Danske Banka's financial results 2009
Banking Activities Latvia
- Total income: LVL 7.8m, up 54%
- Loan impairment charges: LVL 42.0m
- Profit before tax: LVL -37.7m
- Cost/income ratio: 45%
- Deposits: LVL 101.1m, up 41%
- Customer base: 11,262, up 13%
- Bank branches: 5
- Employees: 116 (100 FTEs)
|
BANKING ACTIVITIES LATVIA (LVL thousands) |
2009 |
2008 |
Index 09/08 |
| Net interest income | 5,936 | 4,935 | 120 |
| Net fee income | 66 | 17 | - |
| Net trading income | 1,383 | 31 | - |
| Other income | 454 | 93 | - |
| Total income | 7,839 | 5,076 | 154 |
| Operating expenses | 3,550 | 4,167 | 85 |
| Profit before loan impairment charges | 4,289 | 909 | - |
| Loan impairment charges | 42,030 | 5,326 | - |
| Profit before tax | -37,741 | -4,417 | - |
| Loans and advances, end of period | 218,755 | 237,696 | 92 |
| Deposits, end of period | 101,066 | 71,813 | 141 |
| Allocated capital (avg.) | 10,890 | 11,161 | 98 |
| Profit before loan imp. charges as % p.a. of allocated capital | 39.4 | 8.1 | - |
| Pre-tax profit as % p.a. of allocated capital (ROE) | -346.6 | -39.6 | - |
| Cost/income ratio (%) | 45.3 | 82.1 | - |
Note: Deposits do not include MM Funds of LVL 4.6m in 2009 and LVL 3.5m in 2008.
This report presents the financial results of Danske Banka, the Danske Bank Group's banking activities in Latvia. In addition to banking, Danske Bank operates in Latvia’s financial markets (Danske Markets Latvia).
Danske Banka demonstrated impressive operational results in 2009. As a result of sound cost management combined with an increased income base, the bank attained its best operational results ever, achieving a cost/income ratio of 45.3%. Danske Banka’s total income grew 54% over the level in 2008 to LVL 7.8m, and operating expenses totalled LVL 3.6m, a 15% decrease.
Net interest income and net trading income posted solid gains of LVL 5.9m and LVL 1.4m, respectively. The substantial increase in trading income reflects the mark-to-market revaluation of financial instruments with a positive effect of LVL 1.0m that is expected to be fully amortised in 2010.
In 2009 Danske Banka’s LVL deposit portfolio rose 41% to LVL 101.1m. Corporate customers’ deposits grew 52%, and retail customers’ deposits 18%. The lending portfolio declined 8%, reflecting general lending trends in Latvia in 2009.
Profit before loan impairment charges was LVL 4.3m. High loan impairment charges resulted in a pre-tax loss of LVL 37.7m, however.
Raivis Kakānis, CEO of Danske Banka, comments on the bank’s annual financial results as follows:
"Two thousand and nine was a very challenging and unsatisfactory year from the perspective of our net result, yet an excellent one when viewed in terms of our operating result. The net result was dominated by massive loan impairment charges, 68% of them from individual impairments and 32% from collective impairments. In determining the charges, we used a conservative approach to assess the market value of underlying collateral, particularly mortgages. This ensures that we will not need to make additional individual impairments on loans subject to impairment test for 2009, unless the economic situation in Latvia worsens further."
"I am very proud of our team’s performance in light of the challenging economic environment. We set very ambitious goals for 2009 and were able to meet them. By encouraging employees to perform each task as efficiently as possible, we were able to reduce expenses 15% while maintaining high employees satisfaction and involvement."
In 2009 Danske Banka focused on three main areas of our operations: we continued to improve our efficiency and maintained profitability in our banking activities before loan impairment charges; we continued to improve our offerings for both personal and corporate customers; and we continued to work with delinquent borrowers and on the restructuring of loans subject to impairment test.
In order to further improve our competitiveness, we significantly upgraded our online banking services and improved our products for corporate customers. Companies operating in Latvia as well internationally have valued the advantages of our products and services, as is evident in the full 25% increase in our corporate customer base in 2009.
We expect that in 2010 Danske Banka’s financial results will be more moderate owing to lower net interest income and the amortisation of revaluation gains on financial derivatives at the end of 2009 because of the maturity of the contracts.
Danske Banka’s priorities in the coming period are sound cost management, further growth in our corporate customer base, and the enhancement of product offerings for our retail customers. We will also continue to work with delinquent borrowers and on the restructuring of loans subject to impairment test.
The Danske Bank Group’s Annual Report 2009 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)