OREANDA-NEWS. February 15, 2011. Latvian economy has been developing faster than expected, reported the press-centre of Swedbank.

Substantially lower need for provisions

In Q4, Swedbank Latvia’s customer deposits see 7per cent quarter-on-quarter growth

As a result, Swedbank Latvia concluded 2010 Q4 with a profit of LVL 18 million.

In the Q4 of 2010, Swedbank Latvia has posted a profit of LVL 18m for the first time following 8 quarters of reporting loss.  The result is related to a decrease in provisions as the Latvian economy is recovering faster than expected.

The full-year operating profit in 2010 amounted to LVL 73m before provisions. After provisions, Swedbank’s full-year result in 2010 was a loss of LVL 44m.

Maris Mancinskis, Head of Swedbank Latvia: “2010 stands out as a year when focus was shifted from scaling-down to development thanks to both economic growth and the committed work of the bank employees. Last year, we started the journey towards becoming a truly customer-centric organization, we have worked on activating the new customer service concept and will continue to strengthen it this year, too. “The two key indicators of Swedbank’s development towards sustainable growth in Latvia are the increase in the number of active customers and a significant improvement in bank customer satisfaction and retention index. We will work with strong commitment to build long-term relationships with customers in line with our values of being simple, open, and caring.”

Loans and Deposits
The volume of customer deposits grew by 3per cent in 2010, while the total net credit portfolio decreased by 18 per cent as the trend of deleveraging continues in Latvia.

As the economy is recovering and the situation is stabilizing for people and businesses, also the demand for loans continued to rebound. In 2010, Swedbank Latvia’s amount of new financing was LVL 118 million.

The bank’s loan-to-deposit ratio continued to improve and move towards the model of a balanced portfolio, reaching 196 per cent in end-2010.

Credit Quality
More and more borrowers, who faced difficulties with payments and needed a restructuring solution, started successfully return to normal operating mode. This is a positive trend among both companies and private indivuals.

With the economy recovering, the provisions necessary for impaired loans are on the decrease. In 2010, the bank made provisions in the amount of LVL 123m, which represents a 73 per cent year-on-year decrease (LVL 463m in 2009).

The gross volume of impaired loans has been decreasing for second consecutive quarter and amounted to LVL 890m at the end of 2010 (LVL 924m at the end of 2009). Improvement in risk levels and a gradual rebound in activity of borrowers’ swifts the bank’s attention to issuing new high-quality loans. Credit portfolio management has been enhanced in order to ensure balanced and sustainable growth.

Revenues and Costs
During 2010, revenues decreased by 18 per cent to LVL 132m, while expenses declined by 18 per cent to LVL 59m. Cost/income ratio stood at 0.45 in 2010. 

Customer Satisfaction
Swedbank’s customer satisfaction has strengthened last year. The most notable rise was among retail customers – up by 14 points, reaching 67 points, which is the highest indicator among Scandinavian banks in Latvia, as confirmed by the annual study conducted by TNS, an international customer retention research method. The total number of Swedbank customers grew by 45 000 in 2010.

Market Shares
Swedbank continues to retain its positions in key performance indicators with a 23 per cent share in lending market, a 15 per cent share in deposits market, and a 38 per cent market share in terms of the number of payment cards and 2nd pillar pension fund clients.