Lithuania's banks make passing marks

VILNIUS - Despite the current slump in Lithuania's economy, local banks have managed to churn out respectable profits after the first nine months and seem to be moving in the right direction. Although analysts agree that the sector is doing well, results could be better.

The country's largest bank, Taupomasis Bankas posted a 5.7 million litas ($1.43 million) non-audited net profit. Vilniaus Bankas, Lithuania's largest commercial bank, netted a 53.6 million litas non-audited profit. The country's other banks also had reason to smile.

Eduardas Vilkelis, head of the Lithuanian Commercial Bankers Association, said that the state's financial woes and the country's sluggish macroeconomic situation are not helping the banking sector. But he added that banks will still do reasonably well.

"Well, banks didn't pull in a huge profit, but they made a profit all the same," said Vilkelis. "By year's end, I don't expect any dramatic swings for the worse or the better."

Eugenija Martinaityte, director of the Banking, Insurance and Finance Institute made similar comments.

"All figures by all the banks show more profit than in the previous year," said Martinaityte. "This is good, but banks should be more related to the economy and contribute support to other sectors."

She said she sees a gap developing between the banking sector and other sectors. And, like Vilkelis, pointed out that the state budget deficit and the country's current account deficit are not helping.

Analysts see some significant developments in the sector. A merger between Vilniaus Bankas and its rival, Hermis, is expected early next year. The move will give Lithuania the second-largest bank in the Baltics and a stronger competitor against foreign banks trickling into the country.

But there are some lesser banks moving to find their own niches. Martinaityte said Ukio Bankas, which netted 889,000 litas for the first nine months, has one of the more interesting strategies.

"This bank is rather aggressive," said Martinaityte. "It has participated in privatization projects in Bosnia and also does some business in Ukraine and Uzbekistan. The central bank may let them become the first [Lithuanian] bank to establish a branch in Bosnia. I think this is a really positive strategy because the market in Lithuania is small."

Apparently Martinaityte is not the only one who has noticed Ukio Bankas. Over the past couple months the bank has been extremely active on the stock market. Arvydas Jacikevicius, a stock broker at Suprema, said the price of Ukio Bankas shares has increased between 300 percent and 400 percent over the past three to four months.

"There are many rumors that the bank will get a strategic investor in the very near future," Jacikevicius explained. "People have different guesses as to where this investor could come from. Maybe Latvia, maybe Greece, or from someplace else."