The banking sector posts a profit of 78.5 million lats in the first half of 2012
The banking sector ended the first half of 2012 with a profit of 78.5 million lats, where 14 Latvian banks and five branches of foreign banks posted profit (with market share of 90.6%). The banking sector profit (before provisions and tax) at the end of June reached almost 140 million lats, or up by 24% year-on-year. In comparison with respective period of 2011, both net commission income (by 30.6%) and net interest income (by 9.3%) had grown, whereas expenses for loan loss provisions reduced by 14.6%.
Liquidity and capital adequacy ratios
In June, performance indicators of all the Latvian banks were compliant with the regulatory standards. The banking sector retained high level of liquid assets and at the end of June it was 59.3% (regulatory minimum requirement – 30%) (compared to 59.4% at the end of May). Also, the capital adequacy ratio of the banking sector retained a high level and was 17.2% by the end of June (regulatory minimum capital requirement – 8%), whereas tier 1 capital ratio1 was 14.9% (compared to 17.3% and 15% at the end of May, respectively). Since the beginning of 2012, eight banks had raised their capital in total by 20.5 million lats.
In June, the banking deposit stock rose by 2.2%, or 252.2 million lats, where resident deposit stock grew by 0.6%, or 37.8 million lats (both the volume of household and non-financial institution deposits increased) and non-resident deposit stock grew by 3.9%, or 214.4 million lats. Since the beginning of the year, the amount of banking sector deposits in total increased by 565 million lats, where resident deposits by 15.3 million lats and non-resident deposits – by 549.7 million lats.
During June, the total banking loan portfolio increased 0.4%, (where loans granted to corporate resident clients grew 1% and non-resident loan portfolio – by 1.8%, whereas the balance of loans granted to resident households shrank by 0.8%). Since the beginning of the year, the banking sector had reduced by 9% overall, to a large extent because of the impact made by withdrawal of JSC “Parex banka” and JSC “Latvijas Krājbanka” authorization. However, disregarding the influence of those two banks, the loan portfolio balance had shrunk only 0.8% over the reporting period (where the balance of loans granted to resident households decreased by 3.8%, while the loans granted to corporate resident clients grew by 0.3%, but non-resident loan portfolio increased by 5.7%).
In June, new loans2 in the amount of 213.2 million lats were granted in the banking sector (where 112.8 million lats – for the development of Latvian enterprises, 12.8 million lats – to the Latvian financial institutions, 16.2 million lats – to resident households, whereas 71.2 million lats – to non-residents). In the corporate segment, the major part of new loans were granted to the power sector (54.8 million lats), also trading sector (11.9 million lats), dwelling and catering services (10.4 million lats), financial and insurance activities (8.8 million lats), and manufacturing industry (6.9 million lats). As for the household segment, about two thirds of new loans in June were issued for the purchase, reconstruction and/or repair of housing (10.6 million lats).
With economic recovery the banks have actively resumed lending activities – in total new loans3 in the amount of almost 871 million lats were granted in the banking sector since the beginning of the year (where 341.4 million lats – for the development of Latvian enterprises, 58.6 million lats – to the Latvian financial institutions, 88 million lats – to resident households, whereas 381.8 million lats – to non-residents), or up by 67% year-on-year (including to resident enterprises up by 63%, to resident households – up by 35%, but to non-residents – about two times more than in the respective period in 2011).
No essential changes have taken place in the borrower’s solvency during the first half of 2012 and there was an insignificant improvement in the quality of the banking sector loan portfolio as well (excluding an impact of the withdrawal of the “Parex banka” and the JSC “Latvijas Krājbanka” authorization). Resident household solvency improved at the minimum extent – the share of loans with more than 90 days overdue payments in the total household loan portfolio shrank from 16.2% at the end of 2011 to 16% by the end of June. The quality of corporate client loan portfolio had a moderate improvement – the share of loans with more than 90 days overdue payments in the total loan portfolio reduced from 12.75% at the end of 2011 to 11.5% at the end of June. The share of loans with more than 90 days overdue payments in the total loan portfolio at the end of June was 12.5% (compared to 13.3% at the end of December 2011), whereas total share of the loans past due by the end of June reached 19.6% (compared to 20.6% at the end of December). The amount of loan loss provisions made by the banks at the end of June accounted for 1.075 billion lats or 9% of the total banking loan portfolio (compared to 11.5% at the end of December).
Please find the summary of the balance sheet statements of Latvian banks broken down by months on the Financial and Capital Market Commission’s website at www.fktk.lv/en; Statistics/Credit Institutions/Monthly Reports/.
For additional information:
Public Relations Specialist
Financial and Capital Market Commission
Phone: +371 67774808
1Only the highest quality capital elements are included in the tier 1 own funds: paid-up share capital and reserves, as well as retained earnings of previous year.
2Except the loans that replace the existing loans in the loan portfolio by entering into a new loan contract.
3Except the loans that replace the existing loans in the loan portfolio by entering into a new loan contract.