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Luminor Bank AS today publishes its interim report for the first quarter of 2020, which shows that the bank has improved its funding position and is well placed to support its customers through the COVID‑19 crisis.
Luminor’s funding position continued to improve during the first quarter, with the loan‑to‑deposit ratio standing at 99.7% at 31 March 2020, down from 108.4% a year ago. We saw a 567 million EUR increase in deposits and 1.4 billion EUR decline in lending as a result of planned efforts to ensure fair pricing of risk and improve profitability.
The underlying business performance has improved and is reflected in cost‑to‑income ratio without exceptional costs, this stood at 57.5% compared to 59.7% in the first quarter last year. There was a net loss of 21.2 million EUR in the first quarter that was mostly due to provisions for credit impairments caused by the spread of COVID‑19, a large part of which came from increased stage 1 and stage 2 provisions.
Being an important part of the Baltic economy, Luminor continued to offer banking services and financial infrastructure through the emergency situation declared by the Baltic governments, whilst also taking comprehensive measures to assure the safety of the bank’s employees and customers.
Luminor is helping to mitigate the economic harm caused by the pandemic by continuing to provide financing to its present and future customers and offering simplified grace period solutions for both private individuals and corporate customers.
On 4 March, Luminor issued the first covered bonds from the Baltic region, for 500 million EUR, with an interest rate spread over mid‑swap of 0.25% and a final yield of -0.18%. This set the record for the lowest‑ever rate paid by a non‑government issuer from the Baltics. The funds received are being used to diversity the bank's funding base and to further increase liquidity buffers.
Luminor launched remote customer onboarding in Latvia during the period and plans to extend the service to Lithuania and Estonia this year. Another step in promoting online business was the launch of the e‑Commerce Gateway, an acquiring solution for online merchants in all three Baltic countries.
Luminor also made good progress in becoming independent from the networks and payment systems of its former parent banks. The bank completed the setup of independent payment infrastructure on all the core banking systems in the three countries and is making strong headway with the carveout of international payment flows.
Luminor Bank CEO, Erkki Raasuke, said: “Like all businesses, we had to readjust our priorities in the first quarter of 2020 as we focused on the safety of our employees and customers. We started from a position of strength; our new operating model allowed us to adapt our operations efficiently to the changing circumstances during the pandemic.
"We continue to enhance our organisational capabilities to support our customers and are scenario planning to ensure we are well equipped to take action as the crisis evolves. Most importantly, we recognise our role in restarting the economy and are preparing to contribute to this.”
Luminor Q1 2020 report can be found here.