OREANDA-NEWS. April 29, 2013. Swedbank Estonia earned a net profit of EUR 42.3m in Q1 2013.
 
“During the first quarter we witnessed a slight increase in corporate segment lending. In addition, customers benefited from on-going improvements in credit quality resulting from better risk grades and impaired exposures shifting back to the primary portfolio. Nevertheless, Swedbank is still significantly affected by low interest rates. So it essential to look for efficiencies within our organizational structure and processes and continue to meet our customers expectations within a dynamic banking environment," – says Priit Perens, Head of Swedbank Estonia.
 
Despite the overall weakness of the European economy, solid growth continued in Q4 2012 with GDP up by 3.7 per cent year-on-year in Estonia. In 2012, the Estonian economy was one of the fastest growing in the EU. Nevertheless, growth is expected to slow down somewhat in the first half of 2013 as fierce competition and weak demand from export markets filters through. Credit demand is still relatively weak in Estonia with businesses and, in particular, consumers cautious about taking on more debt.
 
Swedbank Estonia’s profit for Q1 2013 amounted to EUR 42.3m, against EUR 53.1m for Q1, 2012. The decline was mainly due to lower net interest income. In addition, year-on-year net recoveries were down.
 
Loans and deposits
Q1 lending volumes increased by 3 per cent year-on-year (up EUR 155m) and by 0.5 per cent on Q4 2012. The increase went primarily to the corporate sector. Volumes in new household lending remain low. Swedbank’s Estonian market share in lending was 39.6 per cent on 28 February (39.3 per cent on 30 November 2012).
 
Deposits increased by 7 per cent (EUR 332m) compared to the end of Q1 2012. Both corporate and private customer deposits in Estonia show significant growth year-on-year. Swedbank Estonia’s market share for deposits was 45.5 per cent on 28 February (44.5 per cent on 30 November 2012).
 
Credit quality
Q1 2013 net recoveries amounted to EUR 6.4m, compared to EUR 8.8m for Q1 2012. Impaired loans gross continued to decline at a somewhat slower rate in Q1 than in Q4 2012. Impaired loans, gross, amounted to EUR 234m (EUR 379m: Q1 2012). The main causes of decline were on-going collateral realization procedures, impaired exposures being shifted back to the primary portfolio and a smaller number of new impaired loans. Overall credit quality has strengthened through a gradual increase in new low risk lending.
 
The portfolio risk profile improved through better risk grades and stronger collateralisation. Consequently, risk weighted assets declined by EUR 145m in Q1 to EUR 4465m.
 
Revenues and costs
Year on year revenues decreased by 13 per cent in Q1. This decrease was mainly due to lower net interest income (lower base rates), which decreased by 17% compared to Q1 2012. Q1 net commission income increased by 1 per cent year-on-year to EUR 15.4m. This was driven by higher commission income from payment services resulting from increasing client activity. The number of active customers increased by 5500 year-on-year to approximately 792 thousand.
 
Expenses decreased by 3 per cent (EUR 0.7m) year-on-year. The cost to income ratio was 0.42 (0.38). Swedbank Estonia implemented strict cost controls in 2012. This year we will look at our organizational structure and key processes in order to increase efficiency. We will continue to streamline our retail network while improving the level of service provided via digital channels.
 
 
The Q1 loan to deposit ratio was 113 per cent (112 per cent as of Q4 2012).
 
Customer focus
In 2013 Swedbank Estonia will continue to strengthen its customer focused business model based on long-term, full-service relationships. In February, the global finance magazine ‘Euromoney’ recognised the services of Swedbank Private Banking as the best in Estonia and Latvia in 2013.
 
In February the ‘Back to School’ initiative and Swedbank launched a new e-solution to foster cooperation between schools and the rest of society. By March 2013, 120 Swedbank employees had started using the e-solution and altogether 240 lessons were delivered at Estonian schools. This education on money related matters had reached 6000 students by the end of Q1.