Update: Latvian bank performance October 2010

29.11.2010
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Riga 26.11.2010.
Press Release

Update: Latvian bank performance October 2010

Financial and Capital Market Commission releases information on the performance of Latvian banks [1] for October 2010.

Performance results of Latvian banks for October complied with regulatory requirements, retaining high level. By end-October, liquidity ratio in the banking sector was 66.4% (unchanged from September with 66.4%), as well as capital adequacy ratio was 15.2% (unchanged from September with 15.2%). Also Tier I capital ratio has not changed since September and at end-October was 12% (in September – 12%). As from the beginning of 2010, 13 banks have raised their capital in the aggregate by 281 million lats and at end-October banking sector paid-up share capital totalled 1.86 billion lats.

In the first ten months of 2010, the banking sector total loss amounted to 321 million lats (mainly because of loan loss provisions), or by 50% down year on year (compared to 643 million lats in losses in 2009). In the first ten months of 2010, 11 Latvian banks posted profit, of which three foreign bank branches (making 11.1% of total banking sector assets) earning 7.7 million lats in total. The banking sector profit ( before provisioning and tax) accounted for 123.6 million lats at end-October.

By end-October 2010, the amount of deposits in the Latvian banking sector reached 10.3 billion lats , i.e. by 0.3% or 29 million lats up month on month, of which non-resident deposit stock grew by 5% or 194 million lats, resident deposit stock shrank by 2.6% or 164.5 million lats (i.e. mainly due to a decrease in deposits of resident financial institutions by 154 million lats).

In October 2010, the amount of new loans [2] issued in the banking sector made up 236 million lats, of which a major share or 145 million lats were issued to institutions whose business operations cover financial and insurance activities, 12 million lats – to households, manufacturing industry and trade – 10 million lats to each, while almost 33 million lats to non-residents. In October, loan portfolios of five Latvian banks and three branches of foreign banks (making 6.4% of total banking sector loan portfolio) have increased; however, the amount of new loans issued in the banking sector overall was still lower than banking loan depreciation (loans repaid by customers and written-off by banks). Thus at end-October 2010, the banking loan portfolio was still on decline (shrinking by 1.1% or 159 million lats) and totalling 14.5 billion lats, of which the balance of loans issued to resident households diminished slightly slower than corporate loan balance, i.e. by 1% and 1.2%, respectively.

By end-October, of total loans 71.4% were without payment delays (compared to 71.5% at end-September). Following signals indicating the loan quality stabilization, total amount of overdue loans continued shrinking also in October by 0.7% (in Q3 2010 it had decreased by 2.1%). In October, the amount of loans with more than 90 days overdue payments continued shrinking already for a third month in a row, i.e. by 1.5% (in September – by 0.5%, in August – by 0.2%), and their share in the banking loan portfolio at end October totalled 19.3% (at end-September – 19.4%). For loans with more than 90 days overdue payment, the major share constituted resident household loans for housing acquisition (27.5%) and resident corporate loans for real estate transactions (24%).

There are no notable changes in the amount of restructured loans since end-September and by end-October it was still 2.9 billion lats or 19.9% of total banking loan portfolio (20% in September). The greater part of restructured loans constituted loans granted to resident households and micro companies, i.e. 32.8% and 28.3%, respectively, while 15.6% were loans granted to non-residents. In October, the amount of loans in work-out process slightly shrank (par 2%), but at end-October it was still amounting to 2.2 billion lats or 15% of total banking loan portfolio (14.8% at end-September). The major share of the loans in work-out process also was made up of loans to resident households (41%) and micro companies (34.3%).

Upon stabilization of loan quality, the amount of loan loss provisioning has been decreasing already for a third month in a row, i.e. by 1.1% in October, while in September – by 0.2%, in August – by 0.7%. However, the amount of provisions in the banking sector still totalled 1.7 billion lats at end-October or 11.4% of total banking loan portfolio (the same as at end-September).

Anna Dravniece
Head of Office
Financial and Capital Market Commission

Prepared by:
Ieva Upleja
Chief Public Relations Specialist
Financial and Capital Market Commission’s Office
phone: (+371) 6777 4807; e-mail: ieva.upleja@fktk.lv


[1] 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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