OREANDA-NEWS. October 23, 2014. “A freshly adjusted GDP figure for H1 2014 shows that our gut feeling about the Estonian economy has been proved right. Continuously strong industrial output numbers for August suggest that the trend continues. Despite growing instability in Russia and Ukraine, economic activity in Estonia did not decline.

This is also reflected in our strong business results. Loan demand remains stable in both corporate and retail segments and growth in private customer economic activity shows in our growing net commission income.” – says Priit Perens, Head of Swedbank Estonia.
 
Swedbank Estonia’s profit for the first nine months of 2014 amounted to EUR 119.4m. Income rose year-on-year, mainly as a result of increased business activity, while expenses remained flat. Recoveries were lower. Tax expenses increased.
 
Loans and deposits
Lending volumes have remained virtually unchanged since Q4 2013. Consumer finance and private mortgages increased, corporate lending remained stable, while leasing decreased. During the third quarter Swedbank Estonia’s loan portfolio grew slightly despite geopolitical concerns. Swedbank’s market share for lending was 38,8 per cent as of Q2 2014 (39,5 per cent - Q4 2013).
 
Deposit volumes increased by 3,3 per cent during the nine month period. Swedbank’s market share in deposits was 43,6 per cent as of Q2 2014 (44,3 per cent - Q4 2013). The loan-to-deposit ratio decreased to 104 per cent in Q3 (108 per cent as of 31 December 2013).
 
Credit quality
During the nine month period net recoveries amounted to EUR 4,1m, compared with EUR 14,9m during the same period in 2013. Swedbank is taking preventive measures to help its customers affected by events in Russia and Ukraine. No major spill-over effects have been observed as yet on business activity in Estonia or on our customers’ finances.
 
Impaired loans continued to decrease during the first nine months in Estonia to EUR 148m (EUR 150m as of 31 December 2013). Credit quality has improved to such a degree that impaired loans are now decreasing at a more moderate pace compared to both of the past two years.
 
Revenues and costs
Net interest income increased by 14 per cent year-on-year, net commission income rose by 6 per cent year-on-year compared with the nine-month period 2013. The improvements were mainly due to lending margins and increased customer activity, as reflected by increased card related income and higher asset management volumes following the stock market’s positive performance. The number of active customers has increased year-on-year by 3000 to 799 000.
 
Total expenses remained flat year-on-year. Staff and premises costs fell, while IT and regulatory related costs rose. The number of full time employees at the end of Q3 was down 4 per cent year-on-year and the number of branches decreased by 11 to 41 in the last 12 months, of which 12 are now cash-smart branches (3 a year ago) with a focus on advisory services. In July 2014 Swedbank opened 7 self-service centres in rural areas. The cost-income ratio improved to 0,36 year-on-year (0,4 Q3 2013).
 
Profit in Estonia is not taxed until its distribution. Deferred tax is now calculated on the estimated distribution from Estonia, even though it will not be paid until the first quarter 2015. For the first nine months of 2014 deferred tax of EUR 18,8 m has been estimated for future distribution.
 
Customer focus
In Q3 2014 Swedbank was ranked as the most loved financial sector brand in the Baltics and took the 4th place among all global brands in the annual Baltic survey of “Most Loved Brands”, which includes global companies. The three companies ahead of Swedbank were Google, Facebook and Gmail.
 
Swedbank Estonia was ranked as the most competitive company in the Estonian financial sector for the eighth year in a row. The ranking was compiled by the local Chamber of Commerce and Industry and the Estonian Employers’ Confederation.
 
The performance of Swedbank pension funds has been among the strongest in Estonia during recent years. Strong pension funds' results have been reflected in clients' increased trust towards our pension products.
 
Swedbank has the biggest network of bank branches – we have 473 ATMs and 41 branches all over Estonia. In Q3 Swedbank decided to maintain 7 self-service centres in locations where it initially planned to close branches. According to customer feedback so far, our new solution has been well accepted. Our clients mostly turn to self-service centres to solve issues related to bank cards, asking advice on domestic payments and using ATMs. Many customers also receive assistance on using internet and phone bank services. In addition to branches and self service centres our two bank buses travel daily in the country stopping in 51 places.