On the performance of Latvian banks in July 2009
The Financial and Capital Market Commission (FCMC) has summarized data on the performance of the Latvian banking sector in July.
In the reporting month, the Latvian banking system performance ratios complied with regulatory requirements: the average liquidity ratio was 52.6% at end July (compared to 49.6% at end June) and average capital adequacy ratio rose to13.1% in July (compared to 12.4% at end June) in view of raising capital in several banks. In total, five banks increased their capital this year, namely, an increase in their share capital was 350.2 million lats and in subordinated capital, 152.3 million lats. The purpose of capital raising was to secure against impending losses due to loan impairment. Six more Latvian banks were in the process of capital increasing in the total amount of 78.5 million lats, and two banks were planning to raise subordinated debt in the amount of 30.1 million lats.
Total deposits attracted by the banking sector in July contracted by 1.4%, or 132 million lats. However, the amount of non-resident deposits in July was stable, having slipped only by 0.5%, or 15 million lats. However, in view of tense economic situation in Latvia the amount of resident deposits in July fell by 2%, or 117 million lats. Meanwhile, deposits of private persons (residents) shrank by 1.3%, while deposits of resident companies, by 5.1%. Decrease in deposits was because of using deposits for adding current assets and due to outstanding mutual payments.
In July, the Latvian banking sector assets overall decreased by 1.1%, or 245 million lats (compared to 1.6% in June). Though the total loan portfolio of banking sector in July decreased by 0.7%, or 114 million lats, loan balance grew in seven banks and one branch of a foreign bank in the reporting month. At end July, 76% of loans had no payment arrears (compared to 76.5% at end June). In July, the amount of loans more than 90 days past due in loan portfolio grew by 7.8% and their share at end of July made up 13% of loan portfolio (compared to 12% at end June).
Loan loss provisions in the banking sector in July constituted 6.6% of total banking loan portfolio (compared to 6.1% at end June). All in all, a growth in loan loss provisions in July was 8%, thereby having increased by 78 million lats. Though 11 Latvian banks in seven months of 2009 operated with profit and earned 19 million lats overall, the banking sector ended this period with a 400 million lats loss (mainly due to expenses on loan loss provisioning). In seven months of 2009, profit of bank sector before provisions and tax accounted for 222.6 million lats, or by 13.7% down from the respective period last year.
Since autumn 2008 when Latvian banks were incapable of refinancing their syndicated loans due to the global financial crisis till end of July 2009, eight banks had already managed to repay syndicated loans in the amount of 455.8 million lats (of which one bank repaid the loan in July).
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