EESTI ÜHISPANK

COMMENTARY TO FINANCIAL RESULTS



COMMENT ON 1Q 2000 RESULTS OF EESTI ÜHISPANK GROUP



The consolidated net profit of Eesti Ühispank Group in 1Q of the  year

2000  was  EEK36.9m,  which  is  2.5  times  more  than  in  1Q   1999

(EEK14.7m). On 31 March 2000  the total balance of the  Group amounted

to EEK15.236bn increasing by 1.78 per cent during 1Q (EEK266m).



The growth in total balance is due to the increase of deposit  volume:

in 1Q 2000  the amounts owed  to customers of  the Group increased  by

EEK584m, i.e. by 7  per cent.  This  includes the growth of  corporate

and  individual  deposits  with  Eesti  Ühispank  by 12 and 5 per cent

respectively.



At the same time the  volume of funding form other  sources decreased:

in 1Q the Group repaid  outstanding foreign liabilities in the  amount

of  about  EEK350m  (bonds  issued   and  loans  form  other   banks).

Structural changes in liabilities - the growth of relative  importance

of retail  banking deposits  and the  prepayment of  expensive foreign

funding  -  have  made  external  funding  less  costly  and   boosted

profitability.



In 1Q  the equity  of the  Group increased  mostly thanks  to retained

earnings and on 31 March 2000 the capital adequacy was 13.6 per  cent.

As Eesti Ühispank had sufficient equity, it prepaid subordinated  debt

in the amount of EEK16m.



Due  to  the  market  revival  and  increased  loan  demand  the  loan

portfolio of the  Group has grown  by 3 per  cent, up to  EEK9.6bn. At

the same time the uncollectible  loan ratio to loans has  decreased by

2.3 per cent due to the writing off of fully provisioned loans. In  1Q

the additional provisions of the  Group amounted to EEK10m. The  share

of net loan portfolio in assets has increased by 0.65 per cent and  it

amounted to 61.65 per cent at the end of 1Q.



The consolidated net profit of Eesti Ühispank in 1Q was EEK36.9m  (the

Bank -EEK32.3m,  leasing -  EEK5.5m, life  assurance -  EEK0.5m, asset

management -EEK0.6m). Net  interest income makes  up 55.5 per  cent of

the  total  income  earned  by  the  core businesses of the Group. Net

commissions and fees  make up 23.5  per cent, dealing  income 10.4 per

cent,  and  other  income  10.6  per  cent of the total. The operating

income of the Bank is made  up of 59.3 per cent interest  income, 24.7

per cent of commissions and fees,  12.2 per cent of dealing income  to

and 3.8 per cent of other operating income.



The decrease of interest rates in the market as compared to the  first

quarter of 1999 has had a material impact on operations of the  Group.

The  profitability   of  interest-bearing   assets  has   considerably

diminished  but  the  same  applies  also  to the cost of funding. The

interest income of the Group was  EEK260m, i.e. 29.4 per cent down  as

compared to 1Q 1999.  The volume of the  loan portfolio shrunk due  to

the  economic  slump  of  1999  and  the  loan  demand was low, which,

coupled with lower interest rates and changes in the structure of  the

Group (the sale  of Saules Banka)  have decreased interest  income. At

the  same  time  interest  expenses  have  fallen by 32.3 per cent. In

addition  to  changes  in  the  structure  of  the  Group, the fall in

interest expenses is also due  to the refinancing of interest  earning

liabilities:  high-interest  rate  deposits  of  the beginning of 1999

have been replaced  by deposits at  lower interest rate.  The interest

income of the Bank  is down by 22.5  per cent on the  same period last

year. However, the interest expenses are down by 29.7 per cent.



The commissions and fees income of  the Group remained the same as  in

1Q 1999  despite changes  in the  structure of  the Group (increase in

the Bank  by 22.1  per cent).  At the  same time,  thanks to the rapid

spread  of  electronic  services,  their  cost  decreased considerably

(43.6 per cent  decrease in the  commissions and fees  expenses in the

whole  Group  and  26.2  per  cent  in  the  Bank).  Therefore the net

commissions and fees of  the Group increased by  20.4 per cent and  in

the Bank by 46 per cent.



The reduction of operating expenses of  the Group by 21.3 per cent  in

the first quarter of 1999  is another important factor for  the growth

of  profitability.  This  figure  includes  22.3  per  cent  less   of

personnel expenses.  The Bank  reduced its  operating expenses  by 6.5

per cent, including personnel expenses by 11.3 per cent.



The performance results  of Eesti Ühispank  in the format  established

by Eesti Pank will be accessible on the internet home page of Bank  at

http//: <a href='http://www.eyp.ee' target='_blank'>http://www.eyp.ee</a> on 15 May 2000.



Ülo Suurkask

asepresident

Eesti Ühispank

Tel.+372 66 57





Urmas Neetar

head of reporting dept.

6 656 390