Lithuanian Lenders Shed Crisis-Era Loan Woes, Central Bank Says

Lithuania’s banks are at the end of a five-year effort to clean their books of bad debts and may be set to accelerate lending again, the central bank said, citing loan-quality statistics.

“Banks, completing recovery processes begun during the crisis, are eliminating remaining bad loans from their financial documents,” the Bank of Lithuania in the the capital Vilnius said today in a report on its website. “The uncertainty about the outlook for various sectors and lenders that arose with the economic downturn has essentially ended.”

Since suffering the European Union’s second-worst recession in 2009 and 2010, when output plunged by almost a quarter, Lithuania has closed two insolvent lenders. Standard & Poor’s Rating Services earlier this year praised the central bank for the orderly shutdowns and for its work to tighten credit rules. The Baltic nation’s economy expanded 3.6 percent in the first half of this year.

The share of non-loans fell to 12.2 percent at July 1, from 13.1 percent at the start of the year and 19.6 percent in 2010, according to the report on Lithuania’s seven banks and nine branches of foreign banks. Special loan provisions shrank by 2 percent in the first quarter and a another 7 percent in the second quarter.

With bank assets of 75.6 billion litai ($29 billion) again approaching the pre-crisis level, the loan-deposit ratio is just 119 percent, compared with more than 200 percent in 2007, the central bank said.

It said that during the second quarter housing loans increased for the first time in several years and banks increased their commitments to credit clients, “showing potential for further growth of the loan portfolio.”

Local units of Nordic lenders SEB AB, Swedbank AB, DNB ASA, Nordea Bank AB and Danske Bank A/S account for more than 80 percent of bank assets in Lithuania, a fact that S&P said in its February report had aided the industry’s stability.

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