OREANDA-NEWS. For Swedbank Lithuania profit for the first six months of 2015 amounted to EUR 36.2m (EUR 56.4m in the first six months of 2014). The decrease was mainly due to external factors, e.g. low interest rates and effects related to euro introduction.

“Despite external uncertainties, the country’s macroeconomic situation remains stable, and we maintain our focus on meeting the financing needs of our customers. We are pleased with the growth of our lending portfolios, evident both in the private and in corporate area. Although market interest rates have continued to decrease, net interest income, which is our main source of income, remained stable in the second quarter compared with the previous quarter.” – said Dovil? Grigien?, head of Swedbank Lithuania.

Loans and deposits
Lending volumes increased by 5 per cent compared with 31 December 2014, driven by increased credit demand. The positive trend was seen in corporate lending and mortgages.

Deposit volumes remained broadly stable compared with 31 December 2014. The loan-to-deposit ratio was 86 per cent (82 per cent as of 31 December 2014).

Credit quality
Credit impairments amounted to EUR 4m (EUR 7m net recoveries in the first six months of 2014). Impairments were related to a few customers. Impaired loans amounted to EUR 118m (EUR 128m as of 31 December 2014). Credit quality has improved to such a level that impaired loans are now decreasing at a more moderate pace.

Revenues and costs
Net interest income decreased by 13 per cent compared with the first half-year 2014. Low market interest rates pressured deposit margins.

Net commissions decreased by 1 per cent compared with the first half-year 2014. Higher customer activity increased commissions related to cards, asset management and lending. Payment commissions decreased due to Lithuania’s adoption of the euro.

Total expenses decreased by 8 per cent compared with the first half-year 2014, driven in part by euro-related one-off costs one year ago. The cost-income ratio was at 0.48 percent (0.44 in the first six months of 2014).

Swedbank Lithuania will pay EUR 18m in taxes to the state budget for the period January-June 2015.

Last year Europe’s capital adequacy requirements (CRR/CRD IV) were clarified, which made it possible to further optimise the Group’s capital structure. Swedbank’s Baltic operations are very well capitalised after a long period of robust profitability. During the second quarter Swedbank therefore decided to take an extra dividend from the Estonian sub-group of EUR 400m to the parent company. Since profits in Estonia are first taxed upon distribution, this generated an extra tax expense of EUR 100m. Swedbank’s normal dividend policy with respect to the Baltic operations is that around 60 per cent of profits generated by the Baltic subsidiaries since 2014 will be distributed to the parent company, Swedbank AB. Swedbank is also reviewing the possibility to optimise the capital structure in the Latvian and Lithuanian subsidiaries. Distributions in Latvia and Lithuania do not produce similar tax effects, since company tax is paid on an ongoing basis.