Swedbank bounces high from 2 year low

RIGA - Swedbank reported third-quarter earnings that beat analysts’ estimates after a drop in loan impairments helped the largest lender in the Baltic countries return to profitability in the region.
Swedbank stock has rallied 38 percent this year, making it the fourth-best performer among 54 companies in the Bloomberg Europe Banks and Financial Services Index, reports Bloomberg.
Net income in the third quarter was 2.59 billion kronor (277 million euros), compared with a net loss of 3.34 billion kronor in the year-earlier period, the Stockholm-based bank said in a statement.

“The main driver was loan losses as Swedbank recorded reversals in Sweden, Russia and the Ukraine,” said Maths Liljedahl, an analyst at Nordea Bank AB in Stockholm. “We were aware that reversals eventually would occur, but we were not expecting them already this quarter.” Loan losses of 327 million kronor in the Baltic countries were lower than the analyst’s estimated 938 million kronor, he said.

The credit impairments in the region, which stemmed almost entirely from Latvia, narrowed from 3.33 billion kronor in the year-earlier period. Profit at the unit in Estonia, Latvia and Lithuania totaled 531 million kronor, compared with a loss of 2.32 billion kronor a year ago.
Baltic Profits

The lender’s total loan impairments dropped to 120 million kronor from 6.12 billion kronor after it recouped money set aside for bad loans in Sweden, Russia, Ukraine and Lithuania.
Swedbank was the only Swedish lender to have a full-year net loss in 2009 as the Baltic region suffered the steepest recession in the European Union, pushing up loan impairments. The bank was profitable in Estonia and Lithuania in the third quarter, while it reported a loss for Latvia.

“We are very pleased with the fact that Baltic banking reported its first profit since the fourth quarter of 2008,” Swedbank Chief Executive Officer Michael Wolf said on a conference call with journalists today. Provided the economy develops in line with expectations, the bank’s group profit “is expected to continue to improve,” he said.
Real estate giant

Ektornet, the Swedbank arm for managing repossessed assets, expects the value of repossessed assets by 2013 in the Baltic states to reach between .54 billion and 1.1 billion euros.
As Swedbank reported, the Baltic countries account for an estimated 75 percent of repossessed properties, the majority of which are expected to be owner-occupied apartments or projects which will not generate any income until they are sold.

In 2010 and 2011 the Baltic countries will therefore be Ektornet’s highest priority, since the value of these properties will have a significant impact on results.
As of September 30, Ektornet managed properties valued at 130 million euros, compared with 55.4 million euros at the beginning of the year. Of the total property value, the Nordic region accounted for 47 million, Estonia - for 37.2 million, Latvia - for 24.3 million, Lithuania - for 11.1 million and the US - for 12.9 million euros.
In addition, properties have been acquired but not yet repossessed, mainly in Latvia. Due to market conditions and a time-consuming compulsory auction process in some countries, repossessions are expected to continue until 2013.
Payback, not more credit

Erkki Raasuke, Swedbank Chief Financial Officer and former head of Swedbank Estonia, stated he did not expect loan volumes in the crisis-hit Baltic region to grow next year, BBN reports.
“With the current speed of the decline in volumes it’s difficult to see how the full next year will come up with  positive growth. That’s with the current outlook. If it changes - very good,” Erkki Raasuke said, referring to lending in the Baltics.
Raasuke said customers in the Baltics were focused on paying down debt levels and reluctant to take on new loans.