Despite the unstable nature of the economic situation in Europe at this time, the international Moody’s Investors Service ratings agency has preserved Citadele’s financial strength index at a level of E+ and its short term rating at a level of Not Prime. This shows that the bank’s operations are stable.
“Given the unstable economic situation in many European countries, where a series of nations and major companies are having their ratings lowered, it is only logical that ratings agencies are cautious about long term forecasts, and they are reacting to the things that are happening in European markets. Citadele’s long term rating changes are a response to the unstable situation in the European market, and long term forecasts cause everyone to be cautious. Though Citadele’s operating indicators are in line with the bank’s restructuring plan, and in several areas we are doing better than planned,” says Citadele board chairman Juris Jākobsons.
According to Moody’s Citadele’s capital adequacy ratio has increased in 2011 and is beyond minimal requirements. It is also higher than is predicted in the bank’s restructuring plan. At the end of December 2010, the bank’s level of first-level capital sufficiency was at 6.7%, and at the end of September 2011, it was at a level of 7.4%. The bank’s overall capital sufficiency indicator is at a level of 13.2% (11.0% for the group), exceeding 8% minimum level stipulated by the law. Nonetheless, the downgrade in rating reflects Moody’s opinion that the capital adequacy ratio of banks should be higher in given market situation.
During the course of 2011, Citadele engaged in targeted operations aimed at restructuring many loans issued to companies, as well as mortgage loans. This ensured higher revenues for the lending portfolio and allowed to reach sustainable balance between clients’ cash flows and loan repayments schedules. The proportion of loans in arrears for more than 90 days at Citadele is significantly lower than the average in the banking sector. Where the average in the sector is 18%, the average for Citadele is just 6% of the loan portfolio.
Citadele also returned to profits faster than had been anticipated in the restructuring plan this year – already in the first half of 2011. Third-quarter results show that profits rose from LVL 182,000 to LVL 3.4 million. In comparison to 2010, Citadele has substantially increased net interest revenues. The bank’s liquidity ratio is a healthy 62.8%, which is twice more than requested 30% by the regulator.
“We plan to complete 2011 at a profit, too,” says Jākobsons. “Citadele is finding new clients, our deposit volumes have increased, and we’re continuing to offer financial products which are unique at the Baltic level. We have successfully provided state-guaranteed compensation to Latvijas Krājbanka clients, and we have also begun to pay compensation guaranteed by the Lithuanian government to clients of the Latvian branch of the Snoras Bank.”
The bank’s total assets as of September 30, 2011, amounted to LVL 1.2 billion (LVL 1.4 billion for the group). The amount of outstanding loans was LVL 621 million and LVL 713 million respectively for the bank and the group, while the indicators in terms of capital and reserves were LVL 85.3 million and LVL 83.0 million respectively. Total deposits at the bank at the end of Q3 amounted to LVL 980 million (LVL 1.2 billion for the group).
During the third quarter of the year, Citadele repaid EUR 48.7 million (LVL 34.2 million) to the Latvian Finance Ministry. Of this money, EUR 46.6 million (LVL 32.8 million) represented financing which the state had invested in the bank as a term investment, while EUR 2.1 million (LVL 1.5 million) represented third-quarter interest payments to the state for its deposit. This was the third payment over the course of the past year which Citadele has made to the state.
75% (minus one share) of Citadele Bank shares are owned by Latvian State via the state owned Privatization Agency and the European Bank for Reconstruction and Development possesses 25% plus one of its shares.