OREANDA-NEWS. Swedbank Latvia profit for 2015 amounted to EUR 121m, an increase of 7 per cent compared with 2014. The increase is due to higher credit recoveries.

“Year 2015 has been a milestone when for the first time since economic crisis we saw the positive development in bank’s loan portfolio, supported by both economic growth in Latvia and the low interest rates. Given that the Latvian economy keeps developing at the current pace and with the European structural fund money becoming available, we see that there is potential for demand to increase for corporate financing as well as for retail lending” says M?ris Man?inskis, Head of Swedbank Latvia.

Loans and deposits

Lending volumes increased by 0.1 per cent compared with 31 December 2014 driven by increased credit demand both in the corporate and retail segment. New lending volumes increased, reaching 741m euros in 2015, against 584m euros last year. In the fourth quarter lending volumes were practically unchanged in Latvia. Swedbank Latvia market share in lending was 22 per cent as of 30 November 2015 (22 per cent as of 31 December 2014).

Deposit volumes increased by 7 per cent during the year. Swedbank Latvia market share was 17 per cent as of 30 November 2015 (17 per cent as of 31 December 2014). The loan-to-deposit ratio was 83 per cent (89 per cent as of 31 December 2014).

Credit quality

Net recoveries amounted to EUR 24m in 2015 (EUR 12m in 2014). Credit quality remained strong despite market uncertainty. During the fourth quarter, net recoveries reached EUR 11m.

Revenues and costs

Net interest income decreased by 6 per cent during the year, as low market interest rates put pressure on deposit margins. Compared with the previous quarter, net interest income rose by 1 per cent.

Net commission income increased by 7 per cent during the year. Higher customer activity strengthened card-related commissions, and the number of card transactions rose by 14 per cent. At the same time net commission income was negatively affected by the new regulation on interchange fees that took effect in December. Compared with the previous quarter net commission income increased by 28 per cent due to higher asset management income related to the annual performance fee for the second pillar pension plans.

Total expenses decreased by 1 per cent during the year, mainly as a result of lower expenses for premises, consultancy and IT. Compared with the previous quarter Swedbank Latvia expenses increased by 8 per cent, driven by seasonally higher expenses.

Swedbank reached an agreement with Danske Bank to acquire its retail banking business in Lithuania and Latvia. The acquisition is subject to regulatory approval in both Lithuania and Latvia and is scheduled to close in the first half-year 2016.