OREANDA-NEWS. February 03, 2014. Swedbank Estonia reported a net profit of EUR 176m for 2013 (EUR 198m 2012). The decline in profitability was mainly due to lower net interest income and lower net recoveries. Expenses remained largely unchanged.  Operating profits in 2013 were down 6 per cent YoY and amounted to EUR 190m (EUR 202m 2012). Total income dropped by EUR 3m in 2013 and amounted to EUR 265m.

”In Q4 2013 we ended up in a kind of ‘stand-by’ mode. The Estonian economy is in decent working condition, but there isn’t much appetite for new investments. This is also evident in the demand for new loans. Q4 2013 saw a decline in our loan portfolio despite growth in domestic consumption,“ – said Priit Perens, Head of Swedbank Estonia.

“2013 was all about getting used to a difficult market reality for the banks. We have had to learn how to live in an environment of record low interest rates. Consequently, looking for internal efficiencies has been a priority and with consolidated development processes now under joint supervision, it makes more sense to handle pan-Baltic development issues in one place instead of three. Thanks to the changes implemented, we achieved our accustomed efficiency with C/I below 40% in the second half of the year.

Changing patterns of customer behaviour brought along changes in our channel strategy and consequently Swedbank now has 8 cash smart branches in Estonia. This change is best illustrated by the super-fast development of our mobile bank – 18 months ago the mobile bank first exceeded branches in the number of transactions. Today, 3 times more payments are conducted using our mobile app than at the branches. The number of mobile app users doubled in 2013, with 65 000 customers using it every month,“ Perens said.

Loans and deposits

Lending volumes increased by 1.6 per cent YoY and in total, the loan portfolio amounted to EUR 6113m.

Deposits grew by 5.7 per cent in 2013 YoY. The total 2013 deposit portfolio amounted to EUR 5 678m. The loan-to-deposit ratio fell to 108 per cent (down from 112 per cent YoY).

Credit quality

Net recoveries amounted to EUR 30.6m compared to EUR 39.5m in 2012 (a YoY decrease of 23 per cent). Recoveries were generated in all segments. Impaired loans, gross, continued to decline over the year and amounted to EUR 150m (EUR 254m 2012). The decrease was mainly due to amortisations, write-offs and loans that have shown improved performance, The inflow of new impaired loans was imited. Credit quality strengthened through a gradual increase in new, lower risk lending.

Revenues and costs

Net interest income decreased by 5 per cent YoY and amounted to EUR 162m in total. Net commission income amounted to EUR 67m in 2013, a 6 percent increase YoY. The increase was supported, in the main, by increasing customer activity, and a rise in new sales volumes. The number of active customers continued to increase in 2013 and now amounts to 800 thousand, up by 6500 YoY.

Total expenses were unchanged in 2013 and amounted to EUR 105m. To improve efficiencies and cooperation as well as the quality and expertise, Swedbank developed and implemented a pan-Baltic consolidated business model in 2013 withhree Competence Centres focusing on service channels, retail banking and corporate banking. The Competence Centres are now fully functional and providing services. As a result, the number of full-time employees decreased 10 per cent at Swedbank in Estonia in 2013.

During the fourth quarter a dividend payment was made by the non-life insurance company to the Estonian parent company totalling EUR 50m. This resulted in a tax expense of EUR 12m. These redistributions strengthened Swedbank’s capitalisation.

The cost-income ratio for 2013 stood at 40 per cent (39 per cent - 2012).

Customer focus

In 2013 Swedbank ranked fifth in an Annual survey of ‘Most Loved Brands’ in the Baltic countries and was the only bank on the final list of 30 companies. By Q4, nearly one third of the bank’s active customers had used the benefits of Swedbank’s reward programme. Customers have ordered over 500 000 gifts from the reward programme and more than 300 000 euros were donated in 2012 - 2013 using Swedbank’s donation environment.

In its first two years, the Swedbank-founded Prototron fund financed the creation of nine prototypes to the tune of  62 000 euros in total – of which the Flydog Sea Monitoring System, wind measurement tool by Shaka and portable queue management ticket dispenser by Qminder are already launched and received positive feedback.The fund was designed to support the creation of prototypes or initial working models.

In 2013, 142 Swedbank employees led 260 training seminars for 6000 students on money matters via the ‘Back to School’ initiative, which was launched to foster cooperation between schools and the rest of society.