IN 2011, PAREX BANK CONTINUED TO RECOVER STATE INVESTMENTS, SUBSTANTIALLY REDUCED LOSSES

The unaudited financial results of the stock company Parex Bank for 2011 show that the bank has successfully continued to recover the finances which the state invested in its rescue and has also substantially reduced its losses.  Since August 1, 2010, the Parex Bank has recovered more than LVL 220 million, including LVL 158 million during the reporting period.  Most of the money was used to repay the bank’s syndicated loan of LVL 164 million, with another LVL 7 million being repaid to the Latvian Finance Ministry ahead of schedule.  Shortly after the end of the reporting period, the Parex Bank repaid another LVL 8 million to the ministry – five million in principal and three million in interest.

“These results show that over the course of a year-and-a-half, the Parex Bank has turned into a high-level and professional company which manages problematic assets.  Our powerful team has achieved commendable results working with complicated multimillion projects under extraordinary circumstances,” says Parex Bank board chairman Christopher Gwillia.

“The results don’t show all of the work that we did in 2011,” Gwilliam continues.  “Much of the fruit of our labours will be seen later.  Restructuring of loans is a complicated and very time-consuming process.  We are also in no hurry to sell those assets with respect to which we expect an increased value in future.”

Because of carefully considered and cautious operative and financial operations in 2011, the Parex Bank managed to substantially reduce losses related to problematic assets – LVL 70.3 million in 2011, as compared to LVL 163.9 million in 2010.  As was the case in the past, the losses during the 2011 reporting period were based on two major areas of expenditures – interest on the state’s deposit and the subordinated capital, as well as set-asides to reduce the value of problematic assets.  The bank’s restructuring plan does not speak to achieving a level of profitability because of the specifics of the Parex Bank’s operations as a manager of problematic assets.  The fact is that the bank’s portfolio only contains assets with long-lasting repayment problems.  The bank has insisted on several occasions that the only measuring stick to evaluate its operations is to look at the amount of money that has been recovered.

In pursuit of its missions, Parex Bank concentrated its work in three major directions during the reporting period – restructuring of loans, collection of debts and management of real estate.  During 2011, the bank concluded several important, but very complicated loan restructuring transactions which allowed the bank to fully recover the millions in loans which it had issued in the relevant cases.

The most important achievement for Parex Bank in 2011, however, was the repayment of the state-guaranteed syndicated loan of LVL 164 million, which the bank managed to do by itself and without any additional aid from the state.  This protected state and taxpayer interests and fully resolved Parex’s high-priority and essential obligations.

Also during the reporting period, the Parex Bank launched the major project of selling its subsidiary leasing companies in the CIS.  The first results were achieved in late September 2011, when the bank concluded an excellent deal on selling its Russian subsidiary, Parex Leasing and Extroleasing.  This meant that Parex withdrew entirely from the Russian leasing market.  The first payment allowed the Parex Bank to recover more than USD 14.5 million, and until the end of 2013, it will continue to receive payments from the gradual sale of the problematic assets that were in the leasing company’s portfolio.  In October, in turn, the sale of Pareks Lizinq and Faktorinq in Azerbaijan was completed.  This meant the recovery of another USD 3.4 million.

Effective operations have also allowed the Parex Bank to expand its real estate portfolio quite significantly – to more than 800 units at the end of the reporting period.  These are flats and private buildings of various categories, as well as a wide variety of commercial facilities in the Baltic States.  During 2011, the bank engaged in professional management of the real estate that it had taken over, particularly focusing on the preservation and increase of the value of such assets so that they can be sold advantageously.

On November 22, 2011, Latvia’s Cabinet of Ministers approved a new model for Parex Bank operations and a change in its status.  On December 28, an emergency shareholder meeting was held, and shareholders agreed to waive the bank’s license.  The board was ordered to prepare for the successful change in the bank’s status.  This is a logical and carefully considered step, given that Parex Bank has not been providing classical banking services since August 1, 2010.  After the change in status, the bank will continue to work on problematic assets, loan recovery, and the preservation and improvement of the value of assets.  The structure of Parex Bank assets and obligations will be preserved, not least in terms of client obligations.  The new model for the bank is to be implemented after the Finance and Capital Markets Commission gives its blessing to it.



Additional information:
Marita Ozoliņa-Tumanovska
Head of Communication and Marketing Department
Telephone: 67779142 or 29287169
E-mail: Marita.Ozolina@parex.lv