Banks speed up balance sheet cleanup

RIGA - Latvia’s banks have begun to write off questionable loans in earnest; for instance, Latvian Mortgage and Land bank has written off loans with face value of 57 million lats (81.4 million euros), reports business daily Dienas Bizness. This amount includes 14 million lats that the bank last year handed over to its subsidiary Hipoteku bankas nekustama ipasuma agentura (Mortgage Bank’s Real Estate Agency), which deals with debt recovery and sale of foreclosed properties, explains the bank’s head, Rolands Panko.

This year, Mortgage Bank plans to give its subsidiary loans worth another 58.7 million lats, for which the bank has created provisions of 27.8 million lats, which will also be written off. The total amount of loans written off by the banks over the past two years is at least at 84 million lats, which will rise if some new loans are written off this year. This amount made up 13 percent of banks’ total net loan portfolio at end-2009.

In 2010, Swedbank and its subsidiaries wrote off loans with a face value of 147 million lats, and 47.9 million lats in 2009. These figures made up 5.7 percent and 4.7 percent of the bank’s loan portfolios in the respective years. “Provisions are the bank’s evaluation of the situation at a given moment. To say that all the provisions will be written off would be ‘fortune-telling.’ The Latvian economy has gone through some extreme fluctuations, without the experience of past crises,” notes Swedbank financial market management head in Latvia, Renars Rusis.

In the meantime, SEB bank has written off loans valued at 5 million lats, and the bank expects that the volume of loans that will be written off may increase, but not by very much. Outgoing Latvian Commercial Banks Association head Teodors Tverijons believes that banks will continue to write off loans this year and next, and that the total amount of such loans is hard to predict. By the end of last year, banks’ total provisions for bad loans stood at 1.6 billion lats.