Danske Banka’s loan impairment charges fall 86%
Banking Activities Latvia
- Total income: LVL 1.3m, down 59%
- Loan impairment charges: LVL 2.6m, down 86%
- Profit/loss before tax: LVL (2.97)m
- Cost/income ratio: 129%
- Customer base: 11,666, up 9%
- Bank branches: 4
- Employees: 117; FTE: 101
|
BANKING ACTIVITIES LATVIA (LVL thousands) |
1H 2010 |
1H 2009 |
Index 10/09 |
| Net interest income | 1,663 | 3,406 | 49 |
| Net fee income | (50) | 50 | - |
| Net trading income | (529) | (388) | - |
|
(618) | (447) | - |
| Other income | 228 | 123 | 185 |
| Total income | 1,311 | 3,190 | 41 |
| Operating expenses | 1,689 | 1,893 | 89 |
| Profit before loan impairment charges | (377) | 1,298 | - |
| Loan impairment charges | 2,595 | 18,776 | 14 |
| Profit before tax | (2,972) | (17,479) | - |
| Loans and advances, end of period | 218,515 | 222,900 | 98 |
| Deposits, end of period | 75,495 | 113,550 | 66 |
| Allocated capital (avg.) | 9,093 | 11,705 | 78 |
| Profit before loan imp. charges as % p.a. of allocated capital | (8) | 22 | - |
| Pre-tax profit as % p.a. of allocated capital (ROE) | (65) | (299) | - |
| Cost/income ratio (%) | 129 | 59 | - |
Note: Deposits do not include MM Funds of LVL 5m in 2010 and LVL 11m in 2009.
The signs of recovery in Latvia’s economy are also apparent in Danske Banka’s financial results for the first half of 2010. Impairment charges declined by 86% from the level in the first half of 2009. And for the first time since the beginning of 2009, loans issued to corporate customers grew, as the corporate loan portfolio rose by 8%.
Raivis Kakānis, CEO of Danske Banka, comments on the bank’s financial results in the first half of 2010 as follows:
"I am pleased that our efforts to expand our corporate customer service are starting to pay off. Although we are a small bank in Latvia, we have access to all the competencies, resources and sophisticated solutions for corporate customers provided by Danske Bank Group, one of the northern Europe’s leading financial institutions. In the Latvian market we hold a challenger’s position and therefore have a strong motivation as well as the opportunities to offer our customers the best services and pricing. Many Latvian companies have recognised the advantages of our offering, as we have seen our corporate customer base increase 36% from the level a year ago.
"In the first half of 2010, Danske Banka’s total income fell 59% from the level in the corresponding period of 2009 to LVL 1.3m. The result was expected and matches our forecasts. The 51% decline in net interest income was the result of record-low interest rates, and lost interest income owing to an increase in non-performing loans.
"Net trading income declined substantially because of accrued revaluation gains on financial instruments booked in 2009 that are gradually amortised as the instruments mature in 2010.
"Although net fee income benefited from the growth of the corporate customer base and slowly increasing customer activity, it was hurt by high expenses for ATM network maintenance that will also influence the result in the coming quarters.
"As the result of Danske Banka’s determined effort and consistent approach towards restructuring loans, the bank succeeded in reducing impairment charges by 86%. We expect impairment charges to continue to decline in subsequent quarters.
"The main objectives of our work today and in the coming period are excellence in customer service, further growth in our corporate customer base, a stronger position in this segment in Latvia, further loan restructuring and smart cost management."
EU-wide stress test of the banking sector
The Committee of European Banking Supervisors (CEBS) included Danske Bank in the group of 91 European banks covered by the comprehensive 2010 EU-wide stress testing exercise. In the worst adverse scenario, Danske Bank had excess capital of DKK40 bn above the minimum capital threshold set by CEBS. The results placed Danske Bank among the top 25% of the banks covered in the exercise and confirms the Group’s significant financial strength.
The www.danskebank.com/ir site provides more details on the stress test.
The Danske Bank Group’s Interim Report – First Half 2010 is available at www.danskebank.com/reports.
DANSKE BANK GROUP’S CURRENT RATINGS:
Long-term: AA3 (Moody's); A (S&P); A+ (Fitch)
Short-term: P-1 (Moody's); A-1 (S&P); F1 (Fitch)