Latvian bank profits up 25% in 2018

2018 was a successful year for most Latvian banks, notwithstanding the fact that the country's third-largest bank, ABLV, went into liquidation and prompted a massive regulatory crackdown.

Information released by the Finance Latvia Association (FLA) March 25 shows that total profits of banks in Latvia in 2018 were 58 million euros or 25% larger compared to the results of 2017.

The top 5 most profitable Finance Latvia Association member banks (which includes most but not all banks operating in Latvia, and also excludes ABLV bank) in 2018 were:

  1. Swedbank – EUR 111.2 million;
  2. SEB banka – EUR 45.9 million;
  3. Luminor bank – EUR 44.2 million;
  4. Citadele banka – EUR 33.0 million;
  5. BlueOrange Bank – EUR 7.4 million.

"Total assets of Latvian commercial banks were 22.9 billion as of December 31, 2018. The total assets of the sector have been decreasing since 2016. The main reasons for assets’ decrease are the change of strategy for some of the universal banks, change of business models for specialized financial service providers, optimization of capital expenses, as well as the license withdrawal of ABLV Bank. The value of assets has declined by EUR -5.5 billion or -19% since the beginning of 2018. Overall, since the beginning of 2016, the value of assets has decreased by EUR -9.1 billion or -28%," said the FLA.

Between 2015 and 2018, "the ability and willingness of businesses to borrow funds have significantly increased, according to the Finance Latvia Association Lending Index of the business segment. During this period, the lending index for businesses has increased twice as fast than it has increased for individuals which shows that the global economic upswing has a positive impact on the Latvian economy. It is true that, just like residents of Latvia, companies are also cautiously optimistic in terms of borrowing funds, and the ability to borrow is generally higher than the willingness to borrow," the FLA added.

Total capital of the Latvian banking sector reached EUR 2.9 billion as of December 31, 2018. It decreased by EUR -0.3 billion or -10% since the beginning of 2018, affected by the license withdrawal of ABLV Bank.

The average return on equity in the banking sector of Eurozone was 5.0% in 2018. Eight Latvian banks exceed the average return on equity of the banking sector.

Total deposits of the Latvian banking sector were EUR 16.3 billion as of December 31, 2018. The portfolio declined by EUR -3.9 billion or -19% in 2018. The decrease was mainly observed in deposits of foreign companies; deposits of private persons increased in eight banks.

The full data can be read at the FLA website.

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