Swedbank Estonia reported a profit of EUR 199.6m for 2012

Photo: Henn Soodla

Swedbank Estonia earned a net profit of EUR 63.3m in Q4 2012 and EUR 199.6m for 2012 (EUR 185.8m 2011), reported Swedbank.

Credit growth from private customers remains modest in Estonia, since amortization of loans taken during the boom years is larger than the amount of new loans issued. Due to widespread uncertainty, private customers remain cautious in taking on new liabilities.

“Whilst the beginning of 2012 offered favorable business conditions, the last two quarters were mainly characterized by the same low base interest rates which put pressure on banks' revenues all over the euro-zone. Another important aspect was the significant improvement of our loan portfolio quality that brought along EUR 39.5 million less provisions than in 2011, thus remarkably improving our business result. 

Estonia’s 2012 GDP grew approximately 4 per cent more than the euro-zone average. We don't know what 2013 will bring, but we expect Estonia to outperform the euro-zone again by about 3 per cent. The main question remains whether our exporters stand on firm ground and are flexible enough to cope with changes in demand in target markets,“ – says Priit Perens, Head of Swedbank Estonia.

Loans and deposits

Lending volumes increased by 1 per cent (EUR 62m) in 2012. After a fall in the first quarter, the loan portfolio stabilised in the second quarter and grew slightly over the remainder of the year. Swedbank Estonia’s share of the lending decreased during the year at 39.8 per cent as of 31 December (40.3 per cent Q4 2011).

Deposits increased by 5 per cent in 2012. Deposits from private and business customers grew by 8 per and 3 per cent respectively. Swedbank’s market share for deposits was 44.9 per cent as of 31 December (45.6 per cent Q4 2011). The loan-to-deposit ratio was 112 per cent (117 per cent Q4 2011).

Credit quality

Net recoveries amounted to EUR 39.5m (EUR 5.5m 2011). Impaired loans, gross, continued to decline throughout the year and amounted to EUR 254m (EUR 406m Q4 2011). The improvement in credit quality was mainly due to ratings upgrades and increasing collateral values as well as the increase in new, low risk lending.

Risk-weighted assets decreased by EUR 480m from the beginning of the year to EUR 4283m at year end. Risk-weights have decreased mostly in corporate lending portfolios, mainly due to improved ratings, whilst risk-weights in private lending portfolios stabilized.

Revenues and costs

Year on year revenues decreased by 10 per cent in 2012. This decrease was mainly due to lower net interest income (lower base rates). Net commission income remained stable while income from insurance decreased by 10 per cent.

In 2012 the number of full-time employees decreased by 62 or 4 per cent and the optimisation of the retail network continued with 5 branch closings, leaving 58 in place. The retail network optimisation was carried out in tandem with more efficient delivery of services via electronic channels. The cost/income ratio for 2012 was 0.40.

Daily banking activity in Estonia has intensified and over the year the number of active customers increased by 3000.

Swedbank prioritised all round improvement in the bank’s electronic channels in 2012. Around 90 per cent of our customers are internet bank users and more than 83,000 customers have downloaded our mobile applications. Swedbank’s work on electronic channels received recognition in 2012 when Global Finance magazine judged its mobile banking solution for corporate customers to be the best in the world.