Update: banking sector performance in March 2012
Financial and Capital Market Commission releases the Latvian bank performance data for March 20121.
The banking sector liquidity ratio retained high level and liquidity ratio* at end-March was 63.2% (compared to 62.3% at end-February). Also, the capital adequacy ratio* maintained a high level and reached 18.1% at end-March (regulatory minimum capital requirement – 8%), whereas the tier 1 capital ratio2 stood at 14.9% (compared to 17.4% and 14.2%, respectively, at end-February).
On 15 March 2012, the credit institution operating licence granted to the JSC “Parex banka” was withdrawn and thus was accomplished the process of “Parex banka’s” reorganization into another company, not related to credit institution activities. Consequently, though six banks had increased their capital for the total of 5.4 million lats since the beginning of 2012, the banking sector paid-up share capital, however, shrank and by end-March totalled 1 669.1 million lats.
All in all, the banking sector concluded the first quarter of 2012 at a profit of 38 million lats. However, the JSC “Latvijas Krājbanka’s” losses excluded, the banking sector profit totalled 48 million lats by the end of March, where 16 Latvian banks and six foreign bank branches posted profit (making up 92.6% of total banking sector assets).
The banking sector profit (before provisions and tax) by end-March accounted for 70.2 million lats or up by 50.4% year-on-year. In comparison with March 2011, both net commission income and net interest income had grown by 43.8% and 17.1%, respectively.
In March, the banking sector deposit stock diminished by 0.4% or 39.7 million lats, where resident deposit stock shrank by 1.0% or 58.3 million lats (mainly because of a decrease in deposits of financial institutions and non-financial undertakings), but non-resident deposit stock grew by 0.3% or 18.6 million lats.
In March, total loan portfolio of the banking sector shrank by 5.6% or 734 million lats and it was mainly because the banking performance data excluded the JSC “Parex banka” performance. Disregarding an impact of JSC “Parex banka”, loan portfolio shrank just by 0.1% over the month or 16.6 million lats and at the end of March amounted to 12.3 billion lats.
Over the month, new loans3 in the amount of 109.5 million lats were granted in the banking sector (where 33 million lats were issued for the development of Latvian non-financial undertakings, 8.7 million lats – to the Latvian financial institutions, 15.3 million lats – to resident households, whereas 52.4 million lats – to non-residents). The banks were most active in trade lending (6.5 million lats) and manufacturing industry (5.2 million lats), as well as loans to other services (4.3 million lats), agriculture (3.5 million lats) and real estate transactions (3.3 million lats). Whereas in the household sector, majority of new loans were granted to housing purchase, reconstruction and/or repair (10.9 million lats).
The quality of banking loan portfolio materially improved in March with the JSC “Parex banka” leaving the banking sector, but disregarding the impact of the JSC “Parex banka” there had been minor changes in the quality of loan portfolio over the month (only the share of loans with more than 30 days overdue payments slightly fell). The share of loans with more than 90 days overdue payments in the total loan portfolio at end-March made up 13.7% (compared to 17.4% at end February, excluding 13.7% of JSC “Parex banka”). The share of loans with more than 90 days overdue payments in the resident household loan portfolio at end-March reached 16.5%, whereas in the corporate (resident) loan portfolio – 13.4%. The amount of loan loss provisions made by the banks at end of March amounted to 1.25 billion lats or 10.2% of total banking loan portfolio (compared to 11.7% at end-February, excluding 10.1% of JSC “Parex banka”).
Summary of 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.
For additional information:
Public Relations Specialist
Financial and Capital Market Commission
Phone: +371 67774808;
1Information prepared based on the statistical data submitted by banks, including information on the JSC Latvijas Krājbanka, operations of which were halted by the 21.11.2011 decision of the FCMC Board.
*Data on performance of JSC Krājbanka excluded.
2Only the highest quality capital elements are included in Tier 1 own funds: paid-up share capital and reserves, as well as retained earnings of previous years.
3Except the loans that replace the loans in the loan portfolio by entering into a new loan contract.