OREANDA-NEWS. May 04, 2009. Lithuania' economy has entered a stage of recession which, according to Swedbank forecasts, will last longer than one year, while the most difficult period is expected to fall on 2009. The country's declining general domestic product, reducing consumption and weakening demand in export markets directly affects both business and Lithuanian people. This also results in growing number of customers of financial institutions becoming unable to service their debts, reported the press-centre of Swedbank.

In Q1 Swedbank formed provisions in the amount of LTL 297 million for loan portfolio. According to the management accounting results the financial group in Lithuania during the first quarter incurred a loss of LTL 164 million (according to the requirements established by the Bank of Lithuania, loss of the Group amounted to LTL 45 million).

Customer deposits grew by 1% during the first months of 2009, while loan portfolio decreased by 4% in the first quarter.

Provisions for loan portfolio
Due to the worsening financial condition of companies and individuals, the share of customers whose debt  repayments to the bank are overdue for 60 days and more increased to 4% of loan portfolio by the end of the quarter.

In Q1, the total amount of provisions formed for loan portfolio in Lithuania was LTL 297 million. Given the uncertainty of economical situation both in Lithuania and neighbouring markets, general provisions of LTL 109 million were added to this amount.

New circumstances require new solutions
The changing environment requires new solutions from banks which, first of all, would allow helping those customers who encounter difficulties to solve the problems they face. "We have been preparing in advance for a similar scenario of events by improving the efficiency of the bank's activities, cost-cutting, accumulating necessary reserves, and making important structural decisions. All this will be beneficial for our customers", - says Antanas Danys, Head of Swedbank in Lithuania.

Following the previous experience of other countries acquired during similar crises, Swedbank decided to intensify loan restructuring activities by establishing a special unit to deal with customers who need special attention and actions at the time of the crisis. This unit will operate in all the three Baltic countries in close cooperation. It is planned that by the year end the unit will employ up to 200 people including experienced financial experts who used to work in similar situations in several other banks in Sweden, Germany, and Great Britain.

Volumes of deposits keep growing
Volumes of deposits in Swedbank in Lithuania grew by 1% to LTL 11.1 billion in the first quarter of 2009. In terms of this indicator, Swedbank occupied 28.6% of the Lithuanian market. The total amount of deposits in the market has decreased by LTL 74 million during 3 months of the year, while Swedbank's portion augmented by 0.4%.

Borrowing volumes are reducing
The economic downturn increased business risk and considerably reduced demand for new loans. This is why loan portfolio subtracted by 4% LTL 19 billion in Q1 2009.

"In recent few years borrowing volumes grew very fast; therefore, now we are facing a natural correction of this process. Today, the most important thing for both business and financial institutions is to adjust to new business conditions, improve operating efficiency, implement successful restructuring, and enhance competitiveness. A business model mostly based on loans cannot last long", - says Antanas Danys, Head of Swedbank in Lithuania.

Income and cost management
Compared to Q1 of the previous year, income of Swedbank in Lithuania decreased by 2% to LTL 231 million during the first three months of 2009. The affecting factors include reduced base euro interest rates which result in lower income from loans.

As part of the preparation activities for the difficult period in the situation of decreasing volumes of new services, since end-2007 Swedbank in Lithuania kept consistently implementing the strategy for enhancing the operating efficiency further improving the efficiency of business processes, gradually and naturally reducing staf numbers, and rationalising the customer servicing network. Much attention was paid not only to personnel expenses: marketing, office, training, transportation, and other costs were cut as well. This allowed reducing operating expenses of the Bank by 18%, compared to Q1 2008.

Full attention to the customer
"The plans of Swedbank in Lithuania remain unchanged: we strive for becoming the most obliging organisation. This is especially important in the current difficult situation; therefore, we have been and will be paying most of our attention to customers, who need the help of the bank as never before", - said A. Danys.

During Q1 2009, the Bank started the closing stage of changing the bank brand and name, and is continuing its activities under the legal name of Swedbank, AB from 17 March 2009. This process shows strategic importance of the Baltic market countries to Swedbank Group.

Seeking to assure high quality of customer service and foster the partnership with its customers, in Q1 2009 the Bank paid particular attention to looking for joint solutions together with customers who face financial difficulties.

Looking for further possibilities how to improve financial education of customers at the beginning of 2009 the Bank introduced a new version of its internet bank, which provides more additional instruments for customers aimed at management and control of their finances.

In consideration of recent tendencies in Lithuania, in Q1 of this year the Bank took measures to ensure higher security of Swedbank ATM's. In March, the Bank was the first in Lithuania to implement the world's most popular security paint technology in ATMs.

For its activities in Lithuania Swedbank received the Socially Responsible Company's Award which was granted by the National Responsible Business Awards Commission to the companies that are most progressive in all areas of social responsibility. Furthermore, in March the international business and finance magazine Global Finance acknowledged Swedbank as the best growing market's bank in Lithuania.

Swedbank operating results of Q2 2009 will be announced on 17 July 2009.