OREANDA-NEWS. May 04, 2010.
Current economic climate and the bank
The positive signs of slow recovery of Estonian economy were seen during the fourth quarter of 2009, mainly due to the external economic factors, and continuing low domestic demand, reported the press-centre of Swedbank.

The Estonian economy continued moving towards stabilisation in the first quarter of 2010. This was confirmed by the Moody`s, Fitch and Standard and Poor`s rating agencies, who raised sovereign rating and outlook. Swedbank analysts forecast 1.5 per cent economic growth this year and they believe that unemployment will decrease in second half of the year.
Swedbank Group`s producing a profit in first quarter this year sends a very good message, and indicates a stabilization of the economy.

The Bank?s results in Estonia reflect the developments in the boarder economy. We can see some signs of recovery, such as increase of bank transaction activity, but they are not yet very strong. On the other hand, the recession has hit all the stocks that businesses had been holding, and problems that were limited have now also moved to other sectors related to real estate, according to Priit Perens, Head of Swedbank in Estonia. He also noted that export companies stand out as not having been affected by the decrease of domestic consumption.

Perens asserts that a decrease in domestic consumption can promote balance in the economy, as people are now saving more. This spring we can see signs of recovery, such as more activity in the purchase of residential properties. More certainty that Estonia will join the euro zone in 2011 will also contribute to the recovery.

Summary of interim results
The operating profit of Swedbank Estonia was EEK 666 million before provisions, but due to the appropriation for possible impairment losses, the bank produced a net loss for the period EEK 272 million.

Deposit and loan volume
Deposits increased by 2 per cent compared to last quarter. Swedbank’s market share was 47 per cent.

The loan portfolio decreased by 2 per cent, due mainly to less new lending. Swedbank`s share of the lending market was 43 per cent.

Credit quality
Impaired loans, gross, were EEK 8.8 billion on 31 March 2010 (EEK 8.3 billion on 31 December 2009).

Although most of the impaired losses this quarter were in real estate sector, other real estate-related sectors were also affected. However, it can be assumed that impaired loans will peak in the first two quarters of this year.

Regarding individual private portfolio the positive effect of the recovery is expected as payments on impaired loans is highly dependent on unemployment level trends. The share of gross impaired loans was 8.3 per cent in Estonia.

Expenses
Expenses decreased by 15 per cent compared to the same period last year, with operating expenses declining by 15 per cent to EEK 381 million. The cost/income ratio of Swedbank Estonia is 0.36, which shows very high efficiency.

The number of employees stayed almost stabile, decreasing by 3 per cent. The number of branches remained at 67. This means that Swedbank still maintains its position as the bank with the most extensive network of branches and the most personnel in Estonia. Beside branches, clients can use various electronic channels.

Revenues
There are signs of stabilization in the bank’s core business area, such as an increase in revenue compared to the last quarter by 1 per cent, to EEK 1,047 million. Net interest income was EEK 609 million and grew 12 per cent compared to the fourth quarter of 2009.

Net income from payment-related commissions increased by 5 per cent to EEK 253 million compared to the last quarter. This is also a sign of economic recovery.

Business developments and community & customer relations
Swedbank is focusing on maintaining its strong and long-term relationship with its customers. The bank provides continuing advice and information to customers about how to organise their financial matters sensibly. The bank’s services are available not only at the many branches, but also on a special Internet site, www.swedbank.ee/rahaasjadkorda.

In these difficult times, we can see that many of our customers who have trouble repaying their loans have become more aware and active. In fact, most payment deferment and other solutions are made at the customer’s initiative. Our customers are now informing the bank of their expected problems at an earlier stage, and they report that they are satisfied with solutions agreed in cooperation with the bank.

This quarter, the bank, in cooperation with other parties, started Eco-Friendly Home project, which will be renovating one apartment house this autumn. This will serve as a practical example to other apartment houses waiting to be renovated.

Q2 and reports online
The results of Swedbank for Q2 2010 will be published on 22 July 2010.