Profits at Desmond-backed bank slump to €4.3m
Profits at Rietumu Banka, the Latvian financial institution in which businessman Dermot Desmond has a 33pc stake, slumped by two-thirds last year to €4.3m from €13m a year earlier even as the Baltic nation began to emerge from a deep downturn.
Although the bank has not yet formally published its full-year accounts, details of the performance for 2010 were published in quarterly reports the institution files with the Latvian financial regulator. The profit for 2010 marks an 84pc decline for the bank compared the figure returned for 2008.
The quarterly reports also show a steady climb last year in the provision for doubtful debts that Rietumu set aside. That provision rose from 5.2m Latvian Lats (LVL) (€7.4m) at the end of the first quarter in 2010, to a total of LVL18.8m (€26.6m) by the year end.
They also show that the bank's interest income declined 18pc to just under LVL31.5m (€44.6m) during 2010, while its administrative expenses rose 3.6pc to LVL18.7m (€26.5m). Rietumu had total assets of LVL1.16bn (€1.64bn) at the end of 2010, up from LVL1.01bn (€1.43bn) at the end of 2009.
It had a capital adequacy ratio of 17.46pc at the end of last December.
Mr Desmond acquired his stake in Rietumu back in 2005 for an estimated €100m. Last year, Hong Kong businessman Balram Chainrai bought a 5pc stake in the institution.
Despite the declines in its profitability over the past few years, Rietumu Banka has remained one of the more stable financial institutions in Latvia, where the economy has suffered heavily since 2008.
However, along with neighbouring Baltic nations Estonia and Lithuania, the Latvian economy has revived and is expected to post 3.5pc growth this year and 4pc in 2012, according to ratings agency Fitch.
This week, Fitch raised the country's credit rating to the lowest investment grade from junk status. Latvia, which was bailed out by the IMF and EU with a €7.5bn fund, initiated cuts equal to about 16pc of GDP since 2008. Fitch director Douglas Renwick said the country is making "good progress" in its recovery.
"The country has shown strong political and social resolve to adhere to the austerity measures in the programme, underlined by the government's re-election in October 2010, and appears on track to meet its objective of a sub-3pc deficit in 2012," said Fitch.