Q1 2010 Results of Swedbank Lithuania: slower increase of impaired loans
2010-04-27 Back
Current economic climate and the bank
Moody’s, Standard and Poor’s and Fitch Ratings raised the credit rating outlook for Lithuania from negative to stable as the economy of the country recovered faster than anticipated. These rating agencies raised the country`s outlook based on recovery signs and government steps to curb budget deficits. According to the most recent economic outlook published by Swedbank, recovering exports, significant budget deficit and the extensive use of EU funds in the budget helped Lithuania slow down the economic recession.
According to Antanas Danys, Head of Swedbank in Lithuania, “Despite the signs of economic stabilisation, the overall situation of businesses and weakening internal demand caused by growing unemployment still prevent expected rapid operational improvement of the Lithuanian banks. We have noticed the stabilisation of business mostly influenced by lower credit impairment growth rates. Customer loyalty is also of great significance for the operations of the bank, as shown by a 7 per cent increase in deposit volume during the last twelve months”.
Summary of interim results
Swedbank incurred losses of LTL 66.9 million in the first quarter, due to provisions for possible loan losses (losses for the last quarter of 2009 amounted to LTL 598.4 million).
Deposit and loan volume
In the first quarter of 2010, deposit volume increased by 4 per cent, and Swedbank’s deposit market share grew by 0.7 percentage points. The loan portfolio decreased by 4 per cent, as a result of loan repayments exceeding the issuance of new loans. During the first quarter of 2010 the whole lending market contracted and Swedbank’s market share remained stable.
Credit quality
On 31 March 2010, gross impaired loans (i.e. loans overdue for more than 60 days) totalled LTL 1,641 million (LTL 1,582 million on 31 December 2009). There are noticeable differences between corporate and private portfolios. In the corporate segment, the highest share of impaired loans remains in the real estate and construction sectors. Impaired loans in the corporate portfolio are expected to peak in the first two quarters of 2010. Improvement of the quality of private portfolio is expected to be delayed due to growing unemployment levels. The percentage of gross impaired loans of the bank was 10.1 per cent.
Revenues
Swedbank Lithuania´s revenues during the quarter decreased by 13 per cent to LTL 143.2 million, due to a 16 per cent drop in interest income. Operating income, before taxes and provisions, was LTL 115.5 million or 31 per cent higher than during the last quarter of the previous year. Net commission income during the first quarter of 2010 was unchanged from the first quarter of 2009.
Expenses
Expenses of the bank decreased by 18 per cent compared to the last quarter of 2009, while operating costs decreased by 18 per cent to LTL 80.1 million compared to that quarter. The economic downturn and the increase in distressed debt gave rise to expenses related to loan restructuring and recovery. These expenses are considered economic cycle-related and will decrease as the economy recovers.
The number of employees was reduced by 13 or by 5 per cent during the quarter. The cost/income ratio of the first quarter of 2010 was 0.56, which was 0.03 lower than during the last quarter of 2009.
Business developments and community & customer relations
In the first quarter of this year, Swedbank Lithuania continued pursuing a moderate loan restructuring policy. This meant looking for solutions together with customers who had difficulty in discharging their financial obligations. Antanys Danys declared that “it is very important for us to cooperate with the many customers who cooperate with us to find mutually beneficial solutions. The bank does not need to take drastic measures such as the eviction of families from their only home.”
In the first quarter, Swedbank continued to pay great attention to the senior customer segment and implemented an educational project together with the Lithuanian libraries, which teaches elderly people to use the Internet and Internet banking.
Q2 and reports online
The results for Swedbank for Q2 2010 will be published on July 22, 2010.
Swedbank Lithuania´s results for Q1 2010 can be found at www.swedbank.lt.
Swedbank Group’s Q1 2010 report can be found at www.swedbank.com.
