The economic environment in 2020 has been extraordinarily challenging as the Covid-19 pandemic plunged the global economy into a sudden and very sharp recession. Citadele has taken substantial precautionary measures to protect the bank’s employees, clients and partners, and implemented a series of actions to minimize disruption to the Group’s operations during the Covid-19 outbreak.
In Q2 2020, work was accelerated on digitalization of the bank’s services and we see the increase in usage of remote services. Customers in Latvia now get instant individual offers from Citadele for mortgages and consumer loans via digital channels. Mobile App users and Internet bank customers increased by 37% (137 thousand active users) and 8% (194 thousand active customers) year over year.
The positive trend in customer activity resumed in June, and the number of new customers onboarded started to increase. Active customers reached 314 thousand clients as of 30 June 2020, or 12% growth year over year.
Citadele continued its support of customer needs through advisory services, digital lending solutions, and active participation in government guarantee programs to help clients in short-term financial difficulties. The number of requests for grace periods on loan repayments has remained comparatively low, pointing to the relative confidence of Citadele’s clients in successfully overcoming the adverse impacts of the pandemic.
The total loan book has declined during this period of uncertainty, mainly due to portfolio amortisation and lower levels of new lending. A positive trend was seen in June results, where new lending increased by 42% month-over-month, with the Corporate portfolio seeing a healthy pipeline going forward. New lending to Baltic private, SME and corporate customers reached EUR 185 million in the first half of 2020.
Strong progress continued in deposit gathering, where the Group increased Baltic deposits by EUR 210 million during the first half 2020. Total customer deposits increased by 11% and reached EUR 3,652 million.
Operating income during the period was affected by Covid-19-related disruption to economic activity, while credit loss provisions were increased in March to reflect revised prudent macroeconomic expectations. However, the underlying credit quality remains sound with minor changes during the period.
At the midst of Covid-19 uncertainty, the bank invested in a number of financial instruments that would support if there was a sharp and severe recession followed by a slow recovery, leading to a lasting global recession. The bank was willing to pay EUR 30 million, which is slightly less than last year`s net profit, to ensure that the bank could continue to provide financial services and remain a stable bank even in the worst economic downturn scenario. With market recovery proving stronger than anticipated and the much less likelihood of a sharp and severe recession, the cost of this move had a negative impact in the first half year result. The underlying business remained strong, with positive development seen in June and going forward.
As an indication of strength of Citadele’s, the bank continues to operate with strong capital and liquidity ratios, despite the loss in H1, and proactively assess and evaluate potential business impacts from the current environment.
Head of Corporate communications
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