Latvia’s banking sector: Facts & Figures

Updated December 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 €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 have 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 December 2019, there are 16 banks operating in Latvia, including 13 credit institutions registered in Latvia, and three 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 €23.20 billion as of December 31, 2019. The assets increased by €0.25 billion or 1% in the 4^th quarter of 2019, the increase was €0.33 billion during the year 2019. The assets were €31.9 billion at the end of 2015, it had a 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 licence withdrawal of ABLV Bank.

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

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

Total deposits of the Latvian banking sector were €17.21 billion as of December 31, 2019. The portfolio has increased by €0.65 billion or 4% in the 4^th quarter of 2019, and the value increased by €0.87 billion or 5% since the beginning of 2019. Deposits of individuals continue to increase and 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, the remaining 20% are long-term deposits.

Total profit of banks in Latvia in 2019 was €175 million or 59% less compared to the results in 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)