Tuesday, 16 September 2008

Baltic States' Banking Systems in Trouble

A while back I heard (probably on the radio) that heating costs in Vilnius are now as high as they are in Brussels. I wonder if salaries here are half or a just a third of what people make in Brussels? Doesn't seem to make sense, does it? I understand that this is mostly the result of market forces, but that doesn't make tolerating it any easier (and I know in my heart that the owners and upper-level managers of the heating company here are getting filthy rich). Well, I have to admit that I'm not on the city's centralized heating system, but I figure it won't matter too much since we're heating with natural gas and the price of that has also gone through the roof. I think this winter will be telling as people struggle to pay for heating and food. I haven't seen any figures about whether salaries and pensions here are keeping up with inflation, but as far as I know, they aren't in most parts of the world. But it's not only the people here that are having a tough time of it...

Here's an article I found recently about the banking systems in the Baltic States. It's from right here: http://www.delfi.lt/news/economy/business/article.php?id=18507054. The translation is mine.

Citigroup: Estonian, Latvian and Lithuanian Banking Systems in Trouble

SEB Bank is getting ready to announce losses in Estonia and Latvia, and the profits of Swedbank in the Baltic States are dropping because of greater losses in the loans sector. This news was reported by Baltic Business News and based on a report Citigroup sent its clients.

Losses caused by bad loans means that dividends for the next 2 years will stay at the same level as they were the previous year, Ronit Ghose, an analyst at Citigroup, wrote.

"The economies and banking systems of the Baltic States, especially in Latvia and Estonia, are in trouble", Ghose wrote. "Our visits to Tallinn and Riga this week have caused us to worry even more about a collapse because it hard to imagine a quick turnaround in this region...

The article goes on to say that pre-tax profits of SEB in the Baltic States would drop 40 percent from EUR 261.62 million (USD 372.05 million) to EUR 156.97 million (USD 223.23 million) and that the profits of Swedbank from operations in the Baltic States would most likely drop from EUR 502.31 million (USD 714.34 million) to EUR 439.52 million (USD 625.05 million).

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