Citygroup: Estonian, Latvian banking systems in trouble

Kaja Koovit
September 11, 2008

SEB Bank AB is going to report losses in Estonia and Latvia and Swedbank’s profit in the Baltics will shrink as losses on bad loans increase, Bloomberg mediates Citygroup’s note to it’s cilents.

The loan losses mean dividends will remain flat at last year’s levels for the next two years, analyst Rhonit Ghose wrote in a note to clients.
“The Baltic economies and, by extension, their banking systems are in trouble, especially in Estonia and Latvia,” said Ghose. “Our visit to Tallinn and Riga earlier this week left us even more concerned about the downturn as we find it hard to identify a credible near-term recovery path for the region.”
Citigroup forecasts that pretax profit at SEB’s Baltic operations will slump 40 pct to SEK 1.5 billion this year, from SEK 2.5 billion a year earlier. Profit at Swedbank’s Baltic business will probably decline SEK 4.2 billion kronor from SEK 4.8 billion,, Ghose said.
SEB’s Lithuanian business, its biggest in the Baltics, will probably post a loss in 2010, Citigroup estimates.