OREANDA-NEWS. June 02, 2011. In overall terms, the activities of the Parex Bank have been in line with the bank’s restructuring plan, and although the bank finished the reporting period with a loss of LVL 5 million, the result is better than had been planned.  This can be attributed to several major Loan restructuring transactions that were successfully entered into during the reporting period, reported the press-centre of Parex Banka.

This substantially improved prospects for recovering certain loans, and it also allowed the bank decrease previously recognised impairment losses.  The possession for unperforming loans were reduced, and that also reduced Q1 2011 losses for the bank.  Given that the Parex Bank is a specific resolution bank, these are financial results which must be viewed positively.  It must be noted here that the final indicator of Parex Bank operations is the amount of money that is recovered by the year 2017.

“I truly welcome any of our achievements, because the work that we are doing together is not just complicated from the professional perspective, but also difficult.  It seems that there are people who still do not appreciate the importance of the work that we have done or the fact that we are a completely new team which has just one goal – recover the state’s investment as much as possible,” says Parex Bank board chairman Christopher Gwilliam.

The losses suffered during the reporting period in 2011 were caused by two material – interest expenses exceed of interest income, and net loss on available for sale financial assets and financial liabilities. Since the restructuring of the bank, it has become a unique institution in the Baltic States in that it has only problematic loans with respect to which there already have been repayment problems in the past.  Debt collection has been begun in many cases – those in which neither interest nor the principal sum have been repaid to the bank in a longer period of time.  This is why interest income from the Parex Bank’s loan portfolio is much lower than is the case at any other credit institution which has both good and problematic loans.  Still, the Parex Bank is doing everything that it can to increase interest income as much as possible.

Because the Parex Bank continues to have obligations toward providers of syndicated loan, the Finance Ministry, and the depositors of subordinated capital, the volume of the bank’s interest expenses is fixed, and it respectively exceeds bank’s interest income.

During the first quarter of 2011, the priority for the Parex Bank in the context of this overall goal was to collect the money needed to repay its syndicated loan of LVL 164 million.  This was an enormous challenge for the bank’s management and employees, and all of our material and non-material resources were devoted to the accumulation of the necessary sum of money.  Between August 1, 2010, and the end of the reporting period, the Parex Bank engaged in relentless and serious work to recover LVL 125 million.  The sum was mostly based on a restructuring of unpaid loans and on the sale of the bank’s securities portfolio.  It must be stressed that the Parex Bank’s management engaged in a very thoughtful strategy of operations which allowed the bank to avoid any forced sale of its assets.  The real estate market remains inadequate in terms of fairly low prices, and so the Parex Bank is actively managing its properties so that when the situation improves, the properties can be sold in line with market prices and in line with the interests of all taxpayers and shareholders.
 
About Parex banka:
Since 1 August 2010 Parex banka is operating as a resolution bank and it has ceased rendering such classical banking services as account and deposit services, issuing loans etc. The main objective of Parex banka is maximum recovery of the state investments. In order to achieve its goals, the operation of Parex banka is focused on efficient loan restructuring, debt recovery and real estate management.  Majority shareholders of Parex banka are the State of Latvia which is represented by Privatization Agency and the European Bank for Reconstruction and Development (EBRD).