Study: Latvian banks developing faster than expected

  • 2006-08-09
  • From wire reports
RIGA - Latvian banks have been developing at a faster rate than was previously expected, the latest review by SEB Unibanka states.

"Banking figures are exceeding all prognoses. The business environment is very positive for banks, and it is fostered by fast economic growth, increasing revenues, positive outlook and low interest rates," the review stated.
In June, Latvia's banking assets totaled 13 billion lats (18.5 billion euros) growing 43.4 percent from the same month in 2005. The amount of loans issued by Latvian banks over the past year soared 54.1 percent reaching 8.4 billion lats by the end of this June.

SEB Unibanka analysts said the steep growth in consumer and mortgage lending is still surprising. Mortgage lending surged 94.6 percent in Latvia over the past year, reaching 47 percent of Latvian banks' total loan portfolio.
"Although Latvian banks still lag behind Western countries in terms of the average lending volumes against GDP, with the present growth rate, Latvia might catch up with the West in two to three years time," the review stated. "But considering the correlation of household income against the rise of real estate prices and banks' efforts to win larger market shares in a short period at any price… concerns arise over possible corrections in the growth of the lending market in the near future," the bank's analysts said.

In the first half of this year, Latvian banks earned 110.6 million lats in aggregate profit, up 18 percent year-on-year.