OREANDA-NEWS. November 02, 2011. Maris Mancinskis, Head of Swedbank Latvia: “In Q3, our focus remained firmly on new lending. Our priority in corporate and retail financing was sustainability. Households showed more awareness of the safety net of savings. In addition, the country’s economic structure became more resilient. We continued to support the long-term growth of the economy by sustainable financing”, reported the press-centre of Swedbank.

In Q3 2011, GDP grew 5.6 per cent in Latvia on the previous year. Recovery continued hand in hand with increased investment levels. Private consumption grew slowly, supported by increasing employment and wages, as well as rising optimism. Nevertheless, household consumption remained weak due to relatively high unemployment. Economic growth is still very dependent on exports and the health of the global economy.

Swedbank Latvia reported a profit of LVL 28.6m, in the third quarter of 2011 compared to loss of LVL 5.7m in Q3 2010.

Loans and deposits

Customer deposits increased by 1 per cent from the end of Q4 2010 and by 8 per cent in Q3 on a year-on-year basis, reaching the amount of LVL 1 490m.

Swedbank issued LVL 155m in new loans in Q3, LVL 141m of which was made available to businesses. The total combined volume of new loans issued in the Q1-Q3 was LVL 203m.

The total net credit portfolio decreased by 9 per cent from the end of Q4 2010, which was mainly due to amortisation. Deleveraging continued in Latvia and the total portfolio is not expected to bottom out in 2011. The Swedbank net credit portfolio amounted to LVL 2 634m at the end of Q3.

The bank’s loan-to-deposit ratio improved to 177 per cent (196 per cent at the end of Q4 2010).

Credit quality

Net recoveries in the third quarter amounted to LVL 14.7m compared to LVL 27.7m additional credit impairments made in the previous year. In the near future, net recoveries are expected to continue though there are uncertainties from increased external risks. Impaired loans, gross, continued to decrease in the third quarter reaching LVL 698m (compared to LVL 890m at the end of Q4 2010) and this trend is also expected to continue.

Revenues and costs

Total revenue decreased in Q3 2011 by 11 per cent on a year-on-year basis, while costs decreased by 15 per cent compared to the previous year. During the quarter, the number of active customers using banking services increased by nearly 11 thousand. As a result, revenue from daily banking improved by 7 per cent. The cost income ratio in Q3 was 0.38 (Q3 2010 ratio was 0,40).

Focus on customer relationships

Swedbank continued to develop the relationship bank business model, a process which will be completed by the end of Q4 2011. The bank’s efforts also started to earn external recognition. Last quarter, the international magazine Global Finance named Swedbank’s Internet Banking the best online banking facility for consumers in the Baltics. Swedbank ranked 7th in the ‘Most Loved Brands Top’ study conducted by the business magazine Kapitals and the market research company TNS Latvia and was the only financial institution to make it on to the Top 10.