The profit of Latvian banks in the first half of this year amounted to EUR 305.657 million, which is 12.8% less than in the same period of 2023, according to data from the Bank of Latvia. Interest income of banks in the first six months of the year amounted to EUR 776.22 million (35% more), interest expenses – EUR 208.46 million (3.3 times more). Commission income of banks amounted to EUR 168.324 million (-0.1%), and commission expenses increased by 3% to EUR 50.466 million. Banking sector assets in the first half of the year amounted to EUR 28.629 billion, which is 1.4% more than at the end of 2023 (EUR 28.247 billion). Earlier, speaking about the banks' profits, the head of the Finance Latvia Association (FNA) Janis Brazovskis called them "objective indicators of the financial sector, which are fully consistent with the economic cycle and the policy of the European Central Bank, which is not a long-term situation and is already starting to weaken." The amount of loans issued in the first half of the year amounted to EUR 16.322 billion, which is 2.6% more than at the end of 2023, including EUR 13.674 billion in loans issued to local clients (+1.7%). The amount of loans issued to local households amounted to EUR 6.376 billion (+2.8%), and loans to local non-financial enterprises – EUR 6.486 billion (+1.7%), including EUR 3.833 billion issued to small and medium-sized enterprises (+4.3%). Deposits in banks in the first quarter amounted to EUR 24.017 billion (+3.7%), including deposits from local clients increased by 2% to EUR 19.658 billion. Deposits from local households increased by 3.6% to EUR 10.654 billion, while deposits from local non-financial enterprises decreased by 2.2% to EUR 7.288 billion. The market share of the five largest banks by asset volume at the end of the first half of the year was 88.41% (at the end of 2023 – 88.95%), by loan volume – 88.78% (89.07%), by deposit volume – 88.48% (89.97%). As reported, a new excess profit tax is to be applied to banks from next year. Thus, it is planned to stimulate credit institutions to lend more. Minister of Economy Viktors Valainis emphasized that the government does not plan to punish banks with the new tax, the main goal is to promote the growth of lending so that money returns to the economy. According to Valainis, the annual growth of lending should be at the level of 8-10%. At the same time, the government will think about how to separate small banks from large ones. Firstly, they are already actively lending, and secondly, if the excess profit tax does not apply to them, the budget benefit will not decrease much. "Small banks have many projects that can be financed, and their loan portfolio already shows an annual growth of 10% compared to the same period last year. For comparison: for large banks this figure is only 3%. And we need to figure out how to stimulate them to act more actively," the minister also explained the division of banks. The day before, the head of the Finance Latvia Association (FNA) Janis Brazovskis criticized the new tax. According to him, the excess profit tax that politicians propose to apply to banks operating in Latvia should be called a "punitive tax". It will not stimulate lending, but will lead to the opposite effect – in the context of an unclear tax policy, banks will become even more cautious.
