Latvia Commercial Banking Report Q3 2012
Business Monitor International, June 2012, Pages: 60
The Latvia Commercial Banking Report provides industry professionals and strategists, corporate analysts, banking associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Latvia's commercial banking industry.
Since Q108, we have described numerically the banking business environment for each of the countries surveyed by BMI. We do this through our Commercial Banking Business Environment Rating (CBBER), a measure that ensures we capture the latest quantitative information available.
It also ensures consistency across all countries and between the inputs to the CBBER and the Insurance Business Environment Rating, which is likewise now a feature of our insurance reports. Like the Business Environment Ratings calculated by BMI for all the other industries on which it reports, the CBBER takes into account the limits of potential returns and the risks to the realisation of those returns. It is weighted 70% to the former and 30% to the latter. The evaluation of the ‘Limits of potential returns’ includes market elements that are specific to the banking industry of the country in question and elements that relate to that country in general. Within the 70% of the CBBER that takes into account the ‘Limits of potential returns’, the market elements have a 60% weighting and the country elements have a 40% weighting.
The evaluation of the ‘Risks to realisation of returns’ also includes banking elements and country elements (specifically, BMI’s assessment of long-term country risk). However, within the 30% of the CBBER that take into account the risks, these elements are weighted 40% and 60%, respectively. Further details on how we calculate the CBBER are provided at the end of this report. In general, though, three aspects need to be borne in mind in interpreting the CBBERs. The first is that the market elements of the ‘Limits of potential returns’ are by far the most heavily weighted of the four elements. They account for 60% of 70% (or 42%) of the overall CBBER. Second, if the market elements are significantly higher than the country elements of the ‘Limits of potential returns’, it usually implies that the banking sector is (very) large and/or developed relative to the general wealth, stability and financial infrastructure in the country.
Conversely, if the market elements are significantly lower than the country elements, it usually means that the banking sector is small and/or underdeveloped relative to the general wealth, stability and financial infrastructure in the country. Third, within the ‘Risks to the realisation of returns’ category, the market elements (ie: how regulations affect the development of the sector, how regulations affect competition within it, and Moody’s Investor Services’ ratings for local currency deposits) can be markedly different from BMI’s long-term risk rating.
Executive Summary 5
Table: Levels (LVLbn) 5
Table: Levels (US$bn) 5
Table: Levels At March 2012 5
Table: Annual Growth Rate Projections 2012-2016 (%) 6
Table: Ranking Out Of 59 Countries Reviewed In 2011 6
Table: Projected Levels (LVLbn) 6
Table: Projected Levels (US$bn) 6
SWOT Analysis 7
Latvia Commercial Banking SWOT 7
Latvia Political SWOT 7
Latvia Economic SWOT 8
Latvia Business Environment SWOT 8
Business Environment Outlook 9
Commercial Banking Business Environment Rating 9
Table: Commercial Banking Business Environment Ratings 9
Table: Emerging Europe Commercial Banking Business Environment Ratings 11
Global Commercial Banking Outlook 12
Regional Outlooks 20
CEE Banking Sectors Hold Little Promise For Investment Returns 20
Regional Banking Sector Outlook 27
Europe Banking Sector Forecast Overview 27
Table: Banks' Bond Portfolios 2011 27
Table: Emerging Europe Commercial Banking Business Environment Ratings 28
Table: Comparison of Loan/Deposit & Loan/Asset & Loan/GDP ratios 29
Table: Anticipated Developments in 2012 30
Table: Comparison of Total Assets & Client Loans & Client Deposits (US$bn) 31
Table: Comparison of US$ Per Capita Deposits (2011) 32
Table: Interbank Rates and Bond Yields 33
Latvia Specific Banking Sector Outlook 34
Banking Sector Still In The Doldrums 34
Table: Latvia – Banking Sector Overview 38
Economic Outlook 39
Table: Latvia – Economic Activity, 2011-2016 41
Competitive Landscape 42
Market Structure 42
Table: Protagonists In Latvia's Commercial Banking Sector 42
Definition Of The Commercial Banking Universe 42
List Of Banks 43
Table: Authorised Banks In Latvia 43
Company Profiles 44
Swedbank 44
Table: Key Statistics For Swedbank, 2006-2008 (LVLmn) 45
SEB Banka 46
Table: Stock Market Indicators 47
DnB NORD Banka 48
Table: Stock Market Indicators 49
Table: Balance Sheet (LVLmn, unless stated) 49
Table: Balance Sheet (US$mn, unless states) 49
Table: Key Ratios (%) 50
Citadele banka 51
ABLV Bank 52
Rietumu Bank 53
UniCredit Bank 54
Latvijas Krajbanka 55
BMI Banking Sector Methodology 56
Table: Commercial Banking Business Environment Indicators And Rationale 58
Table: Weighting Of Indicators 59
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