OREANDA-NEWS. October 27, 2014. “The bank’s performance reflects current trends in the economy – people are able to set aside more for savings and to borrow in order to fulfil their dreams. Unfortunately, due to amendments to the Insolvency Law, banks will be forced to implement more conservative policies.

The demand for financing among business is still restrained, yet such low activity is not economically justified. We will, therefore, work on solutions to meet the current needs of private customers and businesses in today’s challenging conditions. There is some homework to be done also on the part of the state, including the removal of barriers to the availability of mortgage loans, and supporting new business, growth as well as encouraging existing companies to invest.” said Maris Mancinskis, the Head of Swedbank Latvia.

Swedbank Latvia’s profit for nine month period 2014 amounted to EUR 88m compared to a profit of 81 million euros for nine month period 2013. The result was impacted by the recovery of earlier loan provisions and reduced expenses.

Loans and deposits
The volume of deposits in nine month period remained at previously high levels. This is the legacy of skyrocketing deposit activity at the end of 2013 which took place to ensure easier transition to the euro.Swedbank’s deposit portfolio stood at 3284 million euros at the end of Q3.Credit portfolio amortization still continues and the aggregate volume of loans in nine month period amounted to 3185 million euros.

The volume of new lending in nine month period reached 407 million euros. The mortgage lending market picked up with volumes rising by 28 per cent YoY. Future mortgage lending, however, is likely to be affected by recent amendments to insolvency legislation. The bank is working on solutions to mitigate the effect on the availability of financing to families but overall, the banking industry will be forced to implement more conservative policies.

The demand for new financing among companies remains subdued. The Ukrainian – Russian conflict has not had any direct effect, however some customers have put new investment on hold. The bank is working on financing products to target the current needs of businesses, especially small and medium-sized enterprises – we’ve strengthened our leasing offer and created a lending product for small business purchases.

Credit quality
Credit quality continued to improve in Q3 with the volume of impaired loans down to 174 million euros. Swedbank is taking preventive measures to help its customers affected by the current geopolitical situation. However, thus far the impact on Swedbank customers in Latvia has been insignificant. Net recoveries amounted to 5 million euros in Q3 (10 million in nine month period).

Revenue and costs
In nine month period revenue fell by 3%, while costs decreased by 10% year-on-year. Customers’ active use of day-to-day financial services mitigated the increase in expenses and decrease in revenue related to the euro introduction. The number of active customers has increased by 28 213 since 30 September 2013. The cost/income ratio stood at 38% in Q3.

A shift in customer habits
The customer habit of doing day-to-day banking online becomes stronger – the use of cards, internet banking and mobile devices is on the rise. The number of card purchases increased by 28% in nine month period. Foreign and online transactions also rose sharply, up by 23%.

Several new opportunities have been added for companies to handle their financial affairs via the mobile app, online banking or by phone. For example, as part of developing the eID card functionality on the Swedbank Internet Banking site, now eID cards can be used to remotely open temporary accounts when founding a company. The use of mobile devices in banking has grown exponentially – retail payments surged by 77% in nine month period while corporate payments were up by an exceptional 88% year-on-year.