Update: Latvian bank performance December 2010

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Riga, 24.01.2011

Press Release

Update: Latvian bank performance December 2010
Financial and Capital Market Commission provides information on the performance of Latvian banks for December 2010.

Performance results of Latvian banks for December met the regulatory requirements, still retaining a high level. Liquidity ratio grew in December and by end-month was 67.9% (compared to 64.4% at end-November). Also, 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) remained high and by end December were 14.9% and 11.5%, respectively (compared to 15.2% and 12%, respectively at end November). In 2010, 14 banks have increased their capital overall by 324.4 million lats, including share capital by 278.8 million lats, subordinated capital by 20.7 million lats and reserve capital by 24.8 million lats.

In 2010, the banking sector profit (before provisioning and tax) amounted to 143.5 million lats or by 55.4% down from 2009 (banking sector interest income in 2010 shrank due to the impact of decrease both in loan portfolio and interest rate). In 2010, expenses on loan loss provisioning (almost 506 million lats by-end December) also were the main reason for total losses in the banking sector, totalling 360.6 million lats by end of year (or by 53.4% down from the previous year with losses of 773.4 million lats). In 2010, 10 Latvian banks operated with profit, of which two foreign bank branches (making 15.6% of total banking sector assets) earning overall 8.3 million lats.

In December 2010, deposit stock in banks grew notably (by 5.3%) and by end-December amounted to 11.1 billion lats, of which resident deposits increased by 202 million lats or 3.2%, while non-resident deposits – by 356 million lats or 8.3% (a rapid increase in non-resident deposits at end of year is a typical seasonal feature, mostly occurring either as demand deposits or short term deposits, therefore non-resident deposits usually shrink in the first months of a new year). Since the beginning of the year, total deposit stock in the banking sector rose by 1.6 billion lats, or 16.3%.

In December 2010, the amount of new loans issued in the banking sector made up 191 million lats, of which 127 million lats were issued to the development of the Latvian economy, 14.6 million lats were granted to households, whereas 49.5 million lats – to non-residents. In the 2nd half of year the amount of new loans totalled 956.6 million lats. Though loan portfolios of 8 Latvian banks, of which – three foreign bank branches, have increased in December (making up 11.6% of total market share in the banking sector loan portfolio), the amounts of new loans still constituted less volumes overall in the banking sector than loans repaid by clients and written off by banks. Therefore, also in December loan portfolio continued shrinking (by 1.1% or 160 million lats), where loan balance for resident household loans shrank slightly slower than for resident corporate loans, namely, by 0.5% and 2.3%, respectively. Since the beginning of the year, the banking sector loan portfolio balance has shrunk overall by 7.1%, or 1.1 billion lats, and at end-December accounted for 14.3 billion lats.

At end-December, of total loans 73.4% had no payment arrears (compared to 72% at end-November). As loan quality stabilized, overdue loan balance continued shrinking already for the 3rd month in a row, namely, in December – by 6.1% (in November – by 2.3%, in October – by 0.7%). The amount of loans with more than 90 days overdue payments have been gradually diminishing month on month already since August. In December, upon a decrease in total amount of those loans by 2.7%, also their share in the banking loan portfolio decreased and at end-December made up 19% (at end-November – 19.3%). For loans with more than 90 days overdue payments, the major share constituted resident household loans for the housing acquisition (27.4%) and resident corporate loans for real estate transactions (22.8%).  

In December, the number of restructured loans fell by 2.5 thousand, while their volume – by 53 million lats and at end-December amounted to 2.85 billion lats, or 19.9% of total banking loan portfolio (at end-November – 20%). In December, the amount of loans in work-out process had also shrunk by 19 million lats and by end of month it was 2.2 billion lats, or 15.3% of total banking loan portfolio (by end-November 15.3%).

Upon stabilization of loan quality, the total amount of loan loss provisioning has been gradually decreasing since August, and it has shrunk by 2% in December, or by 32 million lats, at end-December totalling 1.6 billion lats in the banking sector, or 11.3% of total banking loan portfolio (compared to 11.4% at end-November).

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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