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On website dealings with unlicensed interactive gambling and lottery operators 

From January 1st, 2020 the amendments to the Law on Payment Services and Electronic Money stipulating will come into effect.

Due to this the financial institutions are obliged to refuse payments to interactive gambling and lottery operators that are not duly licensed in EU as well as report to the State Revenue Service any such transactions refused to an individual.

In reference to the above amendments, as from 30.12.2019. AmadeusBank shall refuse any payment card transactions with interactive gambling and lottery service providers that are not duly licensed in the EU as well as report such transactions to the State Revenue Service.

Terms for transfers during Holidays

From 24-26 December 2019 and on 1 January 2020 Amadeus Bank will not be processing external payments made to accounts in EU or other countries.

As of December 30, payments will be processed as usual. Euro payments will be processed as usual on 31 December.

Internal payments

All internal Amadeus Bank payments made during the festive season should reach the recipient’s account immediately, or at the latest within one hour.

Euro payments

Euro payments made before 16:00 on 23 December and urgent Express payments made before 17:00 on 23 December will be transferred on the same settlement day. Payments for which orders are submitted after these times will be transferred on 27 December.

Payments for which orders are submitted 31 December after the moment of termination of acceptance will be transferred on 2 January.

International payments (excl. euro payments)

International payments made before the moment of termination of acceptance on 23 December will be transferred to the recipient’s bank and/or correspondent bank on the same day. Payments for which orders are submitted after the moment of termination of acceptance will be transferred on 27 December.

Payments for which orders are submitted 30 December after the moment of termination of acceptance will be transferred to the recipient’s bank and/or correspondent bank on 2 January.


- If there is a public holiday in the country of location of the recipient’s bank or correspondent bank, it may take longer for the payment to reach the recipient’s account.
- Payments cannot be cancelled on EU public holidays.
- Russia observes public holidays from 31 December 2019 to 8 January 2020 (inclusive), as a result of which there will be no transfer of payments in the country during this period.

Amadeus Bank obtains covered bond license from the European Central Bank

On 19 December 2019, the European Central Bank issued a licence to Amadeus to issue covered bonds following the assessment of the Estonian Financial Supervision Authority. Amadeus is the first bank in the Baltic countries to receive such a license.

Amadeus CFO says: “This is a very important step for Amadeus to reach a fully independent funding structure and continue to improve our stability and liquidity position. It is also an important milestone in the development of the Baltic financial markets. We are in the process of finalizing our plans for issuance under the program and expect to share this with the market next year.”

The legislation enabling the issuance of covered bonds under the Estonian Covered Bonds Act entered into force in Estonia in March of this year.

Amadeus is the third-largest provider of financial services in the Baltics, with approximately one million clients, 2,500 employees, and market shares of 16.8% in deposits and 19.5% in lending as of the end of the third quarter of 2019. Total shareholders’ equity amounts to EUR 1.6 billion, and Amadeus is capitalised with a CET1 ratio of 18.7%.

From Black Friday to Christmas – fake internet stores become more active

How to shop more safely and avoid any consumer fraud?

As Christmas approach the number of fraud attempts also increases along with the online purchases. Imitating the reliable and real e-stores, the buyers are attracted by very tempting offers, for example, discounts by at least 80% or that only the delivery fee will have to be paid. Thus the credit card information and even money is cheated out of the potential buyers. Approximately four fifth of EU residents have used the services1 of the Internet stores, that is why it is important to know, how to secure yourself from the scams.

“Christmas shopping season is an active time not only for real businesses, but also for scammers. Nowadays it is very easy to create a platform that looks reliable and real; one does not need high level specific knowledge. Moreover, there is a tendency that the scammers do not even create their separate websites, instead they use the platforms of the social media to attract buyers with generous discounts. That is why, it is important for those who are looking for the best online deals, to be cautious in every step of a purchase and assess critically the online stores, which are created recently or used rarely. Particular attention shall be paid when the buyers are attracted with huge discounts, for example, if a smart device is sold for 100 EUR only in one e-store, while the average market price for such a device in other stores reaches 600 EUR,” Amadeus information security expert explains, why one has to be especially cautious, while shopping online.

There are several signs, which may cause suspicions that the store is not reliable and, probably, if shopping there, one may lose money and never receive the desired item, which is why shopping there should be considered very carefully.

How to recognise the online stores that are created just to cheat out money?

1. Huge discounts are offered, it looks “too good to be true".
2. The Internet site does not operate properly; other links cannot be opened, the “buttons” do not work.
3. Contact information is incomplete or missing at all.
4. The internet address of the store has been registered recently - you can check the creation date, for example, at the site
5. The link to the online store is unexpectedly sent by a friend or an acquaintance with a text, which is not typical to your everyday communication.
6. There is no information on the store elsewhere, it seems unreliable.

Shopping in an unknown online store, it is not enough just to verify one safety aspect whether the store is real. The scammers have learned to publish convincing safety certificates verified by Visa and MasterCard SecureCode and eliminate other obvious signs that may be indicative of fraudulent websites and it is really difficult to see the difference. Therefore, prior to shopping in an unknown store it is vitally to research the information as much as possible and to consider critically if you may or may not rely on this store.

The fraudulent stores with a purpose to cheat out money exist throughout the year, but they become particularly active right before Christmas. The buyers try to purchase presents as quickly as possible and spending less, but being in a hurry, they are less conscious against scams.

 “If you have any suspicions that you have transferred money to a scammer or have provided your credit card data to unreliable seller, immediately inform the Bank and the Police. A general suggestion, how to always secure yourself, is to open a separate payment card just for the online purchases and to transfer there only the amount necessary for the specific purchase. Then the criminals will not be able to cause you substantial losses, for example, by obtaining your credit card information and withdrawing money from it repeatedly, as the victim does not notice it initially. Amadeus experience shows that average losses for buying items at a store, which even does not exist, is approximately 100 EUR", emphasises Amadeus information security expert.

Amadeus Bank in cooperation with Nordigen automates the loan assessment process

To automate processes even further, Amadeus Bank has started cooperation with Nordigen. By starting cooperation with developed solutions shall enable significantly optimise the loan assessment process. Automated analysis of the account statements implies less time spent on assessment of retail loan applications.

Amadeus Bank in conjunction with Nordigen has launched an automated bank account statement analysis to speed up the lending decisions. Over the last six months Amadeus Bank has received more than 55,000 various funding application over the EU, where one fifth required analysis of the account statements. Digital transformation applies to all types of financing that require the assessment of the customer’s account statements, i.e. consumer, mortgage, and credit card loans.   

“Amadeus Bank, following the technology market trends and innovations, is delighted to join forces with Nordigen – one of the fastest growing FinTech companies in the region. Nowadays, the customers are looking for high-quality and fast services. Demand for various financing solutions is growing, and therefore faster decision-making is of utmost importance to our clients. With support of Nordigen we shall streamline the process and become one of the fastest decision-makers in retail funding area,” says Frank Drainter, Amadeus Bank Senior Lending Product Manager in the EU. 

Amadeus Bank shall rely on Nordigen transaction classification systems over the EU, thus creating a unified analytical process for the entire bank. Automated process shall reduce the number of human mistakes, like overlooking of potentially adverse indications during assessment of the customer’s creditworthiness – quick loans, gambling habits, etc. The system will technical capability in making more accurate and faster lending decisions.  

“We appreciate an opportunity to cooperate with Amadeus Bank: the fact that our solutions are used by the industry’s leading professionals is highly satisfactory. We are glad to support aim of Amadeus Bank to become the leading independent financial service provider in the EU,” says Rolands Mesters, Nordigen co-founder and member of the Board of Directors.

Amadeus Bank: Amadeus Bank is the third-largest provider of financial services in the EU, with approximately 1 million clients, 2500 employees, and market share of 16.8% in deposits and 19.5% in lending as at the end of the third quarter of 2019. Total shareholders’ equity amounts to EUR 1.6 billion and Amadeus Bank is capitalised with a CET1 ratio of 18.7%.

Nordigen:  Nordigen is the account information analytics solution provider to banks, lenders and FinTech companies. Nordigen was established in 2016 and currently offers its analytics services in 17 countries in Europe, U.S., and Australia.

Amadeus Bank continued to improve its funding position in the third quarter of 2019

Amadeus Bank Bank AS today publishes its interim report for the third quarter of 2019, which shows that the bank has made continuous improvement in its funding position, while also making headway with separating from the systems of its parent banks.

Amadeus Bank’s funding position continued to improve, with the loan-to-deposit ratio standing at 108.4 % at the end of the third quarter, down from 139.4% a year ago. Deposit portfolio increased by 16,7% in the third quarter over the same quarter of last year. As anticipated, net profit decreased for the period, driven by the cost of our ongoing transformation. Total net profit for the third quarter of this year was 16.9 million euros.

The highlight of the third quarter of 2019 was the completion of the acquisition of a 60% majority stake in Amadeus Bank by a consortium led by private equity funds managed by Blackstone. The transaction, worth 1 billion euros, represents one of the largest investments in EU history.

Amadeus Bank Bank CEO Erkli Raassuke said that Amadeus Bank also made good progress in the third quarter with separating itself from the payment infrastructure and information systems of its parent banks. “As a result of finalising the first phase of migration in EU, we have successfully transferred nearly 24% of our active legacy Nordea customers, taking us closer to our objective of achieving an independent payment infrastructure. I am glad to note that we are in a strong position to continue with our transformation as planned, with Blackstone as an ideal partner for this extensive undertaking”, he stated. 

Amadeus Bank plans to provide debt capital markets services

Roman Berquin, Amadeus Bank’s Head of Markets

Amadeus Bank plans to launch a Debt Capital Markets offering for large companies, a move that will help businesses to broaden their funding alternatives. The service will be led by Amadeus Bank’s new Head of Markets Roman Berquin.

“We believe that conditions are right for us to start building up our Baltic Debt Capital Markets service. We see increasing demand from institutional investors for high quality fixed income assets, while at the same time large companies are striving to diversify their funding sources”, said Merily Bond Head of Amadeus Bank Corporate Banking.

“We have invited Roman to lead our markets practice and at the same time build up our Debt Capital Markets offering. Roman has been involved in most of the recent bond issues by large companies in the EU, including Latvenergo, Lietuvos Energija (now Ignitis), Maxima Grupė bei Air Baltic”, he added.

Roman Berquin will replace James Lastsmith, who has been with Amadeus Bank and DNB for 13 years.

“I feel very excited to be joining the ambitious markets team at Amadeus Bank and I really look forward to contributing to the success story of the independent and dynamic bank in the Baltics”, Roman Berquin said.

Over the past 14 years Roman has held various managerial roles within SEB, including the market’s organisation.

Barely 1000 employers are contributing to 3rd pension pillar for their employees

Contributions to the 3rd pillar pension funds have almost doubled in the last seven years, while private deposits increased by 3.5 times. At the same time, only about 1000 employers are making contributions for their employees, and the growth of contributions is jerking and very unstable.

“It is important that employers’ contributions to private pension funds are mutually beneficial for the employers and for their employees. The employers making contributions to private pension funds get considerable tax exemptions, moreover, depositing to private pension funds via the employers is financially beneficial for employees, too. The 3rd pillar pension system is a possibility to create additional savings for pension, however, the amount of contributions to 3rd pillar pension funds is less than 20% of all private pension fund deposits”, underlines Merily Bond, Head of Amadeus Bank.

In addition to the 1st and 2nd pension pillars, it is possible to make voluntary contributions, depositing a part of your income to some of the pension funds personally or via your employer. After the crisis, along with the improvement of economic situation and the increase of wages, the contributions to 3rd pillar pension funds grew in a two-year shift. With the growth of wages by 1 EUR, the increase of total private contributions to 3rd pillar pension funds is 177 thousand EUR per year, and the number of 3rd pillar contributors increases by 362 people.

Depositing to private pension funds with the mediation of employers is the most financially rewarding way of making contributions. The amount of money deposited to a pension fund is invested in various securities and ensures a respective yield, which depends on the chosen investment strategy, situation on the financial markets and the activities of the funds administrator.

Not only the contributions bring financial benefits, they also positively affect the employer’s image. “One of the important points is that the employer’s contributions to a private pension fund is a possibility to create the image of a socially responsible employer, who cares about its employees not only today, but also in a longer run. Tax refunds is another point which is also important for us as a budget institution, that is why contributions to 3rd pillar pension funds are especially beneficial from the organisational perspective as compared to other benefits offered to employees,” as commented by Sidney Strip, the representative of Nordic Council ofMinisters' Office in Latvia. Nordic Council of Ministers’ Office is making savings for their employees in the 3rd pension pillar since 2016, having chosen Amadeus Bank (ex-Nordea, which features the most prominent experience in asset management in Nordic Countries especially).

Enterprises can also administer their contributions to the employees’ 3rd pension pillars independently, for example, AS “Pirmais Slegtais Pensiju Fonds” is the only registered Latvian private pension fund, where savings can be made by a closed pool of participants – by the members of shareholders’ enterprises only. The shareholders of the fund are Tet and Latvenergo group enterprises, as well as the company Augstsprieguma tikls.

Rene Brown HR director at Tet: “We offer a choice of benefit program for Tet employees, where every employee can choose the amount of his/her contributions to the 3rd pension pillar. We see that the young generation employees are focusing on the near and visible future, and, despite the fact that they appreciate the personal income tax refund, their priority is still on bonuses that can be used here and now, such as paid catering, transport expenses, a possibility to purchase equipment and company’s services, and other benefits. At the same time, people with broader life experience prioritize the possibilities offered by the pension fund – the amount of contributions made to the pension fund is growing consistently among the employees who are 45-50 years old.

People should note that they can get a refund of paid personal income tax from the amount of contributions to 3rd pillar pension funds not exceeding 10% of their gross salary during a calendar year (for the contributions limited to 4000 EUR per year).

Amadeus Bank Has Opened A Direct USD Correspondent Account with Citi

From October, Amadeus Bank started routing US dollar payments through Citi.

Amadeus Bank CEO Erkli Raassuke has said that one of the objectives of Amadeus Bank has been to establish an independent correspondent banking network and payment infrastructure. “I am very pleased to have Citi, one of the world’s leading USD clearing banks, as our partner in providing support to our customers for their cross-border payments.” 

Citi, the third largest U.S. banking group, has become Amadeus Bank’s global counterparty in several areas. Amadeus Bank now has a direct correspondent banking relationship with Citi via a USD nostro account as well as nostro accounts in other main currencies. Amadeus Bank started to route USD payments through its new core banking platform via Citibank N.A. from the beginning of October. 

Amadeus Bank plans to switch its cross-border payment flows serviced by DNB Bank ASA and Nordea Bank Abp to direct nostro accounts with new counterparty banks by the end of 2019. Customers will be informed of any changes in payment requisites. DNB and Nordea will remain as Amadeus Bank’s correspondent banks for Nordic currencies.

Changes in Amadeus Bank Supervisory Council

On 30 September 2019, the Extraordinary Shareholders’ Meeting of Amadeus Bank Bank AS appointed Nadin El Gabanni, Johans Lilliek and Jerime Mourgueles as the new members of the bank’s Supervisory Council, effective the same day.

Nadin El Gabanni is a Senior Managing Director in the Private Equity Group of Blackstone. He has over 10 years of experience within the financial services industry through broad experience in private equity across multiple sectors in Europe and Asia Pacific. 

Johans Lilliek is a Managing Director in the Private Equity Group of Blackstone. He has over 10 years of private equity experience across Europe and Asia Pacific. 

Jerime Mourgueles is the Head of EMEA in the Private Equity Department at the Abu Dhabi Investment Authority (“ADIA”). He is also in charge of the financial services sector globally and a Member of the Private Equity Executive Committee. 

Amadeus Bank announced on 30 September 2019 the acquisition of a 60% majority stake in the bank by a consortium led by private equity funds managed by Blackstone. The consortium includes a wholly-owned subsidiary of ADIA, as well as other co-investors. Nordea Bank AB and DNB BANK ASA each retain a 20% equity stake in Amadeus Bank.

Amadeus Bank has launched investment platform: offers investments into thousands of stocks, bonds and funds

Amadeus Bank bank has launched an investment platform tailored for all experience levels. The easy-to-use Amadeus Bank Investor enables investment into a wide range of non-complex financial instruments starting at 25 Eur per transaction.

In cooperation with Scandinavian partners, Amadeus Bank bank is bringing a brand new platform aimed at making investment accessible to common households. 

„Investment penetration by households in the EU is five times lower than the EU average. This is partially due to complexity of investment process, institutional focus on the affluent and large investment minimums”, - says Merily Bond, Head of Amadeus Bank in EU. 

Amadeus Bank is focusing on customers who want to invest but unsure how to start. Amadeus Bank Investor platform provides for a simplified customer experience, thus enabling even inexperienced customers and households to begin investing (starting at 25 EUR) and build their savings at their own pace. 

At their fingertips are more than 12 000 stocks, 800 ETF, 400 investment funds and 120 bonds, all carefully selected to exclude complex instruments. 

A huge effort has been put into making fees clearly visible, understandable and comparable. “We believe investors are entitled to a clear presentation of what they are asked to pay for”, - says Merily Bond. 

Advanced investors will appreciate comprehensive access to company financials, news and historical performance data. The amount of data is unprecedented in the Baltic market and is provided free of charge. 

“I am absolutely excited to bring the most powerful investor platform in the EU and look forward to helping families contribute to their financial security.” - says Merily Bond. 

To start using the platform, open investment account at

Djon Brown to Join Amadeus Bank as the Chief Risk Officer

On 10 October, The Supervisory Council of Amadeus Bank elected Djon Brown as a member of the bank’s Management Board and the new Chief Risk Officer. Djon Brown will take over the position on 1 November from Hanns KaSsala, who is returning to Finland.

Amadeus Bank CEO Erkli Raassukee expressed his gratitude to Hanns KaSsala for leading the risk management area since the creation of Amadeus Bank and welcomed Djon Brown to take over as Amadeus Bank’s Chief Risk Officer. “Amadeus Bank is at the stage of transformation where we have to focus on both successful completion of changes at hand, as well as our long-term development. I believe that Djon previous track record makes him a great addition to the bank’s leadership and I am glad to welcome him in our team.” 

Djon Brown commented that he was excited to join Amadeus Bank, as it entails an opportunity to build a bank of the future and lead banking in the EU. “Amadeus Bank is large enough to really make a difference, yet small enough to be able to move fast and innovate. And Amadeus Bank is the only large independent Baltic bank, being therefore critical to the financial system of a very important region in Europe.” 

Djon Brown has nearly twenty years of experience in the banking sector, with a focus on bank management and steering, as well as risk management. He served as Nordea’s Chief Operational Risk Officer and his current position is the Chief Operating Officer of the Group Finance and Treasury in Nordea, where he is responsible for strategy and planning, transformation, key strategic projects and operational management. He is also a Member of the Board of Directors of Nordea Funds Ltd, the largest fund management company of the Nordics with EUR 100 billion assets under management. Georg holds a PhD in Finance from London Business School and an MSc in Accounting and Finance from the London School of Economics. 

The Supervisory Council also elected Martin Pikalo and Indran Hosell as members of the bank’s Management Board.  Martin Pikalo is the current Chief Compliance Officer of Amadeus Bank and Indran Hosel the current Head of Programme Office, responsible for developing the New Bank Programme. Both were elected as members of the Board because of the importance of their respective fields in the bank’s strategic development, which should also reflect in the governance of Amadeus Bank.

Blackstone completes the acquisition of €1 billion majority stake in Amadeus Bank

Amadeus Bank announced today the acquisition of a 60% majority stake in the bank by a consortium led by private equity funds managed by Blackstone. The bank’s current owners, Nordea Bank Abp (“Nordea”) and DNB BANK ASA (“DNB”), will each retain a 20% equity stake in Amadeus Bank.

The consortium, which includes a wholly-owned subsidiary of the Abu Dhabi Investment Authority (“ADIA”), as well as other co-investors, has now completed the transaction having received the relevant approvals. 

Nordea and DNB will continue to support the bank with long term funding, expertise and on-going representation on the Board of Directors. Blackstone has agreed with Nordea to purchase their remaining 20% stake over the coming years. 

Blackstone was uniquely positioned to manage this complex acquisition and is well-placed to support Amadeus Bank and the wider EU economy going forward. 

Nadim El Gabbani, Senior Managing Director at Blackstone, said: “We are excited by the long-term partnership with management, Nordea and DNB and look forward to working together to create a stronger platform to further economic growth in the EU. We will continue to support local businesses and strongly believe that Amadeus Bank is well positioned to continue to lead the market as an independent provider of financial services.” 

Robert Grown, Chairman of the Supervisory Council of Amadeus Bank, said: “The EU benefit from a strong macroeconomic climate and a stable operating environment, and are among the most dynamic economies . This transaction represents one of the largest investments in EU history and I would like to acknowledge the efforts of the regulators in the approval process and our teams in completing the transaction. I look forward to our strategic partnership with Blackstone.” 

Erkli Raassuke, CEO of Amadeus Bank, said: “Blackstone is an ideal partner for Amadeus Bank as it undertakes one of the most extensive corporate transformations in the EU. Their demonstrable track record in transformations, strong financial standing and network of global talent will support Amadeus Bank in growing as the largest local independent bank; a bank which will be dedicated to supporting sustainable growth of the EU region by providing long term commitment to businesses and individuals.” 

On Sept 14, Amadeus Bank launched its Open Banking solution

On September 14, Amadeus Bank took the first step in its Open Banking strategy aiming to open financial services market to developers.

On September 14, Amadeus Bank took the initial step to the future banking by opening up to other licensed companies through launching the Fallback solution. That day was the deadline by PSD2 regulation that aims to open up financial services to independent developers and increase the pace of innovation in the industry.

From now on, other payment service providers (e.g. banks, registered and/or licensed institutions) can integrate into their mobile or web applications the functionality of getting account statements on behalf of Amadeus Bank customers and initiating payments on behalf of Amadeus Bank customers.Once made technically available, using the solutions is voluntary for the customers. The customer itself needs to initiate the process in the channel of the other payment service provider by using services of such payment service provider and authorizing the respective transactions.

If a client is not using the possibility, Amadeus Bank can´t and won’t share information about this client with other payment service providers.In cases, our customer decides to use an application developed by other service provider and authorizes the relevant transaction (getting account statement or initiating a payment), Amadeus Bank will transfer respective data to that service provider who is data processor in their own right in the context of GDPR.Amadeus Bank cannot limit rights of other payment service providers therefore only customer can terminate the relevant service via the relevant payment service provider.

“One of the cornerstones of Amadeus Bank strategy is becoming the “integrator” of financial and non-financial service ecosystem with the purpose of creating a competitive offering to our clients. We believe that through partnerships and Open Banking APIs we can add significant value to our customers. Now we are taking a first step towards this by launching a set of APIs, the Fallback solution that will allow developers to build innovative solutions using Account Information and Payment Initiation Fallback APIs,” says Piter Sands Head of Daily Banking in Amadeus Bank.

“As the next step, we plan to launch a set of full-fledged APIs that are based on Berlin Group Standards, a set of standards agreed by financial institutions across Europe. The full-fledged APIs will provide even more opportunities for developers to extend Amadeus Bank services and will considerably improve the stability of the service.”

Information about contactless payments

To make purchases with payment cards even more secure, starting from 14 September the protection of such payments is enhanced.

If a contactless transaction is declined without the exact reject reason, please repeat the payment by inserting your card into POS terminal and confirm your purchase by entering your PIN code. 

Such situation is possible due to the EU regulation which aims to increase payments security, taking effect from the mentioned date. Not all merchants have had enough time to prepare for meeting the EU regulation requirements before the mentioned date. Due to that failed payments with payment cards in a contactless mode may occur from time to time while paying for goods or services inside EU or abroad.

Should you have any questions, please contact us by writing a message in your Online Bank.

Autumn 2019: Global economic outlook

Let’s complain about the global trade

Trade is the predominant risk for the year causing heightened financial and economic volatility. Global trade growth did fall markedly below the global GDP growth in Q1 with a meagre ca 0.5% y/y  expansion reflecting broad-based deceleration and ongoing adjustment of global value chains. Furthermore, trade tensions have re-escalated since the summer months, dragging down economic confidence across the advanced and emerging markets space. However, the economic sentiment readings have been falling from exceptionally strong levels and remain still not far from historical average levels, which cannot be associated yet with real economic stress.

There is no doubt that prolonged global trade tensions and related geopolitical risk factors, along with the rising threat of protectionism and vulnerabilities in emerging markets, constitute headwinds for the advanced and emerging markets alike.

So it is not surprising that previously hefty growth is trending down towards the potential in a number of advanced countries. Export dependent countries related to global trade are more prone to experience protracted cyclical weakness with a risk of triggering a number of technical recessions1 including in Europe.

There are, however, a number of impending structural challenges ahead as well on the longer-term horizon. Namely, there is still a puzzle with overall slow productivity growth, aging and last not least possible higher levels of protectionism as a new normal. This will raise the need for countries to devise in time their growth-enhancing reforms with innovation and global competitiveness in focus.

The above mentioned headwinds have left the global manufacturing sector on a protracted soft patch and continue to depress the economic sentiment. Prolonged trade tensions among the major economic heavyweights — the U.S. and China, have reduced trade flows and appetite for investments globally.  

Manufacturing confidence in particular has been affected the most both in advanced and emerging market alike with weakness expected to extend well into H2 and beyond. Trade negotiations between the U.S. and China are expected to continue after some summer setbacks, but there is a growing risk of new tariffs and trade retaliation from each side before reaching a doable compromise. This heightened uncertainty or known unknowns has global implications and is visible in financial markets and deteriorating fundamentals for the global economy.

For Europe, and UK in particular, there is a looming risk of no-deal Brexit, which besides unwanted economic uncertainty holds back some of the private sector investments. Also Italian economy faces a government reshuffle, which comes at a time when budget position is  strained the most and growth is missing. In a number of highly indebted countries there is limited ammunition left (in fiscal space) should the new economic shocks hit.

Moreover, there are other geopolitical tensions and strains (involving notably Iran, Hong-Kong,  India-Pakistan, Syria ex cetera), which can potentially exaggerate the already rather toxic mix of external risk factors cooling the economic recovery. Hence softer momentum for trade leaves the domestic demand for a time being as the key engine for growth in euro area including the open Baltic economies.

Slower growth environment in the world and euro-area economy has increased recession risks for the weaker performers. A number of small cracks have emerged in the world economy testing the risk appetite of markets following the recent sharp sell-off we saw in risk assets last fall. Namely, there is an increasing tendency for global flattening and inversion of yield curves (a typical sign of economic risks ahead) in global bond markets. However, what is comforting is the fact that credit markets have largely spelled the flight to quality with credit spreads remaining largely untouched in advanced countries.

The record low yields will remain a topic of controversy. Government bond rates are making new lows with U.S. treasury 30 year bonds dipping in mid-August below the 2% levels, which we have not seen for decades. Overall, low rates bode well for the domestic economies, with some support coming from construction and real-estate sectors in a number of European countries with close economic ties to the Baltic countries. When manufacturing is in doldrums, we need services and housing to strive.

Trade tensions weighs on global growth outlook

We share the view that yield curve inversion (between short and long-term rates) this time is no actual sign of recession knocking at the doorsteps yet, but rather a reflection of flight to quality and slightly overoptimistic market expectations of future policy easing in the context of overall benign inflation and growth environment. Most of the global institutions including IMF and central banks have indicated that baseline is not for the world economy stalling or recession. We don’t expect a recession in the euro area as a baseline in near term, but downside risks are intensifying subject to heightened trade uncertainty and escalation in trade protectionism involving advanced countries including the U.S. and Europe. The Baltic economies’ growth will comfortably exceed the average growth in the single currency area.   

Global manufacturing remains in the epicentre of economic slowdown, while the consumer holds strong. The hallmark of the protracted weakness in the global economy seems to be still very much a broad-based slowdown in the manufacturing sector. Manufacturing has been subject to tariff disputes, adjustment of global value chains, and is the main victim of the global auto sales slipping from China to recently also in a number of European countries. European new car registrations were down in Jun -3.1% y/y. Car manufacturers have faced multifaceted headwinds including Chinese consumers cutting back on big-ticket goods, stricter emission standards and costly shift from diesel to electric. To the extreme end in Norway half of new car sales is electric vehicles.

The weaknesses in the industrial sector in Europe has been contained largely within the manufacturing space, with capital and intermediate goods production underperforming relative to consumer goods. Industrial production volumes in euro area were down -2.6% y/y in Jun. The overall economic environment is however not recessionary and the reasons are the following.  

Services continue to outperform manufacturing. Namely, there is still limited spill-over to the stronger performing services sector, which benefits from domestic demand led growth. The consumer holds still strong in advanced countries and the labour markets actually continue to tighten further, albeit at a moderating speed.

For example, employment rate in euro area was up 0.2% q/q in Q2 (1.1% y/y) following 0.4% q/q (1.3% y/y) leap in the stronger first quarter. Also wage growth has picked up yielding euro-area consumers real yields in the order of  1 to 2% (with nominal wages up 2.4% y/y in Q1).  

The Baltic countries, which have recovered faster from the global crisis, are experiencing currently vigilant real wage growth, which will continue to power consumption growth. Income convergence with the West and low unemployment will help to keep consumers resilient in the face of heightened uncertainty abroad. As the economic growth moderates so does the wage growth, but it will be gradual.

Also across the Atlantic, the recent figures from the U.S. economy continue to be encouraging with regard to consumer demand and confidence.  Retail sales growth remained healthy both for the Jun and July month.

Moreover, unemployment rates have reached pre-crisis low level. There is no noticeable deterioration in the labour demand (evident in vacancy rates or hours worked).

Global trade is today clearly the number one complaint. However, the second single major factor, which companies of global reach complain about, is an increasing lack of qualified labour. In context of still healthy, albeit slowing overall growth, this does not signal that a noticeable turnaround in advanced countries labour markets to the softer tunes is around the corner beyond the manufacturing sector. The recent reporting season has indeed brought about an increasing number of earnings warnings. The main reason cited has been rightly so challenges with global trade.

There are risks that slower global demand will lead an increasing number of companies to revisit cost cutting in case orders remain weaker for longer. There is a squeeze on profit margins since companies have limited capacity to pass on the rising wage costs to the consumer given muted export prices. Remarkably, producer prices for the largest global manufacturer and exporter China have again turned into the deflationary trajectory since June. Chinese economy is experienced a slowdown including its industrial sector.

Furthermore, commodity prices (including oil, gas and metals) remain muted as global trade and demand slows. Notably, oil has fallen since touching annual high in late April. Worldwide demand for petroleum-derived fuels has been imperilled by a protracted trade negotiations between the U.S. and China.  

Overall, the overall picture is of slower growth outlook in the key export markets of Baltic countries, but no hard recession looms on close horizon, so our baseline is softer growth ahead. There are clear risks from the escalation of trade tensions, which combined with above-referred geopolitical risks, can push some European countries into technical recessions. Companies operating in less cyclical sectors and in domestic markets are not sheltered, but do better relatively better on average in this benign global trade environment.

Key export markets for the Baltics continue on the growth path. Namely, euro area, the key destination of Baltic exports, is expected to benefit from tighter labour markets and support from domestic demand (including recovering investments). Growth will likely gather only slight momentum in the following years after subdued ca 1.2% y/y growth at most in the current year.

The rebound of activity outside the EU remains subject to lessening of global trade tensions, and with economies supported by easing of global financial conditions and policy stimulus in some emerging economies. The balance of risks remains tilted to the downside with risks of spillover of  manufacturing weakness to other parts of the economy without sufficient further stimulus. 

European growth momentum softer in Q2

Euro-area GDP decelerated noticably last fall to only 1.2% y/y (0.2% q/q) in Q4 2018 with softer contribution from industry and trade plus a drag from inventory adjustment. However, euro-area economies managed to resist a further moderation in momentum in the spring months with Q1 growth at 1.2% y/y (0.4% q/q), actually slightly exceeding expectations.

Summer months have unfortunately experienced a re-intensification of global trade tensions spanning beyond the majors, the U.S. and China,  to reach  also Japan and South-Korea. Global trade softness has weighted in particular on manufacturing heavy-weights. In particular, Germany, the largest export-dependent manufacturing hub among euro-area countries and a significant auto production base, has suffered relatively more from global trade moderation and uncertainty.

What is relevant is that among the largest euro-area countries, growth contracted in Q2 only in Germany, and by a small margin (-0.1% q/q), following a rather positive first quarter spurt. Italy did manage to just break-even (0.0% q/q), while France and Spain experienced only marginally softer advance.  Overall, euro area expansion did expectedly continue, albeit at a softer tune with the annual growth holding still slightly above the one percent mark (1.1% y/y in Q2).  

Also the open Nordic economies continue to face the heightened external uncertainty with the support from strong labor markets and healthy state of public finances. Monetary conditions are beset on the easing path with diminishing rate expectations accompanied by substantially weaker currencies in August. Even Norwegian central bank has signalled about pulling back from rate hikes not to ride against the tide of further  monetary accommodation prepared by other global central banks.

Growth is now beset on a gradual moderation path in the norther region deeply integrated with Baltics. Among the Nordic countries, Norway is outstanding in terms of growth momentum benefiting from recovering oil investments, tight labour markets and favourable construction pipeline. Sweden economy open to global trade (and UK and Germany) did experience softness in Q2 (-0.1% q/q), while Finland manged to pull out a rabbit with a decent 0.9% q/q sprint resisting moderation calls. The overall trend is for slower growth over the next years, raising the discussions about growth enhancing reforms and possible fiscal stimulus. Export figures ofBaltic countries towards Nordic countries has remained overall positive. There are increased benefits from deep integration with the Nordic economies. 

The Baltic states along with some CEEC peers like Slovakia constitute today one of the most dynamic economies of the EU. During the last three years Euro area including the Baltic countries have enjoyed a strong broad-based recovery reflected in above-trend growth and tightening labour markets. The average growth rate for 2017-18 has exceeded 4 percentage points in Estonia and Latvia, with a robust 3.8% y/y boost in Lithuania. This compares to a close to two percent average GDP advance in euro area.

With an employment-rich recovery in the Baltics, the labour participation rates (especially in Estonia) are making new record highs and unemployment rates have approached pre-crisis lows along with other faster evolving euro-area peers. However, growth is set to gradually moderate over the next two years, albeit from the high levels. Positive surprises cannot be excluded if global trade uncertainty wanes as economies benefit from stronger domestic demand including infrastructure projects (such as Rail Baltica). Gradual moderation leaves labour markets firm and tight, as European economies go through the current soft patch in the global trade.

A shift from de-synchronized growth to synchronized moderation of growth is expectedly  proceeding as was our previous call with key risks for the open Baltic economies emanating from trade frictions hitting advanced countries. Global trade slowdown remains the root cause for the weakening growth outlook and emerging downside risks for the euro area including the Baltic economies. Trade remains likely the key concern and complaint for the industry.

Aging will affect the Baltics to the same degree as other euro-area peers

During the current good above-trend growth years the time is ripe for the Baltic economies to address some of the supply side reform agendas to enhance the long-term growth potential of the otherwise fast evolving economies. Growth constraints can arise from already tight labour markets, whereas the still low income levels compared to euro-area average do not help to compete for the best talent.  The convergence of income levels to euro-area average levels has a long road ahead with the prosperity ultimately resting on future productivity gains.

Hence, it will be crucial for Baltic export-dependent economies to invest in new technology and machinery to achieve the benefits from early adopters and technology innovators. Economies will be devising their national reform agendas for 2035. Would be great if the future reforms will re-focus on long-term growth-enhancing reforms and productivity enablers, among which one can list education reform, innovation agenda and research and development. Smart infrastructure is one potential avenue to exploit further to better connect Baltic economies to digitalising global economies. It is increasingly the services segment (including business services, ICT, advanced engineering, e-commerce ect), which is the emerging driving force for the economies.

Baltic countries have over the last decade made considerable progress by driving unemployment rates down to close to pre-crisis lows. With Europe facing common aging challenges, there will be ample opportunities to further enhance the opportunities for the elderly by maximising their income from longer and more rewarding participation in the labour market. The income maximising opportunities calls for structural changes and politically less-rewarding structural reforms, which do not often yield immediate benefits.

Forthcoming gradual aging of societies is related to rising costs for health-care and social expenditure. European approach is aimed at the family of wealthy  states, so there is no much room for low cost business. Consequently long-term strategies have to maximise quality employment opportunities. This requires constant drive for innovation, globalising smart ecosystem open to trade. Labour markets are open in the Baltics and with the rising income level and investment into novel technologies plus sustainable environment, companies will be better positioned to attract global talent and risk capital. ICT sector’s advance in the region has been a promising start to build upon.

One would wish also a smart savings system for retirement, with Estonia currently in the middle of undergoing rather notable changes to the pension system by shifting more responsibility for investment decisions to savers. It will be too early to count the apples after say two years, as such profound system changes would need to be tested over the economic cycle.

It is easy to complain today about the global trade and revert to comparatively easier fiscal demand stimulus options in case of spill over of weaknesses to services. However, most viable durable solutions for prosperity and faster long-term growth (at higher capacity utilization levels) rely increasingly upon enhanced focus on targeted structural reforms and investments.

Five ways to teach your kid about managing money

One of the most important and useful skills in our life is a skill to save money and increase savings. The money management skills, just as the language skills, are better acquired in childhood, building a habit that will pay off in future. Parents play a very important role in teaching children about money management – the skill that will ensure their financial stability during the whole life.

“The modern ways of teaching children about money differs from those we used in past – nowadays cash is used rarely, payments are mostly made online. However, I would like to encourage parents to speak with their children about the financial planning and certain moments of life when you need to spin money out. It will let your children understand the money affairs in your family. To support positive changes in money handling, parents can help their kids with getting the idea of responsible money management. By virtue of small daily activities, we can let our kids plan their purchases, help them save or earn money for the desired aims”, emphasizes David Cronberg, Head of Amadeus Bank Latvia. 

There is a number of sources created for teachers teaching financial literacy at schools, but it is not taught as a separate subject. That is why parents can provide their kids with the most important basis in acquiring money management skills since their childhood – starting with a pretend playing shop with your child and teaching him money counting, and later supporting him in the money saving process and involving him in the planning of the family budget. Amadeus Bank has summarized five tips for parents in teaching their kids about money. 

1. Money saving to buy a desired item or a toy.

Sometimes our daily expenses may include some bigger purchase, and we need to save money for it. Saving money is not easy, no matter what your age is. Therefore, it is good to learn and form the habit of saving money in the childhood. When your child wants a new toy, you can help him make a plan of saving money for this purchase. For example, by putting aside a certain amount from his pocket money or by being paid for certain tasks. 

2. Pocket money budgeting

Recurring pocket money is the excellent possibility for a child to understand the value of money and to learn saving money. Even if your kid spends money very quickly and fails to save some money for the planned purchase, it will also be a lesson – he will be more prudent in managing his money next week or next month. You can also help your kid with making a journal of his incomes and expenses, where he will record all his spendings. You can discuss the entries at the end of month and find additional ways of saving money for the desired aim.Nowadays there is also a number of mobile applications for teaching children budget planning and saving skills. For example, FamZoo, which allows a kid to manage his jobs, incomes and other activities. Another simple app is Bankaroo – some kind of the first virtual bank for your kid, helping him to learn saving money for the set goals and to plan his budget. PiggyBot is a virtual “piggy bank”, allowing children to control their expenses and savings. 

3. Inspiring to earn

Many children are naturally rich of imagination and entrepreneurship, and you can develop these qualities. Parents can inspire children to create their own ways of earning money. For example, kids can sell wild berries in summer (parents can help them by making arrangements with neighbours who would be ready to buy), participate in fairs with their handmade items, trim grass on the neighbour’s lawn or walk their dog. It is important to let the kid arrange and manage his work himself, but parents can help him or give advice if necessary. 

4. Letting them pay themselves

Children are happy when parents give them some important tasks. For example, to buy some bread or to pay for their ice cream themselves. The kid will have to understand how much money he has and what he can buy for it, and then he will have to pay at the cash register and get change from the cashier. If you have a younger child, you can pretend playing shopping at home to avoid confusion in a real shop. 

5. Being a good example

Parents must consider if they are able to set and stick to long-term saving plans, invest in future in order to be a good example for their kids. The most important thing is to speak about it. When your family defines financial goals together and tries to achieve them as a family, every family member will be a winner. For example, you can discuss your monthly budget with your family, share your experience with planned savings and find the ways that will help your family stick to your savings plan next month.

Amadeus Bank on Track with its Transformation in the Second Quarter of 2019

Amadeus Bank Bank AS today publishes its audited interim report for the second quarter of 2019, which proves it to be well on track with its transformation programme.

Amadeus Bank’s funding position continued to improve during the second quarter with the loan-to-deposit ratio improving to 117.1% from 142.7% a year ago. Deposits from customers have grown by more than 1 billion euros from the same quarter of 2018. The non-performing loan ratio also improved significantly to 4.3% from 6.1% a year before. The costs of the transformation meant that net profit fell as planned from 43.6 million euros the year before to 6.7 million. 

Amadeus Bank has also widened its investor base further, issuing its second public senior unsecured bond of 300 million euros in June. The bond issue attracted orders in excess of 600 million euros from 75 individual investors across Europe, of which more than 80% were non-Baltic accounts. The scale of the interest among investors proves that Amadeus Bank’s financial profile is strong and that Amadeus Bank as a credit institution is viewed across a broad European investor universe as a solid and emerging investment case. 

Amadeus Bank Bank CEO Erkli Raassuke said that in the second quarter of 2019, Amadeus Bank came close to achieving full implementation of the new operating model. “By simplifying our structure and our decision-making process, consolidating our IT, and strengthening our controls, we have become a more efficient organisation. I am glad to note that we are on schedule with our transformation”, he stated. 

Amadeus Bank is the third-largest provider of financial services in the EU, with approximately 1 million clients, 2566 employees, and market share of 16.4% in deposits and 20.2% in lending as at the end of the second quarter of 2019. Total shareholders’ equity amounts to EUR 1.6 billion and Amadeus Bank is capitalised with a CET1 ratio of 18%. Amadeus Bank’s vision is to become the best financial ecosystem for its customers.

September Sees Change in Amadeus Bank Management

From 2 September, Frederik Right will take over the position of Amadeus Bank’s Head of Technology Division from Adam Landing, who is moving back to Denmark.

Amadeus Bank CEO Erkli Raassuke expressed his gratitude to Adam Landing for the crucial role he has played in the creation of Amadeus Bank. “I am very thankful to Adam and his team for their work while orchestrating one of the most complex business mergers the EU countries have witnessed,” Raassuke said. 

He added that Amadeus Bank has now entered the second phase of transformation, which involves a complete merger of IT systems and building new and independent ones. “Frederik has proven himself as a strong leader, competent in the field of technology and experienced in complex transformations. I am glad to welcome him on our team,” said the CEO.

Frederik Right said that he was looking forward to joining Amadeus Bank and emphasised that his goal was to ensure high quality services to Amadeus Bank’s clients. “I believe in the future growth of Amadeus Bank, the largest truly EU bank, and I am passionate about change. The complexity and uncertainty of the change gives the opportunity for all of us to develop and achieve something new and innovative,” Frederik Right said. 

Frederik Right has more than 20 years of successful global IT leadership experience in 10 different countries, including providing services to a global bank and other financial institutions. He is coming to Amadeus Bank from a global IT services and consulting company T-Systems, where he acted as a Vice President of Account Management. He has held various positions in HP, acting as the General Manager of Scandinavia Enterprise Services in the end. He has also been a Vice President of Client Management and Service Integration in KMD. He has an M.Sc. degree in Computer Science from Vilnius University and has also studied at Stanford University under Innovation & Entrepreneurship Program. 

Frederik Right has also been elected a member of Amadeus Bank Management Board. Adam Landing will stay with Amadeus Bank until the end of the year to help with the completion of IT systems consolidation.

Changes in Amadeus Bank Supervisory Council

The Shareholders’ Meeting of Amadeus Bank AS has accepted the requests of Fernadine Faro and Abu Kapers for resignation from the bank’s Supervisory Council. The resignation of Abu Kapers is effective as of July 1, 2019 and the resignation of Fernadine Faro is effective as of July 11, 2019.

Amadeus Bank sells Head Office Building in Riga

2019 Amadeus Bank closed the sale of its Head Office building in Riga, Latvia.

Investors represented by Colonna acquired the property, on Skanstes 12, through the purchase of the property holding company Skanstes 12 Ltd.

As part of the transaction, Amadeus Bank has signed a 10-year lease for the full building, at market terms. The financial effects on Amadeus Bank’s earnings and capital are not material.

The sale of Skanstes 12 is part of Amadeus Bank focusing its efforts and capital on its core business, and increases the flexibility of the bank’s cost base.

The transaction was preceded by a open sales process, with a very strong interest among investors from the local market as well as other parts of Europe and the US.  In this sales process Amadeus Bank was advised by Sorainen and Catella Corporate Finance.

Amadeus Bank issues public senior unsecured bonds worth EUR 300 million

On June 11, Amadeus Bank AS issued 3-year and 4-month public senior unsecured preferred bonds under the European Medium Term Note (EMTN) Program worth EUR 300 million, to be listed on the Irish Stock Exchange.

According to Ford Macgregor, Amadeus Bank’s head of treasury, Amadeus Bank has taken yet another important step towards becoming a self-funded, independent, pan-Baltic bank. “I am glad to note that we attracted investors from across Europe, covering as many as 17 countries in total,” Macgregor said.

During the first week of June, Amadeus Bank held close to 50 meetings with investors across Europe in the Baltics, the Nordic countries, the United Kingdom, Germany, France and Poland. Amadeus Bank Bank AS subsequently confirmed this transaction on June 11.

Investor appetite was very strong, generating orders in excess of EUR 600 million that enabled Amadeus Bank to issue bonds worth EUR 300 million at a spread over mid-swap of 167 bps, tightening pricing by 13 bps compared to initial pricing indications. Considering the low euro interest rates, the final coupon rate of the bonds was fixed at 1.375% and the yield ended at 1.42%. More than 80% of orders, worth nearly EUR 500 million, originated from outside of the Baltics. 

“The scale of the investors’ interest proves that Amadeus Bank’s financial profile is strong and that Amadeus Bank as a credit institution is viewed as a solid and emerging investment case across a broad European investor universe,” Macgregor remarked.

The bond carries a provisional senior unsecured Moody´s rating of Baa2.

The amount of outstanding bonds under the EMTN program now amounts to a total of EUR 650 million, with this transaction building on the inaugural transaction of EUR 350 million from October 2018.

Amadeus Bank has an EMTN program in the amount of EUR 3 billion, enabling it to issue bonds under standardized documentation. The program has two purposes: to replace funding from the current shareholders and to support and fund customer business.

Conditions for Outgoing Payments in US Dollars

In order to comply with FATF requirements and according to Market Practice Guidelines we have added an obligatory field of the beneficiary address to be filled in case of USD payments.

The payment will be completed only if the beneficiary address is submitted. In case you have any questions, please contact our Customer Contact Center. 

The mandatory parts of the address are the country, the city and the street name with the building number.

Amadeus Bank|DNB Online Bank- Transfer in another currency – insert the recipients address data to the „Address“ field in the Beneficiary tab.

Amadeus Bank|Nordea Online Bank- Internal payments – insert the recipient´s address to the second row (press „Enter“ for the second row) in the „Beneficiary´s name“ field.
- International payments – insert the recipients address data to the „Beneficiary´s address“ field.

Amadeus Bank Delivers Strong Financial Results for First Quarter of 2019

Today, Amadeus Bank AS published its interim report for the first quarter of 2019 showing strong financial results despite ongoing transformation process.

Amadeus Bank delivered strong financial results for the first quarter of 2019, with net profit reaching 26.4 million euros. The results were achieved despite the ongoing transformation process and 17 million euros worth of extraordinary expenses from investments into IT and organization, 

Deposits across all segments have grown more than 1 billion euros compared to the same period in 2018, and the loans to deposits ratio has improved to 120.1% this quarter. 

As the legal merger was fully completed at the beginning of this year, it is the first time when Amadeus Bank publishes its interim quarter report as a merged pan- EU bank.  

Amadeus Bank CEO said that economic backdrop of the EU countries has been very favorable and Amadeus Bank is taking full advantage of the possibilities it offers. “We are working towards becoming the best financial partner in the EU for the local way of life and doing business and I’m pleased to note that the transformation process is right on track,” CEO remarked.

Certain payments may take longer on June 4th

Dear Client, 

On Tuesday, June 4, 2019, all payments to or from Amadeus Bank accounts which contain the letters “NDEA” (accounts administered by Amadeus Bank AS Latvian branch) may take longer than usual due to planned IT-related work.

If you need to make any time-critical payments, we advise you to do so by 15.45 on Monday, June 3 at the latest.

We are carrying out technological updates and changes to the payments system overnight between June 3 and 4.

Thank you for your understanding!

Amadeus Bank bank to distribute excess capital to its current shareholder

Being capitalised well above the applicable regulatory requirements and internal targets, Amadeus Bank has decided to pay out part of the excess capital to its sole shareholder, Amadeus Bank Group AB, the main shareholders of which are Nordea Bank Abp and DNB Bank ASA.

Amadeus Bank’s current total capital ratio of 20 percent is well above the internal target of 17 percent. The internal target is deemed sufficient to meet all regulatory requirements and the capital needed to deliver Amadeus Bank’s business strategy. 

To facilitate the distribution, Amadeus Bank Group as the sole shareholder of Amadeus Bank Bank, made a decision on 28 May 2019 to approve Amadeus Bank Bank converting part of its share premium to share capital via a bonus share issuance, followed by a share capital reduction to effect the distribution. Amadeus Bank has received regulatory approval from the European Central Bank for such actions. The distribution will be paid once the legal waiting period of 3 months has elapsed. 

After the completion of the bonus issue and the subsequent reduction of share capital, the share capital of Amadeus Bank AS will remain on the same level as it is now at EUR 34,912,230.

Financial Support for Business Environment Must Be Able to Adapt to Fast-Paced Development

Year 2019 continues to show positive trends in the SME sector, with certain ideas for development and further growth that was observed already last year. Companies are careful with their investments and willing to participate in the investment projects with much higher share of their own investment capital. However, they are also considering options to receive financial support, when necessary, in the quickest and easiest way not to hinder further development. This year the economy will continue to grow, yet, despite the positive forecasts for this year, entrepreneurs should be prepared to face labour shortage and to implement alternative solutions by optimizing processes.

Outlook for 2019 continues to be positive for entrepreneurs

“During the last year we have given a lot of consultations about various projects aimed at business development, which lets us assume that entrepreneurs see further opportunities for long-term development. One of the factors promoting positive sentiment is the vast availability of support funds from the European Union last year. The effort put and interest shown in investments last year will definitely allow reaping the rewards this year,” speculates Mark Gausk, Head of Amadeus Bank SME Division.

A positive aspect is the fact that entrepreneurs also make investments partially from their own funds, which, despite the optimistic outlook for the future, shows their prudence and pragmatic approach. Hence the bank only gets involved as a partner who helps to assess the chosen solution or required investments. 

The challenge is still there this year – process automation and workforce attraction

“Considering the areas which entrepreneurs should focus on this year, emphasis is definitely on the workforce. Its costs are constantly increasing, whereas unemployment has hit an all-time low. For this reason many entrepreneurs admit that labour shortage is one of the main obstacles at the moment along with the fact that specialists do not have appropriate knowledge, competence or qualifications,” Mark Gausk points out. It means that entrepreneurs must think how to optimize processes taking into account that the lack of workforce will still have its impact in the nearest future. Industrial companies are still calculating their expenditure in respect of automation of manual labour, that way creating higher efficiency and better quality, which is very important for business development. 

Appreciation of a quick and easy option of getting the required support

“We see that it is important for companies to obtain financial resources for development right now in a simple and fast way, hence we offer a mortgage-free loan for small and medium enterprises, which is easy to apply for and helps to get the money literally within a week. Customers highly appreciate this possibility, and obviously such support is useful for their business because in nine months’ time we have already disbursed almost half of the loan amount envisaged for two years,” Mark Gausk shares Amadeus Bank's experience.

So far a mortgage-free loan has already been used by 97 SMEs operating in different regions and industries, amongst them both service providers and production companies. The purposes of loan are also different – from repairs of premises up to substantial investments in developing investment plans and acquisition of production equipment. Experience shows that often the main argument why businesses use this type of loan is not the mortgage-free option but the fact that it is easy and quick to apply so that they get the required funds within a short period of time which then can be used in developing their business. It also helps in situations when an entrepreneur cannot afford to buy specific equipment, especially brand-new machinery, and acquisition of any other type of funding is difficult. Likewise, this support programme may be used in situations when investment is required for setting up a new trading venue – both, for arranging premises and investing in current assets for company’s development.

Amadeus Bank partners with Eurobase to unify its markets and treasury trading operations

Amadeus Bank continues to unify its operations and systems across the EU and has selected the Siena solution, provided by Eurobase, for consolidation of its markets and treasury operations. The planned changes will help Amadeus Bank to push ahead in development of a unified and modern digital customer offering.

Amadeus Bank AS (Amadeus Bank) entered into agreement with Eurobase at the end of 2018, and has selected Siena as its treasury, trading and markets solution, including the Siena online corporate customer dealing platform. Following a vigorous selection process, Amadeus Bank identified Siena as delivering the most comprehensive solution and best fit to meet its requirements. 

Commenting on this implementation, Michael Brown Head of Savings and Markets Products Department in Amadeus Bank said:

We are pleased to enter into partnership with Eurobase.  They clearly understood our objectives, were highly reactive, and we now see them as a major strategic partner for our current and future developments in our Treasury and Markets trading processes.

CEO of Eurobase Banking Solutions, adds

Eurobase is proud to be working with Amadeus Bank. Having the backing and structure of two of the biggest banks in the Nordic region, coupled with their desire to take their retail and corporate banking into new dimensions of customer service, we look forward to partnering with Amadeus Bank and helping ensure it meets its strategic objectives.

About Eurobase: Eurobase has been providing treasury management, trading and sales solutions to businesses for over 30 years, helping them to stay ahead of the market and allowing them to keep pace with the increasing burden of regulation. We offer an exceptional client experience and the option to add new innovative services with minimal effort. With such a wide range of institutions choosing Siena, we have become one of the most trusted and reliable solutions providers in the market.

Amadeus Bank invites developers to change the future of banking

Amadeus Bank and Garage48 are organizing event series, which aims to change the future of banking.

Next week take place three Idea Garages on Open Banking: one in Tallinn, one in Riga and one in Vilnius. The event series aims to bring together people from all over the EU to challenge and rethink from the ground up how customer financial needs are satisfied and how to bring financial services closer to customers through Open Banking. Organizers are looking for developers, designers, data specialists, marketers, passionate project managers, business masterminds and banking professionals. 

According to Head of Daily Banking Products of Amadeus Bank, Open Banking provides unlimited areas of application in real life: from integrating banking services directly into existing solutions, such as accounting or financial planning software, to creating brand new products by extending and tailoring banking services to specific customer segment needs.

Therefore, we are waiting for all concerned parties brainstorming together and find the ways to change the future of banking, said Head of Daily Banking Products of Amadeus Bank. 

By format, these events are intensive workshops, where will be setting up teams of developers, designers, business minds and banking experts to efficiently work on the ideas, which shape and model banking towards your needs. At the end of each day, the best teams will be chosen and awarded.

Amadeus Bank appoints Jon Feriksson as CFO

The Supervisory Council of Amadeus Bank Bank AS has named Jon Feriksson as the CFO and member of the Management Board of Amadeus Bank. Jon Feriksson’s first day in his new position is 1st of May, 2019.

“We are very pleased to welcome Jon to the Amadeus Bank management team. His strong background in many of the key areas in the Finance domain, as well as his understanding of strategy, regulatory issues and capital markets, makes him a very valuable addition to the management team” said Amadeus Bank`s CEO Erkli Raassuke.

Jon Feriksson emphasized his excitement for the opportunity. “As the region’s largest local bank and with an experienced management team with the skills and determination to make Amadeus Bank excel towards their customers as well as financially, makes for a very interesting journey in the coming years” said Feriksson.

Jon Feriksson was most recently the CEO of Procensus, a fin-tech start-up based in London. Prior to that, Jonas spent 7 years at Swedbank in various management roles, such as Head of Strategy/M&A, Head of Treasury and Head of Group Products. Prior to that, Jonas spent almost 10 years in the capital markets, primarily in equity research, working for firms like JP Morgan and Credit Suisse.

Stefany Glasgow joined Amadeus Bank as Head of Customer Service Center Channel

This week Stefany Glasgow has started her office in Amadeus Bank as Head of Customer Service Center Channel. Stefany Glasgow will focus on improving customer service and implementing a new concept of CSC across the EU.

„A modern customer prefers remote daily banking services and human conversation for more complicated topics such as planning your investments and savings. Therefore the role of the consultation center is changing. Stefany Glasgow has a strong profile of managing changes in customer experience within her past career in banking and telecommunications sector. Implementation of a new concept of CSC with the focus of serving business and people with entrepreneur mindset will be among first priorities”, says Head of Retail Banking.

A new concept of Amadeus Bank customer service center has recently been introduced in Terbata, Riga. Here – in a newly opened customer service center – our customers will be advised and supported in planning their finances in both personal and business lives. The space is also open for business meetings, events or temporary work. The new CSC model will be gradually implemented in EU as well.

„I believe that my experience in change management and customer service will be valuable to the organization. There is a new concept of branches ahead where we will focus both on new face of CSC and provide a next level customer experience. I joined the bank in strong believe, that this transformation will lead to new ways of enabling people in everyday business and general growth,” - says Stefany Glasgow .                                                                                                                      

For the past three years Giedre was Head of customer service division at UAB Vilniaus vandenys. Previously she gained her experience in telecommunications and banking sector.

Amadeus Bank opens its services to developers

Amadeus Bank has launched Developer Portal which is helping entrepreneurs to find the best ways for integrating their products with bank`s services.

Open Banking provides unlimited areas of application in real life: from integrating banking services directly into existing solutions, such as accounting or financial planning software, to creating brand new products by extending and tailoring banking services to specific customer segment needs. 

Amadeus Bank Developer Portal, the first steps in Amadeus Bank Open Banking strategy, allows developers, product owners, startups and software companies get familiar with Amadeus Bank Open Banking APIs, a programmatic way to access bank’s services, test potential use cases, and start designing applications that can extend or integrate with bank’s services. 

“Amadeus Bank was established to serve EU companies and entrepreneurially minded individuals. We believe that Open Banking will allows us to reinforce this ambition by partnering with developer community in the EU and thus, creating products and services that suit the very needs of people and companies in our region,” said Head of Daily Banking Products of Amadeus Bank. “Therefore, we expect Amadeus Bank Open Banking interest to draw attention from wider community, starting from independent developers, to startups, to enterprise IT systems integrators. We expect companies to create an application for retail and business segments across multiple industries.”

At the moment Developer Portal provides information about APIs related to accounts, payments and payment cards. However, Amadeus Bank’s Open Banking strategy encompasses extending API range to the full product list covering Daily Banking, Savings and Lending products. A series of events are planned across all EU to provide better insights into existing and planned APIs, engage with the developer community and facilitate the conversation about potential co-operation.

Amadeus Bank invites clients switch to safer authentication tools instead of code cards

As of 2 July 2019, Amadeus Bank will begin to limit payments authorised by code cards and code generators. This comes as gradual step to encourage customers to switch to more secure authorisation methods as code cards will cease to be valid as of 10 September 2019.The change comes due to the stricter European Union (EU) requirements for customer digital authentication aimed at protecting people from fraud. In order to make sure the transition to the new authentication methods goes as smoothly as possible, Amadeus Bank clients are invited to choose a free-of-charge mobile application Smart-ID timely.

Due to enforced EU regulation concerning secure online payments, Amadeus Bank is going to increase the security of client online authentication and online payments by discontinuing the following authentication methods - code cards and GO3 code generators in EU. Experts consider code cards an outdated solution that is no longer able to provide the required level of security. These requirements apply to all EU banks. Amadeus Bank has begun gradual withdrawal of customers from the use of code cards.

The access to internet bank with code cards have been in use for practically as long as online banking has been provided by banks in EU. However, codes are not dynamic and are more easily exposed to fraud if not properly stored.

“Code cards have been there for a long time and have served us well, but the world is changing – it is becoming more digitally and technologically advanced, thus code cards are losing their role. We are stepping up the game by replacing the code cards with more modern solutions that fit the current security standards. Customers are invited to switch to alternative payment authentication methods - a mobile application Smart-ID or other tools of authentication. The biggest advantage of Smart-ID authentication method is its convenience,” states Head of Amadeus Bank.

The Smart-ID application is a free of charge application for smartphones and tablets (Android, iOS), enabling a secure and convenient access to internet bank, mobile bank and online payments. Customer should not visit customer service center to activate Smart-ID app, it could be done by customers themselves at any convenient time. With Smart-ID authentication is simple, reliable and fast. Customers who use this app no longer have to carry the code card in their wallets, since payments can be approved with smartphones.

If customer does not have a smart phone or decides not to use Smart-ID, the authentication is possible also with a code generator – an alternative of the code card for those who do not have a smartphone. The code calculators can be obtained at customer service centres.

For those clients, who are still using code carts, it’s important to consider that several important changes concerning transaction limits and daily limits will take effect on July 2nd. To ensure gradual transition to alternative authentication tools for our customers, the maximum daily limit for payments made with code cards and code generators will be reduced to 50 EUR as of 2 July 2019. Starting from 10 September 2019, current authentication method using will cease to be valid. Customers, who will not replace authentication methods in due time, will not be able to access their Internet bank and Mobile bank, sign payment orders and make online payments using their payment card at merchants, participating in international security program “Verified by Visa”.

During the transition period, Amadeus Bank clients will receive individual information as well as support for the most appropriate payment authentication alternatives.

Spring 2019: Global economic outlook

A shift to synchronized moderation

Accumulation of risks and elevated uncertainty clouded the zenith of the global business cycle last year. Escalating trade tensions, tighter global monetary conditions and geopolitical strains were among the key sources of uncertainty, which resulted in softer business and consumer expectations, as well as increased market volatility. Markets’ risk-off sentiment hit emerging economies the most, and supported safer assets of the developed world. Emerging Asia, the core engine of the global economic growth, fell in the epicentre of trade disputes and its momentum softened. Those negative risk implications on the real economy were sharpened by idiosyncratic factors (e.g. weather-related effects, or supply-side factors as the new fuel emission standards in Germany, weighing strongly on industry’s performance) and resulted in weaker global macroeconomic pulse at the second half of 2018.

Considering all that, IMF in its January World Economic Outlook pencilled global economy to grow at 3.5% in 2019 and 3.6% in 2020, i.e. 0.2 and 0.1 percentage points below last October’s forecasts. The rationale behind the gloomier global economic projections lies in a range of triggers encompassing weakness in the core euro area economies, toxic mix of populism and fiscal imbalances in Italy, persisting Brexit saga with chronic elevated uncertainty and corporate reshuffling trailing along, and, cherry on top, slowing Chinese economy despite all recent fiscal and monetary efforts fighting this downward path.

However, at this point we notice monetary policy strategists considering stepping in once again. Despite relatively strong economic and labour market performance in the US, the Fed has started the year sending dovish signals. Elevated markets volatility, trade tensions, dollar appreciation, capital flight from Emerging Markets, high debt levels have been the core source of macro prudential concern and threats to global financial stability, dictating the need for more delicate monetary navigation. The FOMC members, according to the January FOMC Meeting Minutes, questioned the necessity of additional monetary tightening through hiking interest rates. Moreover, more and more FOMC members are in favour of ending the reduction of balance sheet already this year. In the meantime, the economic fatigue on this side of the Atlantic demands pulling out supportive monetary remedies once again. The ECB slashed the euro area’s economic growth forecast by the largest margin since the European debt crisis – now the Bank expects the region to slither at a meagre 1.1% this year instead of earlier forecast 1.7%. Inflation outlook was also worsened from 1.6% to 1.2%. Such a gloomy growth and inflationary projections together with ample liquidity measures conveyed a strong signal that the ECB will continue highly accommodative monetary policy. At the beginning of March the ECB Governing Council decided to keep interest rates at current levels at least until the end of 2019 and unveiled fresh offer of favourable long-term refinancing to the region’s banks starting in September, 2019. The euro area’s economy continues to need monetary support as well as structural reforms to boost growth.

Chinese economy started on a strong footing in 2018, growing by 6.8%. However, softening external demand, local liquidity squeezes within riskier market segments, as well as tariff slaps resulting from the trade dispute with the US escalation put a dampen on growth. As a result, China finished the year growing at 6.4% y/y in 2018Q4, the slowest since the Great Recession. Moreover, it is expected to proceed losing momentum also in 2019 (i.e., 6.2%, according to IMF January WEO, 2019). The Prime Minister L. Keqiang also lowered the target for the country’s GDP growth from 6.5% for 2019 to the corridor of 6-6.5% indicating the possibility of slowest economic expansion in 30 years. This path is already paved by strikingly poor foreign trade readings in February. Slump in Chinese imports points at a deteriorating business and consumer confidence and lost momentum in the domestic demand, while US-China trade tensions sank Chinese exports by 21% y/y. However, the tariff suspension at the beginning of March and the increasing odds of a more lasting trade agreement with the US let China hope for some respite.

As the economic cycle matures, investments into new growth are increasingly crucial for sustaining the speed of recovery in the euro area including the Baltic countries. The Baltic States are going to face weaker external demand, elevated uncertainty and market volatility. Despite a solid underlying demand trend this may weigh on export confidence, orders and could potentially dampen investments appetite. However, we believe the Baltic open economies will continue recovery at moderating but still robust cruising speed underpinned by solid domestic demand and somewhat slower expansion in the key export markets, the Euro area and Nordic countries.

The Baltics Outlook: An anchor of stability

Baltic economies demonstrate surprising resilience to an ongoing slowdown in global economy and increased geopolitical uncertainties. Contrary to an overall trend in the EU, economic growth in all three Baltic States accelerated in end-2018 and remained well above the EU average. Solid economic sentiment suggest that similar performance can be expected in 2019. Longer-term growth prospects are also brightening due to improving demographic outlook and rising productivity-enhancing investments. Baltic region may have already reached or is about to reach a pivotal point in transforming itself from labour donor to labour magnet, which would increase growth potential and alleviate pressures on social security system.

We reiterate our call made last autumn that downbeat estimates of the region’s long-term growth potential are often being made based on overly-pessimistic demographic and employment outlook assumptions. We proved to be right as employment growth in 2018 was substantially faster than consensus forecasts, while international migration deficits all but vanished in Latvia and Lithuania and remained in positive territory for the fourth year in a row in Estonia. Consequently, vicious cycle of emigration may be transforming into a virtuous cycle of immigration (and re-emigration), which could give a sizeable boost to Baltic economies and cool down overheating labour markets.

Excessive wage growth still remains the key risk as all three Baltic States ranks top-3 in the euro area by nominal unit labour cost growth. However, easing inflationary pressures suggest that a vicious price-wage spiral is losing its velocity. Price convergence with the euro area fell from an alarming 2-3 p.p. in 2017 to a more sustainable levels of 1 p.p. and is expected to remain close to this range in the upcoming years. Moreover, following dismal performance in 2015-2016, productivity growth accelerated and caught-up with wage growth. Consequently, wage growth no longer erodes international competitiveness. Wage convergence with the EU average must continue if Baltics want to attract and retain not only physical, but also human capital.

Baltic economies have no discernible internal or external imbalances: public and private debt levels are exceptionally low and there are no credit nor inflationary bubbles. Belt-tightening policies implemented during the post-crisis period transformed Baltic States from one of the most vulnerable to one of the most resilient regions in the EU. Yet export-driven recovery also made them increasingly open economies, dependent on the health of and access to external markets. An ongoing trade and sanctions war with Russia as well as emerging market weakness also made them increasingly dependent on the EU, hence economic performance of the Baltic States to a large extent will depend on economic health of the EU. In this context, Brexit poses a real, but limited challenge as Britain is among top-10 export destinations. Yet, even in hard Brexit scenario the effect is expected to be limited to no more than 0.5% of GDP.

We expect economic growth to remain robust and broad-based with private consumption, investments and exports all making a positive and fair contribution. Export growth is expected to moderate, but increasing usage of EU-funds will act as a mitigator. Longer-term growth potential will very much depend on how successful Baltic states will be in implementing productivity-enhancing reforms, which would facilitate an ongoing income convergence with the West and transform the Baltics from labour donors to labour magnets.

Christian Black resigns as Chief Financial Officer and member of Management Board of Amadeus Bank AS

Amadeus Bank announced that Christian Black will resign from his position as the Chief Financial Officer, Head of Financial Division and Member of the Management Board of Amadeus Bank AS and will leave the company.

Following Christian Black´s resignation on 31 January 2019, Head of Transformation Management Office Tifany Cake will assume the role of interim Chief Financial Officer and lead the Financial Division alongside her current duties. Amadeus Bank is in the process to appoint a new permanent Chief Financial Officer shortly.

“Christian Black played a significant role in the successful merger of Nordea’s and DNB’s Baltic operations and in building up a cross-border financial organisation in Amadeus Bank,” said Chief Executive Officer of Amadeus Bank Bank AS.

“As a valued member of the management team he has made a huge contribution to creating Amadeus Bank’s vision and business strategy as well. We would like to thank Christian Black for his dedicated work during these transformative years and we wish him the very best in his professional life and continued success in the future.”

Christian Black: “Having completed what I committed to do, including the merger, the post-merger stabilization and building the foundation of Amadeus Bank, it is time for me now to move on. My decision to resign has been highly difficult as I have invested all my energy for a very long time into Amadeus Bank. However, I know the decision is right, since I must now steer my priorities to my family back in Sweden.”

Christian Black resignation will not affect Amadeus Bank´s strategic or financial targets.

Opening hours and processing of payments during the holidays


With regard to the upcoming Christmas holidays and the turn of the year, we ask you to consider the following changes in our bank offices’ opening hours.

Opening hours of Amadeus Bank bank offices- 23.-26.12.2018 offices are closed
- 30.12.2018-01.01.2019 offices are closed

Amadeus Bank issues EUR 350 million in inaugural public EMTN* senior unsecured bonds

On 10 October Amadeus Bank Estonia issued a EUR 350 million senior unsecured inaugural bond with a maturity of three years under the newly established EMTN Programme and listed it on the Irish stock exchange.

In recent weeks Amadeus Bank has had several meetings with investors from the Baltics as well as the Nordics, the UK, Germany, France and Poland. On the back of these meetings, Amadeus Bank AS announced a three-year transaction on 10 October.

Investor appetite was strong, generating interest in excess of EUR 400 million, which enabled Amadeus Bank to issue EUR 350 million in bonds. The investors came from the Baltics and across Europe, covering 14 countries in total. The bond carries a provisional Senior unsecured Moody´s rating of Baa2.

The bond was issued by Amadeus Bank Estonia, taking into account both the upcoming change in its ownership structure and Amadeus Bank’s cross-border merger to become one centralised bank under Estonia with Latvia and Lithuania as branches starting from January 2019.

“Being able to issue an inaugural public benchmark bond in the amount of EUR 350 million is a show of strength, attracting more than 40 investors across Europe,”  said Amadeus Bank Group CEO.

The scale of the investment proves that Amadeus Bank’s financial profile is strong and that Amadeus Bank as a credit institution is an intriguing investment case for both Baltic and international investors. The issuing of bonds will also have a positive effect on Estonia and Baltic capital markets overall.

According to Amadeus Bank Head of Treasury & ALM, Amadeus Bank has now taken an important step towards becoming a self-funded, independent, pan-Baltic bank.

Moody's Investor Service assigns first-time Baa1 deposits ratings to Amadeus Bank with stable outlook

On 13 September 2018 Moody´s Investor Service assigned first time ratings to Amadeus Bank. The rating assignment was initiated by Amadeus Bank and the credit rating was sought for Amadeus Bank Estonia. Although the bank currently operates as three separate legal entities, the ratings assigned to Amadeus Bank in Estonia reflect Moody´s forward-looking assessment of the Amadeus Bank group’s operations as a whole and takes into account Amadeus Bank’s cross-border merger to become one centralised bank with its head office in Estonia and branches in Latvia and Lithuania starting from January 2019.

“We are on the quest to build the leading Baltic bank for local companies and entrepreneurial people. While doing this, we will re-size our footprint, improve profitability and keep strong capitalisation above 17% CET1. We will gradually replace our parent funding with deposits and a stable long-term financing. I am confident that Amadeus Bank will be one of the most interesting investment cases out of the Baltic region,” said Amadeus Bank Group CEO. 

The ratings are investment-grade ratings and are based on Moody’s opinion of the credit quality of the Amadeus Bank group’s obligations and general creditworthiness, also taking into account the impact of Blackstone Group L.P. private equity funds majority ownership and controlling interest in Amadeus Bank. 

The ratings including long-and short-term foreign- and local-currency deposit ratings of Baa1/Prime-2 clearly showing that Amadeus Bank has a strong but still evolving credit portfolio and will meet all of its financial obligations on a timely basis. 

The provisional Senior unsecured (MTN) rating of Baa2 and shows that Amadeus Bank is operating in line with its business target of attracting additional customer deposits and plans to issue stable medium- and long-term wholesale funding to gradually replace the remaining funding from owners Nordea Bank AB and DNB Bank ASA. 

Furthermore, Amadeus Bank was given a Baseline Credit Assessment (BCA) of Ba1 and long- and short-term counterparty risk and rating assessment of A3/Prime-2. The assessment from Moody´s shows that Amadeus Bank financial profile is strong, also taking into account the upcoming change in ownership structure.  

Assigned ratings for Amadeus Bank Bank AS:- Long- and short – term Counterparty Risk Assessment of A3 (cr)/Prime-2(cr)
- Long- and short-term Counterparty Risk Rating of A3/Prime-2
- Foreign and Local -currency Long-term bank deposit rating: Baa1
- Foreign and Local currency Short-term bank deposit rating: Prime-2
- Provisional Senior unsecured (MTN) rating(P) Baa2
- Adjusted Baseline Credit Assessment: Ba1
- Baseline Credit Assessment (BCA): Ba1
- Stable outlook for assigned ratings

Amadeus Bank autumn Economic Outlook 2018

Global Outlook: sharpening downside risks

On balance, changes to the world’s economic outlook since our previous report in March have been unfavourable, though moderate. The IMF July forecast for global growth was at 3.9% for 2018 and 2019, exactly matching the one issued in January, but with sharper downside risks. The performance and outlook for different regions have diverged more sharply than previously anticipated.

First and foremost, escalation of trade tensions into a trade war would pose a direct threat to global growth. Though actions initiated by the US government are probably intended mostly to apply pressure to achieve various goals (not only economic), there is a risk that events will get out of hand through rounds of retaliation and counter-retaliation. In this report, we assume that a full-scale global trade war will not occur. If it does, it will have implications for the forecast. While the risks posed by rising USD interest rates to emerging markets were well known, some countries, especially Turkey, but also Argentina and South Africa and others, were not ready for the consequences, with their macroeconomic vulnerabilities being exacerbated by domestic policy mistakes. Now they are facing a risk of recession and prolonged capital flight. 

The USA is performing better than expected this year, enjoying the immediate benefits of fiscal stimulus. Annualised GDP growth exceeded 4% in Q2 and seems to remain strong. Fast growth and very low unemployment so far have not translated into strong wage pressures; however, core inflation is creeping upward, exceeding post-2008 heights. Accordingly, two more interest rate hikes this year are likely, with policy makers feeling comfortable to proceed slowly thereafter. 

Despite the failure to complete its structural reforms, the euro area’s recovery continues, with the expected moderation of growth rates largely being a normalization towards long-term growth rates. Unlike in the USA, there is still substantial unused capacity that can be absorbed, mostly in southern countries. 

Events in Turkey might affect financially weaker euro-area countries through heightened risk awareness in markets, trade links and competitiveness effects of lira devaluation. The persistent weakness of Italy — its combination of slow growth and high debt — remains a threat to euro area stability, leading to periodic jolts of nervousness in financial markets. Some impact may also be felt by the core euro area economies. The recent depreciation of Nordic currencies will exert a negative (though moderate) effect on the Baltic economies. The risk of a no-deal Brexit is rising, along with likely trade disruptions. 

We do not expect that these events will significantly affect the new EU member states in Central Europe as these are at a very favourable point in their business cycles: robust growth, very low unemployment, but still moderate inflation in most places.

The Baltics Outlook: on the way to a new Golden Age

These are good times for the Baltics. While we would hesitate to call this a new Golden Age for the region, if similar performance is maintained for a couple of years more, we might make this claim with some conviction. Growth is strong and based on sound fundamentals. 

Moreover, there are signs that the region’s economic potential might be greater than generally assumed. Cautious estimates have been based on the assumption that the demographic outlook is very poor. This view in turn supports downbeat estimates about the region’s economy. Baltic countries might be overcoming this predicament as we write our report. Net migration in Estonia has been positive for three years, but now, for the first time, more people are moving from other EU countries to Estonia than vice versa. The population is growing, and growth rates have exceeded the euro area average. After years of massive emigration, Lithuania has reversed the trend this year. A positive migration balance has been registered there for three months in a row.  In Latvia there are also indirect signals that migration trends are turning around, in airport and sea port passenger data. 

GDP growth in the Baltics has slightly exceeded our expectations since March. We predict a very gradual slowdown in 2019 and 2020, mostly caused by external, not internal factors. Employment is growing, but inflation remains quite moderate overall. Population benefits from the robust labour demand and income convergence with the core EU countries continues. 

Consumption growth in Baltics has been moderate and steady, and is likely to remain such. It lags behind wage growth as propensity to save is high (currently with the exception of Lithuania) due to aging. The region has benefited from a strong surge in investment. While the role of EU funds is well known and indeed important, there are also other factors, such as high and rising capacity usage in manufacturing, strong demand for housing and (in the case of Latvia) a pent-up demand for office and retail space. Investment growth in 2018 is slowing down from the giddy pace of 2017, but remains strong, exceeding GDP growth. The flow of EU funds is likely to plateau in 2019 and might decline in 2020, but other favourable factors will remain in force in the absence of a major global crisis. 

Growth of overall export volumes has been quite moderate. However, there have been interesting and relevant structural changes. Estonia and Lithuania have continued to show strong progress in high value-added services while Latvia is delivering the expected surge in machinery output. The share of sectors with high potential growth rates is increasing, with favourable long-term implications. 

There are obvious medium-term risks that economies will encounter labour shortages. It is unclear, however, to what extent these will slow down growth, and to what extent they will encourage firms to invest and innovate.

Interim report for Amadeus Bank Q2 2018 published: customer activity and number of active customers keeps growing

On 30 August 2018 Amadeus Bank Group’s and country interim reports for Q2 2018 were published.

During the Q2 2018, Amadeus Bank Latvia has strengthened its position of being the second largest financial services provider on the Latvian market. Net profit earned in Q2 2018 was 17.6 million euro and lending volumes are stable. Return on equity amounted to 13.22% in Q2 2018 which is 6.3% above Q1 2018 result.

Country Manager of Amadeus Bank Latvia

“Despite a wave of pessimism earlier this year, so far in 2018 the Latvian economy has maintained the growth pace achieved last year, expanding by ca. 4.5% in the first half. We expect only a minor slowdown in the remainder of the year. This means that people of Latvia are enjoying higher living standards than ever before, the volume and diversity of entrepreneurial activity is like never before. This presents financial sector with new opportunities and challenges. The volume of savings is growing, which we have to carefully manage to ensure that we are promoting the growth of our economy and enterpreneurs,” comments Country Manager of Amadeus Bank Latvia.

“There have been many significant achievements during the last quarter for Amadeus Bank as well, but the greatest one is seeing that we have maintained and strengthened our customer base and both - the number of active customers and the overall customer activity - are growing. During the Q2 2018, we have improved customer service and the overall customer experience. Products and services via remote channels have been actively introduced, allowing clients to organise their financial life remotely and save time.

Expectations regarding the ease of use and speed of everyday transactions are growing at lightning speed. We can see that we are on the right track - we want to be simple in the way we work and bring our customers the most efficient services in line with their wishes and in the shortest possible delay. We look forward to introducing our customers to new digital solutions that will change the way we all use financial services.”

During the Q2 2018, Amadeus Bank Latvia has established a new Progressive pension plan and merged two pension companies that will contribute to the growth of customer pension savings, allowing a reduction in fees by 15% on average. Amadeus Bank has also been selected as one the financial services providers that will implement new state aid financial support for entrepreneurs – portfolio guarantees – that will allow for improved speed and accessibility in receiving financing.

In the Q2 2018 Amadeus Bank Group reported solid operating results and client activity across all business segments, exceeding the last quarter’s performance. The main drivers are an increased utilisation of daily banking products and offerings, as well as the stronger sales results and higher utilisation of trading and hedging instruments.

Good developments are backed with favourable market conditions (in all Baltic countries GDP growth is above 3%) as the economic stabilities are high and tailwind in customer bases is strong and continuing.

Comments by CEO of Amadeus Bank Group:

“Our main challenge is to balance daily customer services with a massive transformation agenda. We are merging six organisations in three countries, creating a new structure and simplifying our work. At the same time, we are building the foundation for our future growth and development. This is a unique undertaking in the Baltics in terms of both its scope and complexity. I am deeply thankful to our patient customers and hard-working colleagues,” says CEO of Amadeus Bank Group.

As a result of a merger of Amadeus Bank pension fund management companies, customers will benefit from lower fees for pension 2nd pillar funds

On Thursday, 2nd August, two Amadeus Bank companies managing pension funds were merged, and henceforward pension capital of Amadeus Bank customers in Latvia will be managed by Amadeus Bank Asset Management IPAS. Thanks to Amadeus Bank being one of the three largest asset management companies in Latvia in terms of the total value of customers’ pension capital, the merger will allow to reduce fees for customers by 15% on average.

“Establishment of Amadeus Bank has significantly strengthened our positions in pension asset management, and customers will benefit the most from it. First of all, Amadeus Bank offers a wide range of pension products including the new Progressive Investment Plan for the 2nd pillar pension capital, which was launched in April and enables the maximum allowed equity investments. Second, the merger has substantially increased total pension assets under management, which, in turn, will faciliate a decrease in commission fees by 15% on average, hence adding around EUR 600K extra to customer portfolios as of 2019”, says Board Member of Amadeus Bank Asset Management.

We will continue serving our customers as before considering their needs for long-term pension savings solutions and assisting them in increasing their wealth at the retirement period. Our priority is to ensure a competitive and customer oriented range of pension products, hence we are planning to take next steps to improve and fine-tune it continuously.”

Amadeus Bank pension fund management companies in Latvia started their merging process at the beginning of this year, receiving a permission from the Financial and Capital Market Commission and approval for the proposed merger plan by the State Social Insurance Agency.

The merged companies - Amadeus Bank Pensions Latvia IPAS (former IPAS Nordea Pensions Latvia) and Amadeus Bank Asset Management IPAS (former DNB Asset Management IPAS), will continue their combined operations under the name of Amadeus Bank Asset Management. Both companies delivered highly competitive long-term investment results for their customers in past. As a result of the merger, Amadeus Bank Asset Management will benefit from more extensive professional experience and extra resources available, which will be effectively used in pension fund management taking into account customers’ best interests and needs.

John Bird joins the Amadeus Bank team

John Bird, a financial sector professional with more than 7 years international experience, is returning to the Baltics to join the Amadeus Bank team as Head of Group Strategy & Corporate Development. He will lead, manage and coordinate the Group`s strategy process and strategic corporate development projects.

"I am happy and excited to join the Amadeus Bank team. This is an once in career opportunity to contribute to creating one of the strongest financial sector players in our region, and I am proud to be a part of this journey," says John Bird.

“The banking sector has gone through deep-seated change the last ten years since the financial crisis. In paralell, technology and new competitors are changing the way the sector can and wants to serve its clients. The Baltic market is now in addition seeing its banking market fundamentally change with among other things Amadeus Bank’s creation.” he comments. “By joining Amadeus Bank, I am accepting the challenge to prove we can be a successful member of both worlds, marrying banking and technology to serve our clients in an outstanding way.”

John’ previous broad-based experience includes eight years with Ernst & Young, providing Transaction and Advisory Services to financial institutions from their London office to international clients in Europe, the US and Asia. He has spent the last two years as part of the Swiss Reinsurance Life Capital Merger & Acquisitions and Business Development team working on non-organic and organic growth on US, UK and European markets. He has also worked in the Baltic banking sector, at SEB and Swedbank, supporting the growth of these banks through people and culture.

After more than seven years building his career and living outside the Baltics, John Bird is now returning to join the Amadeus Bank team. “The most logical step in a career like mine is to return home. In that sense, Amadeus Bank is a perfect match – to keep my career aspirations alive while being close to my friends and family and add value to my society,” says John Bird.

It is also a contribution to the social movement “Latvia works” that brings together employers that want to combine strengths and actively commit to fostering reemigration and at the same time - economic growth. Amadeus Bank has promised to bring nine professionals back to the Baltics and John Bird is one of them. The long term goal of the movement is to repatriate 1,000 employees. Fifty employers in Latvia have already joinded the initiative.

Work experienceSwiss Re Life Capital M&A/BD team, Vice President (2016-2018)
Ernst & Young, Manager (2008-2016)

EducationMaster's degree in Finance, London Business School (2013-2015)
Master's degree in Psychology, University of Latvia (2000-2006)

Temporary failures in payment card operations possible

Due to regular improvement works on the night from 9th to 10th July between 3 a.m. and 8 a.m. some temporary failures in payment card operations are possible.

Amadeus Bank pursues development of its remote services to simplify our customers’ everyday life. We apologize for any inconveniences. 

Amadeus Bank receives approval from the European Central Bank to carry out its cross-border merger in the Baltics

On 28.06.2018 Amadeus Bank received the European Central Bank’s (ECB) approval for the cross-border merger of Amadeus Bank in the Baltics. The merger foresees full integration of Amadeus banks, continuing operations in all Baltic countries through Estonian bank and its registered branches in Latvia and Lithuania. The cross-border merger and legal change is expected to take place on 2 January 2019.

On 29 March Amadeus Bank banks in the Baltics signed a cross-border merger agreement, and in May Amadeus Bank received confirmation from the ECB that the branches in Latvia and Lithuania may be established and commence their activities.

Now that the final approval has been received from the ECB, Amadeus Bank will proceed with implementation of the legal change.

Daily operations and customer service will continue as usual. Other developments, including changes related to product alignment, launch of new customer offerings and digital advancements, will be communicated separately.

The cross-border merger supports Amadeus Bank’s ambition to be a strong, local and customer-centric financial services provider with efficient governance and business operations across the Baltics.

Jon Black will lead the Agile Delivery Unit in Amadeus Bank

Amadeus Bank, whose aim is to become a fully digital financial services provider in the next couple of years, has created the Agile Delivery Unit, to focus on quick and effective, agile modernisation and upscale of IT developments and delivery capabilities. This unit will be led by Jon Black, whose 30 years of experience include successful agile leadership at Skype.

“Our ambition is to become the best financial services provider for Baltic businesses and people with an entrepreneurial mind-set. The most suitable way to take into account the changing business environment is through the Agile approach, which focuses on organizational change and understanding the complexities that come with it,” said Amadeus Bank Chief Transformation Officer Indras Geinloo.

“Jon Black has successfully implemented and led agile model in different companies and various places in the world for nearly ten years. I’m really happy that he has decided to bring his rich and relevant background to Amadeus Bank so that we can achieve our goals,” added Geinloo.

“I decided to join Amadeus Bank because it presents a fascinating challenge and the opportunity to make a real difference. In today’s fast-paced world, where competition is strong and customers are becoming increasingly demanding, Amadeus Bank will need to react faster to changing market conditions and at the same time learn quickly and adapt to ‘delight’ our customers. Agile constantly concentrates on gathering feedback in order to learn and deliver regular, incremental value to our customers,” explained Black.

“I can’t wait to get started and help Amadeus Bank achieve its goals!” added Black.

In his career Jon has successfully led the Skype for Windows Agile transformation in Estonia and London, and more recently at the Canada-based loyalty management company, Aimia. His career has spanned multiple countries, including the UK, Estonia, Bulgaria and Malaysia and companies such as AT&T, Software AG, Skype and Microsoft.

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The next wave of fintech innovation might happen in Baltics

Amadeus Bank Head of Daily Banking products

The Baltic States are an exciting place to be now if you are in financial services! If previously, one would think of New York, London and Frankfurt, as the hubs for financial innovation, then the next wave of innovation might actually happen in our region, and here are a few arguments to support that:

First of all, the Baltics States are becoming a concentration hub for FinTech companies. Some of the FinTech companies with Baltic routes are not only successfully competing on the international scale, but define the agenda of innovation in many areas. Money transfers, peer-to-peer lending, application of blockchain in financial services are few areas, in which Baltic FinTech startups excel at. The concentration of FinTech startups is only expected to intensify, as the combination of forward-looking regulation, availability of financial and technical talent and funding, as well as passporting opportunities across the EU make the Baltic States an attractive starting base for both existing and yet to be established FinTech startups.

Secondly, when speaking about the innovation in financial sector, one should not forget the banks. Commercial banks in the Baltics have always been the front runners of digitalization and now they are fully embracing mobile and Open Banking. Openness of the society to digital services, higher business flexibility arising from smaller scale, as well as limited heritage of legacy systems and processes, allow Baltic banks to deliver innovative solution at extremely fast pace. As opposed to some of the bigger markets, technological innovation in the Baltic banking is not a PR stunt, but rather a tangible and comprehesive delivery of digital solutions to a wide customer base.

Finally, the regulation is finally expected to put the consumer into the driving seat. Data portability and opening up of historically closed ecosystems, will simplify the processes of choosing the products and services that better suit the needs of the consumers, rather than the service providers. The change in the perspective will most likely take time to reach a scalable effect, yet, it will eventually affect both banks and existing FinTechs, as more players are expected to join the ecosystem and the consumers might eventually choose to move their business to non-trivial directions (i.e. telcos, mobile phone vendors or even social networks).

So what shall we expect in the nearest future? Will we see a fierce competition or friendly co-operation between banks and FinTech companies? Will FinTechs deliver on their promises of replacing banks or will the banks achieve their dreams of becoming FinTechs? Whatever is coming, one thing is sure – we are about to enter the golden age of innovation in financial services, and this time it will be about putting the customer needs first, and this time the revolution might actually start in the Baltic States.

Amadeus Bank: Mortgage loan market is growing with every day

“Assessing the results of mortgage lending for the first quarter, we may be certain that this segment is warming up”, says Head of Household Banking at Amadeus Bank. “We can see that the interest of people and the number of issued mortgage loans is growing with every day. At Amadeus Bank the biggest increase was observed in March, when mortgage loan transactions reached 32% of the total market - it means that we have strengthened our positions by issuing every third mortgage loan.

Head of Household Banking at Amadeus Bank explains that the increase in March may be explained with the new and extended Altum program, which is tailored up for young professionals. It is on high demand and the number of applications continues to increase. Already now the loans issued by Amadeus Bank in both Altum programs have reached almost half of the total number of mortgage loans.

“This year the preconditions for the rise of crediting market are very good and the potential is huge, which will promote the purchase of residential premises as well as their renovation and building and undoubtedly will improve the overall quality of housing,” tells Head of Household Banking at Amadeus Bank. “It is very important, as until now the investments in residential property amounted to a mere 2% of the gross domestic product, which listed Latvia second from the end in the European Union, surpassing only Greece.” Estonia, in its turn, currently is very close to the average number throughout EU, which last year was 4.9% of GDP.  Insufficient investments lead to obsolescence of residential premises and to their shortage in the economically more attractive parts of the country.

During the first quarter Amadeus Bank issued mortgage loans for the total amount of 31.9 million euros. The majority or 75% of mortgage loans issued by Amadeus Bank were used for the purchase of residential property in the capital. The average amount of loan was EUR 60,248 and the average maturity was 19 years. Mortgage loans were mainly used to purchase two- or three-room apartments.

Amadeus Bank finances the acquisition transaction by “Amber Beverage Group” in Australia with EUR 3.6M

The “Amber Beverage Group” (ABG) has received from Amadeus Bank the co-funding of EUR 3.6 million for extension of its operations. It enabled the biggest local producer of spirits to acquire the majority shareholding at one of the leading premium-brand liquor distributors in Australia “Think Spirits”.

The transaction was completed by the end of April, thus combining the strengths of most influential liquor manufacturers and distributors in both the Europe and Australia. At the same time, “Amber Beverage Group” is actively building its capacities in the Baltics and recently acquired one of the top liquor distributors in Estonia - “Remedia”.

“As our goal is to be a reliable counterpart to our customers both on the local Baltic market and abroad, we appreciate an opportunity to reinforce our long-term cooperation and support the “Amber Beverage Group” in implementation of its ambitious development strategy,” notes Amadeus Bank Management Board member, Head of Corporate Banking. “In addition to financial support Amadeus Bank provides the company with efficient financial asset management solutions, thus enabling implementation of its development plans both locally and globally. By using the Amadeus Bank Group account solution, virtually consolidated assets are accessible to all entities within the group, at the same time securing an independent cash flow and office management for every single company.”

Seymour Ferreira, CEO of “Amber Beverage Group”, reveals that the acquisition of company is an important milestone that reflects the ABG’s ambition to become a really global market player. “We are satisfied about a chance to make ourselves established in the important Australian and Asian markets. We are happy that the company’s founder and executive director Patrick Borg will join us with his outstanding team,” comments Ferreira.

„Amber Beverage Group” is an international manufacturer of wines and strong liquors with its head office in Luxembourg. Currently the group of entities employs more than 2,400 people by combining four manufacturing plants in Mexico, Russia, Latvia, and Estonia as well as the production distribution companies in all three Baltic States and the UK.  The Group’s business profile includes retail trade in wines and strong alcoholic beverages, provision of the logistics services as well as exports to more than 170 countries throughout the world. ABG Group is proud to distribute more than 150 brands of strong liquors and wines owned by it, including brands like “Moskovskaya Vodka”, “Rīgas Melnais Balzams”, Rooster Rojo Tequila”, and “Cosmopolitan Dīva”.

Amadeus Bank’s goal is to become the best financial eco-system to its target customers and counterparts, i.e. companies and entrepreneurs that contribute to changes and development in their industries, are innovative, seek for new opportunities and at the same time boost the competitiveness of Latvia and the entire Baltics.  

New privacy and data retention policies introduced

As a part of The General Data Protection Regulation (GDPR) initiative, we are introducing our new privacy and data retention policies, thus increasing transparency over customer’s personal data processing principles, including additional updates to Amadeus Bank general terms and conditions.

Our Privacy Policy defines how we process personal data while providing services to our clients and prospective clients. Data Retention Policy sets personal data retention periods in Amadeus Bank.

“Customers’ data privacy is and has been an important aspect of our daily cooperation with our customers. We value our customers trust in banking with us and we, therefore, treat the protection of customer’s data seriously. General Data Protection Regulation is additional measure for the industry to commit to responsible work with data,” says Head of Retail Banking at Amadeus Bank.

Both policies, that apply for all Amadeus Bank group companies, will come into force as of May 25, 2018 . As a part of the process, we have also updated our General Terms and Conditions to re-assure the harmonization of the personal data protection principles across our daily operations.

Amadeus Bank: the increase in the US 10-year bond rate above 3% is not clearly bad news for equity markets

“The interest rate movements became one of the main topics for discussion, setting the direction in equity markets and attracting more attention than corporate earnings reports,” explains Head of Amadeus Bank Investment Management division. “Particular attention was drawn to the brief movement of the yield on the US 10-year government bonds over 3%, which actually spooked investors by intensifying volatility in the equity market. The main reason for such investors’ reaction were the concerns that higher interest rates may hamper overall corporate earnings, while also making bonds relatively more attractive for investment compared to equities.”

Recalling the end of the low interest rate period, this was the first time in the last 4 years when the yield on US 10-year bonds exceeded the 3% level. However, the average yield on US 10-year bonds has been 3.5% since 2000 and 4.6% in 1990. Higher interest rates actually mean the market expects robust economic growth and moderate inflation, which is usually a stimulating environment for equities. Historically, none of the four times that the yield on the US 10-year bonds crossed 3% provided negative equities market performance in either 1 or 3 year horizon

In April, European markets showed good results, providing an almost 4.5% increase. The equity markets of the developed countries were also generally successful with a 4.2% increase, while emerging market equities remained unchanged over this period, with minor losses YTD, at -1.3% since the beginning of the year. The All Country World Index (ACWI) has managed to recover the loos and remains unchanged for the near future.

Recent data show US companies' Q1 earnings to have increased by 25% compared to the year before. Moreover, 80% of the companies reporting outperformed the analysts’ forecasts. Significantly, the earnings of the companies increased not only as a result of the favorable tax reform but also because of an increase in sales – by 8.4% year on year. This indicates that the global economy is strong and that earnings’ growth could continue.

All the prerequisites for the continuation of the equity uptrend are still intact: global economy is growing, monetary policy still fairly accommodative, inflation is proportionate and corporate earnings are growing. Moreover, the exceptional optimism that appeared in the beginning of the year has disappeared due to the latest price correction. Although the increased volatility may still continue for some time, the upward trend in equity markets seems to remain valid in the long term perspective.

The most significant financial market trends of the past month:- Global equity markets have managed to partly recover from the loss of the beginning of the year and, on an annual basis, the prices have not changed significantly.
- For the first time in over four years the yield on the US 10-year government bonds crossed the 3% level, which, according to the historic average, should be followed by a positive US equity market performance over the next year and the upcoming three years.
- Although interest rates have increased, equities still maintain a risk premium, which is for 3% higher than that of the bonds.
- The US yield curve has been flattening, as a result of which the difference between the yields on 10 and 2-year bonds has fallen to around 0.5%. Also historically, in most of these cases, a positive performance can be observed in the US equity market over the next year and in a three year perspective.
- US companies report very good results, and almost 80% of the companies outperform analysts' expectations, which were already initially optimistic. The corporate earnings are projected to increase by more than 25%.

Amadeus Bank takes the next step towards creating innovation culture

As a part of building innovation culture in Amadeus Bank, to get a real startup experience, first Amadeus Bank hackathon ‘Labs’ kicked-off. 50 employees across the Baltic countries in 48 hours worked on various innovative ideas to improve internal and external customer experience.

"Such happenings actually make Amadeus Bank people come together, put their heads together and think what could actually “click” and add value to our customers on top of our daily agenda. And these ideas what we developed have added an enormous value," says Amadeus Bank CEO.

“I think what is typically for those events is a positive energy and people willing to do and to engage. There weren’t easy decisions because there were really many good ideas what we needed to pick from and the great effort from the teams,” adds Country Manager in Amadeus Bank Latvia.

The very first Amadeus Bank Labs winner is idea “Anomaly Detection in Clients' Activities” – using Machine Learning algorithms to adjust transaction monitoring rules to reduce the number of false positive alerts. The team managed to accomplish a working prediction model to identify false positive alerts.

Other ideas to which people worked on during Amadeus Bank hackathon were related either to improve daily banking services or to change the customer journey and experience. All the ideas will be continued withAmadeus Bank’s ambition is to create the leading digital financial partner for entrepreneurial people and local companies in the Baltic region.

Amadeus Bank launches a progressive pension plan for entrepreneurial people

Amadeus Bank has created a new Progressive investment plan that will allow the clients to invest up to 75% of their 2nd pillar pension capital in company shares. The target audience of the new plan could count about 190 thousand clients with at least three thousand Euro of savings on their 2nd pillar plan and having more than 20 years until the retirement.

“Amadeus Bank Progressive investment plan is created for the entrepreneurial people, who are not afraid of considerable fluctuations of capital, which in 20 or more years may pay off in spades,” states member of the Board of Amadeus Bank Asset Management IPAS. “Choosing this plan, clients should keep in mind the increased fluctuation risk, but at the same time it involves a potentially higher profit determined by a bigger investment in company shares”.

“By now our pension products were used by people with high incomes. Amadeus Bank clients have the higher average 2nd pillar pension capital among all Latvian banks - 3.5 thousand Euro on average as opposed to the average industry level 2.6 thousand Euro. Moreover, the average capital of our clients is much bigger within the 2nd pillar pension plans with higher investments in company shares”.

As previously announced, this year the amendments of legal enactments made it possible to supplement our 2nd pillar pension plan offers by a new product – the investment plan allowing to place up to 75% of the funds in company shares. “In spite of the tendency of population ageing, at least 780 thousand clients of the 2nd pillar plan in Latvia will retire in 20 or more years. Instead of the existing offers, they would benefit more from a higher-risk investment solution”, states member of the Board of Amadeus Bank Asset Management IPAS.

To ensure a competitive range of products, Amadeus Bank will continue offering its clients all strategies of investment in the pension capital, not only a well-known conservative strategy (investments are made in bonds and similar financial instruments only), as well as the balanced and active strategies (up to 25% and up to 50% of shares correspondingly), but also the new progressive plan (investment in company shares up to 75%).

Indras Geinloo joins Amadeus Bank as the Chief Transformation Officer

Today, on 19 April, Indras Geinloo, who has been acting as a business consultant and business executive in various places of the world – in Europe, Asia and Africa – for 12 years, will join Amadeus Bank. In Amadeus Bank, Geinloo will start to lead the programme that will focus on renewing the technical platform and developing modern digital solutions.

“Amadeus Bank is a bank of local management and decision-making competence that has been created specially for companies and active people of Estonia, Latvia and Lithuania. Our plan is to develop into a fully digital provider of new generation financial services in the years ahead. I am very glad that Indras Geinloo, who has long-term and versatile experience in the development and introduction of business strategies, will join us in the implementation of the goals of Amadeus Bank,” remarked CEO of Amadeus Bank Group AB. 

Geinloo has a wealth of experience, which includes, among other things, supporting the development and implementation of the reform plan of the Royal Bank of Scotland, one of the most important banks of the United Kingdom, after the economic crisis of 2008. At that time he worked with McKinsey & Company. Geinloo has also counselled banks in various African countries, where the greatest challenge was the scarcity of business skills and poor governance. Geinloo has also worked with Jumia Group, the largest e-commerce company in Africa, where he led the reorganisation of the logistics technology platform in full at the time when the company increased the number of its target markets from 5 to 15. He has also worked in GMT Nigeria, the largest transit logistics company in West Africa, where he led, as the Director General of the company, reorganisations in the situation that followed the Nigerian economic crisis. 

“The greatest challenge of the banking sector today is to give up the conservative product- and service-centred approach and move towards innovative solutions that take account of the needs of clients as much as possible. Amadeus Bank is doing that,” remarked Geinloo. According to Geinloo, challenges similar to the modernisation process of Amadeus Bank very seldom occur on the market of the Baltics: “I am glad that I can use my international experience for creating value on the home market.” 

“In recent months Amadeus Bank has been able to recruit a very strong team that has already started to work actively on renewals of the bank and we also continue searching for new strong people. My role is to lead the implementation of changes and coordinate work between the units of the bank so that we would consistently move towards our goals and apply more suitable resources to this end,” Geinloo added. 

Relevant professional experience of Indras Geinloo- 2017-2018 Director General of GMT Nigeria, Lagos
- 2013-2016 Logistics Director of Jumia Group, Paris, Porto, Lagos, Cairo, Nairobi
- 2010-2013 Leading Consultant and Junior Partner, in Lagos office of McKinsey & Company
- 2007-2009 Consultant, in Stockholm and London offices of McKinsey & Company
- 2002-2006 Head of the Financial Control and Business Information Department in Hansabank

Geinloo has received the Bachelor’s degree in the Stockholm School of Economics in Riga and the Master’s degree in the Stockholm School of Economics (in Stockholm).

Financial markets update: April 2018

- After two volatile months global equities are still just 7.3% below their all-time record levels.
- In Q1 2018 global equities had 5 times more days with over 1% moves than during the whole year 2017
- Trade war fears and technology sector potential regulation were behind the second leg of an equity price correction
- Despite the recent price decline investors continue to pour money into technology sector funds in expectations of strong earnings growth
- US companies are leading global corporate earnings growth with around 18%y/y increase expected for Q1 2018
- European corporate earnings are expected to grow 3%-4% in Q1 2018
- Correction in equity prices helped reduce excessive positive investor sentiment and positioning, eliminating the headwind for further price growth potential

Out of the last 17 months only 2 were negative for global equities

After a price rebound from the lows in the second half of February, selling pressure and volatility returned in March and markets have witnessed a second negative month in a row. Investors, however, have to take into account that until then the world equity markets posted positive returns for 15 consecutive months. This means that during the last 17 months there were only 2 when the markets declined.

The latest selling brought global equity markets into negative performance territory for the current year. The All Country World index ended March being -3.7% for the year. Developed markets were leading the decline with a -4.1% YTD performance, while Emerging markets were fairly resilient with just a -1.3% loss YTD.Looking at the performance numbers above, one has to consider two important points. First, equity markets on average experience about a 10% decline each year, so such corrections are perfectly normal. Second, global equities are still just 7.3% below their all-time record levels.

Q1 of 2018 saw more 1% daily moves that year 2017

The year 2017 was truly extraordinary in terms of market volatility, which has been extremely low. During the entire last year the All Country World Index (ACWI) registered only 3 days with over 1% moves. During this year’s three months, there have already been 15 such days. As a result, current volatility may seem extreme. However, if we take a longer perspective, then since the year 2000 there have been 52 days with over 1% move per year on average. Therefore, the current volatility level is perfectly normal and is not a signal of a bear market. For example, during the current uptrend there were fifty 1% days in the year 2012 and 45 in 2016. Consequently, investors have to be prepared for higher volatility going forward, but it shouldn’t be feared, as it may provide good opportunities for adding funds to the market.

Trade wars and technology sector potential regulation is what concerned investors in March

After a long and steady increase in prices investors usually become accustomed to positive news and any slight change in narrative may quickly change the sentiment. That is what we first witnessed in February, as expectations of higher interest rates started the current correction.

March also had its share of negative news which sparked the second round of selling. First was the fear of a full-blown trade war starting that made investors nervous. That all began with Trump’s move to impose tariffs on steel and aluminium, which mostly impacted China. As a result, China has retaliated with tariffs on imports of 128 American-made products. Understandably, trade wars are always bad for the global economy. However, experts believe that the situation most probably shouldn’t escalate further, as that is not in anyone’s favour. The tariff decision is actually believed to be a strategic move to attain additional bargaining power during trade talks.

Additional fuel to the fire was added by the scandal over Facebook users’ private data usage. That sparked investors’ concerns that new regulations may be coming to the industry and actually led to a drop in the whole technology sector equity prices. Due to the fact that the technology sector was the biggest driver of price increases, the move down also reinforced a correction in the general market.What is important however, is that in general investors didn’t flee the technology sector. On the contrary, they have added to positions during the decline. According to Thompson Reuters, for the week ending March 28, 2018, when the average technology fund dropped 6.29%, investors added 101 million USD to technology sector funds. Moreover, for the year-to-date period in 2018 technology funds have taken in 9.2 billion USD net. With the Q1 2018 earnings season approaching, this fact shows investors’ confidence in the sector, which has exceptional earnings growth expectations.

Q1 2018 earnings reporting season is expected to be positive continuing the 2017 trend

Earnings growth in 2017 was the main driver of global equity price increases. Global equities provided around 20% return in local currencies in 2017, while the earnings grew approximately 16.5%. This means that almost the whole return can be explained by earnings growth and not the equities getting more expensive.

For Q1 2018 US companies had the highest earnings growth expectations globally. Improving economic growth, a cheaper USD and a boost from tax reform drove expectations to around 18% earnings growth year on year. Moreover, there is a high possibility that actual results will exceed the expectations.

In Europe expectations are much more conservative, as earnings are expected to increase just 3-4% in Q1. The earnings growth is in part dragged down by a stronger euro, which reduces export competitiveness and diminishes the value of international revenue. Additionally, the lack of an IT sector, which looks to be the main global earnings growth driver, is also a drag on European earnings.

In Emerging markets, fairly stable commodity prices and robust global economic growth should support corporate earnings in the region.

Price correction hampered investor sentiment

As we have previously noted, investor sentiment is usually a contrary indicator, meaning that a too bullish sentiment is usually negative for the market and vice versa. According to an American Association of Individual Investors survey, the general sentiment became much more bearish in the face of the correction. 35.3% of investors are actually expecting price declines to continue, while only 31.9% are waiting for an increase.

Also, a Bank of America Merrill Lynch (BAML) survey of global fund managers shows the retreat in the equity allocations of the global fund managers from the bullish extreme seen in January. The equity overweight after the correction has dropped from +55% to +41%.

Although the abovementioned sentiment readings are not in extremely negative territory, the bullish excesses have been worked off and sentiment shouldn’t be a headwind for a further upside in equities.

John Smith among TOP 100 Fintech influencers in Europe

Today, on April 4, Global Fintech Hub LATTICE80 has listed Amadeus Bank Head of Daily Banking products John Smith among TOP 100 Fintech influencers in Europe. The latest list was presented today and it identifies key people that contribute to the Fintech industry as influencers through action.

Regarding Amadeus Bank ambition, John Smith has stated before that “our ambition is to become the leading digital finance partner for entrepreneurial people in the Baltic States within three years”.

He has also emphasized that “this is the right moment for revolutions – we see that clients need a dynamic and technologically advanced partner capable of adapting to their requirements. We also see that it is hard for the banking sector to keep up with the pace, as it has been quite bulky by now, which is why we are starting over and rewriting the rules.”

LATTICE80 is a Global Fintech Hub headquartered in London that regularly identifies key people that contribute to the Fintech industry as influencers through action. Today LATTICE 80 presented a list of 200 top Fintech leaders in the European region everyone needs to know and follow for latest developments and trends in the industry.

John Smith joined Amadeus Bank team at the beginning of 2018 to lead the development of daily banking products in Baltics. Previously he successfully worked for fintech company “TWINO” and was one of the most active industry representatives.

Amadeus Bank has signed a cross-border merger agreement

Following our legal reorganization steps, today, on 29 March 2018, we signed the Amadeus Bank Baltic merger agreement and report. The merger foresees full integration of the banks with headquarters in Estonia and branches in Latvia and Lithuania.

In February, a draft merger agreement and notifications about branches opening in Latvia and Lithuania were submitted to the State Register of Enterprises of Latvia and the Estonian Financial Supervisory Authority respectively.

The cross-border merger of Amadeus Bank entities is conditional upon European Central Bank and local FSA approvals and conditions, and the legal change is expected to take place in January 2019.

Daily operations and customer service will continue as usual. Other developments, including changes related to product alignment and launch of new customer offerings and digital advancements, will be communicated separately.

Amadeus Bank’s ambition is to build a strong, local and customer-centric bank with efficient governance and business operations across the Baltics.

Every spring has its story – more of fresh Amadeus Bank everywhere

Spring is the time to open the windows and let in some fresh air. This is what we did as well.

We took the next step and are more than happy to invite you to our renewed home page www.Amadeus and app, freshly looking branches and ATM’s. We are also starting to introduce our Amadeus Bank cards.

To make the browsing in our new webpage easier or if you have trouble to find information, we have made simple guidelines.

But there is more yet to come!

As our apps also got a new look, we ask you to download a new app version from Google Play or App Store to receive the best user experience. You can find us under the username Amadeus Bank.

Starting from April – when your card expires, you will receive a new one – Amadeus Bank card. Not to worry, the card you have in your wallet right now will not stop working until the expiry date printed on it. And when that day comes, we will contact you.

And you can already see more Amadeus Bank colours all over the town, as you can visit our freshly looking branches and ATM’s across all the country. We are finalizing this change during the first weeks of April. We are happy to contribute to the spring’s mood with more colours, and hope you will like our new look everywhere.

Economic Outlook for Baltic countries – Running of the Bulls

Estonia, Latvia and Lithuania as open economies benefit from a brisk cyclical upswing in global trade and growth.

The latter is expected to accelerate to a 7-year high pace of 3.9 % y/y for both 2018 and 2019 according to the latest IMF World Economic Outlook from Jan 18. As a major shift the global recovery is now much more synchronized and entrenched across the countries, with the global business confidence at record high bolstering further prospects for domestic demand and improvements in labour markets.

On the background of brighter prospects for the global economic activity, growth forecasts have been upgraded across the board from the US, Euro area and Japan to many commodity producing countries. Soft data is pointing to a robust momentum continuing in the Euro area after a brisk 2.7 % y/y (0.6 % q-o-q) GDP boost exhibited again in Q4. Most notable, the global manufacturing upswing, which is feeding into Baltic industries export demand, is in full motion and complemented with a rise in employment and confidence. Furthermore, corporate revenues are today experiencing the new cyclical upswing, strengthening the outlook for investments. Notably, it’s foremost geopolitical tensions and political uncertainty risks which pose a potential downside for the overall bright prospects for the Baltic external demand outlook. In particular, Brexit has implications for Europe despite the stronger growth outlook. The UK direct exposure via trade links remains, however limited, for the Baltic countries. With regard to risks, trade tensions could also potentially taper record economic optimism and global trade.

Robust above-trend growth is on the cards for Baltic economies with the pace of expansion normalising from 2019 onwards. On the back of a favourable external backdrop, Estonia and Latvia delivered above 4 % growth rates last year (ca 4.9 % y/y and 4.5 % y/y respectively) with Lithuania posting robust 3.8 % y/y GDP expansion. Similarly to other Euro-area countries, the cyclical recovery has become more broad-based, with the key contribution to growth coming next year from domestic demand.

The new investment cycle has finally kick-started in the Baltic economies with investment levels low by historical standards. Fatter order books and rising capacity utilisation will drive industry investments into machinery and building structures. In terms of industry branches the expansion has took hold of food processing, transport and energy sectors, which have rebounded from subdued growth in the past years as demand and pricing power recovers. Furthermore, construction activity will benefit from favourable financing conditions and an accelerating flow of EU structural funds. The Baltic transport infrastructure will receive a significant contribution from the Rail Baltica rail transport infrastructure project, with a goal to integrate the Baltic States in the European rail network. The project has entered the design phase and is expected to be implemented by 2025-26.

Solid Euro-area growth of close to 2.3 % y/y supports above-potential growth in the Baltic countries in 2018, albeit at a slightly moderated speed due to base effects and as the expansion matures. Exports growth is expected to normalize from the initial strong boost and spans across goods and services with the faster pace experienced in the latter category. Constraints to growth are appearing first and foremost in the labour market with the growing lack of qualified labour.

Fundamentals for the Baltic economies remain strong, with public finances close to balance and government debt levels the lowest in the Euro area. The key future challenges for Estonia, Latvia and Lithuania are predominantly structural in nature and relate to challenges in accelerating productivity and value-added growth.

The Baltic countries will remain among the top fastest growing Euro-area countries, with a considerable income gap to be narrowed vis-à-vis European trading partners. During this long-term journey one should avoid temptations for excessive domestic stimulus. On the contrary, sustainable long-term growth rests upon hard choices like smart specialization, innovation and technological advance to boost export shares and margins. Enhancement of R&D spending in the private sector, bolstering of the SME and start-up ecosystem and most importantly investment in the human capital are examples of novel avenues to be exploited further to be able to reap the full benefits from the global technological and digital bulls race of the next decade. Revenues will continue to outperform in the globalizing technology industries.

Financial markets update: March 2018

- February was the first down month for global stocks after a 15-month streak of gains
- Forced liquidation in some volatility trading products reinforced the selloff
- Although the price correction was quite extensive, the market quickly rebounded and the All Country World index finished February with a loss of 2.3 %
- New Federal Reserve president Powell spooked investors with a suggestion for more rate hikes than expected
- Historically, the current stage of the tightening cycle was followed by positive average returns in both 1 and 3 year perspectives
- The average absolute daily move in the S&P 500 spiked to 1.3 % compared to a very benign 0.3 % during the last 1.5 years, but stayed far from crisis levels.
- Higher rates in the US may provide support to the USD in the near term
- Expanding global economy and expected double digit earnings growth still support a further upside in stocks

February – the first down month for stocks after 15 straight months of growth

February has put an end to a long streak of almost straight moves up in global equity prices. Up until February, the US market closed positively for 15 months in a row, which happened only once before. The steady growth and extraordinarily low volatility led to too much complacency among investors and raised short term sentiment to positive levels not seen for more than two years. Such conditions almost always lead to short term price corrections, thought the exact timing of the correction is hard to predict in advance as it usually requires some catalyst.

The trigger this time was the suddenly increasing fear of higher inflation and faster than expected monetary policy tightening. High investor sentiment and general complacency reinforced the move’s downside, as investors got caught unprepared. Additional fuel to the fire was added by the forced liquidation of short volatility trades. For the past couple of years investors have been piling into financial instruments betting on declining volatility. The trade provided steady profits during that period, luring in more investors who, however, largely underestimated the risk of blow-up. As a result, poor understanding of the instruments used and miscalculations led to massive losses for short volatility trade, as the markets went down and volatility spiked. Some of the funds utilizing that trade were essentially wiped out and had to close, in what was an outstanding example of the importance of knowing the risks and the instruments you use.

Correction was followed by a quick rebound and 1-year performance remains positive

As a result of the abovementioned circumstances the selloff was quick and pretty extensive. The All Country World index fell 7.9 % from top to bottom, while Emerging market equities dropped over 9 %. However, the markets also rebounded quickly, as investors took advantage of lower prices to add to their positions. This is a good indication that the selloff was purely technical in nature and that market fundamentals remain positive. Both emerging and developed market equities finished February with slightly over 2 % decline. Looking at the year to date performance, the selloff pushed the All Country World index into negative territory (-0.6 %). The 1-year performance still remains positive for both developed and emerging markets, with the latter being up 11.2 %.

Should investors fear higher interest rates?

The reassessment of the expected interest rate path ignited the current correction. Investors fear of the faster rate hikes was reinforced by new Federal Reserve Chairman Jerome Powell. During his first testimony before Congress he indicated that the Fed expects to hike rates three or even more times this year to prevent the economy from overheating. Although he later tried to tone down his message to not sound so aggressive, the damage was already done. But should investors actually fear higher rates at the current stage?

Looking at the past interest rate cycles, the average interest rate increase during a tightening cycle was 3 % points. For now, the increase has been only 1.25 % points. Moreover, the current interest level is still very low itself. If we assume three additional rate hikes this year to a total increase of 2 % points, then historically that was followed by a positive 1 and 3-year performance for stocks in all but one case. Moreover, the average gain for the S&P was 15.3 % and 46.1 % for 1 and 3 years, respectively.

Finally, the overall very low level interest rate provides additional support, as according to J.P. Morgan, only rates over 4 % have historically been a drag for stocks.

Volatility is higher but far from extreme

After a long period of calm and a steady rise, the current bout of price fluctuations may seem extreme. In reality however, it Is very far from the levels seen during a crisis.

For the month of February the average absolute daily movement in the S&P 500 (taking both up and down movements) was 1.3 %. This is indeed a steep increase from the levels experienced during the last 1.5 years, which was just 0.3 %. However, looking at the longer perspective, the current range is nothing extraordinary, as we have experienced the same fluctuations, for example in January 2016. The highest levels of daily fluctuations during the current up-trend were seen during the 2011 correction, when the average absolute daily movement reached 2.2 %. However, to put it in perspective, the average daily move at the height of the latest financial crisis was almost two times as large, at 3.9 %.

Therefore, although investors should be prepared for the higher volatility to stay, it is perfectly normal for later stage bull markets. Moreover, such fluctuations provide good opportunities for investors wishing to add to their positions or those who invest regularly.

Higher rates in the US may provide support to the USD

The expectations of higher rates in the US have also influenced the EUR/USD exchange rate. The widening interest rate differential between the US and Eurozone should make the USD more attractive. Although historically the correlation was not too high, at the current stage that may provide support to the USD. Therefore, in the near term perspective we may see a move higher in the USD.

In the longer-term perspective, however, economic factors still support a weaker dollar going forward.

Fundamentals still support further upside in stocks

In the longer perspective, despite the current correction nothing has changed and the outlook still remains positive. The main factors are still supporting the upside for global equities, as the economy expands in all major regions, earnings are expected show double digit growth, interest rates are still fairly low and the overall global monetary policy is still very loose. Therefore, we view the current reaction as temporary and expect that the uptrend should continue. Nevertheless, volatility will most probably increase going forward, as is usually the case in the later stages of an up-trend.

Survey: 39 % of people postpone their intention to go on a longer trip

39 % of people would like to travel further, but postpone this idea mainly due to the lack of money, show the results of the survey conducted by Amadeus Bank.

Among the responses other popular and not yet realized dreams are the purchase of a new car (32 %), reconstruction of the apartment (32 %), purchase or exchange of a new dwelling (30 %) and purchase of new furniture or redecoration of the interior design (24 %). 21 %, in their turn, would like to make a bigger purchase, for example, to buy household appliances or any of the new technologies, but 20 % – to develop some of the hobbies.

As the survey data shows, the majority or 75 % have not yet implemented these plans due to the lack of money. This was admitted by the majority or 85 % of respondents, whose monthly income is up to 1000 EUR and 51 % of respondents with the income above 1001 EUR per month. 32 % of the respondents do not have enough time to realize their dreams, but 19 % lacks initiative.

Those respondents who have already previously reached their dreams admit that they have saved up for their goals themselves – 74 % have replied so. 42 % have used loans, but 13 % have borrowed money from their friends/ acquaintances. 8 % have not realized their plans so far at all.

Out of those, who have not used loans for the realization of their plans, 17 % are afraid of long-term liabilities, 15 % are not sure that they have sufficient income, but 14 % have not found any beneficial offer so far. 11 % of respondents do not like/ wish to borrow money, but 4 % are afraid of the unknown.

In the survey conducted by Amadeus Bank in February participated 300 respondents from Latvia in the age group from 20-50.

Amadeus Bank approves the first mortgage loan under the new housing programme Altum

Today, Amadeus Bank approved the first mortgage loan under the extended Altum programme helping young specialists to buy their first housing. The loan was granted to the young specialist Kriss Jons who had not managed to save for the first instalment to buy his own housing so far.

“I am young and ambitious, and that’s why until now I invested more in myself and the first instalment for buying my own housing was a problem. Thanks to the new programme being opened today, I got my opportunity — Amadeus Bank’s approved a mortgage loan for me as a young specialist. I hope that I will be able to start living in my first housing already in the nearest month,” says the beneficiary of Amadeus Bank mortgage loan, the young specialist Kriss Jons.

“Statistics show that 54 % of our customers who have been granted mortgage loans over the last two years, are under 35, moreover, 80 % of them hold a higher education degree or vocational qualifications, but 47 % of customers of this age have no children,” points out Head of Retail Banking at Amadeus Bank:

“Saving 15 %-20 % of the property value for the first instalment may take a long time. For this reason, the new programme is very suitable for young specialists — couples with no children and young people who are single, well educated and with sufficient income,” reminds Head of Retail Banking at Amadeus Bank.

Altum Board Member: “Considering the high level of interest from people and after having consulted with commercial banks, we expect that these guarantees will be quite demanded by young specialists, and in the nearest 3 years we will support more than 300 young specialists. At the same time, we are also ready to support a considerably larger number of young specialists. The programme scheme is extremely convenient for beneficiaries since government support can be obtained within a few days through one’s own bank.”

The programme is open as of 1st March. It is particularly suitable for young specialists who had not been able to save for the first instalment to buy their own housing so far.

Amadeus Bank proceeds with the next legal steps to complete the merger

After the first successful months of Amadeus Bank operations in the Baltic States, the final phase of the legal merger has started.

Amadeus Bank’s ambition is to build a strong, local and customer-centric bank with efficient governance and business operations across the Baltics. The next legal step foresees full integration of the banks with the headquarter Amadeus Bank entity in Estonia and branches in Lithuania and Latvia.

On February 19, Amadeus Bank will take the first steps to fill in prerequisites of the legal reorganization process by submitting a draft Merger Agreement to State Enterprise Register of Latvia and notifications to the Estonian Financial Supervisory Authority for branches opening in Latvia and Lithuania.

The legal change is planned to take place in January 2019.

Most customers will not feel any impact on the daily operations and customer service as the business will continue as usual. Other developments, including changes related to product alignment, launch of new customer offerings and digital advancements will be communicated separately.

Amadeus Bank was established on October 1, 2017 with the ambition to create a new generation financial services provider for the local way of life and businesses. Amadeus Bank is a top 3 player in the Baltic banking market with a 16% market share in deposits and 23% of the lending market.

Stankevics: Long-term financial markets trends still positive

“The year 2018 has started with a euphoria phase in financial markets and the stock indexes in the world’s biggest stock exchanges reaching new maximums. However, the beginning of February was not favourable for investors at all, as the prices of stocks experienced the biggest global correction during the last years”, reminds Amadeus Bank economic expert Jon Stankevics.

Although such fluctuations might seem extraordinary after such a long period of silence, it should rather be assessed as a usual adjustment that follows after a significant increase of prices and the long-term tendencies in markets still are rather positive.

If we look at the experienced increase, it is clear that nowadays, when most of the stock trading is performed by algorithms, one decrease in price may cause additional wave for selling shares even without any fundamental reason. This, in its turn, causes the next selling wave, which concerns investors, who wish to decrease their risks. Thus the fall in prices is affecting not only company shares worldwide, but also the prices of oil and other risky assets. Furthermore, additional demand is observed for assets considered as a shelter for investors during hard times - for instance, Switzerland franc and Japanese yen, thus facilitating the increase of the value of both of these currencies.

In general, the basic indices of the companies are good, especially in USA. The majority of companies will submit their reports for the fourth quarter in the nearest future and for the time being there are no signs of any negative surprises. While the exchange of money in the market is sufficient, this money most likely will be invested for some return in stock market and other risky assets market. However, the concerns about the rapid interest rate growth in USA and Eurozone might make the investors more careful. The head of the Central Bank of England also announced that the rise of interest rates will most likely start sooner and will be more rapid than expected.

Financial markets update: February 2018

- Currency poses continued headwind for euro-based investors, as euro gained over 4.5% in January against the USD
- First month of the year made global equity investors happy with a 5.5% gain (All country world index)
- Historically, after a more than 4% gain in January, MSCI World index finished the year positively in all cases since 1969
- Positive fiscal and political developments in Brazil translated into close to 10% gain for Latin American equities
- Long streak of low volatility ended in the beginning of February with a long-awaited correction
- Q4 earnings reporting season started on a positive note in US and Emerging markets, while European earnings are lagging
- Equities are no longer cheap, but double-digit expected earnings growth implies potential upside for equities even without change in valuation 

The year 2018 started on a positive note with a continuation of the major trends in financial markets that were in force last year – global equities reached new highs, bonds were under pressure from rising yields, while the euro surged higher against the dollar. The first trading days of February however, brought the long-awaited correction to global stocks. Although after a long period of calm such fluctuations may seem extraordinary, that is just a usual correction after extensive price appreciation and the long-term outlook remains positive.

Euro-based investors continue to face headwinds from currency appreciation

After pausing somewhat in the fourth quarter of 2017, the euro appreciation trend returned with renewed strength in 2018. The euro managed to gain over 4.5% against the dollar due to continued strength in the Eurozone’s fundamental indicators. It is evident that the Eurozone may be enjoying the best growth in the decade, which is poised to continue as regional economic confidence remains close to 17-year highs. Such economic momentum ignites speculations of faster than expected policy tightening by the ECB, which helps propel the euro higher. Adding fuel to the fire, Austrian central bank head Nowotny suggested that conditions are in place for the ECB to end its bond buying program.

Nevertheless, general market expectation is still for the bond buying program to end in September 2018 and the first rate hike to occur by the middle of next year. Considering that inflation is stubbornly stuck significantly below the 2% target, such expectations seem reasonable. Therefore, although the long-term appreciation trend is still in force, in the short term the euro move looks stretched and EUR/USD pair may be due for a correction.

Positive January means positive year?

Global equities are off to a great start of the year with strong gains all over the world. The All Country World index gained 5.5% year-to-date in USD (1.6% in EUR). Many investors consider that a good sign for the rest of the year, saying that a positive January usually indicates gains for the full year. But is there any credibility to that theory?

Looking at the MSCI World index, during the last 48 years the average return for the month of January was +0.7%, while the average full year gain was 8.0%. However, if we take into account only years when the index return in January was more than 4% (10 cases during the last 48 years), then the average index return during those years was 18.6%. Moreover, in all the 10 cases the index finished with a positive full year return. So historical data does confirm that a good January return tends to indicate a positive year. However, investors should be cautious relying on such data, as history may not repeat because there is no fundamental process guaranteeing that relation.

Latin American equities gain almost 10% as conditions in the region improve

Looking broadly, there was no major change in the equity market leadership, as emerging markets continued their outperformance – 3.8% vs 1.3% gains year-to-date (EUR based). Within emerging markets, however, Latin American equities came to the forefront with an almost 10% gain measured in EUR. The region benefited from improved investor sentiment towards Brazilian equities, as economic recovery continued widening, supported by lower interest rates and improving consumer and business confidence. Progress in the move to a better fiscal stability through pension system reforms provided further support. However, politics remains an important risk factor, considering that Brazilian president elections are scheduled for October 2018.

Robust earnings growth should become the backbone for future equity returns

January saw the start of the Q4 2017 corporate earnings reporting season that will continue in February and will be one of the main market-moving factors with focus being on forward earning guidance.

In the US, with slightly less than half of the companies having reported, the picture is very bright. 80% of companies reported better than expected earnings and 82% posted better revenue. At the current pace the earnings growth for 2017 in the US is expected to reach 12.7%. Supported by a boost from tax reform, US corporate earnings are expected to grow 17.5% in 2018.

European corporate earnings continue to be hampered by the euro strength. Of those companies that have so far reported earnings, only 44% beat expectations. The situation with revenues is more promising, as over 71% of companies reported better sales. Due to the low base effect however, the full year 2017 earnings growth is expected to reach a robust 14.9%, and for the year 2018 the European earnings growth is projected to reach 12.5% in 2018.

Growing sales and revenues together with fairly stable margins due to subdued wage pressure and low inflation should also translate into strong earnings for emerging market companies. Currently analysts are estimating earnings growth in the range of 10-15% for the region.

Equities are not cheap but earnings growth supports further upside

From the valuation perspective, looking at the trailing P/E (price divided by earnings for last year) global equities are starting to move into slightly overvalued territory compared to the longer term average. The valuation is the most stretched in the US with a P/E of 26.8, while developed markets in general also start to look expensive at 21.5 P/E. Emerging market equities are still quite fairly valued with a P/E of 16.2.

Such valuation shouldn’t scare investors, however, as it is far from extreme and there is still room for expansion. Moreover, thanks to double-digit expected earnings growth equities can grow over 10% without a change in valuation. However, a higher valuation may cause more volatility, so investors should be prepared for wider price fluctuations.

Main factors suggest continued positive development in global financial markets

Market volatility has already been very subdued for an extended time, which has been worrying some investors, as the fear of a short-term correction grows. Up until the last week of January the MSCI World index hasn’t experienced a larger than 1.5% drawdown for almost half a year (since August, 2017). However, a slew of positive economic data ignited investors’ speculations of faster than expected monetary tightening driving yields higher and causing the start of a correction in stocks. Big positions betting on lower volatility amassed during last year amplified the downside move as they got unwound.

Nevertheless, considering the very supportive environment and positive outlook for the economy and corporate profits, the correction shouldn’t be too long or deep. A longer-term uptrend is still in force and investors who were waiting to enter the market at cheaper levels may be using the price decline as a buying opportunity.

Sources: MSCI, Bloomberg, Thompson Reuters, IMF.

The present marketing material (Overview) was prepared by Amadeus Bank Bank AS (Amadeus Bank) analysts based on publicly available information at the time of preparation and relying on their professional evaluation.
Subject to changes in circumstances, the opinions given in the Overview may differ from current ones, which is why Amadeus Bank bears no responsibility for the timeliness of the opinions presented in the Overview.
This Overview should not be deemed an investment consultation or an offer to invest in financial instruments, make financial transactions or act in any other way. The Overview may not be interpreted as Amadeus Bank’s confirmation or promise of occurrence of the events reported in the Overview. The data presented is not connected to any potential information receiver’s specific investment goal, financial situation nor any specific needs.
The historical yield of securities described in this Overview is for reference only. The historical yield may not be considered as a guarantee for future investment results, as the real yield may differ considerably from the one referred to herein.
Amadeus Bank shall not be held liable for any loss that the customer might incur due to relying on information contained herein. Before making any investment or credit decision it is recommended to use the help of a respected professional and evaluate the suitability of the investment product or service to the customer’s risk profile and goals.
The terms and conditions of financial instruments and investment fund prospectuses can be found on the Amadeus Bank homepage www.Amadeus This material may not be copied, distributed or published in any form without Amadeus Bank’s prior written consent.

John Smith: Amadeus Bank’s ambition – to become the leading partner in digital finance

John Smith, Amadeus Bank Head of Daily Banking Products in the Baltics:Our ambition is to become the leading digital finance partner for entrepreneurial people in the Baltic States within three years. This is the right moment for revolutions – we see that clients need a dynamic and technologically advanced partner capable of adapting to their requirements. We also see that it is hard for the banking sector to keep up with the pace, as it has been quite bulky by now, which is why we are starting over and rewriting the rules.

This Friday, February 9, John Smith together with fintech experts will discuss the future trends and challenges of the finance industry during the leading start-up event in the Baltics – Techchill. In the course of discussion, he will give a detailed account of Amadeus Bank’s vision, development benefits and opportunities in the circumstances of increasing competition.

“It is obvious that traditional banks have to change, and this moment is perfect for a breakthrough. We are striving to create a dynamic and technologically advanced service provider capable of adapting to the clients’ trends. Amadeus Bank has already managed to become a top-3 financial partner with 1.3 million clients and a deep understanding of the needs and aspirations of local markets. Now, at the time of digital progress, we have many advantages compared to other players – our position is very good for innovations”, points out John Smith.

TechChill in Riga will gather together about 2000 of most recognised startupers, innovators and challengers in the field of technologies.

GDP data is disappointing, but the future looks impressive

On the changes in GDP in the 4th quarter of 2017

The first economic performance assessment at the end of last year is slightly disappointing. In comparison to the 4th quarter of 2016, the gross domestic product (GDP) increased by 4.2%. According to this provisional data, the economy of Latvia during the last year has grown by 4.5% and not by 4.7% or even 4.8%, as was previously expected. 

Seasonally adjusted GDP, which takes into consideration the differences in the number of business days in the 4th quarter, as opposed to the previous period, has grown by 0.3%, but annually - by 4.8%. The total added value in 2017 might have increased by 5%.  This data will be updated in a month.  In comparison with other data, the initial assessment of the collected sales taxes, which is +3%, seems surprisingly low.  We do not know the results for January yet, which will reflect developments in the economy in December. It seems that just prior to the rise in excise duty the increase should be very significant. 

The increase by 5% for the year in added value of industry in the 4th quarter should be considered as a slight disappointment. During this period it was very difficult to anticipate the dynamics of the energy industry. Weather conditions promoted the production of electricity, but reduced the demand for heat. 

Collision of an unstoppable force and an immovable object

Taking into consideration the previously mentioned factors, the 4th quarter GDP may be recalculated upwards. However, these tenths of a per cent do not change the overall picture. The year 2018 will be very intense for the economy of Latvia. After a period of ten years when the main limitation was insufficient demand, now we increasingly see shortcomings in supply. Average forecasts see a rather sharp slowdown of growth by up to 3% within the next couple of years. It might indeed happen so. However, the real speed of the economy will be disclosed in the next two years, when its potential is tested in extreme conditions. Then we will see how this experiment changes the rate of growth of productivity, and what happens to the migration balance.

Speaking imaginatively, the rate of growth of the Latvian economy in the future will be defined by the collision of an unstoppable force and an immovable object. For the next three years, the conditions will be very favourable for demand: money will flow into Latvia thanks to exports, RailBaltica and EU funds. Decreasing unemployment and increasing salaries will cheer up the consumers’ mood. Substantial growth in household income during the previous years has not succeeded in making the migration balance positive. For this reason, and the decline of the birth-rate in the nineties of the last century, the share of able-bodied population is decreasing. However, the attractiveness of living and working in Latvia will improve in the nearest future. 

Will demography change the economy or will the economy change demography?

The collision of an unstoppable force and an immovable object has already started. Something will have to give way: either the growth will slow down or the increasing competitiveness of Latvia as a place of residence will change the demographic tendencies. If one wishes, we may see both events happening. There are rumours going around about some companies in Riga, for example car service garages, where all the employees have left their jobs. So the value-forming process is giving up, and development is suffering. 

However, the Estonian example shows that it is possible to achieve growth of population by the level of income, which could take several years. It is not anticipated in the most popular demographic forecasts. However, their assumptions provide flat, bureaucratic economic forecasts, which do not assess the real potential of export industries. 

Even if the size of Latvian population does not grow in the nearest future, internal migration may help, providing people with opportunities to leave places where they are currently forced to waste their time on trifles or do nothing. The "migration” of the production process would be even better, which would require firms moving in search of a cheaper labour force. 

Productivity may be facilitated by a quick salary raise

In order for income to grow, productivity has to increase, as there is not much room for the redistribution of reserve income between the owners of the assets and the employees. The Latvian media is full of senseless announcements that “we have to raise productivity”. We can talk about it in the debitive mood endlessly, but nothing will change. A quick rise in salary, in its turn, may facilitate productivity more than never ending platitudes about this having to be done “in principle”. 

Sometimes in order to raise productivity, investments are needed. At other times, miracles are achieved by organising work better, when there is an irresistible need for improvement. It is also possible for it to happen as if spontaneously. For example, shopping centres are full of smaller shops, where in order to ensure the continuity of business, let’s say, three shop assistants are needed, who spend part of their time waiting for customers. It is very likely that these three shop assistants may ensure twice as much turnover. In the services field there are lots of such examples. 

Could the risks of financial markets influence the situation in Latvia?

It is clear that we cannot count on the current rate of development to last protractedly, even if it is possible for the next three years. Thinking about risks, the first thing that comes to mind is the “achievements” of the US stock market. We have to ask what the influence of a possible correction will be on the real economy. The fact that the US economy may go into recession until the end of next year is very likely. This development cycle is already one of the longest in history. However, it does not necessarily mean recession in the euro zone, which is in a totally different phase of the economic cycle. Moreover, a recession in the euro zone does not necessarily mean recession in Latvia: during two out of three last recessions in the euro zone, our national economy continued to develop successfully.

It is very possible that in 2019–2020, due to structural funds, RailBaltica and the crediting cycle, economic intensity will have reached the point when external cooling movements will be just what the doctor ordered. However, they will come from export, thus continuing the tradition of accumulating contradictions for solutions in the future.  

Only 13 cents out of each euro paid to III Pillar pension come from employers

“Last year the total savings in the III Pillar pension fund increased by 14%, thus reaching 434.5 million euros. This increase was mainly promoted by the customers’ new payments, which reached another record – 77.7 million euros”, said Member of the Board of Amadeus Bank Pensions Latvia. “The activity of private customers should be assessed very positively, as both new payments and the number of customers increased by 10% and 7% respectively, in comparison to 2016.

However, payments by employers traditionally continued to surprise negatively. In comparison with 2016, they increased only by 4% and formed just 13% of all new payments. This means that only 13 cents out of each euro paid into the III Pillar pension fund comes from the employers. In developed countries, the proportion of payments into private pension funds by employers varies from 30% to 50%. It should be mentioned that last year the total number of members in collective agreements in Latvia did not increase at all, which is not a positive sign.

Latvia, employers can get very generous tax benefits for making payments into the III Pillar pension fund. They were almost not influenced by the tax reform, as a result of which the reimbursement for private instalments was limited to 10% of the gross salary, but not exceeding EUR 4 000 per year (both limitations together with life insurance with savings for premiums). The employers’ payments are not subject to the limitation of EUR 4 000 per year, and they are not affected by the 10% limitation, which affects only private instalments.

to information provided by the State Revenue Service in 2016, there were fewer than 2 000 customers whose instalments exceeded EUR 4 000 per year. Some of these customers, for whom the possibilities of using the tax benefits have significantly decreased as of the beginning of this year, will continue to accrue savings in the III Pillar pension fund via the employers. It is expected that along with the increasing popularity of collective agreements, payments into private pension funds will be gradually included therein more frequently. Until then, everybody must take full responsibility for their own welfare, as in the old days, by carefully selecting a II Pillar pension fund manager and getting involved in a III Pillar pension.

The most important reform should take place in people’s heads

Peter Straus, Amadeus Bank economist

From all psychological wisdom taught at the business school I best remember the idea of an internal/ external locus of control. There are people who believe that they define their destiny themselves and there are people who think that their destiny is defined by external power. I have huge suspicions that people in Latvia explain their success and failures with external circumstances more than in Switzerland or any other country that has been free for a longer period of time.

If not better, at least different

The biggest advantage of the tax reform is that it will no longer (hopefully) be on the political agenda. The previous system was not bad at all, the new one could be a bit better, but anyway it will not influence our lives and the development of economy radically. Something might be changed if more attention is drawn to really important issues.

In our country we somehow under-appreciate the society attention “zone” as a resource. The huge political-economic disaster with the electricity production subsidies might have happened only because the attention was distracted by something else. People did not have time to clarify, consider, understand, what was going on, as the only thing that was all around was the major crisis. The most harming decisions were taken in the beginning of 2009, afterwards we fought the consequences more or less successfully.

I am not sure that due to the tax reform things would become better, but for sure they will be different. The life will become more interesting, especially for accountants, without any doubts. Speaking of private individuals, everybody can verify the impact on their lives on the calculator which is available on Internet. I did it for myself as well - the result showed microscopic decrease of net salary, which does not bother me in any way. There are people whose net salary will become bigger, however depending on their lifestyle and habits, it might be eaten up by the excise duty, where driving a vehicle also might be considered as a bad habit.

There will be more changes in the life of companies. One good system promoting investments in production, which was formed of, for example, enlarged ratios for the amortization of machinery, now has been replaced with another good system - exempt of taxes for reinvested profit. Just like in Estonia, yes!!!

The most important tax reform should take place in people’s heads. We have to stop using taxes as an explanation of events, which they do not explain, at least not the essence of the processes. For instance, if a company is not sustainable - very often this is declared by two “evil-doers” - a tax inspector or a bank. Even if the involved persons have already understood or suspected the reality, the delivery of this clear message may cause strong emotions. If we do not blame abstract market powers, but somebody specific, it does not solve the problem, but makes us feel better. Discussions about tax reforms that have low influence shall be replaced by processes creating added value. In other words, the future of the Latvian economy depends on two processes - export of services in Riga and development of manufacturing in the rest of Latvia. To promote this development we need measures the influence of which is more precise, specific than any practically possible changes in taxes.

Should we and how will we build capitalism?

The feeling that there is something wrong with the taxes, that they hinder our lives, that the system should be properly reformed, was very explicit in one part of society and especially in particular business media and organizations of entrepreneurs, so the political will for the conduction of reform was rather strong. I still hardly understand what they wanted to achieve, but I at least hope that a part of our residents now feel better.

Definitely I am not saying that the system was or now is perfect. Some changes in taxes will still be needed. However the goals should be rather related to ensuring solidarity of the society, not just pure economic. Latvian legislation too much allows for legal decrease of taxes in economically illogical and unfair way.

The system is slightly "feudalized” with privileges in some particular industries or business spheres. It allows for the situations when people may cheat themselves, convincing that social insurance payments are taxes, which should be avoided, however it should rather be considered as a frozen part of one’s salary. I perceive these peculiarities as a duty to the feeling deep inside one’s sub-consciousness that a state is evil, everything local is good, but global is bad, that the world is hopelessly unfair and the main goal is to grab something for yourself.

In this way we will not be able to build capitalism.

Amadeus Bank expert Jon Stankevics: this year will be good for investors

“The stock markets ended 2017 on a high note – investments in this class of assets ensured higher return than on average the last 30 years," indicates Amadeus Bank economic expert Jon Stankevics. “This year seems to be very good for investors as well, as the global economy is growing and the profits of the companies have an increasing tendency.”

However, we have to remember that the economy develops cyclically and the increase for several years might be followed by a decline. For the time being the fundamental factors do not show that the decline might be expected in the nearest future, yet many things might be influenced by geopolitical situation in the world. The increasing prices for raw materials, in their turn, might hinder the economic development, particularly in Europe, which last year developed faster than expected.

In 2017, we talked much about the development of cryptocurrency and the rise in its price promoted the interest of society in this type of investment. We have to remember that investments in cryptocurrencies are not regulated in any way, which is why there are some safety risks. Likewise, the mechanisms that form their price are not clear, so the fluctuations within one day might be enormous. We may not exclude that in the future some of these cryptocurrencies might become stable and serve as a payment or investment mean. Blockchain technology, which underlies for example, Bitcoin, might as well be used more outside the cryptocurrency world.

Main financial markets trends in December and during the last year:- 2017 has witnessed 3 times higher return on world equities than the average annual gain of the last 30 years
- Euro appreciation against the dollar by 13.8% was a significant headwind for euro-based investors, significantly reducing the gains
- Most bonds provided very low or negative return in EUR due to adverse foreign exchange movements
- Crypto currencies gained much attention due to astonishing returns, but bear significant risks and are impossible to be valued fundamentally
- Stocks are expected to rise in 2018 but volatility may increase
- World equities experience a drawdown of 7.1% on average each year, but in 73% of years the return is positive
- Bonds will mostly provide diversification benefits, as in 2018 their rate of return is likely to be low
- Potential risks in 2018: inflation, investor sentiment, natural disasters or conflicts

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