Desmond-backed Rietumu’s assets drop amid client cull

Dermot Desmond-backed Rietumu Banka in Latvia delivered an increase in profit in the first quarter as it kept a tight rein on expenses and the lender's liabilities slumped at a faster pace than assets as it went about terminating relationships with "high risk" customers.

Net profit increased to €16.8 million for the three months from €16 million for the year-earlier period, the bank said in its latest financial report. Total assets at the bank fell by 28 per cent during the quarter to €2.15 billion. However, its liabilities fell by more than a third.

Rietumu, in which Mr Desmond owns a 33 per cent stake, decided in March to end its relationship with 4,000 “high risk” customers, most of whom were based in offshore jurisdictions outside the Organisation for European Cooperation and Development.

It followed Latvia's Financial Sector Development Council agreeing to ban co-operation between banks and shell companies that have no economic activities.

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Management shakeup

Rietumu, where long-standing board member Rolf Fuls has recently taken over as chairman as part of a management shakeup, said in its latest report that its future strategy is to work with customers that own production companies, distribution networks, retail chains, transportation and real estate enterprises, as well as firms trading internationally.

The lender said it will also concentrate on assets and wealth management, brokerage services and corporate loans.

Authorities in Latvia have been seeking to tighten supervision of the sector after the Baltic state’s third-largest lender, ABLV Bank, was put into liquidation in February as the US accused it of using “institutionalised money laundering as a pillar of the bank’s business”.

Also that month, the country’s central bank governor, Ilmars Rimsevics, was detained for 48 hours by anti-corruption authorities over bribery allegations that he denies.

Mr Fuls said in an interview with Latvian financial publication Dienas Bizness in early May said that Rietumu has more resources to develop lending than most local rivals as the whole sector seeks to overcome reputational problems.