HANSAPANK

COMMENTARY TO FINANCIAL RESULTS



COMMENTARY TO FINANCIAL RESULTS, Q1 2001



All  figures  in this announcement are in euros. The EEK/EUR  exchange

rate is 15.6466.



Hansabank Group’s consolidated unaudited result for the first  quarter

of  2001  was  a net profit of EUR 26.2 million. As of  March  31  the

Group’s total assets amounted to EUR 3.10 billion.



The Group’s consolidated assets grew by 39.9% year-on-year (from March

2000  to  March  2001),  totalling EUR  3,102.4  million.  The  growth

originated from two items – customer deposits and debt securities.

Clients’  deposits  increased by 41.5%  yoy,  amounting  to  EUR  1.95

billion  at the end of March. Of the total growth 53% originated  from

Estonia,  24%  from  Latvia,  9%  from  Lithuania  and  14%  from  the

acquisition of Ventspils UBB in the second quarter of 2000. During the

past  12  months  time  deposits have recorded a significantly  higher

growth  rate  (66%)  compared  to demand  deposits  (30%),  which  has

increased their share in total deposits by 5.5% to 37.8%.

The  volume  of  foreign funding increased by 49.6% yoy  to  EUR  0.57

billion  at the end of March. The volume of debt securities issued  by

the group increased 3.9 times to EUR 0.26 billion as a result of a EUR

150 million Eurobond issue launched in March 2000 and a EUR 70 billion

issue launched in February 2001.



The  Group’s  shareholders’ equity increased  by  19.5%  to  EUR  0.41

billion as of March 31. The shareholders’ equity was increased by  the

net  profit  of the period and decreased by the dividends paid  during

2000. At the end of the period the Group’s total capital adequacy  was

16.8% (Tier I 15.8%).



The  Group’s loan portfolio increased by 42.3% yoy, amounting  to  EUR

1.85  billion at the end of March. The loan to deposit ratio stood  at

95.3%  at  the  end  of the period. Regionally the portfolio’s  annual

growth  and  size  at the end of the period can be split  as  follows:

Lithuania +139% to EUR 0.19 billion, Latvia +68% to EUR 0.44  billion,

Estonia  +  27.4% to EUR 1.20 billion and other + 22.3%  to  EUR  0.02

billion.

At  the end of March 2001 the loan loss reserve formed 2.40% of  total

loan  portfolio (2.45% in the beginning of the year). At the same time

the  volume of loans overdue more than 60 days (NPLs) amounted to  EUR

11.9 million, forming 0.64% of the Group’s loan portfolio.



The  volume  of liquid assets (cash and cash reserve, dues from  other

banks,  treasury securities and repos) increased by 51.0% to EUR  0.92

billion  at the end of March, forming 29.7% of total assets. One  year

ago the respective ratio stood at 27.3%.

 

Hansabank Group’s consolidated unaudited profit for the first  quarter

of 2001 was EUR 26.2 million.

The  results of the five business units were the following:  Hansabank

Estonia EUR 8.46 million, Hansabanka EUR 1.62 million, Hansabankas EUR

–0.13  million, Hansa Capital EUR 8.44 million, Hansabank Markets  EUR

7.57 million and other (support activities not directly related to any

business  unit) EUR 0.26 million. These results are not comparable  to

the  results of the respective legal entities (AS Hansapank EUR  14.84

million,  a/s  Hansabanka EUR 2.14 million, AB bankas Hansabankas  EUR

–0.03 million and AS Hansa Capital EUR 8.79 million.)



Interest  income increased by 46.2% compared to the first  quarter  of

2000,  totalling  EUR 64.5 million, at the same time interest  expense

increased  by  64.9%  to EUR 27.7 million. As a  result  net  interest

income increased by 34.7% to EUR 36.9 million.

Loan  and  leasing  interest revenues form EUR 79.0 million  of  total

interest  income.  Their volume increased by  36.3%  from  last  year,

falling  slightly  short of the portfolio’s growth rate  (42.3%).  The

difference is caused by decreasing risk margins – the average yield of

the  portfolio  decreased to 10.90% from 11.28% in last  year’s  first

quarter. Interest income from repos increased 9.4 times yoy to EUR 1.3

million. During the first quarter of this year these instruments  were

used  for  liquidity  management whereby their volume  increased  26.8

times compared to March 2000.



Under  interest  expense the cost of client deposits amounted  to  EUR

15.7  million.  Of this EUR 1.8 million were payments to  the  Deposit

Guarantee  Fund.  During one year, interest expense  on  deposits  has

grown  by 52.4%. The fairly rapid growth is caused by the rising share

of  time  deposits in total funding. Interest paid for foreign funding

(loans and deposits from other banks and debt securities) increased by

40.7% compared to the first three months of 2000, amounting to EUR 8.0

million  this  year.  The  growth comes from two  larger  bond  issues

whereby interest expense on securities has increased by 145.5% yoy.

Compared  to  the first quarter of 2000 the average yield of  interest

earning  assets decreased by 99bp to 9.02%. At the same time the  cost

of  interest bearing liabilities increased by 8bp to 3.91% whereby the

spread  decreased by 108bp to 5.11%. The Group’s net  interest  margin

remained  almost  unchanged, decreasing by 7bp 4.90%. Despite  falling

lending  margins,  NIM  was  supported by rising  euro-rates  and  the

recovered loan growth.



Fees and commissions received during the first quarter amounted to EUR

17.4  million, exceeding previous year’s same period result by  23.4%.

The  growth originated from two sources. Fees from transfers increased

by 45.8% yoy to EUR 3.9 million. A significant part of the growth came

from  Latvian  Hansabanka, which respective  fees  more  than  doubled

(+110.2%) to EUR 1.5 million. This item was also positively influenced

by the growing number of transfers made in the Internet bank. Compared

to the first quarter of 2000 the number of transfers made in hanza.net

in  Estonia  increased by 67.4% to 1.94 million. At the end  of  March

Hansabank  Group  had already over 275,000 Internet bank  users.  Fees

from bank cards increased by 51.9% yoy to EUR 4.4 million. Again,  the

result  was  significantly influenced by Hansabanka, which  respective

fees  increased  by 75.4%. The largest fees item – fees  from  issuing

loans,  leasing and guarantees amounted to EUR 4.5 million during  the

first quarter of 2001 (growth of 26.7%).

Fees  and  commissions paid increased by 14.7% yoy to EUR 3.7 million.

The  largest  growth rates on the expense side were recorded  by  fees

paid for settlements, which increased by 67.2% to EUR 1.3 million  and

by card services, which respectively grew by 21.1% to EUR 1.0 million.

Net  service  fees increased by 26.0% to EUR 13.7 million compared  to

last year’s first quarter.



Trading income for the Group totalled EUR 7.6 million in 2001, down by

19.7%   from  last  year’s  first  quarter.  Due  to  negative  market

sentiments  most of the sub-items (investment and trading  portfolios,

derivatives)  recorded a decrease. Only income from  foreign  exchange

increased by 9.2% to EUR 6.2 million.



The  Group’s total revenues amounted to EUR 61.2 million in the  first

quarter  of  2001,  exceeding previous year’s same  period  result  by

24.3%.  The  revenue  distribution for the period was  the  following:

60.3% net interest income, 22.4% net fee income, 12.4% trading income,

and 4.9% other income.



Operating   expenses  totalled  EUR  32.0  million  for  the   period,

increasing from previous year's same period by 23.4%.

Of  total  expenses  40.9%  was formed by personnel  expenses  (annual

growth  of 32.2%), 18.6% by administrative expenses (annual growth  of

5.4%),  19.6% by other expenses (incl. goodwill amortisation)  (annual

growth of 20.6%), 14.8% by depreciation (annual growth of 24.0%),  and

6.0% by IT expenses (annual increase of 42.7%).

In  the  first  quarter of 2001 the Group’s cost-income ratio  (before

provisions)  was  46.7% and the ratio of operating expenses  to  total

assets was 4.26%.



Loan  and  guarantee provisions increased by 105.9% from  last  year’s

first  quarter,  amounting to EUR 7.8 million during the  first  three

months  of  2001. Actual loan write-offs amounted to EUR 5.74  million

and actual recoveries were EUR 5.73 million.





Mart Tõevere

Head of investor relations

+372 613 1569