TALLINN - The Hansabank Group, the largest financial group in the Baltics, announced on Feb. 12 that 2003 earnings amounted to 2 billion kroons (130 million euros), a 9 percent increase compared with 2002. The result was less than analysts had expected, and the market response to the news was described by traders as tepid.
CEO Indrek Neivelt said 2003 was a successful year for the group, with operations in Latvia and Lithuania particularly strong.
"We reached several important milestones: our group has 2 million cards, 1 million Internet bank customers and half a million pension customers," Neivelt told reporters.
The CEO stressed that the bank became more efficient in 2003, reducing its cost to asset ratio from 3.8 percent to 3.1 percent over the year.
Other factors influencing growth included decreasing margins, strong lending growth, an increase in foreign funding and normalization of provisioning costs, the bank said in a statement.
Among the year's highlights were the acquisition of Lithuania's largest life insurance company, Lietuvos Draudimo Gyvybes Draudimas, the successful start of Hansa Leasing Russia and a new management structure in the head company.
Also, more than half a million Baltic clients in 2003 chose the Hansabank Group as the manager of their pension savings during the second pillar of pension reform taking place in all three Baltic countries.
Analysts, however, said they had expected the group's profits to be 2 percent - 4 percent higher.
David Nangle, an analyst of Netherlands-based ING, said that he had expected Hansabank to earn at least 133.4 million euros, while Gregorz Zawada of Erste Bank said that he had forecast 137 million euros. The group's fourth-quarter costs, said the analyst, were higher than expected.
"However, if I compare Hansabank with Central European banks, it is still a good investment," said Zawada.
Hansapank stock rose 1.5 percent on Feb. 12 to 366.13 kroons and ended the week on the same level.
Regarding dividends, the group said it would not change its policy and that up to 30 percent of the profit would be paid out to shareholders. A final decision will be made by the supervisory council at the end of the month, CFO Kristiina Siimar told reporters.
Bank managers admitted the bank was overcapitalized, and that they faced the dilemma of a conservative or aggressive policy, Erkki Raasuke, manager of the group's Estonian operations, said. A conservative policy is supported by the argument that the Baltic states are a fast-developing market and that a strong capital base is necessary, while those who argue for a more aggressive policy claim there is no need to keep such a large amount of the owners' money in the bank.
