According to the data of the national monetary and financial system supervisor, the Bank of Latvia, the total portfolio of loans issued by Latvian commercial banks to both domestic and foreign clients in the third quarter of this year was one percent higher than at the same time last year, reaching 15.88 billion euros. The loan portfolio issued to residents – residents of Latvia, companies and other borrowers has been less than 13.44 billion euros, compared to the corresponding period last year, increasing by 2.3%. It should be noted that local lending has shown an upward trend in the last two quarters, despite the fact that Latvia has one of the highest interest rates in the European Union and our country’s economy has shrunk during this time.
For small and medium ones
When it comes to long-term economic development, a very important factor is how small and medium-sized businesses feel. At a time when consumption was supposed to fall under the influence of high inflation, but the decline in international trade reduced sales opportunities abroad, naturally there would be reason to think that the economic situation is not the best. However, it seems that large companies have had to deal with it more, because, as can be seen, it is small and medium-sized companies that have been the worst borrowers. This is evidenced by the fact that the amount of loans issued by banks to this category of companies in the third quarter of this year, compared to the same period last year, has increased by 149 million euros or 4.3%, reaching 3.61 billion euros. Meanwhile, it follows from the data that the amount of liabilities of large companies to commercial banks has decreased by more than 100 million to 2.8 billion euros during the year. At the moment, it cannot be evaluated as a unequivocally bad or good event, because perhaps expecting an increase in loan interest rates at the expense of the profits made during inflation, companies have reduced their debts, thus also improving their balance sheets. If the current global economic slowdown continues, it is easier for companies to survive possible troubles with a smaller amount of liabilities, but what is important for citizens – to keep jobs and continue paying salaries. At the same time, large companies have access to other ways of financing their activities, such as issuing bonds, and obligations to bondholders traditionally give more financial freedom than loans from banks. At the same time, the increase in the volume of lending to small and medium enterprises should be evaluated more positively than negatively. Unlike large companies that operate in the so-called broad market, small and medium-sized companies are more focused on specific niches, and if these niches do well, then companies also go to the bank for loans to expand their operations. The good news is that the increase in small business lending activity could serve as a signal that the economic situation in the country is as bad as the public sometimes believes. In general, the volume of loans granted to companies – non-financial companies during the year increased by 0.6% to 6.4 billion euros.
Leading industries continue to borrow
An important news regarding lending is the fact that the largest sectors of our country’s economy are being lent more than before. This also applies to our at least previously largest economic sector – the manufacturing industry, which during the last year had to live with a very noticeable decrease in the volume of operations. However, according to information from the Bank of Latvia, the volume of lending in this sector has increased slightly faster than the total. During the year, the amount of bank loans issued to companies in the manufacturing industry has increased by 3.4% to less than 775 million euros. The volume of loans issued to the trade sector has increased even faster – by 9.9% to 917.7 million euros. Understandably, companies in this field also continue to implement investment projects and expand, despite the allegedly difficult economic situation. However, the representatives of the industry themselves also said that it is quite difficult to find a period of time when the economy would be without complications, therefore, as long as the projects have a future perspective, they are implemented even when the economy is not in the best of times. The volume of loans to the transport and storage sector, real estate operations and commercial services, which are very important in our country’s economy, has also increased over the last year. Thus, if you look at the top five economic sectors, you can draw a conclusion from the lending data about the rapid activation of our country’s economy, possibly already in the next year.
Also more for households
The fact that the economic activity in the country is maintained is also evidenced by the increase in the volume of loans issued to households. It should be noted that, in contrast to the overall volume of loans issued in the country and from companies, the dynamics of lending to households is significantly more pronounced, and we are talking about an increase in volumes for several quarters in a row. In general, the amount of loans granted to households by banks in the third quarter of this year was 3.5% higher than in the corresponding period last year, reaching 6.17 billion euros. Among other things, the good news is that the amount of money issued by banks for home lending is also increasing. True, the increase in this segment is not too pronounced and in annual terms reaches only 1.2%, up to 4.74 billion euros. It is still too early to judge whether this increase could be continued, as there is a high probability that as the national economy continues to decline, moving more and more towards deflation, the circulation of money in the country will become smaller at some point, thus reducing the amount of lending.
2023-12-29 03:15:43
#citizens #entrepreneurs #bank #loans
