Mortgage Bank accumulates provisions and proceeds vigorously with implementation of the state-aid programmes

In the first half-year of 2010 the Mortgage and Land Bank of Latvia pursued     
active lending within five state aid programmes granting loans to the companies 
in the priority sectors established by government. The development loan         
portfolio accounts for 40% of the total loan portfolio of the Mortgage Bank.    

By way of proceeding with the financing of the entrepreneurs of Latvia within   
the framework of the state aid programmes, the Programme for Improvement of     
Competitiveness of the Businesses has granted 330 loans for 126,4 million lats. 
The following companies producing high added value products benefited from the  
financing: SIA “Dendrolight Latvija”, SIA “Nordic Metalplast”, AS “Dzintars”,   
SIA “Glāzeri BT”, SIA “MC Bio”, a.o. The European Social Fund Programme "Support
to Self-employment and Business Start-ups" granted 130 loans to business        
start-ups for 2 million lats and trained more than 370 start-up entrepreneurs.  
The Small and Medium Enterprises Micro-lending Programme granted 217 loans for  
the total amount of 602 thousand lats. The Bank has started to work with the    
funds of the SME Growth Loans Programme and has granted 56 loans for the total  
amount of 3,7 million lats by now. The Working Capital Loans Programme for      
Farmers has granted 77 loans for 2 million lats.                                

As planned and in line with the law on the state budget for the year 2010, the  
equity capital of the Mortgage Bank was increased by 70,28 million lats in the  
first six months of 2010. The share capital of the Bank is 191,60 million lats, 
but the reserve capital - 2,063 million lats. As at 30 June 2010 the capital    
adequacy ratio of the Bank was 18.6%.                                           

Rolands Paņko - Board Chairman of the Mortgage Bank says: “The payment          
discipline of the customers improves alongside stabilisation of the economic    
situation. We expect that the stabilisation trend pertaining to late payers will
become more distinct in the second half of the year. The increased capital base 
of the Bank enabled us to intensify the revaluation of the risk of the granted  
loans and accumulate provisions for insecure loans. At the same time we have    
also accumulated funds for repayment of the next syndicated loan due in August  
this year. We are glad that the volume of deposits with the Bank keeps rising   
since the Bank has managed to maintain high customer loyalty.”                  

In the first six months the Bank built provisions for insecure assets in the    
amount of 49 million lats. As a result, the unaudited losses reached 46,77      
million lats. As at 30 June 2010 the ratio of the accumulated provisions and    
loan portfolio of the Bank was - 15.8%. The Bank's profit before provisions and 
income tax was 2,3 million lats. As at 30 June the Bank's liquidity ratio was   
117%.                                                                           

In view of the fact that the loans of the aid programmes have a higher inherent 
risk, the ratio of the non-performing loans (overdue more than 90 days) is 23.3%
at the Mortgage Bank. At the same time the Bank has drafted and improved over   
the time the procedure encompassing uniform standards and other solutions for   
the existing and potential late payers. In 2009 these solutions were applied to 
772 loans. This year the amount of restructured loans keeps rising as in the    
first year-half of 2010 various solutions have been already applied to 543      
loans. Carrying over of the principal, capitalisation of the interest or taking 
over of the assets of the collateral are the options used most frequently.      

In the first six months of the year 2010 the gross assets of the Mortgage Bank  
amounted to 937,8 million lats, the gross loan portfolio - 657,2 million lats.  
The volume of deposits grew by 3% in the given period reaching 329,9 million    
lats.                                                                           

“Moody's Investors Service Ltd” notched up future outlook for the Bank's        
long-term foreign currency deposits from negative to stable in the first        
half-year of 2010. The Mortgage Bank is assigned the following ratings:         
long-term foreign currency deposits Baa3, short-term foreign currency deposits -
P3, financial strength rating - E+, mortgage bonds - Baa2.                      

The Mortgage Bank was founded on the 19th of March 1993 as the state commercial 
bank. The group of the Mortgage Bank includes the following subsidiaries:       
Hipolīzings, Hipo Fondi, HipoNIA and Risk Investment Company.                   



For more information contact:                                                   
Sandra Eglīte                                                                   
PR Officer of Mortgage Bank                                                     
sandra.eglite@hipo.lv                                                           
Telephone: +371 67774244, + 371 26577810                                        
www.hipo.lv