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Swedbank: healthy demand for loans is returning to Latvia

Imagr: youtube.com.
Healthy demand for loans has begun coming back to Latvia, says Swedbank Latvia board chairman Reinis Rubenis.


«Low rates, export growth and improvement of consumers’ mood are the main factors that affect loan services. Although amortization of previously issued loans continues on its way to conclusion, the volume of newly-issued loans continues increasing – healthy demand for loans is starting to come back. The speed of demand growth will depend on the level of optimism from businesses and society, as well as economic process,» said Rubenis.
 

He notes that the lack of income transparency remains a serious obstacle for more rapid development. This is why one important long-term goal relies heavily on contribution to economic development. «It is good that the initiative we have been supporting for a long time now will finally be realized in Latvia, namely the initiative to lift corporate income tax from reinvested profits. Amendments to the law ensure that corporate income tax is not necessary to be paid if profits are not divided into dividends. Estonia’s experience shows that this kind of practice improves balance of businesses and their ability to take loans,» mentions Rubenis.
 

He says that there is an increase in demand for loans among Latvia’s small and medium-sized companies. «We have financed a 30% larger segment of medium-sized companies. As for small companies, we issued 53% more loans to them in nine months of 2017 than we did in 2016. We have also noticed more demand for loans in the agriculture, trade, production, real estate and construction sectors,» said Rubenis.
 

He notes that export development also affects loan services. «Current trends show that finances of turnover funds is more topical to our clients than it was last year. We expect these trends to continue in future years. We also expect a bigger effect from EU funds,» added the head of Swedbank Latvia.
 

Rubenis also said that positive developments in the economy, low interest rates and the state support programme for families with children also serve as good stimulus for housing loans.
 

«Although the general mortgage loan portfolio does not grow, demand for new loans remains stable and positive. In average, the volume of issued loans grows by 20-25%. This year is no exception. It is worth mentioning here that actual demand is even higher, but this is not true for all. Most often this is associated with income that cannot be proven and insufficient savings for the first instalment. The first instalment matter can be resolved with the help from the state support programme. In practice we see that a wide audience requires support for housing purchases, this is why it is important to continue work on expanding the programme,» he says.
 

At the same time, Rubenis is positive about the situation in the economy – people not only spend more money nowadays or consider taking a loan to improve their quality of life, but also think more often of their future. Savings made on deposit accounts, long-term savings, pensions and insurance pillows all continue growing.
 

«In general, the amount of money people have in all forms of savings and deposits in Latvia continue growing. In the past 10 years, a major increase has been observed in other forms of financial deposits – accumulative life insurance, third-level pension and direct deposits in securities,» adds Rubenis.
 

At the same time, he emphasizes that although the volume of deposits continues growing, it is still important to consider the general savings level in society. Survey performed by Swedbank Finance Institute shows that in the event of a household losing all of its regular income sources (wage, pension, benefits, etc.), they would not last longer than a month.
 

Asset-wise, Swedbank is the largest bank in Latvia.

BNN/LETA

27-12-2017
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