TALLINN — Sampo Bank announced Thursday that its deficit in 2009 was 2 billion krooni, which is mainly affected by loan losses.

After 2008’s profit of 462 million krooni (€29.5 million), Sampo Bank ended the year with a pre-tax loss of 2 billion krooni (€127.8 million). Profit before loan impairment charges totaled 647 million krooni (€41.3 million), less than 2008’s 707 million krooni (€45 million) pre-loan impairment profit.

In keeping with the Danske Bank Group’s conservative loan portfolio assessment policy in light of the crisis, Sampo Bank cut back lending. At the end of 2009, total lending volume was 29.2 billion krooni (€1.8 billion). Lending to retail customers decreased by 5 percent, 69 million krooni (€4.4 million), and lending to corporate customers fell by 21 percent, which is 3.9 billion krooni (€249.2 million). The loan portfolio declined by 1.4 billion krooni (€89.4 million) in the fourth quarter.

Aivar Rehe, CEO of Sampo Bank downplayed the losses as an indication of the bank’s performance in 2009.

“Sampo Bank achieved two main objectives last year, which were maintaining profitability in our banking activities before loan impairment charges and implementing the Danske Bank Group’s conservative loan portfolio assessment policy,” Rehe told media.

Despite the results, Rehe forecasts economic stabilization and recovery further on in 2010.

“The Estonian economy is in the midst of a transition. In the coming year, we expect economic stabilization and recovery, the first signs are already visible,“ said Rehe. “However, income and solvency are likely to remain under pressure for both retail and corporate customers in the first half of 2010.”

Swedbank, SEB, and Nordea will release their results next week, but are expected to show heavy losses as well.

The operational profit of Swedbank in Estonia was 586 million krooni (€37 million) before provisions and the third quarter loss was 323 million krooni (€20.6 million). SEB’s deficit by the end of third quarter in 2009 was 1.23 million krooni (€78.6 million), while in 2008 the bank earned 532 million krooni profit (€34 million).

Better times ahead

The Bank of Estonia predicted in January that the banking sector return to profitability in the middle of 2010.

According to Viljar Rääsk, the press spokesman of the Bank Of Estonia, the commercial banks continued earned profit before the one-off loan losses and other impairments, the decline of which boosted banks already in the fourth quarter of last year.

“The decline of interest loan growth and the high level of loan provisions allows to expect that this year the need for the impairments is smaller,” Rääsk told Baltic Reports.

“The extensive heap of loan problems stayed into last year, and expecting the continuation of pre-impairment profit improvement having the improvement of the economic environment, we can prognose that the banking sector as a whole will earn profit on the second half of 2010,” Rääsk said.