Monthly Overview of the Latvian Banking Sector Performance for May 2012
Performance indicators of all the Latvian banks complied with the regulatory standards also in May.
The banking sector retained high level of liquid assets and at end-May liquidity ratio was 59.4% (compared to 62% at end-April). Also, the capital adequacy ratio remained high and reached 17.3% at end-May (regulatory minimum capital requirement – 8%), whereas the tier 1 capital ratio was 15% (compared to 18.1% and 15% at end-April, respectively). Since the beginning of 2012, seven banks had increased their capital for the total of 19 million lats, according to the information on the Latvian banking performance for May 2012, provided by the Financial and Capital Market Commission (hereinafter – the Commission).
Overall, the banking sector ended the first five months of 2012 with a profit of 73.4 million lats, where 15 Latvian banks and six branches of foreign banks posted profit (with market share of 93.7%). The banking sector profit (before provisions and tax) by end-May exceeded 115 million lats, i.e. up by 20% year-on-year. In comparison with May 2011, both net commission income (by 33%) and net interest income (by 10.3%) had grown, whereas expenses for loan loss provisions fell by 15.8%.
During May the banking deposit stock shrank by 0.9%, or 107.3 million lats, where resident deposits fell by 0.5%, or 26.5 million lats and non-resident deposit stock – by 1.4%, or 80.8 million lats, that was mainly affected by exclusion of the insolvent JSC “Latvijas Krājbanka” data reported in May (after initiating bankruptcy proceedings, a credit institution operating licence granted to the JSC “Latvijas Krājbanka” was cancelled on 10 May 2012).
Loan Portfolio Volume
Withdrawal of authorization for the JSC “Latvijas Krājbanka” had an impact on the loan portfolio contraction as well. In May, the total banking loan portfolio shrank by 2.8% (where the balance of loans granted to resident households – by 2.1%, to corporate resident customers – by 3.5%, to non-residents – by 2.6%). Whereas disregarding an impact left by the revocation of the JSC “Latvijas Krājbanka” licence, the decline in loan portfolio volume was only 0.2%.
In May, new loans in the amount of almost 137 million lats were granted in the banking sector (where 56.4 million lats – for the development of Latvian enterprises, 12.2 million lats – to the Latvian financial institutions, 17.6 million lats – to resident households, but 50.5 million lats – to non-residents). In the corporate segment, the major part of new loans were granted to the trading sector (15.9 million lats), followed by real estate transactions (15.1 million lats), manufacturing industry (7.2 million lats), electric power industry (5.2 million lats) and agricultural sector (4.9 million lats). As for the household segment, the majority of new loans in May were issued for the purchase, reconstruction and/or repair of housing (11.3 million lats).
The share of loans with more than 90 days overdue payments in the total loan portfolio reached 12.9% at the end of May (compared to 13.8% at end-April). Such loans made up 16.2% of resident household loan portfolio, and 12.0% of resident corporate loan portfolio. The amount of loan loss provisions made by the banks at the end of May accounted for 1.11 billion lats or 9.3% of total banking loan portfolio (compared to 10.1% in April).
Summary of the balance sheet statements of Latvian banks broken down by months is available on the Financial and Capital Market Commission’s website at www.fktk.lv/en; Statistics/Credit Institutions/Monthly Reports/.