OREANDA-NEWS. “Currently, we are in the final stretch towards the introduction of the euro and this issue will dominate in Q4. Customer behaviour is changing as people reduce the use of cash in their day-to-day affairs, including spending. Businesses are preparing for an increased circulation of cash at the turn of the year by signing cash-in-transit service agreements and by making it possible for customers to pay by card. By the end of Q3, over 2000 of the most far-sighted companies had ordered euro sub-frontloading. Nevertheless, this is certainly not the time to take a breather - the turn of the year, with a much higher workload, an increased customer flow and much more cash to handle, will also be a singular time for Latvian banks. Bearing this in mind, Q4 will see us continuing to prepare all bank processes for the euro changeover and assisting customers to seamlessly switch to the new currency,“ said Maris Mancinskis, the CEO of Swedbank Latvia.

Swedbank Latvia earned LVL 23m in net profit in Q3 2013 including the insurance business (LVL 15m profit - Q3 2013). The increase was mainly due to increasing net recoveries.

Loans and deposits

Q3 lending increased to LVL 118m, LVL 99m of which was made available to businesses and LVL 19m - to individuals. An increased demand for new lending was seen in such industries as transport and agriculture in Q3. The total net credit portfolio still continued to decrease, contracting by 5% YoY. The credit portfolio stood at LVL 2 365m for Q3 2013.

The volume of customer deposits in Q3 increased by 23% on Q3 2012 and stood at LVL 2 052 m. Private deposits increased by 27% and corporate deposits by 17% YoY. Overall, the Latvian economy saw less cash in circulation and a corresponding increase in bank account balances. This could be attributable to people reducing the use of cash in their day-to-day affairs with a view to making the changeover to the euro as hassle-free as possible. The deposit portfolio also benefitted from last year's acquisition of the commercial arm of Latvijas Hipoteku un Zemes Banka.

The Q3 loan-to-deposit ratio was 115% (127% - Q4 2012).

Credit quality

Q3 net recoveries amounted to LVL 6m (the provisions made in Q3 2012 amounted to 1m). Recoveries were mainly generated in the corporate portfolio as the economy strengthened and company credit ratings improved. Impaired loans, gross, continued to decline, decreasing to LVL 245m in Q3 (LVL 428m - Q3 2012). Overall credit quality strengthened through a gradual increase in new lower risk lending.

Risk-weighted assets decreased YoY by LVL 332m to LVL 2 302m.

Revenue and costs

Q3 total revenue and costs increased in by 15% YoY, including one-off euro project costs.

The cost/income ratio was 43% in Q3 2013. In order to increase efficiencies at Swedbank, a unified business model across the Baltic countries is being implemented to improve collaboration in the Baltic region. At the heart of the process is a focus on developing the bank's channels based on the evolving needs of customers.

Customers choose modern financial solutions

In Q3, the millionth activated Swedbank card was registered and in Q1-3 the number of card purchase transactions grew by 19% reflecting a continuing preference for modern financial solutions moving forward toward the euro changeover. The number of purchase transactions for purchases on the web and abroad was up 23% in the first nine months of the year. Digitals solutions also allowed customers to stay in control and plan their budgets. Since July, Swedbank's mobile app has allowed customers to simply shake their smartphones to check their balance - a feature which has already been used a million times.

In Q3, switching to more convenient banking channels for day-to-day purposes slashed cash handling activities at branches. Cash withdrawals and deposits at branches fell by 26% and 31% respectively. Customers increasingly opted for more convenient and cheaper self-service channels, such as ATMs. in Q3, as much as 95.3% of all cash deposits at Swedbank were made via ATMs.

In the reporting period, Swedbank continued to support customers for an easier changeover to the euro. Since mid-July when Swedbank was the first among banks in Latvia to offer businesses the opportunity to sign euro sub-frontloading agreements for delivery of euro cash to the company's specified address, the offer has been taken up by over 2000 of the most far-sighted companies. At the beginning of September, Swedbank repeated a series of widely-attended business seminars about the euro. The bank has also taken an active part in euro related activities organized by the state and the banking industry, such as the Regional Euro Days.