OREANDA-NEWS. July 26, 2011. The start of 2011 has brought a positive evaluation of Latvian economic development potential, bearing a positive influence onto the economic recovery processes and triggering faster business activity. During this period, the VAS “Latvijas Hipoteku un zemes banka” (the Mortgage and Land Bank of Latvia - Hipoteku banka) has constantly moved towards becoming a development institution and attained sound operating results – Hipoteku banka has obtained profit of 3.1 million lats in the first six months of 2011.

Rolands Panko, Hipoteku banka Chairman of the Board, comments, “By keeping to a balanced financial policy and focused implementation of state aid programmes, Hipoteku banka has returned to a steady growth in the first half of 2011. Hipoteku banka is active in lending under the state aid programmes, thus confirming the need for a specialized state aid institution. An agreement under the transitional process towards a development institution was signed in June with SIA IBS “SEB Enskilda” on development and implementation of the strategy of detachment of Hipoteku banka’s commercial assets.

The transformation process of Hipoteku banka into a state institution to aid business will further facilitate the implementation of effective programmes that respond to the needs of business. We are planning to launch a new state aid lending programme in the third quarter of this year, issuing microloans and grants to micro, small and medium businesses.

During the first half of this year we have completely implemented the funds of the working capital programme to farmers of 10 million lats, and the government has increased the amount of this programme to 18 million lats. In this period, we have also expanded the accessibility of the Business start-ups programme and now the programme is available also to current entrepreneurs, who are willing to start on a new of field business operation and establish a new company for this purpose. In order to help the entrepreneurs finding best ways with the state aid programmes, we have made an online calculator for state aid programmes.

Recognizing the essential role of Hipoteku banka in channelling the lending resources to the small and medium business sector, the international rating agency Moody’s has retained the bank’s long-term deposit rating on the previous level. During the first half of this year, Hipoteku banka has completely settled all its commitments towards its international syndicated lenders from its own funds before maturity, maintaining a high liquidity ratio at the same time.”

Operating results
The profit before provisions and taxes of Hipoteku banka was 4.6 million lats, that was doubled compared with the respective period in the previous year.  The income of the first six months of this year reached 11.9 million lats, which is 30% more than during this period in 2010. Hipoteku banka has operated with profit of 3.1 million lats during the first six months of this year.

Assets
The volume of gross assets during the first six months of 2011 has shrunk by 59.3 million lats or 7%, reaching 748.9 million lats at the end of June. The gross loan portfolio has shrunk by 5% to 565.6 million lats, constituted by the promotional loan portfolio of 235.3 million lats (42% of the portfolio) and commercial loans portfolio of 330.3 million lats (58% the portfolio).

Deposits
The total volume of deposits during the first six months has grown by 5%, reaching 376.7 million lats.

Catchment
The number of customers of Hipoteku banka in the corporate sector is still on the rise, this is due to the active operations of the bank in the realm of implementing state aid programmes. Year on year, the number of new corporate customers has grown by 26%.

Capital adequacy and liquidity
Hipoteku banka maintains its capital adequacy and liquidity ratios steadily high, which considerably exceed the minimum requirements specified in the Law on Credit Institutions. The capital adequacy ratio was 16.3% on June 30 (8% being the minimum requirement), the liquidity ratio on June 30 was 66.4% (the minimum requirement being 30%).

Progress of state aid programme implementation
Hipoteku banka continues to fund business start-up and development projects and is working on developing new programmes. The total loans granted under the Competiveness improvement programme for businesses amount to 151.3 million lats. Under the European Social fund programme "Support to starting self-employment and business", there were 465 projects of business start-ups supported by 5.8 million lats, and 996 new entrepreneurs trained. Under the SME growth programme, 14.7 million lats have been granted, the lending is also active under the working capital loans to farmers, where 399 loans have been granted by June 30 for the total amount of 12 million lats. 11 farming long-term investment projects of 6.3 million lats were funded from the funds of the Credit fund.

Hipoteku banka was established in 1993. The priority of the bank is supporting the small and medium businesses and facilitating the economic activity in all regions of Latvia. Hipoteku banka offers lending under targeted state aid programmes to tend various business needs: loans for investment in business, working capital loans, as well as loans for starting business.