RIGA - Consolidated assets of financial institutions have been rising fastest in Latvia among the Baltic states, according to a recent analysis.
At the end of July, total bank assets in the three countries amounted to 89 billion kroons (5.7 billion euros) in Estonia, 4.9 billion lats (8 billion euros) in Latvia and 19 billion litas (5.4 billion euros) in Lithuania.
Total assets rose 17 percent year-on-year in Estonia, 31 percent in Latvia and 20 percent in Lithuania.
Lending to both households and businesses continues to boom. At the end of July the volume of loans granted to the private sector grew 24 percent year-on-year in Estonia, 42 percent in Latvia and 50 percent in Lithuania.
The extremely high credit growth in Lithuania was partly due to credits granted to the Mazeikiu Nafta oil company, which has undergone a major overhaul of its production facilities and is focusing on boosting throughput at its refinery and exports at its Butinge terminal.
To be sure, low interest rates have done much to spark consumer demand. Lending rates have fallen about 2 percentage points over the past 12 months. Interest rates on foreign currency loans averaged two percentage points less than rates for loans in domestic currencies.
Interestingly, growth of deposits has substantially lagged behind credit growth. At the end of July, year-on-year growth of deposits was 6 percent in Estonia, 23 percent in Latvia and 15 percent in Lithuania.
A substantial share of deposits – 30 percent to 50 percent – was denominated in foreign currencies.
Foreign currency loans represented 82 percent of all loans in Estonia, 54 percent in Latvia and 56 percent in Lithuania.