Having undergone considerable restructuring, the Lithuanian bank sector faces another big challenge: providing efficient access to credit for the fast-growing small business sector. An extension of maturity of the existing subordinated loan of E7.7mn and the increase of commitment by E3.3mn constituting in aggregate E11mn subordinated loan from the EBRD to NordLB Lietuva aims to help meet this challenge.
The subordinated loan will strengthen NordLB Lietuva’s capital base to enable it to grow in line with a quickly expanding market. Kurt Geiger, EBRD director of financial institutions, says the EBRD’s experience in providing facilities for small and medium-sized enterprises should contribute in particular to NordLB Lietuva’s efforts to target the SME sector.
Despite strong growth, financial intermediation in Lithuania remains the lowest among the new EU member countries, with bank loans to GDP only 23.6%, compared with a central European average of 47.5%. This implies that bank loans in particular are expected to grow strongly in the coming years and that lending banks in Lithuania will need substantial amounts of additional capital.
NordLB Lietuva has a long-term relationship with the EBRD. It will use its strengthened capital base to cater for target products – SME and mortgage loans – to clients, says Hinrich Holm, chief financial officer of NordLB Lietuva.
NordLB Lietuva is owned by Germany’s Norddeutsche Landesbank, which won the privatisation tender for the Lithuanian Agricultural Bank in 2002 and rebranded it NordLB Lietuva in 2003. Today it is the third largest bank in Lithuania, with 85 branches and sub-branches and more than 1,200 employees. The bank is concentrating its activities on company financing and retail banking services.
The EBRD has been operating in Lithuania since in 1991 and so far has signed projects worth more than E970mn.