Latvian Banks Results in 2009
According to the publication of the Latvian Institute which regularly provides statistics and forecasts on Latvian Banking Sector, and to the data of Latvian Association of Commercial Banks, in 2009 housing loans issued by Latvian banks to resident households decreased by 4.5%, or LVL 226,1 million (app. EUR 321,7 million).
In 2009, 20 Latvian banks issued housing loans. Latvia’s Swedbank led other Latvian banks, by the end of the year it has issued LVL 1,296 billion (EUR 1,844bn). Market share of Swedbank in housing lending did not change from the end of 2008 and made 26.9 %.
The Latvian branch of Nordea Bank Finland ranked second with LVL 782,8 million (app. EUR 1,114 billion) housing loans issued. The bank’s market share in late 2009 was 16.2% — this is 0.7% growth from the end of 2008.
DnB Nord Banka was in the third with LVL 750,7 million (app. EUR 1,068 billion) issued in housing loans. The bank’s market share has grown from 14.9% in 2008 to 15.6% in 2009.
According to Teodors Tverijons, President of the Latvian Association of Commercial Banks, Latvian banks are not expected to reduce lending in 2010 more than last year, when it declined by 7% to LVL 15.429 billion (app. EUR 21,953 bn). He said, however, that there is no growth in lending anymore, and almost no loans are being issued for new real estate projects.
According to the information published by the Latvian Finance and Capital Markets Commission, in 2009 the aggregate loss of the Latvian Banking sector was LVL 773,421 million (EUR 1,1 billion), incurred mainly due to the need to create provisions for bad (unsafe) loans.
The Latvian Association of Commercial Banks informed that to reduce their losses, the Latvian banks last year cut their administrative costs by some 13,4%, slashing salaries by 18,3% for employees and by 14,1% for top managers. Other administrative costs have been cut by 10,6%. The President of the Association also predicted that the banks would reduce their administrative costs by up to10% also in 2010.
According to the information provided by the Latvian Association of Commercial Banks, the aggregate assets of Latvian banks declined by 6.7% and made LVL 21,678 billion (app. EUR 30,845 bn) at the end of 2009. Most of the banks reported a decline in their assets. The largest decline was reported by VEF Banka (27.7%), which in May 2010 announced about the cancellation of its licence by the decision of the Financial and Capital Market Commission. It was followed by LTB Bank (18,6%), Latvijas Biznesa Banka (18,5%). Among the banks that experienced growth of assets there are Trasta Komercbanka (the biggest growth of 27,7%) and Aizkraukles Banka (3,7%).
The banks that have the biggest market share in Latvia showed stable results. Latvia’s Swedbank, the largest bank in the country by assets, at the end of 2009 had LVL 4,944 billion (EUR 7,034 bn) in assets, which is 6.2% decline compared to 2008. The bank’s share in the Latvian banking assets was 22,8% as compared to 22,7% in late 2008. SEB Banka’s assets decreased by 2.6% and made LVL 2, 95 billion (EUR 4,197 bn) at the end of last year, and its share in the Latvian banking assets was 13,6% (13% at the end of 2008). The assets of the Latvian branch of Nordea Bank Finland were LVL 2,253 billion (EUR 3,206 bn), the bank’s share in the Latvian banking assets was 10.4%.
The liquidity ratio of the banking sector was 61.4% at the end of January 2010 (the minimum requirement is 30%). The capital adequacy ratio of the Latvian banking sector in late January was 14.3%, according to the report of the Latvian Finance and Capital Markets Commission.
The total amount of bank liabilities towards monetary financial institutions declined by 3%, or LVL 235, 5 million (EUR 335,1 mn), as the Latvian banks continued to repay the funds attracted from their parent banks in line with their loan contracts.
The president of the Latvian Association of Commercial Banks Teodors Tverijons said that in 2010 provisions for bad loans would grow again, and the largest loan portfolios will suffer loss again. However, he considers that the Latvian banking sector might show growth in 2011.