Despite the serious global challenges posed by the pandemic to the country’s economy and financial sector, we are pleased with the financial results of 2020.
Undoubtedly, COVID-19 left some traces in the performance of LPB Bank, but the most important financial and efficiency indicators are at a good and stable level due to the development strategy chosen by the Bank, namely, the provision and development of ecommerce services and the successful development of business relations with FinTech companies.
Of course, the pandemic has become a serious challenge for many companies, but we clearly see that COVID-19 has given some of our customers the opportunity to develop new business ideas or modernize an existing range of services. We are satisfied that more and more new companies have decided to use the e-commerce services offered by the Bank and reorient their business to online sales.
Due to a significant increase of customer deposits, at the end of 2020 the Bank’s assets amounted to EUR 237.6 million, increasing by EUR 43.3 million during the year. The Bank continued to maintain high liquidity of assets while maintaining a well-diversified structure. The share of the debt securities portfolio in assets increased to 43%, of which 98% had an investment grade credit rating. 29% of the Bank’s assets consist of receivables from banks, including the Bank of Latvia. The amount of loans issued to customers did not change significantly and accounted for 20% of assets. The liquidity coverage ratio as at 31 December 2020 was 158.83%.
As the period of the negative euro base rate and the ECB’s bond purchase program continues, the Bank, while planning its investments in the securities portfolio, expects lower coupon rates and thus a lower return in the form of interest income. As a result, net interest income in 2020 was 4% lower than a year earlier. On the other hand, due to the successful operation of e-commerce services, net commission income showed an increase of 27%. The result of trading and revaluation of financial instruments, which increased by 13.5% compared to the previous period, also showed positive dynamics.
In 2020, the Bank maintained a high profitability, closing the year with a profit of EUR 4.7 million. The return on assets (ROA) according to the financial results of 2020 was 2.32%, while the return on equity (ROE) was 15.01%.
As a prudent approach to creation of provisions for the reduction of the quality of financial assets was applied, the structure of the Bank’s profit sources changed during the year, while commission income became more important – the share of net interest income after creation of provisions for financial assets decreased to 11%, net commission income accounted for 49%, net profit from financial instruments – 39%, other income – 2%.
The Bank’s total capital adequacy ratio at 31 December 2020 was 24.64%. The Bank has not established a trading portfolio, therefore, the Bank’s market risk is mainly related to foreign currency risk.
By supporting those customers of the Bank who are temporarily facing financial difficulties caused by the COVID-19 outbreak, the Bank joined the moratorium developed by the Finance Latvia Association for both, individuals and companies. In 2020, the Bank was able to maintain the gross value of the loan portfolio at the previous year’s level, i.e., in the amount of EUR 53 million including off-balance-sheet liabilities to customers.
Given that limiting the negative effects of the spread of the Covid-19 virus and its consequences on the economy remain in the spotlight, the Bank continues to follow closely market trends, assessing their impact on the Bank’s investments in debt securities and credit portfolio, and ensuring a prudent lending monitoring process by critically accessing customer solvency assessment. The Bank carefully analyzes the signs of changes in customer credit risk and makes appropriate decisions regarding the classification of exposures.
We invite you to get acquainted with full version of Financial statement.
Yours LPB Bank