OREANDA-NEWS. February 17, 2012. Estonia continued to post strong economic growth and GDP grew in Q4 2011 by flash estimates grew by 4 per cent compared to the previous year. Overall economic growth was more broadly-based and was mainly driven by exports. However, domestic demand will continue to remain weak in the near future. GDP growth is expected to slow down in 2012 due to euro-zone issues and a deteriorating global outlook, both of which impact Baltic exports performance, reported the press-centre of Swedbank.

"It was the first calm year after the crisis. Economic activity in Estonia grew and the year was good for the Estonian economy as a whole and for the banking sector as well," – said Priit Perens, the Head of Swedbank Estonia. "Adopting the euro certainly had its own impact, for example in decrease of payment commissions and FX earnings," he added.

"Recently announced Estonia’s annual economic growth figure 7.5 per cent signals that 2011 was also good year for our clients. It shows that the structural changes initiated at difficult times were beneficial," said Perens.

"We will certainly continue with our societal engagement initiatives this year, be they focused to culture, sports or social matters. Considering future growth engines for the Estonian economy, we hope our investments to support youth entrepreneurship will help to shape mindset and give inspiration," said Perens, referring to the “Make the Stars Shine” youth business idea competition and the “Junior Achievement” program for student companies.

Swedbank Estonia, including insurance business, reported a profit of EUR 50.2m in Q4 compared with EUR 46.2m for Q4 2010. Excluding the impairment, Swedbank Estonia reported a profit of EUR 44.1m in Q4 2011, 14 per cent down on Q4 2010. The results of the Latvian non-life insurance company ceased to feature in Estonian Q4 results.

Swedbank Estonia reported a total profit of EUR 190.1m in 2011, compared to EUR 78m for the previous year. The improved result was mainly due to net recoveries. Total income remained flat in 2011, while costs increased by 1 per cent compared to 2010.

Loans and deposits
Lending volumes decreased by 7 per cent compared with Q4 2010. This was mainly due to limited demand for new loans and the resulting amortisation of the existing portfolio. Corporate loans, leasing and consumer financing portfolio decreased most, while mortgages decreased less. With growing macroeconomic uncertainty and slowing foreign demand, companies were more cautious about investment decisions.

Deposits rose by 9 per cent in 2011, private deposits increasing more than corporate deposits over the year. Swedbank’s market share for deposits increased to 46.2 per cent at the end of December, up from 45.1 per cent at the end of Q4 2010. In the same period, the loan-to-deposit ratio fell to 117 per cent (137 per cent at the end of Q4 2010).

Credit Quality
Credit impairments fell by EUR 5.5m for 2011, compared to increased credit impairments of EUR 103.7m for the previous year. Credit impairment reversal trends started in Q3 2010 and continued throughout the 2011. Impaired loans, gross, continued to decrease throughout the year and amounted to EUR 406m at the end of Q4 2011 (EUR 526m at the end of Q4 2010) and this trend is expected to continue.

Revenues and costs
Net interest income increased by 8 per cent compared with 2010. The increase was in large part driven by higher Euro base interest rates of the first half of the 2011. Net commission income decreased by 7 per cent. The decrease was driven mainly by cheaper euro payments and card payment fees.

Net gains and losses on financial items at fair value declined by 54 per cent compared to the previous year. This drop was the result of transaction related exchange rate differences and the reduced need to convert currencies, subsequent to Estonia’s adoption of the Euro.

Expenses increased by 1 per cent compared to the previous year. The cost-income ratio for 2011 stayed flat at 0.37 compared to the previous year.

Estonia has successfully managed to return to growth after a severe recession. However, growth is expected to slow down in 2012 due to a deteriorating global economic outlook. Swedbank is taking measures to mitigate the expected negative impact on revenue generation. Costs are under intense scrutiny and activities are proactively adjusted to ensure increased customer satisfaction which in turn will naturally enhance our ability to generate revenue and maintain profitability.

The number of full-time employees increased during the year by 55 to 1785.

Customer focus
In 2012 Swedbank?s focus in Estonia, Latvia and Lithuania will be on further strengthening a customer-centric business model based on full client services and long-term relationship building whilst always keeping an eye on efficiency.

Indeed, this approach was validated by the customer satisfaction index NPS (Net Promotor Score), which rose over the course of the year in all areas including customer service and advisory, with an annual average of 38% - up from 33% in previous year.

Over the year, the number of active customers increased by more than 8000 (790 000 at the end of 2011).

In 2011, the Swedbank bonus program was extended to payments made by debit card. This offers the opportunity to choose more favourable banking services and other gifts, something which is highly appreciated by the bank’s active clients. Thanks to the recently launched mobile banking application, both our private and corporate clients gained easier access to banking services.

In 2011, Swedbank’s position as a leading bank in the Baltic countries was confirmed by several local as well as international awards. In surveys and awards in all three Baltic countries Swedbank was recognised as the most reputable company in the financial sector. Global Finance magazine named Swedbank Estonia the Best Bank in the survey “Best Emerging Market Banks 2011 in Central & Eastern Europe”. Swedbank Estonia was also named Best Foreign Exchange Provider. In addition, Swedbank was named Best Bank in Lithuania and in Estonia in the Euromoney Awards for Excellence 2011. In December, the Financial Times and Mergermarket named Swedbank Markets the best financial advisor in the Baltics.