Baltic, Banks, Deposits, Financial Services, Loan

The bank in Latvia informs that the reduction in income was mostly due to low interest rates, while a reduction in expenses was achieved through the bank's sustained focus on increasing operational efficiency. Net recoveries continued in Q1 2015, albeit at a more subdued rate.

In the first three months of the year, Swedbank saw an increase in new lending volumes, reaching EUR 176 million compared to EUR 100 million in Q1 2014. Corporate new lending grew by 87% and reached EUR 135 million. New mortgage lending, in turn, increased by 25%, while consumer financing new deals doubled. The bulk of corporate lending was in agriculture and forestry, water supply, retail, transport and IT&T industries. Amortization of the credit portfolio slowed in Q1, with the total credit portfolio decreasing by 1% when compared to Q4 2014.

The volume of deposits increased by 12% year-on-year and by 2% quarter-on-quarter.

Swedbank Latvia informs that it made recoveries of earlier loan provisions of EUR 1 million, compared to EUR 7 million in Q1 2014. The level of impaired loans, in turn, continued to decline and at the end of Q1 2015 stood at EUR 147 million (EUR 215 million in Q1 2014). The credit quality has improved to such a level that impaired loans are now decreasing at a moderate pace. Swedbank informs that it continues working on preventive measures to help customers that could be affected by the situation in Russia.

Total revenue decreased by 10% year-on-year. As a result of a low rate environment, net interest income shrank by 14% which was partially offset by increased customer activity in card payments, lending and insurance. Home insurance sales increased by 79%, whereas demand for life insurance experienced almost four-fold increase. Total expenses in Q1 decreased by nine% year-on-year reaching a cost/income ratio of 0.42, the bank informs.

Q1 2015 saw continued investment in customer service, including the branches reopening after renovation in Rumbula and Imanta, as well as staffing of 24/7 availability of banking services by phone increasing to 170 employees.

''While extremely low interest rates have created a challenging environment for banks, they have stimulated customer activity, especially in lending. After insolvency legislation was amended and Swedbank joined the state support program for households with children, interest among customers in home loans returned. In the meantime, corporate new lending increased by a 87% YoY. In Q1 2015, Swedbank earned EUR 46 million for our customers in their pension funds and in addition a regional development program was launched, part of which involves a commitment to provide a 100% cash machine coverage in all municipalities of Latvia by the end of 2015,'' said Maris Mancinskis, CEO of Swedbank Latvia.

Swedbank Lithuania earned a net profit of EUR 21 million in Q1 2015 against EUR 26 million for Q1 2014 (18% down year-on-year). The decrease was mainly due to external factors, e.g. low interest rates and effects related to euro introduction, Swedbank said in a report.

"The financial market was influenced by low interest rates that have put pressure on the bank's net interest income. On the other hand, during the second half of the quarter we saw a positive trend with lending volumes, both to corporate and private clients. New corporate lending equalled EUR 208 million. The Lithuanian economy remains among the fastest-growing in the EU and consumer confidence is high despite the uncertain external environment. Therefore, we believe that the necessary conditions remain for growth in sustainable financing for corporate and private clients," said Dovile Grigiene, head of Swedbank Lithuania.

Grigiene adds that Swedbank's pension funds provided a strong result, earning EUR 45.5 million for second pillar customers in Q1 2015.

Lending volumes increased by 5% year-on-year. The increase in corporate lending was up 7%, while consumer financing and private mortgages together grew by 3%. In total the loan portfolios amounted to EUR 4.1 billion.

Deposit volumes increased by 13% year-on-year. Private deposits showed a growth of 16% while corporate deposits grew by 7%. The total Q1 2015 deposit portfolio amounted to EUR 4.8 billion.

The Q1 2015 loan to deposit ratio stood at 86%, compared to 93% in Q1 2014 (7% down year-on-year).

Total Q1 2015 income amounted to EUR 44 million, down 10% year-on-year (EUR 49 million).

Net interest income decreased by 10% year-on-year and reached EUR 24 million. The decrease was mainly due to the impact of low interest rates. Net commission income amounted to EUR 16 million in Q1, this represented a 1% increase year-on-year. Net commission income was pressured by lower income from international payments after the euro transition in Lithuania.

Total expenses decreased by 5% year-on-year, Q1 2015 expenses amounted to EUR 21 million. The cost to income ratio for Q1 2015 stood at 47.8% (Q1 2014 – 45.1%).

Swedbank Lithuania will pay EUR 8.8 million in tax to the state budget for the period January – March 2015.

Swedbank Estonia earned a net profit of EUR 37.1 million in the first quarter of 2015 versus EUR 39.4 million at the same time last year as low interest rates put pressure on net interest income, the bank announced.

"Swedbank's solid first quarter 2015 business result in Estonia was supported by ongoing efficiency measures as well as by the current stability of the Estonian economy. Private consumer confidence remains strong, as reflected in growing demand for loans. Corporate customers' interest in new investments is also on the rise. Although the Estonian economy can be considered firm, we saw rising risks in the private real estate sector in the first quarter with supply exceeding demand and stocks of available housing continuing to grow," said Robert Kitt, Head of Swedbank Estonia.

Despite external uncertainties, lending volumes increased by 1.1% year-on-year. The improvement was mainly driven by growth in the corporate financing portfolio and strong growth in private lending in March 2015. Swedbank Estonia’s market share for lending was 38.7% in the fourth quarter of 2014 (39.5% a year earlier).

Deposit volumes showed a strong 2.5% increase in the first quarter of 2015. Swedbank Estonia’s market share in deposits was 43.7% as of the fourth quarter of 2014 (44.3%). The loan-to-deposit ratio was 100.4% (101.8%).

Credit impairments amounted to EUR 1.5 million (up from EUR 1.0 million net recoveries on Q1 2014). Impaired loans amounted to EUR 134 million at the end of Q1 2015 (EUR 138 million – Q4 2014). Overall, the quality of lending portfolios has improved to the degree that impaired loans will now decrease at a more moderate pace.

Total expenses increased by 0.9%, due to higher staff costs, while IT expenses decreased. Staff costs increased as salary levels, mostly for the front-line, were reviewed. Due to customers’ increasing use of digital services, the number of branches was reduced by 11, down to 40 over the preceding 12 months. 14 of these branches are cash-smart branches with a focus on advisory services. In addition, digital sales and service to customers have significantly improved through automated offers that enable the bank to target customers more efficiently. Swedbank Estonia still maintains the biggest branch network in Estonia – overall 40 branches, 7 self service centers and 429 ATM-s.