In spite of the fact that most CEOs in Baltic States see no reason for further reduction of interest rates for loans, only a small number of them plan to use the current situation. In the time when interest rates have reached their historic minimum, only 17% of Baltic companies plan to secure long-term financing for their companies.
Only 15% of large companies in Latvia believe low interest rates should be used to attract funding. Another 4% of large companies plan to do this in the near future. 40% of respondents note they are ready to view such an opportunity. Another 40% of CEO say they prefer fluctuating rates.
SEB Bank board member Ints Krasts says: «The base rate of loans issued this year is zero. Added rate is on the same level. This is the perfect moment for the realization of investment plans by using low interest rates. From the perspective of long-term planning, it would be reasonable to review long-term commitments and fixate the rate on the current level. The choice of fluctuating rate is beneficial in moments when rates are low. Nevertheless, fluctuations are typical for this market – rates always go up.»
As for other Baltic States, only 15% of Lithuanian and 14% of Estonian companies have used the period of low interest rates. However, the proportion of CEOs who prefer fluctuating rates is smaller in Latvia’s neighbouring countries: 29% in Lithuania and 31% in Estonia. 54% of large companies in Lithuania and Estonia are prepared to re-assess their plans in regards to the current situation.
«In the current situation, interest rates are so low that it gives large companies an advantage. This is because banks actively compete with one another. Often companies choose the most beneficial offer from 4-5 banks,» – adds Ints Krasts.
This is confirmed by results of a survey, according to which the level of satisfaction of large companies with their current state of relations with banks continues to grow. 87% of large companies in Latvia view their relations with banks as very good or good (80% in Lithuania and 69% in Estonia).
Interest toward financial markets remains low
Considering the current situation, the majority of large companies of Baltic States sees no reason to attract funding on financial markets. 82% of CEOs in Latvia, 74% in Lithuania and 83% in Estonia believe this. Only 12% of Latvian and Lithuanian CEOs and 6% of Estonian CEOs said they plan to enter financial markets in the near future.
Forecast: rates will grow
According to results of the survey, only 4% of CEOs in Baltic States believe interest rates will continue to decline in the next 12 months. The number of those who believe interest rates will grow also increases: 16% of CEOs in Latvia believe so (8% in October 2014), 22% in Lithuania (13% in 2014) and 27% in Estonia (11% in 2014).