Editor’s note: Second of a three-part series on Baltic banks’ struggle in 2009 and outlook for 2010.

RIGA — During the first two months of the year the Latvian banking sector has shown overall losses of 59.3 million lats (€84.7 million).

The Latvian banking sector suffered heavily in 2009 when toxic debt started a cascade of losses that forced many entities in the country into insolvency, including the nationalized bank, Parex. The overall figures does however include nine banks and one foreign branch that worked with 1.5 million lats (€2.1 million) in profit collectively.

The Financial and Capital Market Commission’s data shows that banks in general, similar to last year are suffering losses due to doubtful loans. Provisions for February increased by [private_supervisor]2.8 percent, or 37.8 million lats (€53 million), reaching 1.4 billion lats (€1.9 billion) or 9.1 percent of the all the banks’ total loan portfolio.

Bank operating profits before provisions and taxes at the end of February amounted to 14.6 million lats (€20 million) however.

So, how will this year turn out for banks in Latvia? Mārtiņš Kazāks, chief economist of Swedbank Latvia, told Baltic Reports that this year would be uncertain for the banking sector, which still is unsure about their provisions.

“On a day-to-day basis, the bank is profitable, but losing money on old loans. Why the banks are reporting losses is because of provisions in case they lose money they lent. With new loans, they are making money,” Kazāks said adding that aggressive banks might be able to turn a profit in 2010. “What we will see this year is that the banks still have operation profits and this is a matter of fact, you will have specific segments that still have problems so there will be loans that turn bad.”

Given how bank’s tightened loan policy, the rate of bad loans is sure to decrease. Last year’s results are still unclear because of the unaudited results that are still being processed. Many banks are still to report their final 2009 figures.

Swedbank believes that Latvia’s GDP has already bottomed out, but that unemployment will lag behind causing yet more defaults on loans. Other economists such as SEB’s Dainis Gašpuitis emphasize the importance of government fiscal policy for Latvia’s recovery. [/private_supervisor] [private_subscription 1 month]2.8 percent, or 37.8 million lats (€53 million), reaching 1.4 billion lats (€1.9 billion) or 9.1 percent of the all the banks’ total loan portfolio.

Bank operating profits before provisions and taxes at the end of February amounted to 14.6 million lats (€20 million) however.

So, how will this year turn out for banks in Latvia? Mārtiņš Kazāks, chief economist of Swedbank Latvia, told Baltic Reports that this year would be uncertain for the banking sector, which still is unsure about their provisions.

“On a day-to-day basis, the bank is profitable, but losing money on old loans. Why the banks are reporting losses is because of provisions in case they lose money they lent. With new loans, they are making money,” Kazāks said adding that aggressive banks might be able to turn a profit in 2010. “What we will see this year is that the banks still have operation profits and this is a matter of fact, you will have specific segments that still have problems so there will be loans that turn bad.”

Given how bank’s tightened loan policy, the rate of bad loans is sure to decrease. Last year’s results are still unclear because of the unaudited results that are still being processed. Many banks are still to report their final 2009 figures.

Swedbank believes that Latvia’s GDP has already bottomed out, but that unemployment will lag behind causing yet more defaults on loans. Other economists such as SEB’s Dainis Gašpuitis emphasize the importance of government fiscal policy for Latvia’s recovery. [/private_subscription 1 month] [private_subscription 4 months]2.8 percent, or 37.8 million lats (€53 million), reaching 1.4 billion lats (€1.9 billion) or 9.1 percent of the all the banks’ total loan portfolio.

Bank operating profits before provisions and taxes at the end of February amounted to 14.6 million lats (€20 million) however.

So, how will this year turn out for banks in Latvia? Mārtiņš Kazāks, chief economist of Swedbank Latvia, told Baltic Reports that this year would be uncertain for the banking sector, which still is unsure about their provisions.

“On a day-to-day basis, the bank is profitable, but losing money on old loans. Why the banks are reporting losses is because of provisions in case they lose money they lent. With new loans, they are making money,” Kazāks said adding that aggressive banks might be able to turn a profit in 2010. “What we will see this year is that the banks still have operation profits and this is a matter of fact, you will have specific segments that still have problems so there will be loans that turn bad.”

Given how bank’s tightened loan policy, the rate of bad loans is sure to decrease. Last year’s results are still unclear because of the unaudited results that are still being processed. Many banks are still to report their final 2009 figures.

Swedbank believes that Latvia’s GDP has already bottomed out, but that unemployment will lag behind causing yet more defaults on loans. Other economists such as SEB’s Dainis Gašpuitis emphasize the importance of government fiscal policy for Latvia’s recovery. [/private_subscription 4 months] [private_subscription 1 year]2.8 percent, or 37.8 million lats (€53 million), reaching 1.4 billion lats (€1.9 billion) or 9.1 percent of the all the banks’ total loan portfolio.

Bank operating profits before provisions and taxes at the end of February amounted to 14.6 million lats (€20 million) however.

So, how will this year turn out for banks in Latvia? Mārtiņš Kazāks, chief economist of Swedbank Latvia, told Baltic Reports that this year would be uncertain for the banking sector, which still is unsure about their provisions.

“On a day-to-day basis, the bank is profitable, but losing money on old loans. Why the banks are reporting losses is because of provisions in case they lose money they lent. With new loans, they are making money,” Kazāks said adding that aggressive banks might be able to turn a profit in 2010. “What we will see this year is that the banks still have operation profits and this is a matter of fact, you will have specific segments that still have problems so there will be loans that turn bad.”

Given how bank’s tightened loan policy, the rate of bad loans is sure to decrease. Last year’s results are still unclear because of the unaudited results that are still being processed. Many banks are still to report their final 2009 figures.

Swedbank believes that Latvia’s GDP has already bottomed out, but that unemployment will lag behind causing yet more defaults on loans. Other economists such as SEB’s Dainis Gašpuitis emphasize the importance of government fiscal policy for Latvia’s recovery. [/private_subscription 1 year]

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