Data on bank performance in December 2008

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Riga, 27.01.2009

Press Release

Data on bank performance in December 2008

In accordance with the data on the banking monthly balance aggregated by the Financial and Capital Market Commission (FCMC), the Latvian banks all in all have ended the year 2008 with profit, earning 78 million lats. However, profitability of banks plummeted over the year, namely, by 79% or 294 million lats down year-on-year.

In 2008, total banking assets rose by 6% or 1.3 billion lats. In December, in comparison with November, the liquidity indicator of the Latvian banking sector slightly climbed up to 52.8% (in comparison to 48.7% in November) and capital adequacy was around 11.8% on the average (regulatory minimum – 8%).

In December the total amount of deposits with Latvia’s banks increased by 0.5%, or by 46 million lats. Over past five years the amount of bank deposits had annually increased by 21% – 37% on the average, but since the autumn of 2008 there has been a downward trend in total deposit volumes. Though a slight increase in deposits was still observed in first eight months of 2008, in September and October the amount of deposits went down, but in November and December their amounts again slightly grew thus total deposit stock in the banking sector by the end of 2008 accounted for 9.8 billion lats or by 4% down from the end of 2007.

Total loan balance in December continued a downward trend shrinking by 1.1% or 182 million lats (compared to 0.1% in November). Essential changes took place in the upward proportion of the growth rate of private business lending (13.1%) to the household lending growth rate (7.0%). In the period between 2003 and 2006 the household lending growth rate outpaced the private business lending growth rate by 25% – 42% and they had almost levelled out only in 2007 (39.5% and 41%, respectively). The above developments result from the economic situation (high inflation rate, unemployment, GDP decline) as well as indicate to the decreasing solvency of households and limited borrowing ability.

In December, provisioning for loan impairment surged significantly (by 77% or 150 million lats) amounting to 345 million lats by the end of the year, thus provisioning for loan impairment at the end of 2008 had quadrupled compared to end of 2007, namely, by 314%, or 262 million lats. According to the FCMC projections, total banking loan loss provisions constituted 2.1% of banking loan portfolio at the end of the year (compared to 1.2% in November), thus increasing by 0.9 percentage points over the year. Overall, the share of outstanding loans in the total banking loan portfolio has grown from 6.8% at end of 2007 to 15% by end of 2008.

The aggregate data on the Latvia’s bank monthly balance reports for December are available in Latvian on the Commission’s website at: (Section: Statistika/Kredītiestādes/Mēneša pārskati.

Ieva Upleja

Public Relations Adviser
Chairwoman’s Office
Financial and Capital Market Commission

Telephone: (+371) 6777 4807



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