JSC PAREX BANKA RECOVERS LVL 20 MILLION IN FIRST TWO MONTHS AFTER THE SPLIT

The first nine months of 2010 have been months of significant changes for joint stock company Parex banka – for the first time in Latvia’s history a large scale bank restructuring project was carried out, thus helping not only the biggest Latvian national bank – Parex banka – who was going through difficult times triggered off by processes of global financial crisis, but also, as financial experts say, for Latvian banks with national capital in general.

The European Commission approved the restructuring plan of Parex banka on 15 September. Obtaining the mentioned authorization is a significant success in carrying out the recovery plan of the bank; many European banks have to wait for the permission of the same type much longer.

Total financial results are still strongly affected by provisions made during accounting period of the bank and group companies in the amount of LVL 83.8 and LVL 75.2 million respectively. Therefore the first nine month of this year were concluded with total losses of LVL 120.0 and LVL 103.0 million, but losses before provisions and taxes made up LVL 43.2 and LVL 19.8 million respectively. Taking into account the fact that balance of Parex banka consists of problematic assets, the aim of provisions is recovery of decrease in value of assets.

“In general, the activities of the Bank have been undertaken in compliance with the prognosis of asset realisation and the restructuring plan approved by the Government and the European Commission which necessarily includes incurring some losses. However, due to the intense work in the two month since 1st August, Parex Banka has managed to recover more than LVL 20 million, that is, since the splitting of the Bank, which is down to the determined efforts of the excellent team that we have in the Bank,” underlines Chairman of the Executive Board Christopher Gwilliam.

As at 30 September 2010 the loan portfolio of Parex banka and its group was LVL 630.6 and LVL 638.0 million respectively, total assets – LVL 859.7 and LVL 866.4 million. Equity as at the end of September of 2010 equalled LVL 74.5 and LVL 78.4 million.

Considering the amount of assets managed by Parex banka which as at 30 September 2010 amounted to almost LVL 900 million a great deal of attention is paid to management thereof. For the given reason Parex banka pays special attention to recruitment of accordingly qualified experts and formation of professional team, as well as the company carefully and responsibly evaluates administrative resources and attracts effective outsourcing service providers.

By gradually recovering assets from the existing loan portfolio of Parex banka, it is planned that cash flow generated by the bank will be sufficient to make the next syndicated loan payment without state support. According to the agreement reached with providers of syndicated loan in March 2009, Parex banka has already repaid 70% of total loan amount. The remaining 30% or LVL 163 million is due in May 2011.

Even though activities undertaken with an aim to increase assets to be recovered will inevitably cause temporary losses even the most cautious forecasts say that with national economies recovering, value of loans and assets of Parex banka will increase in the future. The recovery term and total volume of assets to be recovered depends on both management efficiency of Parex banka, namely professional activities and knowledge of experts, and to a large extent also on global and local tendencies and speed of economic development, including impact of the said process on real estate markets.

About Parex banka:
Parex banka is structured as a resolution bank whose main task is to maximize recovery of the investments made by the State in the time limit prescribed. In order to achieve its goals, activity of Parex banka is focused on recovery of assets, effective loan restructuring and management of real estates which once served as collaterals. While planning a targeted rising of value of the said assets Parex banka renders professional real estate management services so that when real estate markets recover real estates could be sold at a profit in the best interests of the state and tax payers.

Additional information:
Marita Ozoliņa-Tumanovska
Head of Communication and Marketing

Telephone: 67779142 or 29287169
E-mail: Marita.Ozolina@parex