OREANDA-NEWS. February 15, 2010. The positive signs of Estonian slow economical recovery were seen during the fourth quarter of 2009. It is mainly the result of external economical environment and domestic demand remains still low, reported the press-centre of Swedbank.

Estonia has requested euro adoption in 2011, and the Bank of Estonia believes the chances of fulfilling the Maastricht criteria are realistic. Euro adoption would increase stability in the Baltic region and reduce Estonia’s country risk level. Local currency interest rates have fallen, which reflects the market’s expectations.

Summary of the result 2009
Swedbank Estonia can be positively noted -  in fourth quarter loan losses were smaller and economical results better than in previous quarter.

Operational profit of Swedbank Estonia  increased to 667 million before provisions. Swedbank Estonias net result for the period was loss of 129 million, mainly due to an increase in impairment losses.

Revenues inreased by 6 per cent to 1,114 billion, while operating expenses reduced by 2 per cent to 447 million. Client deposits increased by 5 per cent during the quarter, while the loan portfolio declined by 3 per cent.

"At the end of the year same trends of the previous quarter continued - clients are doing better step-by-step, but growth of unemployment still affects the overall situation. In business side signs of stabilization are more clear, but financial well-being of private individuals will require a reduction of unemployment. This can only take place with the support of new investments in Estonia, "said the Head of Swedbank Estonia Priit Perens.

"People have become more modest in their consumption patterns/habits and expenditures are not made lightly. However, if there is a need to look for a new home and family income hasn?t changed substantially, people are looking for the real estate offers. Current price range favors the purchase of property," he described. At the samet ime. bank will continue to search for solutions and give financial advice to those clients, whose incomes have decreased and who are facing solvency problems.

Volumes
During 2009 more focus was given to increase of local funding. As a result, deposits increased by 4 per cent. Lending volume decreased by 12 per cent during the period.  The decrease is the result of a combination of higher provisions and reduced new lending.

Revenues
Throughout a year revenues were impacted by a combination of higher provisions, low money market rates and lower lending volumes.

Credit quality
Impaired loans, gross, were 8 315 million kroons on 31 December 2009 (3 596 million kroons on 31 December 2008). The share of impaired loans, gross, was 6.78 per cent in Estonia.

The Baltic Restructuring and Recovery unit (BFR&R) achieved the set objective for 2009 to review distressed large corporates loan portfolio, including full risk assessment with the delivery of individual restructuring plans for the majority of the clients.

In the fourth quarter Swedbank transferred collateral to Ektornet AB, which will manage it during the recession.

Expenses
Expenses decreased by 2 per cent. Swedbank took broad measures to adapt organisation to slower economic activity. Thanks to the support activities undertaken, Swedbank in Estonia was able to adapt to the changed economic environment and able to keep the unit cost-benefit ratio on a good level - 0.40.

At the same time the economic downturn and the increase in problem loans raised expenses related to loan restructurings and recovery. These expenses are considered cyclical and will diminish as workout solutions are implemented and the economy recovers.

To adapt to smaller business volumes the number of employees was reduced last year and decrease of employees stayed at 5% in fourth quarter. Swedbank has 68 branches in Estonia as of the end of 4th quarter. Swedbank is still keeping its position as the largest number of bank offices and personnel in Estonia. Beside branches, clients can use various electronical channels.

Outlook
In client relationships, Swedbank is keeping the focus on informing clients about how to organise their money matters sensibly. In a special webpage, what was opened last year, clients can get advice about managing their everyday money matters - www.swedbank.ee/rahaasjadkorda

Closing paragraphs
The bank will disclose the results of Q1 2010 on 27 April.