Ieva Tetere: Year 2020: deposit growth and an increase in contributions to pension funds

In the 12 months of 2020, SEB Group had an after- tax profit of EUR 39 million in Latvia, down 21% compared to 2019. At the same time, the pension fund assets and deposit growth reached an all-time high in 2020.

In 2020, the total amount of loans granted by SEB to customers reached EUR 767 million, an increase of 29% compared to 2019. The Bank’s loan portfolio grew healthily – by 2% on average.

At the same time, customer deposits increased significantly. In 2020, the amount of customer deposits at SEB banka increased by 13% compared to the 12 months of 2019, which is suggestive of the thoughtful behaviour of the population and the desire to provide for their stability, as well as of the caution of companies that accumulate liquidity and shy away from new long-term investments.

Increased customer activity was also seen in investing in long-term savings, term deposits, and Tier 2 and Tier 3 pension plans. Although last year was eventful in the financial markets, with a significant fall in stock prices in the first half of the year, Tier 2 and Tier 3 pension assets managed by SEB Investment Management increased by almost 7.9% in 2020, reaching EUR 1,378 billion. In 2020, SEB pension plan customers achieved positive investment performance of more than EUR 20 million in cooperation with SEB Investment Management.

Commenting on the annual performance, Ieva Tetere, CEO of SEB banka, admits that during the first and second waves of the pandemic, economic activity declined rapidly, and the actions of customers had a direct impact on the Bank’s business and financial performance.

“Constraints on the economy and on the mobility of people caused household consumption to fall sharply; the volume of exports also declined. At the same time, the entrepreneurs’ anticipation of the temporary effect of Covid-19 kept investments high. Retail trade, manufacturing and commodity exports successfully recovered by the end of the year despite the sharp decline in the spring. Due to economic equilibrium, competitiveness of entrepreneurs and less dependence on the tourism, catering, hotel and entertainment sectors, the Latvian economy was relatively more successful in overcoming the challenges than the countries in Southern Europe. In addition, the support mechanisms that the State put in place in the spring of 2020 gave borrowers confidence that the challenges related to paying debt would not affect the sustainable survival of their businesses. In turn, the Balsts programme provided a great incentive for lending to individuals. SEB recognised the importance of the programme in promoting long-term prosperity and improvement of the demographic situation and was the first bank to enter into an agreement with Development Financial Institution Altum to provide Balsts grants for loans to families with many children for housing or construction,” says Tetere.

Breakthrough in digital solutions facilitated the use of video consultations

To ensure the availability of banking services to customers during this period, the Bank had to restructure its operations, adapt its systems, introduce a new model of customer service, and change the usual format of cooperation with entrepreneurs.

Since there was no possibility of holding face-to-face meetings, the number of video consultations increased significantly from 2,500 (in 2019) to almost 8,000 at the end of 2020, with the largest increase in the SME segment.

Several important improvements were also added to the mobile application in 2020. For example, the “Payment to a phone number” service was introduced, defining multiple savings targets for savings was enabled, and an automatic savings function was created. During the year, the number of users of the mobile application increased by 21%, reaching more than 195 thousand users in Latvia by the end of 2020.

Another significant change in previous customer habits relates to payment cards, where 80% of new and 99% of renewed debit cards were delivered to customers by post in December, even though a year ago most customers went to the branches to collect them.

A new turning point in the Bank’s relationship with its customers

Speaking of supporting entrepreneurs, Growth Programme was hosted remotely for the first time and met with an unprecedented response of around 100,000 viewers. The grant programme" (ie)dvesma" (inspiration) for start-ups, which took place online, also received a record number of applications - 77 ideas that are indicative of the tireless entrepreneurial spirit of our customers.

“As difficult and complicated as 2020 may have been, in some ways it has allowed us to get to know our customers and their daily needs even better. The same is true of our work with individuals and businesses. We have assessed the impact of Covid-19 on the economy and the risks to the business environment and have made additional provisions in the event that Covid-19 impacts a customer's business. It must be admitted that our customers have so far demonstrated their excellent ability to adapt to new circumstances and have proven a good results," admits SEB banka's CEO.

Financial indicators of SEB Group in Latvia in the 12 months of 2020.

• SEB Group’s revenue in Latvia reached EUR 107 million, a decrease of 2% compared to the 12 months of 2019;
• Costs amounted to EUR 52 million, a decrease of 4% compared to last year;
• Profit before provisions reached EUR 56 million, a decrease of 1% compared to January-December 2019;
• Provisions of EUR 15.8 million were created from 1 January to 31 December 2020;
• Operating profit after tax and provisions reached EUR 39 million in the 12 months of 2020, a decrease of 21% compared to the previous year;
• At 31 December 2020, SEB banka had total deposits of EUR 3.5 billion, up by 13% compared to the deposit portfolio at the end of December 2019;
• The total loan portfolio was EUR 3.1 billion at the end of December 2020, up by 1% compared to the end of December 2019;
• Shareholders’ equity amounted to EUR 430.2 million at 31 December 2020;
• Assets amounted to EUR 4.3 billion at the end of December 2020.