EESTI ÜHISPANK

COMMENTARY TO FINANCIAL RESULTS



PUBLIC ANNUAL REPORT OF 1999 OF EESTI ÜHISPANK GROUP



Herewith  Eesti  Ühispank  publishes  the  "Public  annual  report" as

stipulated by  the Act  no 25  (of 19  Oct. 1999)  of President of the

Bank of Estonia.



The  "Public  annual  report  of  1999"  is  available  at  Ühispank's

homepage at <a href='http://www.eyp.ee/publicannualreport1999.xls' target='_blank'>http://www.eyp.ee/publicannualreport1999.xls</a>



The annual report  to be confirmed  by the shareholders  on the annual

general meeting on April 7,  will be available on Ühispank's  homepage

(at <a href='http://www.eyp.ee)' target='_blank'>http://www.eyp.ee)</a> on 24 March latest. Additional notification

will be sent to the stock exchange information system.







COMMENTS TO THE PUBLIC ANNUAL REPORT OF 1999 OF EESTI ÜHISPANK GROUP



The net income for Ühispank's  Group was 100.2 million kroons  in 1999

(in  1998  a  loss  of  382  million kroons). The Group's activity was

significantly affected by  the recession in  the economy that  started

after  the  Russian  crisis  in  August  of  1999.  Due  to this, loan

financial markets and other business activity was quite modest.  Also,

management was  very conservative  towards taking  risks after  1998's

losses.



In  1999,  ROE  and  ROA  have  been  positive,  but  the target is to

increase ROE significantly in following years. Significant cut in  the

number of Bank staff occurred at the end of 1999 (number of  employees

decreased  from  1466  to  1191).  This  reduction  is a result of the

development of electronic channels and  cuts in the ordi- nary  branch

network.



In beginning of  1999, the Estonian  banking system was  characterized

by  a  strong  liquidity  deficit  (reason  was  the Russian crisis in

August  1998).  It  lead  to  high  interest rates in the money market

which caused high lending interest rates (interest rate for EEK  loans

in Estonian banking system was 16.5%).  After Telekom's  privatization

in February 1999, the money supply started to increase  significantly,

also  deposits  began  to  increase.  High  liquidity and lack of good

investment projects characterized the second half-year in the  banking

system. As several  big corporations belong  to foreign investors  and

can borrow directly from Western  banks, there was a need  to decrease

the loan interest rates  to compete in the  loan market. Due to  these

factors, the Group's loan portfolio  decreased but started to grow  in

the second half of the year, rapidly increasing in the fourth  quarter

of 1999.



In worsening economical conditions in the first half-year, the  amount

of non- performing loans (on which interest is not accrued)  increased

also. This was also one of the reasons why interest income  decreased.

In the Year  2000, the loan  portfolio quality is  expected to improve

in quality and grow in size.



The total  amount of  loan provisions  for 1999  has decreased  4 fold

compared to 1998 (474.5 million kroons at end of 1998 and 115  million

kroons at  end of  1999). This  is mainly  due to  the high  provision

level  in  1998  but  also  connected  with  the  stabilisation of the

economic situation and  recovery starting from  the end of  1999 which

all have had a positive impact on loan portfolio quality.



In addition  to the  main operating  activity, there  was also  income

from  the  sale  of  associates  and  subsidiaries  (Leks   Insurance,

Fondijuht and Saules Banka) in amount of 68 million kroons.



The total  amount of  operating expenses  was 824  million kroons. The

biggest  part  was  personnel  expenses  in  the amount of 284 million

kroons. The  number of  employees decreased  significantly during  the

year: the number of employees at  the beginning of the year was  1942,

at the end of year 1369,  a reduction of 573 people (incl.  342 people

in Saules  Banka). There  was quite  an impressive  decrease in  other

administrative  expenses  (pro  forma  '98  Ühispank and Tallinna Pank

Group -  22%) due  to conservative  cost control  and due to synergies

from  the  Bank's  merger.   Because  of  the  Bank's  new  headoffice

building in Tornimäe  Street and because  of the increase  in goodwill

after the merger of Tallinna  Pank Leasing and Ühisliising, there  has

been increase in depreciation costs.



As  a  result  of  the  abovementioned  activities the operation costs

(excl. depreciation costs)  of the Group  in 1999 decreased  pro forma

by 1.6%, i.e. 13 million kroons.



At  the  end  of  1999  the  assets amounted to 14.970 billion kroons.

Total assets  decreased by  9.3 per  cent, i.e.  by 1.5 billion kroons

during  1999,  it  is  first  and  foremost  due to the sale of Saules

Banka.  Pro  forma  (excluding  the  sale  of Saules Banka) the assets

increased by 4.8 per cent.



Due   to   unfavorable   economic   conditions   and   the   lack   of

investment-worthy loan projects, 1999  saw a considerable decrease  in

the (net) loan portfolio of the  Group, i.e.  in excess of  1.1billion

kroons. Lending  started to  increase in  the second  half of 1999 and

this, in  combination with  improved economy,  should have  a positive

impact  on  the  year  2000  performance.  The  total  amount of loans

remained practically at  the same level  as in 1998:  in 1999 the  net

loan portfolio amounted to 61 per  cent of total assets. As the  level

of  provisioning  was  lower  in  1999  than  in the previous year and

uncollectible  loans  were  written  off,  the  ratio of uncollectible

loans in  the total  loan portfolio  fell form  4 per  cent to 2.7 per

cent.



Client deposits (pro forma, excl.  sale of Saules Banka) increased  by

12.2  per  cent,  i.e.   by  one  million kroons. Growing money supply

after  the  privatization  of  Eesti  Telekom and the overall economic

recovery, demand deposits kept  growing rapidly since April  (the 1999

pro forma increase was  19.5 per cent, i.e.  816 million kroons).   At

the  same  time  the  lowering  of  interest  rates  on  time deposits

affected the  deposit growth  (pro forma  increase was  4.6 per  cent,

i.e.  185  million  kroons).  Thanks  to  the quicker growth in demand

deposits,  the  liabilities  have  shifted  towards  less  costly  and

shorter-term money. While  the growth rate  in private individual  and

corporate  deposits  surpassed  expectations  (21  per  cent pro forma

increase), the share of local and central government deposits as  well

as off-balance sheet  funds decreased by  nearly one-fifth -  a result

of the 1999 budget deficit.



The owner's  equity increased  thanks to  the profit  of 100.2 million

kroons and to  a share issue  for private placement  with FMO (411,000

shares, related to  the transfer of  the 20 per  cent stake of  FMO in

Saules Banka) in  May 1999. The  additional equity was  reduced by the

advanced   repayment   of   a   subordinated   debt   to   Hüvitusfond

(Compensation Fund) in the amount of 15 million kroons.



Due to the increase  of the equity and  as Saules Banka's assets  were

not included in the risk-adjusted assets at the sale of the bank,  the

capital  adequacy  ratio,  which  was  13.4%  as  of 31 December 1999,

evidenced  a  significant  increase  compared  to  the  1998 year end.

Improvement of the capital adequacy raises solvency of Eesti  Ühispank

Group and therefore also its trustworthiness.









Key figures and ratings of Eesti Ühispank





KEY FIGURES                            Consolidated      Bank

                                       1999     1998     1999     1998



Return on equity (ROE), %              5.07   -29.42     6.60   -30.57

Average assets/Average equity          7.97    10.33     7.01     9.04

Profit(loss)/Income, %                 5.37   -22.23     7.90   -28.62

Income/Average assets, %              11.85    12.82    11.91    11.82

Return on assets (ROA), %              0.64    -2.85     0.94    -3.38

Net interest margin (NIM), %                             3.61     4.12

SPREAD, %                                                3.72     4.41



SHARE INFORMATION                                  Bank

                                                   31.12.99 31.12.98



Number of shares at the end of period            66,562,381 66,151,422

Average number of shares, adjusted with issues   66,404,068 44,290,700

Price of shares (Tallinn, close price), EEK           25.50      19.30

Earnings (profit before extraordinary items-Taxes)    129.2     -387.9

Earnings per share (avg.number of shares), (EPS)       1.95      -8.76

Price / Earnings ratio (P/E)                          13.08      -2.20

Market price of shares at the end of period, EEK    1,697.3    1,276.7

Book value of shares, EEK                             22.43      20.20





QUALITY OF ASSETS                  Consolidated      Bank

(EEKmio)                           31.12.99 31.12.98 31.12.99 31.12.98



Assets                             14,969.7 16,498.7 13,958.0 13,499.7

Overdue                               471.8    213.0    344.1    138.7

 - overdue/assets, %                   3.15     1.29     2.47     1.03

Provisions                            251.4    431.9    174.5    353.3

(uncollectible debt)



Equity after deductions, EEKmio     1,701.8  1,876.3  1,673.9  1,624.0

Capital adequacy, %                   13.42    12.51    13.45    12.85

Tier 1  Ratio, %                      10.16     9.26    10.13     9.00

Tier 2  Ratio, %                       3.26     3.24     3.32     3.85





RATINGS                            14.03.00       31.12.99    31.12.98



Moody's Investor Service:

Deposit rating (Long term/Short term) Baa2/P-3    Baa3/P-3    Baa3/P-3

Financial strenght rating                 D+             D           D

Rating description

in Internet: <a href='http://www.moodys.com' target='_blank'>http://www.moodys.com</a>



FitchIBCA:

Short term rating                        F3             F3          F3

Long term rating                        BBB           BBB-        BBB-

Individual rating                       C/D              D         C/D

Support rating                            3              4           -

Rating descriptions

in Internet: <a href='http://www.fitchibca.com' target='_blank'>http://www.fitchibca.com</a>



Thomson Finance BankWatch:

Intra-Country Issuer raiting             A/B           B/C           -

Short term debt rating                  LC-1             -           -

Rating descriptions

in Internet: <a href='http://www.bankwatch.com' target='_blank'>http://www.bankwatch.com</a>









Management Board

of Eesti Uhispank

Tel.+372 66 55 300





Urmas Neetar

head of reporting dept.

6 656 390