TALLINN - Bigbank AS, an Estonian-owned bank that operates throughout all three Baltic states, has announced that it will shut down one-third of its offices amid widespread layoffs.
Kaido Saar, a member of the board at the bank, said the situation with credits is becoming more and more difficult.
"We don't have the clientele any more, [we lost] the ones that we had before, on which the financial products of Big have been calculated. And those who are still left do not meet any of the necessary requirements for obtaining a loan," Saar was reported by the dv.ee online news portal as saying on April 27.
"This year we have reduced nearly 10 workers and we have closed down two offices 's in Maardu and Sillamae" he said.
At the beginning of the year Bigbank had 22 offices in Estonia. At the end of 2008 the bank employed a total of 512 people in 45 branches throughout the Baltic states.
Targo Raus, Chairman of the Board of Bigbank, said the bank was forced to take a more conservative line than in recent years in its operations because of the surrounding macroeconomic environment, but still managed to maintain a reasonable level of profitability. "We expect we'll be operating along similar lines throughout 2009 as well," he said.
The amount transferred to the reserve for potential bad loans was increased during the year, with the reserve valued at 210.8 million kroons (13.47 million euros) by the end of 2008 compared to 101.7 million kroons at the end of 2007. Boosting the reserve was again connected to principles of determining conservative deductions, including a special collective
deduction introduced at the end of the third quarter as a result of the worsening in the macroeconomic environment in Latvia.
PROFIT MARGINS
Despite the layoffs and office closures, the bank reported a profit in 2008.
According to the audited consolidated financial results for 2008, the bank made 144.8 million kroons in profit for the year, while the company's Baltic states loan portfolio only increased slightly over 2007, growing by 4.5 percent.
By the end of the year, the group's loan portfolio was worth 2.29 billion kroons. The proportions of the bank's portfolio were 50.4 percent in Estonia, 40.2 percent in Latvia and 9.4 percent in Lithuania. The greatest growth in the portfolio took place on the Lithuanian market, where the volume of client claims increased over 12 months by 154.7 million kroons 's more than 2.5 times.
Despite the growth, the 144.8 million kroons in consolidated net profit for 2008 was less than in 2007, when 177.3 million kroons in profit was earned. The profitability of the company was most affected by the growth in interest expenditure and the increase in loan provisions. Interest revenue in 2008 amounted to 686.3 million kroons, compared to 248.3 million kroons in interest expenditure.
The total value of the bank's fixed-term deposits reached 630.6 million kroons at the end of 2008, compared to 183.9 million kroons at the end of 2007.
Bigbank continued to pursue a conservative policy of liquidity management in 2008 and increased the volume of available funds in its bank accounts. The total value of the bank's liquid resources at the end of 2008 was 479.4 million kroons, representing 16.5 percent of its balance sheet volume. The same figures in 2007 were 369 and 14.1 percent, respectively.
Bigbank AS is an Estonian-owned specialist credit institution with subsidiaries in Latvia and Lithuania. The bank also offers its range as cross-border services in Finland. Its bonds are listed on the Tallinn and Stockholm stock exchanges.
