Operating results of commercial banks in Latvia: summary of 1st quarter 2018
This year for Latvia as a whole began with a sharp growth in the economy. This is supported by OECD experts, who at the end of May have predicted 4.1% increase this year. ALCB statistics of the first quarter reflect the current situation in the banking sector – a continuation of the significant changes that has started in 2016 to ensure the highest standards in countering money laundering and terrorist financing as well as to facilitate sustainable development of the Latvian banking sector. The ALCB is committed to achieving the highest anti-money laundering and combating the financing of terrorism (AML/CFT) compliance standards among member banks within the next 2 to 3 years.
ALCB sees the potential of Global Business Service Centre (“GBSC”) development in Latvia. Considering the increasing role of GBSC in the economic growth of the Central European and Baltic regions, as well as the untapped job creation potential for the city of Riga, the Ministry of Economics of the Republic of Latvia, the Riga City Council and the Investment and Development Agency of Latvia, all of which represent the public sector, and The National Alliance of Real Estate Developers, the Association of Latvian Commercial Banks and the Foreign Investors’ Council in Latvia, all of which represent the private sector, on April 26, 2018 signed “Memorandum of Cooperation for the development of Global Business Service Centres” and agreed to undertake deliberate cooperation aimed at the development, growth and new job creation in the GBSC sector. We are proud to be part of this alliance as it is important to have both strong partnership and concentration of resources for further development.
Total deposits at Latvian banking sector were EUR 18.1 billion as of March 31, 2018. The portfolio has decreased by -11% in the 1st quarter 2018. The decrease was mainly observed in the corporates segment, which is mainly due to the ongoing changes in the business model of a number of banks embarked upon a number of years ago and accelerated further in recent months.
In the 1st quarter of 2018, the new loan issuance increased by 4% compared to the 1st quarter of 2017, reaching 546 million EUR. It should be noted, however, that the amount of new loans also includes refinancing.
Over the past year, the ability and desire of Latvia’s businesses and private individuals to borrow, and the inclination of banks to lend has rapidly increased. This is confirmed by the
Lending Index developed by the ALCB, which is the first all-encompassing measure in Latvia of the interaction between lending growth trends and Latvia’s economic situation. The ALCB index, which spans and analyses 16 different indicators, integrates the most significant dimensions related to the process and volume of lending, i.e. the most important indicators regarding the interaction between lending supply and demand and banks’ desire and ability to lend, as well as borrowers’ desire and ability to take out loans. Compared with previous years, the index’s results in 2017 show stable growth, in particular reflecting the growing desire of the part of banks to lend (+13%), and the ability (+7%) and desire (+8%) of borrowers to take out loans. However, banks’ ability to lend has fallen slightly (-5%), because of structural changes within the sector. More information: https://www.lka.org.lv/en/news/lcba-lending-index-banks-desire-lend-customers-ability-borrow-growing/
Equity decrease in the 1st quarter 2018
Total capital of the Latvian banking sector reached EUR 3.1 billion as of Mach 31, 2018. Total equity has decreased during the 1st quarter 2018; the decrease was EUR -0.1 billion or -3%. However total equity has increased in the last 12 months period, the increase was +0.1 billion EUR or +4%.
Deposits declined by -2.2 billion EUR in the 1st quarter 2018
Total deposits at Latvian banking sector were EUR 18.1 billion as of March 31, 2018. The portfolio has decreased by -11% in the 1st quarter 2018. The decrease was mainly observed in the corporate segment. Total deposits at Latvian banking sector have been decreasing since 2016 due to accelerated business model changes in a number of banks.
Net profit of Latvian banking sector in the 1st quarter 2018 reached 91 million EUR
Total profit of commercial banks in Latvia in the 1st quarter of 2018 was by EUR -14 million or -13% lower compared to the results of the 1st quarter of 2017.
TOP 3 most profitable banks in the 1st quarter 2018:
1. Swedbank – EUR 32 million;
2. Rietumu bank – EUR 16 million;
3. SEB bank – EUR 12 million.