Lithuanian Bank Credit Quality Hurt by Ukio, Moody’s Says
The suspension of Lithuania’s Ukio Bankas AB 14 months after Snoras Bankas AB’s bankruptcy will further erode confidence in the Baltic nation’s banking industry and may hurt liquidity, Moody’s Investors Service said.
“The suspension of Ukio’s license is credit negative for all Lithuanian banks, particularly locally owned ones, because it undermines confidence in the banking sector, thereby increasing liquidity risk,” Moody’s analyst Blake Foster said today in an e-mailed report from London.
Ukio’s operations were suspended Feb. 12 after regulators deemed it insolvent, mainly because of risky lending to related parties. The central bank plans to decide today whether Ukio, the country’s fourth-largest deposit bank, should be split up and partly sold, taken over by the state or declared bankrupt.
Nordic lenders’ local units enjoy more trust among residents and probably won’t suffer significant deposit withdrawals, according to the Moody’s report. Subsidiaries of Stockholm-based SEB AB, Swedbank AB and Nordea Bank AB controlled 65 percent of Lithuanian banking assets at the end of September, while units of Norway’s DNB ASA and Denmark’s Danske Bank A/S held another 21 percent, according to the Association of Lithuanian Banks.
Siauliu Bankas AB and Medicinos Bankas UAB, which are majority Lithuanian owned and also report “significant” amounts of related-party lending, stand to lose most, Moody’s said. Siauliu’s vulnerability is reduced by the fact that the European Bank for Reconstruction and Development is a shareholder, according to the report.
Siauliu, which fell 1.2 percent the day Ukio was suspended, has since gained 12 percent on EBRD-backed plans to bid for Ukio assets. Its shares rose 0.4 percent to 0.27 euro at 3:05 p.m. in Vilnius.
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