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Swedbank outruns SEB in Baltics as merger beckons

Aug 30, 2001
Kairi Kurm

TALLINN - Swedbank-owned Hansapank, the Baltic states' biggest banking group, announced a record 914 million kroon ($54 million) profit for the first half of 2001, 74 percent up on last year.

Hansapank group's profit is twice the total profit of the three Baltic banks owned by Scandinaviska Enskilda Banken, expected to be the dominant partner under a planned merger. Together SEB's Baltic subsidiaries have earned 430.1 million kroons this year.

Net interest income of the Hansapank group grew 37.6 percent from last year to 1.21 billion kroons. SEB's Baltic banks posted a 133 percent increase to 967 million kroons.

Indrek Neivelt, Hansapank's chairman, said the good results were caused by several factors, including more successful management and recovery of bad debts at the leasing company Hansa Capital, increased revenues from interest payments and increased deposits in Latvia and Estonia.

Hansapank also completed the acquisition this June of Lithuania's largest retail bank, Lietuvos Taupomasis Bankas, a deal which contributed much to a balance sheet which grew by 69 percent to 69.18 billion.

As a result of the acquisition the group's loan portfolio grew by 55 percent to 34.77 billion kroons and deposits by 90 percent to 48.4 billion kroons. Neivelt said that the formerly state-owned bank's relatively small lending experience meant employees would have to learn new skills.

He added that because of the potential for growth in Lithuania, the largest Baltic country, Hansa-pank is not planning to cut employee numbers there.

The bank received a 278.5 million kroon incentive payment for making the purchase, a sum which will be amortized over the next five years.

The group's return on equity was 29 percent and return on assets was 3.6 percent at the end of June. Most of the group's net profit came from Hansapank Estonia and the leasing company Hansa Capital. Latvia's Hansabanka netted a 57.9 million kroon profit, while Lithuania's Hansabankas together with Lietuvos Taupomasis Bankas brought in 3.1 million kroons.

Despite the risks, expansion into Lithuania is essential for the group, said analysts. "The bank's growth opportunities will slow down in Estonia, but there is a lot of potential in Latvia and Lithuania," said one.

Uhispank predicted Hansa-pank's profit would be 1.8 billion kroons by year's end.

But brokerage house Trigon Capital did not alter its prediction that Hansapank's profits would total 1.53 billion kroons in 2001. Analyst Toomas Reisenbuk said profits from provisioning exaggerated perceptions of the bank's success.

"It was a fantastic period, but one which is unlikely to be repeated," he said. "We expect modest development in the next half of 2001."

Hansapank's share price increased by 3 percent to 158.75 kroons on Aug. 23, when the results were published. Trading in Hansapank shares that day was worth 29 million kroons - about 90 percent of the stock exchange's total turnover for the day.

Results announced by Estonia's second largest bank, Uhispank, were comparatively modest. With assets of 17 billion kroons, Uhispank made a 86,6 million kroon net profit in the first half of 2001 - twice more than last year.

Uhispank has slipped from the analysts' spotlight since it left the Tallinn Stock Exchange after being acquired by SEB, which also owns Latvian Unibanka and Lithuanian Vilniaus banks. Since SEB is set to merge with Hansapank's owner Swedbank in the near future several Baltic banks may come up for sale in order to avoid creating monopolies. But which will be sold has yet to be discussed, say the banks' negotiators.

Hansapank's Neivelt said the decision had been put on hold until the merger is approved by the European Union's competition board in Brussels, which is expected on Nov. 14.

SEB is expected to make up 51.5 percent of the new Swedish bank and Swedbank 48.5 percent.

The third largest Estonian bank Sampo made a good profit in the first half of 2001 as well. Its assets grew by 21 percent to 5.2 billion kroons and it earned a net profit of 31 million kroons, which is three times up on the first half of 2000.

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