Baltic States – CIS, Banks, Financial Services, Latvia

The profit of Rietumu Group last year shrank 2.5 times year-on-year to EUR 33.494 million.

The bank's management said that, due to the recent events in the Latvian banking sector, its auditors had asked for extension of the deadline for completion of the audit and are expected to produce the audit opinion in April.

At the end of 2017, Rietumu Banka had EUR 2.999 billion worth of assets, down 13.5% from the end of 2016 when the bank's assets were worth EUR 3.466 billion.

The Group's operating income was EUR 136.611 million last year compared to EUR 180.981 million in 2016. Net fee and commission income was EUR 34.629 million against EUR 41.095 million in 2016.

"During 2017 the Group continued to focus on trade finance, leasing and consumer finance businesses. As a result of the uncertain environment in the region the Bank has scaled down its commercial lending in the CIS countries. In addition, the Group focused on reducing concentration risks of large lending projects. This resulted in the lending portfolio being diversified over a large group of medium sized loans rather than the portfolio being concentrated in a smaller group of larger loans," the management said.

The commercial loan portfolio represents about 89% of the Bank's total loans of EUR 917 million last year. Latvia, Russia and Belarus are the largest commercial lending markets with real estate management, financial services and transport representing the largest industries in the commercial loan portfolio. The second largest category of lending is margin lending to customers against liquid securities as collateral and this represents about 5.5% of the total loan portfolio.

Due to inherent risks in the markets of CIS countries, in 2018 the Group plans to transfer the loan portfolio to Latvia and other regions such as the Baltic states, the EU states (in particular Ireland, the United Kingdom and others).

Current accounts and deposits due to customers in amount of EUR 2.34 billion decreased by 14.7% compared to 2016. "The fall in deposits occurred due to the economic downturn primarily in Russia as well as a result of the new customer policy adopted by the bank," Rietumu Banka said.

"In the beginning of year 2018 Latvian banking sector faced local and international reputational crisis which also affect the bank and the Group," the management said

Partly in response to this, the bank made immediate changes to its operations. For example, the bank decided to retranslate all customer USD balances to EUR and to terminate its relationship with a significant number of high risk customers.

"We will continue to adapt to the changes in the market and banking sector and we believe that we will be able to strengthen our relations with our customers and our position in the market," Rietumu Banka said.

In 2016, Rietumu Banka made EUR 80.3 million in annual profit, and the Group's profit was EUR 82.337 million.

At the end of 2017, Rietumu Banka was the fifth largest bank in Latvia by assets. The bank's main shareholders are Esterkin Family Investments (33.12%), Maltese company Boswell (International) Consulting Limited (33.11%), and Suharenko Family Investments (17.34%).