EESTI ÜHISPANK

COMMENTARY TO FINANCIAL RESULTS

 

COMMENT TO FINANCIAL RESULTS OF EESTI ÜHISPANK 31.12.1999

 

As  at  end   of  December  1999,   Eesti  Ühispank's  balance   sheet

amounted  to  EEK  13.958  billion  (EEK  14.3 billion in November and

EEK 13.520  billion in  December 1998).  In December,  the Bank earned

a profit  of EEK  12.2 million.  Total unaudited  profit for 1999 thus

amounts to EEK 101 million.

 

In December,  the Bank's  balance sheet  decreased by  EEK 343 million

as a  result of  decrease in  deposits by  EEK 330  million, of  which

demand   deposits    constituted    EEK   248    million.    Financial

institution's  demand  deposits  decreased  by  almost EEK 220 million

which  was   caused  by   transfer   of   cash  prior   collected   by

Ühisliising  for  repayment  of  loans.  In  client structure, amounts

owed to  financial institutions  decreased by  15% and  those owed  to

the government  by 11.3%.  Parallel to  that, growth  of amounts  owed

to  private  individuals  continued   (increase  during  December   by

3.4%).

 

Since the  beginning of  1999 clients'  deposits have  increased by  a

total  of   EEK  902  million,  i.e.  12.5%.  Significant  growth  has

occurred in  demand deposits  (EEK 905  million, i.e.  26%). Amount of

time  deposits  has  remained  on  the  same level as at the beginning

of the  year as  a result  of significant  lowering of  interest rates

during  the  second  half  of  the  year  as  well as by a decrease of

state  term  deposits  which  in  turn  was caused by deficit of state

budget.

 

During  1999,  deposits   of  corporate  clients   in  Ühispank   have

increased by almost  30%, i.e. EEK  824 million, in  part as a  result

of  gaining   of  market.   Deposits  of   private  individuals   have

increased  by  26%,  i.e.  EEK  492  million  during  the   respective

period.  State  and  local  government  deposits  have  decreased by a

quarter, i.e. EEK 393 million.

 

During  the  year,  the  deposit  base  of  the Bank has strengthened:

proportion   of   private   individuals'   and   private  enterprises'

deposits  has   increased  up   to  30%   and  42%   respectively.  In

addition,  as  a  result  of  rapid  growth  of  demand  deposits, the

deposit  structure  has  shifted  towards  short-term  and less costly

funding.

 

Share  of  other  liabilities  in  the  bank's  foreign  capital   has

decresed  primarily  due  to  repayment  of  bank  credit  lines   and

bonds.  As  the  Bank  has  held  an  extra liquidity during the year,

there was no need for additional foreign capital.

 

Loan  portfolio  increased  signifcantly   in  December  by  EEK   422

million,  i.e.  5.3%.  The  growth  was  stimulated  by  low  interest

rates  and  an  upturn  in  the  economy  which  started in the second

half of  the year.  Noteworthy increase  in housing  loans for private

clients  as  well  as  loans   for  production  for  enterprises   has

occurred.

 

During  the  year,  the  loan  portfolio  has increased by 13.7%, i.e.

by  a  billion.  Most  of  the  growth  has  occurred  in  the  fourth

quarter  which  should  start  reflecting  in the increase of interest

income earned  by the  bank in  the present  year. As  at end of 1999,

the  Bank's  net  loan  portfolio  constituted  60%  of  total assets.

Increase of  the loan  portolio has  a positive  effect on  the Bank's

efficiency.

 

Deposits  in  other  banks  decreased  by  EEK 440 million, i.e. 17,5%

during the month.

 

During   December   an   additional   2,300   clients   started  using

Ühispank's  internet  bank.  Since  the  beginning  of  the  year, the

amount  of  users  of  the  internet  bank  has  almost  tripled  from

growing  from  13,000  to  more  than  33,000. The montlhy increase of

users has steadily increased throughout the entire year.

 

The  Bank's  unaudited  profit  (results  of  subsidiaries  have  been

added to the  result of the  bank using the  equity method)   for 1999

totalled  EEK  million  of  which  December's  profit  constituted EEK

12.2 million.

 

In  the  income  structure,  the  interest  income  amounted to 54.5%,

commission  fees  19.1%,  financial  income  20.5%  and  other  income

6.0%.  The  largest  cost  item  was  personnel cost (25.3% of income)

which  proportion  in  the  income  has  decreased  during  the   year

(37.5% of income  at end of  1998). During 1999,  the Bank made  staff

cuts  which  have  resulted  in  a  decrease  of personnel by nearly a

fifth, i.e. from 1,466 to 1,191.

 

During   the   year,   the   Bank   made   an  additional  expenditure

(provisions  less  recovered  loans)  of  EEK  123,9 million  to cover

the  loan  losses.  As  at  end  of  1999, loan provisions amounted to

2.6% of the entire portfolio (4.6% as at end of 1998).

 

The sale  of Bank's  investments in  December has  not been  reflected

in  the  operational  income  of  the  Bank but as "Income from equity

method and  adjustments of  long-term investments" . According  to the

relevant agreements, the amounts of transactions are confidential.

 

As at end of December, the Bank's capital adequacy amounted to 13,7%.

 

A  more  detailed  comment  to  the  Bank's  audited  and consolidated

results  will  be  published  after  the  audit,  on  March  17th  the

latest.

 

 

Ülo Suurkask

Vice President

Tel: +372 6 657 200

 

 

Urmas Neetar

head of reporting dept.

6 656 390