Update: Latvian bank performance 2Q 2010
Financial and Capital Market Commission has prepared recent data on the performance of Latvian banks as at end-2Q 2010.
Performance results of Latvian banks for 2Q complied with regulatory requirements, retaining high level, i.e. liquidity ratio was 64.5% at end-June, while capital adequacy ratio stood at 14.2% (compared to 62.8% and 14.2%, respectively, at end-1Q 2010). Besides, Tier I ratio used by CEBS in stress testing (only high quality capital elements were included in the own funds: paid-up share capital and reserves as well as retained earnings of the previous years) was 11.2% at end-June (regulatory minimum 4%).
In the first half of 2010, nine banks increased their capital overall by 150.3 million lats and at end-June paid-up share capital in the banking sector accounted for 1.75 billion lats (inter alia 13 Latvian banks in 2009 had increased their capital in total by 998.2 million lats).
The banking sector reported total loss of 249.5 million lats in 1H 2010 (mainly due to expenses on loan loss provisioning), or by 28% down from the respective period in 2009 (namely 346.8 million lats). In H1 2010, eight Latvian banks and one branch of foreign bank (with 14.3% of total banking sector assets) posted profit, earning in total 6.2 million lats. The banking sector profit (before provisioning and tax) amounted to 70 million lats.
In 2Q 2010, deposit stock in banks grew for the third quarter in a row, i.e. by 4.5% or 444 million lats and at end-June amounted to 10.2 billion lats, of which resident deposit stock increased by 1.8%, but non-resident deposit stock – by 9.3%.
Loan portfolio of the banking sector in 2Q 2010 overall shrank by 1.7% or 256 million lats, i.e. at a similar pace as in the previous quarter, or on the average by 0.6% monthly and at end-June totalled 14.9 billion lats, where resident household loan balance contracted at a slightly slower pace than resident corporate loan balance, namely by 1% and 1.7%, respectively. Meanwhile loan portfolios of ten Latvian banks and three foreign bank branches increased in the reporting quarter (with 14.5% of total market share in the banking sector loan portfolio).
By the end of June, of total loans 71.4% were without payment delays (compared to 72.5% at end-1Q 2010). Following the trends of loan quality stabilization, growth rate of overdue loans was still on decline and by the end of 2Q 2010 they made up 2.2% (compared to 6.1% in 1Q 2010). Also, the growth rate in the amount of loans with more than 90 days overdue payments fell down to 4.1% in the accounting quarter (compared to 7.5% in 1Q 2010) and their share in the banking loan portfolio had not changed since end-May, i.e. 19%. For loans with more than 90 days overdue payment, the major share constituted resident household loans for housing acquisition (27.3%) and resident corporate loans for real estate transactions (25.5%).
In 2Q 2010 banks were still focusing on dealing with the clients experiencing financial hardship, hence the amount of restructured loans increased by end-June totalling 2.9 billion lats or 19.6% of total banking loan portfolio (compared to 18.1% at end 1Q 2010). Of total amount of restructured loans, 69% were loans granted to legal persons. In the accounting quarter, the amount of loans in work-out process was still increasing and at end-June amounted to 1.7 billion lats or 11.6% of total bank loan portfolio (compared to 10.8% at end-1Q 2010). 54% of total loans in work-out process were loans granted to legal persons.
Loan loss provisioning rate decreased in the banking sector on the average from 44% quarterly in 2009 to 6.9% in 2Q 2010 and the amount of provisions in the banking sector totalled 1.7 billion lats at end-June or 11.2% of total banking loan portfolio (compared to 10.3% at end-1Q 2010).
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