Bank profits regain luster

RIGA - The banking sector in Latvia has turned the corner. After operating with losses for the previous three years, banks finally returned to profit in 2012, reports Nozare.lv. In other banking developments, Latvijas Krajbanka and Parex bank had their licenses cancelled last year and Latvijas Hipoteku un zemes bank (Mortgage and Land Bank) is withdrawing from the commercial sector.

According to the latest data, bank profits reached 128.3 million lats (183.2 million euros) from January-November. Fifteen Latvian banks and four foreign banks’ branches in Latvia, whose total share of the banking sector’s total assets is 93.9 percent, operated with a profit.
The amount of deposits attracted by the banks exceeded the amount of loans for 2012: at end-October, deposits in Latvian banks stood at 12.2 billion lats, whereas the total amount of loans was 11.9 billion lats. The last time the amount of deposits was larger than the amount of loans was in June 2005. The amount of non-resident deposits has increased significantly this year. There are 14 banks in Latvia that are targeted at non-residents, and a higher capital requirement is applied to these banks.

The Mortgage Bank is gradually completing its commercial activity - so far, the 2nd pillar pension scheme of the bank was bought by SEB Wealth Management, whereas Swedbank bought Mortgage Bank’s borrowing, settlement and deposit services, as well as the leasing company Hipolizings.
Agreement on the sale of Mortgage Bank’s two other commercial assets could be reached at the beginning of this year - a property development business and property assessment, lending, construction and legal services company HipoNIA. The Mortgage Bank is to be transformed into a development bank by the end of 2013.

Riga Regional Court last May opened bankruptcy proceedings at Latvijas Krajbanka after the bank’s administrator, audit company KPMG Baltics, concluded that none of proposals for the recovery of the bank was viable. The bank’s license was revoked in May. After that, properties of the bank and its subsidiaries were sold at several auctions for a total price of 5.007 million lats. The bank’s loan portfolio could be sold in the spring of 2013. The Krajbanka administrator has also transferred 90 million lats to the Deposit Guarantee Fund.

Parex bank’s license as a credit institution was also revoked last year. The new company is called Reverta and is involved in the management of problematic assets.
The bank Citadele, established in the summer of 2010 by taking over Parex bank’s liquid assets, concluded the third quarter 2012 with 5.7 million lats in profit after provisions and taxes.
Finally, Saeima appointed Kristaps Zakulis as the head of the Financial and Capital Market Commission last January, and Peteris Putnins was appointed Zakulis’ deputy in December, both for a period of six years.