• Lender considers buying portfolios in Latvia, Lithuania
  • Bank aims at Baltic loan/deposit ratio of ``just over'' 100%

Swedbank AB is looking at smaller peers in Latvia and Lithuania for further deals after buying units of Danske Bank A/S as the region’s largest lender seeks to reverse the contraction in its loanbook.

Unlike in Estonia, the bank’s market shares in the two other countries are small enough to allow purchases of rivals’ portfolios without raising competition concerns, Priit Perens, the head of Swedbank’s Baltic unit, said in an interview in Tallinn on April 29. The lender plans to raise its loan-to-deposit ratio to "just over” 100 percent in the region from between 85 percent and 88 percent, he said. The figure peaked at 206 percent in 2008, according to Swedbank data.

Swedbank’s expansion plans signal a further recovery after a regional property boom turned to bust amid the global financial crisis and plunged the three nations into the world’s deepest recessions in 2008 and 2009. While some Nordic rivals are now retrenching in the region, Swedbank remains firmly committed to Baltic countries, defining them as “home markets,” even as it repatriates capital in extra dividends from its businesses there, Perens said.

“If it is possible to grow, we want to grow, because we clearly have more deposits than loans in the Baltics," Perens said. "We are ready to buy the portfolios of other banks in Latvia and Lithuania. We can’t do that in Estonia due to the size of market share.”

Most Dynamic

Swedbank agreed to buy the Lithuanian and Latvian retail units of Danske in September. In contrast, Swedbank’s biggest rival, SEB AB, isn’t interested in Baltic operations of other Nordic banks, Chief Executive Annika Falkengren told Estonian public broadcaster ERR in an interview last month. Nordea Bank AB, the biggest Nordic lender, plans to sell its Baltic units in the “near future,” Estonian newspaper Aripaev reported last month, citing unidentified people.

Swedbank’s Baltic Banking unit last year saw lending shrink 2 percent in Swedish currency to 124 billion kronor ($15.5 billion). The group still controlled 31 percent of the mortgage market in Latvia and 26 percent in Lithuania as of last year, while its shares of corporate lending were at 17 percent and 23 percent, respectively, according to bank’s annual report. The bank’s overall loan market share in Estonia was 38.5%.

Lithuania “is clearly the most dynamic” of Baltic markets as the opening of back office centers by international companies has spurred construction, while mortgage growth exceeds Estonia’s, Perens said. The loan portfolio has stabilized in Latvia thanks to consumer credit and corporate loans, though Latvian mortgage lending is still in a small decline, Perens said.

“I’m cautiously optimistic on all three Baltic countries," Perens said. "The biggest risk now is that a potential exit of the United Kingdom from the European Union or Germany becoming isolated as a result of the migration crisis could lead to Europe splintering and create a geopolitical vacuum in our region.”

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