OPTIVA PANK

ANNOUNCEMENT

09.11.99

 

UNAUDITED 9-MONTHS FINANCIAL RESULTS OF OPTIVA GROUP

 

In Q3 Optiva group's net profit amounted to 2.4 million EEK; in 9 

months the group has earned 10.0 million EEK of net profit. As of 

the end of Q3, Optiva Group's balance sheet size totaled 3.11 

billion EEK, providing 90.7 million EEK or 2.8% decrease from the 

beginning of the year. At the same time the clients' deposits 

increased by 198.9 million EEK or 22.8%.

 

External finances.

Compared to the beginning of the year the group's balance sheet 

volume is lower mainly due to decreased volume of external finances 

by 102.2 million EEK or 3.6%. This includes decrease of bonds 

issued and repayment of long-term loans from other banks.

In three quarters the clients' deposits have increased by 198.9 

million EEK or 22.8%, amounting to 1 072.0 million EEK at the end 

of Q3.

No substantial changes took place in deposit structure in 9 months 

- at end-Q3 the clients' current accounts accounted for 62.6% 

(Dec-98: 62.3%) and term deposits for 37.4% (Dec-98: 37.7%) of 

total deposits. Although the clients' current accounts dropped in 

Q3 by 32.9 million EEK or 4.7%, the 9-months increase is 126.8 

million EEK or 23.3%. Such growth has occurred due to inclusion of 

new clients and increased business activity of the existing 

clients. Such trends have also been supported by stabilization 

processes in the Estonian economy as well as on foreign markets. 

Corporate current accounts have increased in 9 months by 62.8 

million EEK or 13.9%, and private by 48.3 million EEK or 70.4%.

The volume of clients' term deposits have grown somewhat slower 

than that of the current accounts, amounting to 21.9% (72.1 million 

EEK). The growth of term deposits proceeds mainly from increased 

corporate term deposits (107.6 million EEK or 193.4%). As in 9 

months the clients' deposits have grown the fastest amid different 

interest-bearing external finances, the share of clients' deposits 

on the group balance sheet also increased from 27.3% at end-1998 to 

34.5% at the end of Q3. The volume of clearing accounts increased 

in 9 months by 58.5 million EEK or 58.6%, mainly due to growth in 

current accounts.

 

At the end of September the group's owners' equity account amounted 

to 347.8 million EEK, or 11.2% total group assets (Dec-98: 10.5%). 

The capital adequacy stood at 10.15%.

 

Loans issued.

At the end of Q3 the gross loan portfolio stood at 2 113.1 million 

EEK, decreasing in 9 months by 88.8 million EEK or 4.0%. In H1 the 

gross loan portfolio declined by 231.3 million EEK due to loan 

repayments (mostly in Q2); new loans issued in Q3 (due to increased 

loan demand) increased the gross loan portfolio by 142.6 million 

EEK or 7.2%. At end-September the provisions for potential loan 

losses accounted for 10.2% of gross loan portfolio (Dec-98: 10.6%).

 

Securities and liquid assets.

Current accounts and time deposits with other banks decreased in Q3 

by 151.5 million EEK or 28.5%, providing 33.9 million EEK or 9.8% 

increase compared to the beginning of the year. Cash in hand 

dropped in Q3 by 20.6% or 14.5 million EEK.

Investments in bonds serve two major purposes - earning of income 

to the group and management of liquidity risks. In 9 months the 

investments in bonds increased by 39.3 million EEK or 22.8%, 

accounting for 212.0 million EEK or 6.8% of total assets. Amid the 

investments in bonds, the investments in liquidity reserves account 

for the major share. 

The group's investments in shares dropped in 9 months by 27.1 

million EEK or 18.6%, accounting for 118.5 million EEK at the end 

of Q3 (Dec-98: 145.7 million EEK).

 

Interest income/expenses.

In 9 months the net interest income amounted to 69.9 million EEK; 

net interest income after loan provisions was 32.7 million EEK.

The group's 9-months interest income totaled 176.8 million EEK. 

Regardless of substantial drop in interest rates during the first 

three quarters of the year, its effect on return on 

interest-bearing assets and thus also on interest revenues only in 

Q3; the return on interest-bearing assets dropped from 10.1% in Q1 

down to 9.1% in Q3. The group's interest income thus fell in Q3 by 

6.2 million EEK or 10.1% from the previous quarter's respective 

levels.

9-months interest expenses amounted to 106.8 million EEK. In Q3 the 

group's interest expenses decreased by 8.3 million EEK or 21.8% 

compared to Q1, mainly due to fall in interest-bearing external 

finances by 157.7 million EEK or 5.8% from the beginning of the 

year. The cost of interest-bearing liabilities decreased from 5.5% 

in Q1 to 4.6% in Q3. One reason behind it was change in the 

structure of interest-bearing external finances. The share of 

current accounts increased from 20.2% at the end of 1998 to 26.4% 

by end-September. 

The spread between the group's interest rates has been stable at 

4.6% during the first nine months of the year, whereas the interest 

margin has increased from 2.8% in Q1 up to 3.1% in Q3. Such 

increase was chiefly due to growth in interest-bearing assets (8.4% 

from the beginning of the year) and the concurrent drop in 

interest-bearing liabilities (-5.8% from the beginning of the 

year).

 

Non-interest income.

The 9-months non-interest income amounted to 157.1 million EEK, of 

which the share of net interest income after loan provisions was 

20.8% (32.7 million EEK), commissions and service fees received 

25.7% (40.5 million EEK), income from financial investments 3.4% 

(5.4 million EEK), income from financial operations 39.6% (62.3 

million EEK) and other income 10.4% (16.3 million EEK).

In Q3 the group's income from service fees increased on quarterly 

basis by 5.7 million EEK or 50.5%. Increased revenues proceeded 

mainly from growth of loan portfolio in Q3 and increased volume of 

clients' international and domestic transactions. In 9 months the 

group has earned total of 40.5 million EEK in service fee revenues.

The group earned in 9 months 62.3 million EEK of income from 

financial operations, incl. 36.5 million EEK in Q2. Income from 

financial operations includes both currency exchange revenues and 

revenues from securities transactions. The extraordinary income 

account contains revenues earned in Q2 from redemption of bonds 

issued by the bank.

 

Expenses.

9-months non-interest expenses amounted to 106.9 million EEK, of 

which the share of personnel expenses was 47.6% (50.9 million EEK), 

other administrative expenses 23.7% (25.3 million EEK), commissions 

and service fees paid 9.1% and other expenses 19.6%. 

The group's major non-interest expenses are personnel and 

administrative expenses, whereas the administrative expenses have 

indicated continuous declining trend on quarterly basis. Compared 

to Q1, the personnel and administrative expenses dropped in Q3 by 

6.6 million EEK or 23.6%. Amid the administrative expenses the main 

expense articles are communications and data processing related 

costs, and costs related to rental and administration of the 

premises.

 

Optiva Group's operating profit after provisions and before 

depreciation stood at 50.1 million EEK.

 

The following table presents the key indicators of the group and 

bank 

in 9-months 1999:

 

 				  Q1 99  Q2 99 	Q3 99 	9-M 99

Return on equity		   3.5%  5.4% 	 2.7% 	 3.9%

Return on assets 		   0.4%  0.5% 	0.30% 	0.41%

Average asset utilization         11.4% 13.8%   11.1% 	12.3%

Average yield 		           7.4%  7.2% 	6.81% 	7.23%

Net non-interest margin            4.1%  6.6% 	4.28% 	5.09%

Profit margin 		           3.2%  3.9% 	 2.7% 	 3.3%

Net interest margin after          2.3% -0.02% 	1.77% 	1.34%

loan provisions

 

 

Piret Villman

Head of Budget and Analysis Dept.

+372 63 02 103