OREANDA-NEWS. July 27, 2012. Swedbank Estonia earned EUR 45.6m  in net profit in Q2 2012

Increased client activity and banking efficiency

Continued stability in lending volumes

“We witnessed increased client activity - mainly in the more intensive usage of our electronic channels, including our newly opened mobile bank link, which allows buying directly with your mobile phone. This trend is also evident in our award winning and increasingly popular online financial planner tool. This, together with an increase in private saving in Q2, indicates that the importance of long term financial planning has reached more and more people,” said Priit Perens, Head of Swedbank Estonia.

"The proof of increased client activity can be seen also in our corporate lending - the launch pad for continuing growth," Perens said.

Economic growth remained strong in the Baltic countries. In Q2 2012 year on year GDP growth was 3.6 per cent in Estonia which was mainly supported by domestic demand in the construction and retail sectors.

The increase in net profits was mainly due to higher net recoveries. Nevertheless, net income was affected by lower base interest rates.

Loans and deposits

Lending volumes decreased by 0.8 per cent YTD. In Q2 2012, the net lending portfolio grew (0.3 per cent), indicating that deleveraging might be levelling out in Estonia. Increasing lending volumes were reported both in the corporate and consumer financing segments. Swedbank’s market share in lending was 40 per cent as of 31 May 2012 (40.3 per cent Q4 2011).
Total deposit volume increased by 3.6 per cent on Q4 2011 (5.2 per cent Q2). Private and corporate deposits rose by 5 per cent and 2 per cent respectively. Swedbank’s deposit market share was 45.2 per cent as of 31 May 2012 (46.2 per cent Q4 2011). The loan-to-deposit ratio decreased to 112 per cent (117 per cent Q4 2011).

Credit quality

Net recoveries amounted to EUR 11.6m for H1 2012 (EUR 2.8m Q2 2012), compared to a EUR 14.3m credit impairment increase in H1 2011. Recoveries were reported in all credit portfolios. Impaired loans, gross, declined in H1 and amounted to EUR 322m (EUR 406m Q4 2011) in Estonia. New lending gradually increased, which has improved also the overall portfolio quality.
Risk-weighted assets decreased by EUR 260m YTD to EUR 4866m. Risk weights decreased in most of the portfolios mainly due to positive rating migrations.

Revenues and costs

In H1 2012, net interest income decreased 11 per cent year on year, driven by lower base rates and a smaller loan portfolio. In H1, net commission income decreased by 2 per cent year on year due to lower commission income from payment and securities services. Volumes of card payments increased by about 10 per cent, reflecting an increase in daily banking activity and an improved economic environment. The number of active customers increased by 4775 in H1.

Year on year expenses were 8 per cent lower in H1 2012 due to lower consultancy, marketing and travelling costs. Fixed staff costs were also lower - as of the end H1 there were 23 fewer full-time employees year on year. The branch network was also restructured to reflect customer behaviour and a move to more efficient e-channels. A total of 4 branches were closed in the last 12 months. The cost/income ratio improved to 37.4 per cent in H1 as a result of efficiency measures (37.9  per cent H1 2011).

Customer focus

In Estonia, Swedbank retained the best reputation among large companies for the fifth consecutive year. In the Best Banking Act contest organised by the Estonian Banking Association, the jury voted Swedbank’s internet-based Financial Planner as the best banking service of 2011.

Swedbank demonstrated its commitment to diversity by opening the first ATMs in Estonia for blind and visually impaired people, each kitted out with special aids. In addition, the bank has started to mark the steps and stairs in branches to make movement easier for the visually impaired.

Swedbank’s reward program for clients was well received and widely used for ordering free payments as well as donating to charities. To provide access to the best of Swedbank’s expertise, the bank launched a unique infoportal for business clients, presenting information for both start-ups and experienced entrepreneurs.