Riga, 7 May 2010
Latvian bank performance update 1Q 2010
Financial and Capital Market Commission has prepared recent data on the performance of Latvian banks for the first quarter of 2010.
In 1Q, performance data of all the Latvian banks met regulatory requirements, still retaining high level, i.e. liquidity ratio reached 62.8% by end-March, while capital adequacy ratio was 14.2% (compared to 62.8% and 14.6%, respectively, at end-2009).
During 1Q 2010, five banks increased their capital overall by 57.3 million lats and paid-up share capital in the banking sector accounted for 1.7 billion lats at end-March (13 Latvian banks increased their capital in total by 998.2 million lats in 2009).
In 1Q 2010, deposit stock in banks grew for second quarter in a row, i.e. by 2.5% or 235 million lats and at end-March totalled 9.8 billion lats. In March, for second month in a row resident deposit stock increased (by 2.4% or 143 million lats), where both corporate deposits (by 6.5% or 104 million lats) and household deposits increased (by 1% or 29 million lats). In March, there was also an increase in non-resident deposit stock by 4.8% or 167 million lats.
Though the Latvian banking assets fell by 1% or 222 million lats during the first quarter, in March the amount of assets grew by 0.8% or 175.5 million lats and totalled 21.5 billion lats by end-March.
Loan portfolio of the banking sector overall shrank by 1.7% or 222 million lats during 1Q 2010, i.e. at a similar pace as in 2009, or on the average by 0.6% monthly totalling 15.2 billion lats at end-March, where resident household loan balance contracted at a slightly slower pace than resident corporate loan balance, namely by 0.5% and 0.8%, respectively. Meanwhile loan portfolios of eight Latvian banks and three foreign bank branches increased in March (making up 19.2% of total market share in the banking sector loan portfolio).
At end-March, of total loans 72.5% were without payment delays (compared to 74.5% at end-2009). In March, the amount of loans with more than 90 days overdue payments grew by 0.7%, and their share in the banking loan portfolio by end of March made up 17.9% (compared to 16.4% at end-2009). For loans with more than 90 days overdue payments, the major share constituted resident corporate loans for real estate transactions (28.2%) and resident household loans for housing acquisition (28.1%).
In 1Q, banks were still focusing on dealing with the clients experiencing financial hardship, and the amount of restructured loans increased in 1Q 2010 and at end-March totalled 2.7 billion lats (of which loans to legal persons – 1.9 billion lats, natural persons – 841 million lats) or 18.1% of total bank loan portfolio (compared to 16.1% at end-2009).
Since client creditworthiness did not show improvements, accordingly loans in work-out process showed an upward trend and at end-March totalled 1.6 billion lats (including to legal persons – 866 million lats, natural persons – 765 million lats) or 10.8% of total banking loan portfolio (at end-2009 – 9.5%). Likewise in March 2009, a major share of restructured loans and loans in work-out process were secured with real estate, i.e. 82.4% and 89.9%, respectively.
Loan loss provisioning rate decreased in the banking sector on the average from 44% quarterly in 2009 to 17.7% in Q1 2010 and the amount of provisions in the banking sector totalled 1.6 billion lats at end-March or 10.3% of total banking loan portfolio (compared to 8.6% at end-2009).
In 1Q 2010, seven Latvian banks and one branch of foreign bank (covering 11.1% of total banking sector assets) posted profit, earning in total 2.9 million lats, however, the banking sector reported total loss of 133.4 million lats by end of March, mainly due to expenses on loan loss provisioning. The banking sector profit (before provisioning and tax) amounted to 28.8 million lats by end-March.
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