Update: Latvian bank performance November 2010

28.12.2010
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Riga, 23.12.2010

Press Release

Update: Latvian bank performance November 2010

Financial and Capital Market Commission releases information on the performance of Latvian banks  for November 2010.

Performance results of Latvian banks for November complied with the regulatory requirements still remaining high, i.e. capital adequacy ratio was 15.2% at end-November  (the same as at end-October), while the banking liquidity ratio was 64.4% (compared to 66.4% at end-October). 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) also remained unchanged since September and at end-November was 12%.

Since the beginning of 2010, 14 banks have increased their capital overall by 300 million lats and at end-November paid-up share capital in the banking sector accounted for 1.88 billion lats (in comparison, 13 Latvian banks had increased their capital in total by 998.2 million lats in 2009).

The banking sector profit (before provisioning and tax) amounted to 136 million lats in the first eleven months of 2010 or by 55% down from the respective period (banking sector interest income in 2010 shrank due to the decrease both in loan portfolio and interest rate). Expenses on loan loss provisioning (almost 470 million lats by end-November) have been main reason for total losses in the banking sector this year as well amounting to about 327 million lats by the end of November (or down by 54.6% from the respective period in 2009 when losses reached 719.8 million lats). In first eleven months of 2010, 10 Latvian banks posted a profit, of which two foreign bank branches (making 11.9% of total banking sector assets) earning overall 9 million lats.

At end-November, the amount of deposits in the Latvian banking sector totalled 10.6 billion lats, i.e. by 2.9% or 298 million lats up from end-October, including an increase in both resident deposit stock by 1.7% or 104 million lats (mainly due to private non-financial undertaking deposit stock and household deposit stock, i.e. by 82 million lats and 18 million lats, respectively), and non-resident deposit stock – by 4.8% or 194 million lats.

In November 2010, the amount of new loans  issued in the banking sector made up 116 million lats, i.e. 77 million lats were issued to residents (of which 16 million lats were granted to institutions whose business operations include financial and insurance activities and to companies engaged in building activities (to each), 15 million lats – to trade and 11 million lats – to households), while almost 39 million lats were granted to non-residents.

In November loan portfolios of 17 banks increased (of which 14 banks and three foreign banks’ branches, making up 53% of total market share in the banking sector loan portfolio), however, the amounts of new loans still constituted less volumes overall in the banking sector than amortized loans (loans repaid by clients and written off by banks). Therefore, in November 2010 the overall loan portfolio continued shrinking (by 0.2% or 29 million lats) and at end-November totalled 14.5 billion lats, where loan balance both for resident corporate loans and resident household loans shrank at a similar pace (by 0.5%), while non-resident loan balance grew by almost 45 million lats.

At end-November of total loans, 72% had no payment arrears (compared to 71.4% at end-October). As loan quality stabilized, overdue loan balance continued shrinking also in November, i.e. by 2.3% (compared to 0.7% in October). In November, the amount of loans with more than 90 days overdue payments continued shrinking already for the fourth month in a row, i.e. by 0.4% (having decreased overall by 2.6% since August or 75 million lats) and their share in the banking loan portfolio was 19.3% at end-November.

There have been no notable changes in the amount of restructured loans since end-September and by end-November it was still 2.9 billion lats or 20% of total banking loan portfolio. The greater part of restructured loans constituted loans granted to resident households and micro companies, i.e. 33% and 29%, respectively, 15.7% were loans to non-residents. In November the amount of loans in work-out process slightly grew (by 1.3%), however, at end-November it was still 2.2 billion lats or 15.3% of total banking loan portfolio (at end-October – 15%). The major share of the loans in work-out process also was made up of loans to resident households (42%) and micro companies (33%).

Upon stabilization of loan quality, the total amount of loan loss provisioning has been slightly decreasing already for the fourth month in a row, i.e. in November – by 0.2% (since August their amount has shrunk by 2.2% overall or 38 million lats). However, the amount of provisions in the banking sector still was 1.7 billion lats by end-November or 11.4% of total banking loan portfolio (compared to 11.4% at end-October).

Anna Dravniece
Head of Office
Financial and Capital Market Commission

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


[1] Data from banks and their branches in Member States .

[2] “Refinancing” may be included, i.e. refinancing of loans issued by another bank.

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