Update: banking sector performance in January 2011

02.03.2011
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Riga, 25.02.2011

Press Release

Update: banking sector performance in January 2011

Financial and Capital Market Commission releases information on the performance of Latvian banks for January 2011.

Performance results of all Latvian banks for January 2011 complied with regulatory requirements. By end-January liquidity ratio of the banking sector was 67.5% (compared to 67.9% at end-December 2010). Whereas the banking sector capital adequacy ratio and tier I capital ratio (only high quality capital components were included in the own funds: paid-up share capital and reserves as well as retained earnings of the previous years) by end-January were 14.4% and 11.3%, respectively (compared with 14.6% and 11.5% by end-December 2010). In 2010, 14 banks had increased their capital overall by 324.4 million lats, and the banks still continued raising their capital also in January 2011 (by 1.3 million lats), and paid-up share capital of the banking sector reached 1 887.8 million lats at end-January.

The banking sector had a profit of 10.9 million lats in January (contrary to loss of 36.1 million lats in the previous year), where 15 Latvian banks and five foreign bank branches posted a profit in January 2011 (constituting 78.6% of total banking sector assets) earning the total of 15.5 million lats. In January, banking revenue exceeded operating expenses mainly due to a decrease in provisioning and recovery of assets written-off earlier, as well as increase in net interest income. The banking sector profit (before provisioning and tax) accounted for 18.2 million lats in January.

In January 2011, banking deposit stock fell by 3%, or 337 million lats, mainly due to shrinking of non-resident deposit stock, i.e. by 6%, or 279 million lats (because of typical seasonal increase in non-resident deposits at end of year, however, non-resident deposits usually decline in the first months of a new year as deposits are mostly demand deposits or short term deposits). In January, resident deposit stock also slightly shrank, i.e. by 0.9%, or 58 million lats. At end-January, total deposit stock in the Latvian banking sector amounted to 10.8 billion lats.

Though new loans in total of 57 million lats were issued in January 2011 (of which 26.5 million lats were granted for the SME development in Latvia,
7.8 million lats – to households, while 22.7 million lats – to non-residents), and loan portfolios of four Latvian banks and four foreign bank branches (making up 17% of total market share in the banking sector loan portfolio) had grown, total banking sector loan portfolio still continued declining in January (by 1%, or 150 million lats) and at end-January made up 14.2 billion lats (compared to the decline by 1.1%, or 160 million lats  in December 2010). Corporate loan balance to residents in January decreased slower than loan balance to resident households, i.e. by 0.2% and 0.8%, respectively.

By end-January of total loans granted by banks, 72.8% had no payment arrears (compared to 73.4% at end-December 2010). Whereas total overdue loan balance, after a three-month decline, slightly grew in January, i.e. by 1.4%, or 52 million lats, of which the greater part constituted loans granted to resident households and for performing real estate transactions. The amount of loans with more than 90 days overdue payments continued declining in January (by 0.8%), however, their share in loan portfolio still was 19%. For loans with more than 90 days overdue payments, the major share constituted loans granted for real estate transactions (23.1%) and to resident households for housing acquisition (28.1%). At end-January, the total amount of loan loss provisions stood at 1.6 billion lats, or 11.4% of total banking loan portfolio (compared with 11.3% at end-December).

In January, almost 2.8 thousand new loans (147 million lats) were included in the category of restructured loans. Whereas the number of loans in work-out process increased by 2 thousand, or 48.5 million lats. At end-January, the share of restructured loans amounted to 19.9% of total loan portfolio, while loans in work-out process constituted 15.6% of total banking loan portfolio (compared to 19.9% and 15.3% at end-December).

Anna Dravniece
Head of Office
Financial and Capital Market Commission
Phone: +371 6777 4800, email: anna.dravniece@fktk.lv

Prepared by:
Agnese Joela
Public Relations Specialist
Financial and Capital Market Commission’s Office
Phone: +371 67774808; email: agnese.joela@fktk.lv

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