Latvia’s banking sector: Facts & Figures

Updated April 2020 – For earlier editions of Facts & Figures click here

Compared to 2018, the economic growth continued and Gross Domestic Product (GDP) increased by 2.2 %. In 2019, GDP in Latvia at current prices amounted to EUR 30.5 billion.

Banking sector is secured with the necessary preconditions to work with a clear awareness of the specific risks in Latvia. Reforms that have taken place since 2018 has resulted in one of the most effective financial crime prevention systems. Latvia as first from Moneyval member states successfully implemented all 40 of the Financial Action Task Force recommendations, as well as introduced a public-private partnership and a fully available register of ultimate beneficial owners.

An international credit rating agency S&P Global Ratings (S&P) upgraded Latvia from ‘A’ to ‘A+’ level with a stable outlook. Agency’s assigned ‘A+’ credit rating ensures historically highest credit rating level since 1997, when credit rating was assigned to the Republic of Latvia for the first time.

In April 2020 there are 19 banks operating in Latvia, including 13 credit institutions registered in Latvia, and 3 branches of credit institutions registered elsewhere in the EU. The Latvian banking sector is dominated by Nordic banking groups.

Total assets of Latvian banks were EUR 23.20 billion as of December 31, 2019. The assets increased by EUR 0.25 billion or 1% in the 4th quarter of 2019, the increase was 0.33 billion EUR during the year 2019. The assets were EUR 31.9 billion at the end of 2015, it had negative trend since 2016. Main reasons for assets’ decrease were the changes in business strategies and business models, optimization of capital expenses, as well as the license withdrawal of ABLV Bank.

Total capital decreased by EUR 0.16 billion or 6% in the 4th quarter of 2019, thus the total amount decreased by EUR 0.19 billion during the 2019. It most material impact was attributed to the net loss of insolvent AS PNB Bank.

The loan portfolio decreased by EUR 0.45 billion or 3% in the 4th quarter of 2019. The total decrease was EUR 0.09 billion or 0.7% in 12 months of 2019. Main decrease was in loans to corporates. The corporates amount to 60% of the total loan portfolio. Loans to individauls increased by EUR 0.12 billion or 2% in 2019. Eight banks had loan portfolio increase in 2019.

Total deposits of the Latvian banking sector were EUR 17.21 billion as of December 31, 2019. The portfolio has increased by EUR 0.65 billion or 4% in the 4th quarter of 2019, and the value increased by EUR 0.87 billion or 5% since the beginning of 2019. Deposits of individuals continue to increase; they increased by 10.5% since the beginning of 2019. They make 54% of total deposits portfolio. Short-term deposits make 80% from total deposit volume, remaining 20% are long-term deposits.

Total profit of banks in Latvia in 12 months 2019 was by EUR 175 million or 59% smaller compared to the results of 12 months 2018. It was affected by net loss of insolvent AS PNB Banka in 2019.

The Latvian banking sector is stable, resilient and well capitalized. It is committed to embedding a culture of compliance while developing products and services that support the economy being shaped by environmental, social as well as governance challenges.

Contributor: Kārlis Jēkabs Īvāns (karlis.ivans@financelatvia.eu)