OPTIVA PANK

COMMENTARY TO FINANCIAL RESULTS



COMMENTARY TO FINANCIAL RESULTS, H1 2000



Optiva Bank

Semiannual 2000 consolidated financial results





The consolidated net profit of Optiva Group for the first half of

2000  was  9.8 million EEK, which is 2.2 million EEK  (29%)  more

than  for  1  H  1999. On 30 June the total assets of  the  Group

amounted  to  3.3 billion EEK, growing by 76 million  EEK  (2.4%)

during  1H.  During the six months of 2000 total assets decreased

by  210  million  EEK (6%). The main reason for  the  decline  in

assets  was maturity and repayment of debt securities at the  end

of January and February.

The results of the bigger affiliated companies  of Optiva Liising

and Optiva Kinnisvara for the six months were EEK 3.8 million and

EEK 2.7 million, respectively.



At the end of June total liabilities amounted to 2995 millon EEK,

which  is  218 million EEK (6.9%) less than at the end  of  1999.

Among liabilities, interest bearing liabilities decreased by  EEK

424 million (14%) and non-interst bearing liabilities grew by EEK

205 million (130%).



Clients’  deposits amounted to 1.53 billion EEK  at  the  end  of

June, growing by 10.7 million EEK (0.7%) during the last 6 months

and 489 million EEK during the year. Demand deposits increased by

259  million  EEK  (36.8%) and time deposits by 229  million  EEK

(68.4%). At the end of June clients’ deposits represented 59%  of

all  interest bearing liabilities, compared with 50.3% at the end

of 1999. Demand deposits represented 63% and time deposits 37% of

all clients’ deposits.



During the six months the amount of debt securities decreased  by

279  million EEK (55%), loans from other banks by 110 million EEK

(15.7%) and government lending funds by  45 million EEK (47%).



Clearing  accounts  jumped  by 195 million  EEK,  or  2.2  times,

compared  to  31.December 1999, backed by  a  sharp  increase  in

clients payments.



At  the  end  of the first half of 2000, Group equity represented

EEK  327.1  million,  or 10% per cent, of Group  assets.  Group’s

capital adequacy was 13.16% at the end of June (11% last year).



As  of  June 30, the amount of liquid assets (cash and dues  from

other  banks,  equity trading portfolio)  was  806  million  EEK,

decreasing by 128 million EEK (13.7%) over the six months.



In Group’s total assets, interest bearing assets decreased during

the  first half of 2000 by 85 million EEK (3.0%). The reason  for

that  change  was a decrease of 80 million EEK (9.7%)  in  nostro

accounts and loans to other banks and a decline of 18 million EEK

(7.4%) in liquid debt securities



The  loan  portfolio decreased by 19 million EEK (1%) during  the

six  months. The reserve for possible loan losses represented 6.0

per  cent  of  the gross loan portfolio. The net  loan  portfolio

represented 54.5 per cent of total assets.



The  consolidated net profit of Optiva Group was 7.4 million  EEK

for  the  first  quarter  and  2.4 million  EEK  for  the  second

quarter. The decrease in net profit was caused by an increase  in

provisions in the second quarter.



Net  interest income for the six months amounted to 53.6  million

EEK  and loan provisions for possible losses totaled 10.9 million

EEK.  Compared  to  last year net interest  income  grew  by  9.0

million  EEK (20%) due to a faster decrease in interest  expenses

than the decline in interest income. Interest income decreased by

7.8 million (6.4%) and interest expenses fell by 16.8 million EEK

(21.7%).  During the year changes in interest rates affected  the

yield  of interest earning assets and cost of funds. In the first

half  of 2000 the yield of interest earning assets was 8.1% (last

year  10.2%), cost of funds 4.5% (5.8%) and interest spread  3.6%

(4.4%).



Compared  to  last  year,  increase in  non-interest  income  was

sharpest in foreign exchange income and commissions income  which

grew  by  8.8  million  EEK  (59.9%) and  10.9  million  (46.4%),

respectively.  Increase in commission fees and  foreign  exchange

income originated from a fast growth of the customer base and  in

customers’  transactions. Foreign exchange  income  for  the  six

months  amounted to 23.4 million EEK and commission fees to  34.3

million EEK.



In  the  first  half of  2000, commission fees represented  48.9%

(last  year  26.1%), income from foreign exchange 33.4%  (16.3%),

income  from  share investments 5.3% (45.5%) and other  operating

income 12.4% (12.2%) of non-interest income.



The decline in income from share investments was 37.2 million EEK

(91%).  During the same period of  last year Optiva Group  earned

an  extraordinary income. A second reason in the decline in share

income  was  caused by a decrease in the securities portfolio  by

43.6 million EEK (34.2%), compared with  the end of 1999.



Non-interest  expenses for the six months of this  year  totalled

77.8  million EEK, increasing by 4.5 million EEK (6.1%) over  the

previous year’s first half result. Personnel expenses represented

48.7% (last year 48.4%) and administrative expenses 33.4% (38.4%)

of  total  non-interest expenses. Compared to last year personnel

expenses  increased by 2.3 million EEK (6.7%) and  administrative

expenses decreased by 0.8 million EEK (7.9%).

Due to an increase in customer transactions, commissions expenses

grew  by  3.2 million EEK (61%) over the first half  results   of

last year.



Group  return on equity grew by 1.5 percentage points  from  4.5%

last  year  to 6.0%. Return on assets was 0.6% compared  to  0.5%

last year.





Piret Villman

Analysis Department

+372 6302442