Swedbank chief defends lending policy, braces for losses in Baltics

  • 2008-06-11
  • Staff and wire reports
RIGA - The president of the largest banking group in the Baltics acknowledged that Latvia's economy was headed toward a rough period but that Hansabank's lending policies during the past boom years, often criticized as too liberal, were adequate.
Jan Liden, president of Swedbank, which owns the Hansabank Group, said in a June 5 interview to Latvian public radio that hard times lie ahead for Latvia.

"I believe that more serious economic difficulties await Latvia, its residents and companies. It is so," he said.
He was quick to add that Hansabanka's lending policies were not to blame for the lend-and-spend spiral that led to a property bubble, high inflation and an unjustifiably large lending to GDP ratio.
At the same time he said the bank was braced for lower profits due to its Baltic operations.
"We understand that our losses will increase, and we expect to continue cooperation with our customers," Liden said, adding that everyone has to assume responsibility for the economic predicament.
Swedbank's Baltic operations have accounted for some 30 percent of group profits, according to reports.
"Despite all the difficulties, I am optimistic. After several years, good development will return to Latvia," he said.

As regards talk of a hard-landing, Liden said he didn't think there would be one.
"I believe that it is possible to control the situation. It is important not to enter the denial phase. The problems should be seen as they are, and they should be fought 's  they should be solved," he said. 
After three years of double-digit growth, Latvia's economy is entering a phase of low-growth and high inflation 's sometimes referred to as stagflation. In May the consumer price index reached 17.9 percent, the 12th straight increase and the highest annual rate in 11 years.

Economists generally fault the over-exuberance that existed in the years after EU accession, when Latvians borrowed and spent with abandon and thought nothing of saving.
Linden, speaking to a business forum in Riga on June 4, said the main challenge for the Baltic states is to provide for long-term growth by addressing issues of labor and investment in long-term projects.
Hansabanka analyst Peteris Strautins told Latvian television that "it is clear that companies have to change."
"Employees should master new skills, which will be demanded in the changing economic situation. There are no doubts that welfare will increase in Latvia in the long term," he said.

Hansabank is the largest bank in the region, and recently its Swedish owners decided to change the bank's name to Swedbank. Linden defended the decision, which will cost the bank 10 million euros, saying it demonstrated the mother bank's long-term commitment to the Baltics.