EESTI ÜHISPANK

ANNOUNCEMENT

29.10.1999

 

 

EESTI ÜHISPANK GROUP INTERIM RESULTS: SEPTEMBER 30, 1999

 

Eesti Ühispank Group profit for 9  months of 1999 is EEK 75.1  Million

(EEK 5.2 Million in 1998). The total balance  sheet of  the  Group  is

EEK 17. 1 Billion, an increase of 3.4  per cent from the end of  1998.

At the end of September,  the  ROE of the  Group was 5.1 per cent  and

the ROA 0.6 per cent.

 

Structure of the Group

During   the   third  quarter   of  1999,  Ühisliising,   a    leasing

subsidiary of the Group acquired  the TP Leasing by   purchase method.

The  resulting  goodwill is EEK   49.7  Million.   The merger   of the

leasing arms  completed the  merger process   of Eesti   Ühispank  and

Tallinna Pank  groups, and  put an  end   to duplication in functional

units. In addition, by the end  of the  year,  EÜP Group  subsidiaries

LF Finants, Navarra,  and TPF  Orior  will  also be liquidated.  These

companies  have ceased their  operations, the settlement of due  legal

issues, however, will come to an  end at the beginning of next   year.

In   compliance   with   amendments in  the Credit   Institutions Act,

housing  loans to the staff handled by LF  Finants,  a subsidiary   of

the Group, were transformed  into the  housing  loans  of   the  Bank.

This move improved the  organizational structure of the Group as  well

as  its  management  by  reducing  the   number  of Group members. The

change  does  not  affect  the  loan   portfolio   of  the  Group  but

increased  the  amount  of housing  loans  granted in the Bank by  EEK

74  Million.  In October the EÜP acquired 3.3 per cent of  Ühisliising

shares from  the   Rural  Life Crediting  Fund, thus  increasing   its

stake in the company to a 100 per cent.

As     major   changes   have   taken   place   within   the     Group

structure,   in   order to  make comparison  easier,   pro  forma data

has  been  used as a basis of analysis of  income  and costs.

 

Income/Costs

Due  to  the decreased loan portfolio volume as compared  to the   end

of the last  year and to  the rapid fall  of interest rates   on   the

Estonian  money  market,  the  Group's  nine-month interest  income is

down by 10.1  per cent. At  the same   time the   interest expense has

fallen by 6.6 per cent.  It  is  a positive  indicator that the  third

quarter  interest  income remained  on  the  same level as during  the

second  quarter,  while  interest  expense was down  by 8.6 per  cent,

the result of lowered interest rates on demand and term deposit.

The  total income  of Eesti Ühispank Group  as compared to the  second

quarter was up by  11 per cent. As  a  result   of  the cost   cutting

policy implemented  during the  third   quarter, the   operating costs

were  down  by  1.7  per  cent  when  compared  to  the second quarter

operating costs. As a result of these  changes,   the  efficiency   of

the  Group   is    increasing, expressed also  by the lower  operating

costs to total   income ratio.   The  share   of  credit   losses   in

costs  has  also decreased as compared to the last year.

 

It     is     very   positive   that   the   income   from   financial

activities  of  the  Bank  has  substantially  increased  as  compared

to  earlier  periods.  The  bulk  of  it  has  been   earned  by    FX

transactions  of the clients.   Income  from  trading securities   has

been modest, due  to the   lack  of   interest among   clients in  the

securities market. The  Bank  has   not taken  proprietary   risks  on

open  currency   and   securities  position  exposures  as  the   loss

incurred in these areas  last year was considerable.

 

Balance Sheet

The  total balance sheet of  the Group amounted to EEK 17.060  Billion

as  of  30 September 1999 (EEK  16.5 Billion  on  31 December   1998).

The  balance  sheet  did  not  grow   during   the third  quarter, the

increase as compared to  the end of   last year is 3.4  per cent, i.e.

EEK 562 Million.

At  the  end of September  the market share of Eesti Ühispank on   the

Estonian banking market was  32.5 per cent, that   of Saules Banka  in

Latvia: 3.8 per cent.

 

During  the  third  quarter the increase of  total  deposits  amounted

to EEK  39 Million,  i.e. 0.4  per cent.  The deposits  have  gone  up

13.8 per cent, i.e.  by EEK 1.1 Billion   since the  beginning  of the

year. The  central and  local government  deposits   have decreased by

13.6 per cent, EEK 270  Million, due  to  servicing  of  foreign  debt

and  the  state  budget deficit.  The decrease was compensated by  4.2

and  4.3  per cent  increase  in  the  deposits of corporate   clients

and private   individuals respectively.  Demand deposits  increased by

3.7  per   cent  during   the third   quarter,  while   time  deposits

decreased by 3.1 per cent. Thus  the shift  in  the  deposit structure

has been in favor of demand deposits.

 

Although  the  loan  portfolio   has  grown  considerably  since   the

beginning  of  September, the third  quarter growth in   liquid assets

even  surpassed   it: the  amount   of  liquid   assets increased   by

EEK  337  Million,  i.e.  by  9.4  per   cent,  while the  three-month

decrease in net loan portfolio was EEK   246 Million,  i.e.  2.7   per

cent.  The  main   decrease   of   loan  portfolio   is   due   to the

decrease of the   Group's  leasing  portfolio.  The   increase of  the

total amount  of    doubtful loans  in  the   third  quarter  is   due

to   the   additional provisioning  of TP  Liising portfolio  upon the

merger  of   TP Liising and  Ühisliising. The average  loan provisions

of  the whole Group amounted to  4 per cent of the loan portfolio.  At

the  end  of  September  the  net  loan portfolio amounted to 52.1 per

cent  of  total assets and to 95.2 per cent  of  client deposits.

In   the   third  quarter  the  share  capital remained unchanged, the

increase in  equity is  due to  the profit  of the  Group and  to  the

change  in  foreign  exchange  rate  accounting  in consolidating  the

subsidiaries abroad.

 

Ülo Suurkask

vice president

Eesti Ühispank

Tel.+372 6657 200