Parex Bank posts losses "tens of millions"

  • 2008-11-19
  • By TBT staff
RIGA - Latvia's ailing Parex Bank hasn't seen the last of its troubles as customers continue to withdraw funds in huge amounts. Tens of millions of lats have been withdrawn so far, though it is now happening at a slower pace than previously and mostly by non-residents, said Finance and Capital Market Commission (FKTK) deputy head Janis Brazovskis.

"Now the situation is getting stable in some segments [and] withdrawals from ATMs by individuals are getting back to normal. Legal entities and residents are also getting back to ordinary transactions. We still have to work with non-residents," he said.
The bank, which is poised to be taken over by the Latvian government, will continue functioning and even reports new accounts being opened.
FKTK chairwoman Irena Krumane said that Parex Bank will also succeed in extending the maturity of its syndicated loans.

In a public statement, Krumane said that the bank and the Finance Ministry were negotiating with loan providers, viewing the Latvian government's take over of the bank as a positive thing, as they will be able to guarantee loan repayment. 
"The government has taken the place of the bank shareholders. It is a signal to the members of the syndicate. We are in negotiations now. The first talks with the syndicate leaders, namely, Mizuho Corporate Bank, have been successful in the same that they feel very positive about the fact that the government has become the owner of the bank. For them it serves as a guarantee they see that the liabilities continue and might be extended upon maturity," said Krumane.

Krumane also said that Parex Bank had two syndicated loans. One is for 275 million euros maturing in February 2009 and another is for 500 million euros maturing in June 2009.
"If the work continued like this, the government won't have to repay the loan early," said Krumane.
The plan is to request a one year extension of the syndicated loan maturity.
"A year is the minimum term, it is difficult to say what the situation on the markets will be," said the FKTK chairwoman.

"The bank's results for this year won't be great, and it will definitely post losses in 2008," said Krumane.
Vadims Jerosenko, chairman of the board of the financial company Laika Stars, told the Baltic News Service that the market value of Parex Bank had gone down significantly, but that this is a universal trend across the banking industry.
He said that the market price decrease "depended on several factors, including loan portfolio quality, the general structure of the bank etc."
Jerosenko, however, does not approve of the state being the largest shareholder and encouraged investors to step up.

"One cannot think of a worse shareholder than the state," he said.
Should no investors arise, Jerosenko said that Parex Banks' value might be halved. Until the crisis in November, Parex had a 12.41 million lat profit in 2008. The current market value of Parex Bank is now lower than $1 billion.

To aid the struggling bank, the Latvian government on November 8 decided to take over 51 percent of Parex shares through the state-run Mortgage Bank.