On the performance of Latvian banking sector in 3Q 2009
The Financial and Capital Market Commission (FCMC) has compiled operative data on the performance of the Latvian banking sector as at end of September.
The Latvian banking system ratios complied with regulatory requirements at end of 3Q: the average liquidity ratio at end-September had grown to 54.4% (at end-August – 52.5%) and the average capital adequacy ratio was 13.6 % (at end-August – 12.9%) following capital-raising in several banks. Overall, 10 Latvian banks have already increased their capital since the beginning of the year, incl. share capital by 404 million lats, subordinated capital by 165 million lats and reserve capital by 21 million lats. Several more banks have intended to strengthen capital base by the end of the year.
Total amount of deposits attracted by the banking system in 3Q contracted by 240 million lats, or 2.6%, incl. the amount of resident deposits shrank by 201 million lats, or 3.4%, in times of economic downturn (in comparison to a 3% decrease in the previous quarter). Meanwhile the amount of non-resident deposits over the period decreased by 38.9 million lats, or 1.2% (in comparison to a 6.5% decrease in the previous quarter).
In 3Q, the Latvian banking sector assets diminished by 0.8%, or 163 million lats (in 2Q – by 2.1%). Total bank loan portfolio by end-September had contracted by 1.4%, or 230 million lats, incl. resident corporate entities’ loan balance contracted faster than resident household loan balance, namely, by -2.4% and -1.1%, however, loan balance in seven Latvian banks and one foreign bank branch had grown over the period.
By end-September, the share of loans without payments overdue constituted 74.8% of bank total loan portfolio (at end-August – 74.9%), while loans more than 90 days past due made up 14.5% (at end-August – 13.8%). The greater part of the total loans more than 90 days past due was comprised of loans granted to resident households for the purchase of housing (30%) and resident corporate entities for real estate transactions (29%). In the reporting period, while the banks continued handling with customers in difficulty, the number of restructured loans grew accounting for 2.5 billion lats (incl., to legal entities – 1.8 billion lats, physical entities – 679 million lats), or 15.8% of total bank loan portfolio. While the customers’ creditworthiness was still on the decline, shrinking by 25.4% in the reporting quarter, the number of loans in the recovery process increased and at end-September totalled 1.3 billion lats (incl. legal entities – 625 million lats, physical entities – 637 million lats), or 8% of total bank loan portfolio (at end-June – 6.3%). Likewise in the pervious quarter also at end-September almost 82% of restructured loans and about 88% of loans in recovery process were secured with a real estate.
Bank loan loss provisions in 3Q rose by 30.7%, or by 298 million lats, and at end-September amounted to 1.3 billion lats, or 8.1% of total bank loan portfolio (in August – 7.1%), and the bank sector ended the nine months of this year with 579 million lats in losses (mainly because of loan loss provisioning). Meanwhile 10 Latvian banks (with market share of 14.6%) reported profit in this period earning a total of 18.3 million lats. On the whole, the bank sector posted a profit of 268.6 million lats (before provisions and tax) in the reporting period.
Head of Chairwoman’s Office
Financial and Capital Market Commission
Phone: (+371) 6777 4820