And that was a reason for temporary suspension.
Now it's open again.
Great. Thank you, Vytautas. The next question is about AT1 instrument. And the question is, why did you decide to issue AT1 instrument specifically? Vytautas, you want to take that question?
Yes, sure. So thank you for that question. So we are highly focused on our capital efficiency. And it's one of the steps that we needed to do in order to go throughout that journey. AT1 instrument works very well in our capital structure because that brings us into a better position on our CET1 ratio. And we can use equity for growth or for higher distributions for the shareholders. So in overall, it's one of the steps that we needed to do. We still have room and, you know, another bunch of steps that we need to do in order to get into the most efficient capital structure for our shareholders.
Great. Thank you. The next question is about our marketing and equity story effort. Looks like your international bond issuance was well received by international investors. Do you plan to start marketing your equity story more actively and start attending roadshows? I can take this question. Well, the answer is we already are. We are already participating in a number of conferences and meeting investors who are focused on emerging Europe equity. Only this year, you know, we already attended a couple of conferences and we plan to attend, you know, a few more. We're building pipeline for the next year. We're working with international investment banks in order to keep expanding our equity research coverage. So investor relations team doing, you know, a lot of different things to help to expand our marketing and amplify our equity story, which, you know, we do believe it's a great investment.
We have an interesting story and the valuations still do not reflect that yet. Okay, I don't know if we have any other questions left. Doesn't look like, so I think this concludes our investor webinar. Thank you very much for dialing in and joining us. If you have any additional questions later today or later this week, please reach out to the investor relations team. We'll be more than happy to answer those, and again, thank you for dialing in. Have a good day.