HANSAPANK

COMMENTARY TO FINANCIAL RESULTS



CONSOLIDATED FINANCIAL RESULTS, 1ST Q 2000



Hansabank’s  consolidated unaudited result for the  first  quarter  of

2000 was a net profit of EEK 325.9 million. As of March 31 the Group’s

total assets amounted to EEK 34.65 billion.



Hansabank’s consolidated assets grew by 1,2% during the first  quarter

of 2000 totalling EEK 34,650.4 million at the end of March. The growth

originated completely from clients’ deposits.

Clients’   deposits  increased  by  8,7%  during  the  first  quarter,

amounting  to  EEK  21.51 billion at the end of March  (annual  growth

39.3%).  Of the EEK 1.73 billion deposit increase 61% originated  from

the  Latvian and Lithuanian markets and 39% from the Estonian  market.

Deposit  growth rate continues to outstrip the growth  rate  of  both,

loans  as  well as assets. As of March 31 Hansabank’s market share  by

total deposits was 57.8% in Estonia.

Total  funds  received from other financial institutions decreased  by

13.7% to EEK 4.44 billion during the three months. The reason for  the

decrease was the repayment of an EEK 0.80 billion syndicated  loan  in

March.

The  third largest source of funding – debt securities issued  to  the

public  –  decreased  by 21.3% during the first quarter  to  EEK  1.00

billion.  In addition to this the repo agreements made for  additional

liquidity  during the millennium changeover, matured in January,  thus

decreasing liabilities by a furter EEK 0.51 billion.

Total  liabilities increased by 0.1% during the three months amounting

to EEK 28.85 billion at the end of March.

During  the first quarter of 2000 total shareholders’ equity increased

mainly  on the account of net profit and amounted to EEK 5.31  billion

as  of  March  31. At the end of the period the group’s total  capital

adequacy  was  19.24% (Tier I 17.49%) and for the  bank  it  stood  at

19.60% (Tier I 17.68%).



The  loan  portfolio  increased by 4,8% to EEK 20.39  billion  (annual

growth  23.5%) during the first three months of the year. As of  March

31  Hansabank’s market share by total loans was 53.3% in  Estonia.  At

the  end  of  March the loan loss reserve formed 3.15% of  total  loan

portfolio  (3.32% in the beginning of the year). The loan  to  deposit

ratio  decreased from 98.4% in the beginning of the year to  94.8%  at

the end of March.

The  volume  of liquid assets (cash and cash reserve, dues from  other

banks  and treasury securities) decreased by 5.8% to EEK 0.59  billion

at  the  end of March as a result of the previously described  changes

inside  the  liabilities. Despite this decrease the volume  of  liquid

assets  still amounts to EEK 9.46 billion at the end of March, forming

27.3% of total assets. At the same time the net loan portfolio’s share

increased to 57.0% (54.9% in the beginning of the year).



The  third  more significant change on the asset side was a  EEK  0.38

billion  decrease  of  the investment portfolio,  which  almost  fully

originated from a decrease in the bond portfolio.



Hansabank’s consolidated unaudited profit for first quarter  2000  was

EEK  325.9  million. The results of the principal business lines  were

the  following:  banking  in Estonia EEK 197.7  million,  leasing  and

factoring EEK 90.1 million, banking in Latvia EEK 32.6 million,  asset

management EEK 5.0 million, life insurance EEK 2.9 million and banking

in  Lithuania EEK –6.5 million. In addition to the mentioned  business

lines,  consolidated  results also include  other  support  functions’

results and eliminations.

Hansabank has made some changes to its income statement since the  end

of  1999.  Payments to the Deposit Guarantee Fund are now recorded  as

part   of   deposit  interest  expense  (previously  under  Fees   and

commissions  paid). Encashment services are recorded  under  Fees  and

commissions   paid   (previously   under   Administrative   expenses).

Respective changes have been made in earlier periods as well.



Interest  income increased by 15.8% compared to the first  quarter  of

1999,  totalling EEK 690.7 million. At the same time interest  expense

increased  by  4.4%  to EEK 262.4 million. As a  result  net  interest

income increased by 24.1% to EEK 428.3 million.

Over  80%  of  total  interest income is formed by  loan  and  leasing

interest  revenues. At the same time the fastest growing  items  among

interest income were funds placed with other banks (growth of 33.5% to

EEK  48.4  million) and interest from securities (growth of 108.7%  to

EEK  67.5  million).  For both items an important  growth  driver  was

higher euro-interest rates. Besides higher interest levels, the growth

of  interest  revenues from debt securities was also influenced  by  a

significant  growth  in  the  volume  of  the  portfolio,   especially

investment portfolio, when compared to March 1999.

Under  interest  expense the cost of client deposits amounted  to  EEK

161.2  million. Of this EEK 21.0 million were payments to the  Deposit

Guarantee Fund. In one year interest expense on deposits has grown  by

9.1%,  compared  to  a  39.3% growth of deposits.  Interest  paid  for

foreign  funding  (loans  and  deposits  from  other  banks  and  debt

securities) decreased by 2.5% compared to the first quarter  of  1999,

to EEK 89.1 million kroons. At the same time the volume of these funds

decreased by 13.2%.

Compared  to  1999  the  average  yield  of  interest  earning  assets

decreased  by  79bp to 9.14%. At the same time the  cost  of  interest

bearing liabilities decreased by 81bp to 3.83% whereby the spread grew

by  3bp to 5.32%. The Group’s net interest margin increased by 12bp to

4.98%  during  the  quarter.  (Because of  the  inclusion  of  Deposit

Guarantee  Fund  expense under interest expense the restated  NIM  for

1999 was 4.86%).

Trading income for the Group totalled EEK 147.8 million for the  first

quarter  of  2000,  down  by 7.4% from last year’s  same  period.  The

decrease was caused by a 80.7% drop in income from derivatives, which

in  the  first quarter of 1999 was at a very high level. In the  first

three  months  of 2000 income from derivatives amounted  to  EEK  16.1

million.  At the same time income from foreign exchange has more  than

doubled  to EEK 88.9 million. Income from equity and bond trading  and

investment portfolios amounted to EEK 43.8 million.

Fees  and  commissions received during the first three months amounted

to  EEK  221.1 million, exceeding previous year’s first quarter result

by  32.3%.  For Hansapank the largest fee income source are electronic

channels.  Fees  received  from services  offered  through  electronic

channels  increased by 27.2% to EEK 58.4 million in the first quarter.

The  increase was brought about by a constant growth in the number  of

transactions done through electronic channels – in March 2000  already

86.4% of all transactions were done through electronic channels. Loan,

leasing  and  guarantee fees amounted to EEK 55.4 million  during  the

first  three months (growth of 102.9%). The rapid growth is  a  direct

result  of  the stagnating loan market in the beginning of 1999.  Fees

and  commissions paid increased by 30.6% to EEK 51.1 million,  falling

short  of  the growth rate of fee income. The largest growth rates  on

the  expense side were recorded by fees paid for securities  services,

which  increased by 242.9% to EEK 12.6 million and by  card  services,

which respectively grew by 47.9% to EEK 13.3 million. Net service fees

increased by 32.7% compared to the first quarter of 1999 to EEK  169.9

million.

In  the  first quarter of 2000 the Group’s total revenues amounted  to

EEK  769.8 million, exceeding the last year’s first quarter result  by

11.2%.  The  revenue distribution for the first three months  was  the

following:  55.6%  net interest income, 22.1% net  fee  income,  19.2%

trading income, and 3.1% other income.



Operating  expenses  totalled EEK 405.8 million for  the  first  three

months  of  this year, increasing from previous year's  first  quarter

result by 7.4%.

Of  total  expenses  38.1%  was formed by personnel  expenses  (annual

growth  of  9.5%), 21.8% by administrative expenses (annual growth  of

7.3%),  20.0% by other expenses (incl. goodwill amortisation)  (annual

decrease of 5.8%), 14.8% by depreciation (annual growth of 24.7%), and

5.2%  by IT expenses (annual decrease of 8.6%). The rapid increase  of

depreciation is caused by the completion of the renovation of the head-

office at Liivalaia 12.

The  7.4%  growth  of expenses fell short of both, the  11.2%  revenue

growth  as  well  as  the  20.1%  asset  growth,  reflecting  improved

efficiency.  The  Group’s  cost-income ratio (before  provisions)  was

46.2%  in the first quarter (after net provisions 50.7%) and the ratio

of operating expenses to total assets has decreased to 4.13%.



Loan  and  guarantee  provisions decreased by  48.0%  from  the  first

quarter of 1999, amounting to EEK 59.3 million during the first  three

months.  Actual  loan losses amounted to EEK 47.1 million  and  actual

recoveries were EEK 25.0 million.





Mart Tõevere

Investor relations

+372 6131 569