Banks, Financial Services, Latvia, Legislation

The concern's loss in 2015 reached EUR 54.24 million compared to EUR 60.39 million loss reported in 2014.

Reverta has repaid EUR 53 million to the Treasury, of which EUR 30.7 million was the repayment of the principal amount and EUR 22.3 million was interest on the state aid provided for Parex Banka.

In line with the Restructuring Plan, which envisages termination of all Reverta’s operations by the end of 2017, during the reporting period the company continued persistent work on the restructuring of the distressed assets portfolio. As a result of this, at the end of 2015 Reverta’s total assets were EUR 144.6 million compared to EUR 220.3 million on December 31, 2014.

Reverta reported that the biggest challenge in 2015 was the unstable geopolitical situation, resulting in a steep reduction in recoveries from the portfolio of the CIS countries. Devaluation of the Russian currency and economic recession in the country, deteriorated loan repayments from Russia and CIS countries.

Reverta’s operation is being gradually downsized and amended to suit the reducing assets, including, the staff numbers have been decreased two times since the beginning of Reverta to ensure that the company’s high efficiency is retained. Calculations show that each employee has recovered from the distressed assets approximately EUR 6 million.

Since August 1, 2010, the state has received from Reverta a total amount of EUR 610.8 million in the form of various payments, of which EUR 366.6 million was paid directly to the Treasury. In addition to this, Reverta has also disbursed term deposits, interest on subordinated capital and other big volume payments.

Reverta's board chairwoman Solvita Deglava said in a statement to the press that the company continues to do its best to recover as much state money as possible.

"It is not an easy task in view of the significant impact made both by the Russian crisis and the economic situation in Latvia and Europe. Besides, only the most complicated assets are left in our portfolio as all other distressed assets have been already restructured and disposed of during the five years of Reverta’s operation,” she said.

Overall, Reverta has rcovered EUR 666.2 million from the restructuring of distressed loans, sales of bonds, and disposal of real estate properties.

Following a request by the Latvian Privatization Agency, KPMG Baltics is currently analyzing the situation in the distressed asset market in order to provide recommendations on future disposal strategy of Reverta, including potential sales strategies along with a justified opinion on whether there are grounds to reconsider the currently approved sales strategy.

In fall 2008, Parex Bank, the second largest bank in Latvia at the time, sought government assistance to stave off financial trouble brought about by the global financial crisis. To support the failing bank, the Latvian government decided to take over a controlling stake in Parex Bank from the bank's founders, major shareholders and top executives Valerijs Kargins and Viktors Krasovickis.

In 2010, Parex Bank was split into a good bank and a bad bank. The good bank was called the Citadele Bank and successfully continued the banking business, but the bad bank, left with the distressed assets of Parex Bank and later named Reverta, ceased to provide commercial banking services and instead focused on restructuring of loans, recovery of debts and management of repossessed real estate in order to recover the money invested by the Latvian government in the Parex Bank bail-out.

Reverta’s shareholders are the Latvian Privatization Agency (84.15%), the European Reconstruction and Development Bank (12.74%) and other shareholders (3.11%).