Citadele Bank (Estonia)

Citadele Bank Repays Latvian State Term Deposit Ahead of the Schedule

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Citadele Bank has repaid the whole sum of Latvian State term deposit to the Ministry of Finance of the Republic of Latvia. Total sum of the term deposit was 203.7 million Euros. This funding was repaid in instalments during a one-and-a-half year long period, and the total sum was repaid earlier than planned. Citadele paid 14.7 million Euros in interest to the State for using this deposit from August 2010 until February 2012.

The last instalment, i.e. 46.94 million Euros, was transferred to State Treasury on 14 February. The breakdown of the last instalment was as follows: 46.6 million Euros was the principal sum, and the rest 340 thousand Euros was interest.

“The ability of Citadele Bank to repay State deposits ahead of the schedule is good news. Firstly, this means that the selected restructuring model for the bank is sustainable, and the bank is capable of meeting its obligations. Secondly, the bank has acquired certain trust in people’s eyes in order to attract the necessary funds for repaying State deposit and ensuring liquidity. Now Citadele will have to prove that it can increase its value regardless of the volatility that exists in European financial markets so that it can be handed over to private shareholders, recovering the funds invested in its share capital, within a reasonable period,” says Daniels Pavļuts, Minister of Economics.

“Repayment of State term deposits was one of our key tasks. I am thankful to all employees of Citadele. The bank was able to repay the whole sum of the term deposits that the State deposited in Citadele thanks to their professional and active work,” comments Juris Jākobsons, Chairman of the Board of directors of Citadele Bank.

“Having repaid the State term deposit, our team will now continue developing Citadele in a well-considered manner focused on long-term cooperation with our clients. We will continue increasing the bank’s liquidity and we will concentrate on a solid and profitable asset structure.

Citadele has especially promoted deposit products up to now, and we will continue to be an attractive bank for depositors in the future as well because deposits are the main source of funding for the bank. It is particularly the successful deposit policy that enabled us to issue new loans worth 151 million Lats in 2011 in Latvia. This is 10% of the total amount of newly issued loans in the local banking sector. In 2012 we will continue funding the Latvian economy paying special attention to small and medium enterprises, and facilitating utilization of resources available from the EU structural funds. We will also continue working on introducing new products and services tailored to the needs of clients. Every Lat deposited with Citadele is invested in the Latvian economy, and it continues working for the benefit of the national economy,” says J. Jākobsons.

“Successful performance of Citadele Bank has increased depositors’ trust, and the Latvian State can now significantly reduce its support. This is of great importance because the State has limited financial resources, and attracting depositors' funds will also be necessary for further development of the bank. Resources for development can also be ensured by means of attracting new shareholders. Thus selling the bank for a reasonable price remains a strategic goal,” says Iveta Zalpētere, Chairman of the Board of SJSC “Privatization Agency”.

Apart from the term deposit Citadele Bank also has a subordinated loan worth 64.3 million Euros granted by SJSC “Privatization Agency”. Citadele has paid 11.4 million Euros in interest for this loan from September 2010 until February 2012 to the Latvian State. Thus Citadele has paid a total of 26.1 million Euros in interest to the Latvian State for the term deposit and subordinated loan during the last year and a half. State share in Citadele Bank’s share capital is 77.2 million Lats or 109.8 million Euros. The State will recover both its investments when it sells its shares of Citadele.

As announced previously, bank Citadele started working with profit, i.e. 1st half of 2011, which is earlier than it was anticipated in the bank’s restructuring plan. Citadele’s profit had increased further from 182 thousand to 3.4 million Lats in the 3rd quarter of 2011. The bank’s deposit portfolio was 1.08 billion Lats, excluding State Treasury funds, as of end of December 2011.

Citadele Bank was founded on 30 July 2010 and launched its activity on 1 August 2010. 75% (minus one share) of Citadele Bank is possessed by SJSC “Privatization Agency” and 25% plus one share is possessed by the European Bank for Reconstruction and Development.