Latviski English По-русски
Wednesday 19.09.2018 | Name days: Verners, Muntis

Deposit yield four times lower in year and a half time

(No Ratings Yet)

Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RU

Within year and a half, deposit yield at the Latvian banks has overall dropped 3.5 to four times, but in the last six months – almost two times. While the interest rates of 12-month deposits in lats currently form only 3.5%, after accounting for 5.5% to 6% last November, according to the portal data.

The deposit yield decline has contributed to the emergence of new trends. If during the period 2009 – 2010 Latvia’s population preferred short-term deposits, this spring long-term deposits ranging from one year or longer prevail.

Swedbank’s Investment Product Department manager Reinis Jansons explains such a dramatic deposit interest rate drop urges depositors to assess term deposits thoroughly and choose deposits with the most beneficial conditions and highest interest rates. For example, in early 2010, when deposits with increased interest rates accounted for 37% of all Latvian household deposits, in late 2010 they had already increased to 45%. People are mostly keeping their money in bank accounts. They are waiting for deposit rate growth to place their spare funds on more favourable interest rates, Swedbank’s expert indicates.

According to Citadele Bank experts, even two years ago, people in Latvia preferred placing their funds on short-term deposits for the period of one to three months. Currently, 6 to 12-month deposits are the most requested. Such depositors choice can be explained with the fact that deposit rates are falling all the time – for the short-term deposits they have dropped almost to zero, hence they have become less attractive for depositors. Our estimates indicate over the last year the return on 3-month deposits in lats has fallen by 95%, on deposits in dollars – by 68%, while on deposits in euro – by 65%, the bank’s representatives specify.

The second trend mentioned by the banking experts is the so-called structured deposits’ increasing popularity. Their yield is determined by various financial assets; so, as a rule, the profit from such deposits is higher than of ordinary deposits.

Despite the term deposits are still the most popular, constituting 48% of all the bank’s deposits, the Progressive deposit popularity keeps growing, SEB bank’s spokeswoman Ieva Tetere characterizes the current situation in the deposit market. Presently, more than 25% of SEB bank’s traditional and progressive term deposit contracts are concluded via the Internet bank.

When analyzing the Progressive deposit offers in 2010, more deals relating to raw materials and precious metals were required. Based on the amount of deposited funds and the client’s applications, last year the most demanded offer was the Progressive deposit Gold. While in terms of yield, the best indicators were observed for the offer Raw Materials and Metals deposit – its underlying asset return on February 1, 2011, comprised about 43%.

As regards deposit rates, all the surveyed banking experts by the portal indicate significant changes are not expected in the next six months. The reason – the lat currency balance, which is practically not used in lending. While the return on term deposits in euro might slightly increase in the next six months due to the ever-increasing inflation rate in the euro zone. found that currently high interest rates on term deposits are offered by small banks, such as the Regional Investment Bank, SMP Bank, PrivatBank and Trasta komercbanka. The current best offer yield on 1 000 lats deposit for 12 months constituates 3.05 – 3.5% per year. The yield on such large deposit in euro and US dollars for the same period is similar: for euro deposits – 3.5% to 3.65% per year, while for US dollar deposits – 3% to 3.4% per year.

Another trend indicated by the surveyed banking experts – the average depositers’ age is increasing. For example, SEB bank’s representatives have observed that the most active «investors» are elderly people – 55% of the bank’s total volume of term deposits have been deposited by clients, aged 50 to 74 years.

While the deposits of Citadele’s clients, in the age group 60 to 70 years, comprise 24% of the bank’s total deposits. At the same time, Citadele ranks first in terms of deposit volume, particularly, its clients, in the age group 50 – 60 years, with deposits comprising one-fourth of the total deposits.

Interestingly, banks also have quite «exotic» investors. SEB bank has clients who are only few years old. Their relatives accumulate savings on their name at the Maturity deposit. Moreover, there are also about thousand solid pensioners, aged 80 years and more among the bank’s clients, reveals Ieva Tetere.

Leave a reply

  1. Clara says:

    How it is possible to save when we have no money to feed kids?

Russian plane near Syria shot down by ally targeting Israeli planes

The Russian military plane, which went missing on Monday, has been shot down by its ally Syria targeting Israel's war planes and the number of servicemen lost in the event has been corrected from 14 to 15, the Russian government stated.

Latvian border guards find more than 140 kg of hashish in a car

On 16 September, Latvian State Border Guard detained a 1991-born man and his car at Grebnev border checkpoint. A secret compartment containing 145.3 kg of narcotic substances was found in his car during a routine inspection, as reported by State Border Guard.

EU suspects German car-makers of colluding against cleaner technology

EU competition watchdogs are probing if German automotive giants have colluded to restrict the development of clean emission technology.

Number of job vacancies in Latvia up 7.8 thousand in Q2 2018

In Q2 2018 there were 24.5 thousand job vacancies in Latvia, which is 7.8 thousand vacancies or 46.6 % more than in Q2 2017. In public sector there were 7.2 thousand and in private sector 17.3 thousand job vacancies.

Latvian government desperate to resolve the growing piles of used tires problem

Latvian government has supported Environment Protection and Regional Development Ministry’s prepared report ‘On maintenance of used tires’. This report includes proposals for measures to help resolve the matter regarding speeding up recycling and regeneration rates, as well as the no less important matter of maintenance of used tires.

Cargo volumes handled by Latvian ports remain stable in first half-year of 2018

Latvian ports transshipped 43.468 million tonnes of cargoes in the first eight months of 2018, which is 0.9% more than in the same period of last year. According to data from Transport Ministry, cargo turnover’s negative balance continues declining at Ventspils port, where 13.274 million tonnes of cargoes were transshipped in the first eight months, which is a drop of 11.9%.

airBaltic carried 18% more passengers in summer

Latvian airline airBaltic has carried 2,770,047 more passengers to destinations in Europe, Scandinavia, Russia, CIS and the Middle East in the first eight months of 2018, BNN was told by the company.

Ukrainian workers in Lithuania gradually fill gap left by Lithuanian exodus

Companies in Lithuania, in particular operating in construction, logistics and retail chains, are increasingly inviting workers from Ukraine and Belarus to fill the worker shortage of Lithuanians moving to richer countries.

ABLV Bank assets worth EUR 47.14 million recovered in August

Assets worth EUR 47.13 million were recovered from the liquidated ABLV Bank in August, which is 2.2 times more than a month prior, according to the account published in Latvian Herald.

Estonia bank watchdog points to Denmark's responsibility over Danske

As to the allegations of doubtful billions flowing via the Estonia branch of Danske Bank, the Estonian watchdog of financial institutions has noted that the Danish supervisory authority was responsible for the lender's risk control.

Liepaja City Council vice-chairman steps down

On Monday, 17 September, Liepaja City Council vice-chairman for tourism and investment affairs Ģirts Kronbergs announced his resignation.

Sixteen contenders apply for Rundale Castle Museum director’s post

A total of sixteen contenders have applied for participation in Latvian Culture Ministry’s announced open personnel selection process to find the next director of Rundale Castle Museum.

Russia: Military plane with 14 Russian soldiers has been lost near Syria

A Russian war plane with 14 servicemen on board has disappeared while over the Mediterranean Sea near the coast of Syria, Russia's Defence Ministry has stated.

Unity decides not to support UGF’s initiative for people’s elected president

Unity political party has no plans to support the amendments submitted by the Union of Greens and Farmers on people’s elected president, says Unity’s chairman Arvils Ašeradens.

U.S. to introduce more import tariffs on China produce

The U.S. government has announced imposing import duty tariffs on Chinese products worth USD 200 billion (EUR 171 billion), in a trade dispute between the world's two biggest economies.

Latvian parties’ pre-election promotion costs reach EUR 1.64 million

Three weeks prior to Saeima elections, expenses of Latvian political parties on promotion have reached EUR 1,638,393. Concord remains in the least expense-wise, according to information from Corruption Prevention and Combating Bureau.

Internal Security Bureau criticizes State Police for insufficient corruption prevention

Internal Security Bureau has detained several police officers under suspicion of bribery. Because of that, the bureau has voiced criticism to the management of Latvia’s State Bureau for insufficient corruption prevention measures.

Full transition to electronic documents in construction sector planned for 2019

During a meeting on 17 September, Latvia’s Cabinet of Ministers supported the amendments to Construction Law developed by Economy Ministry. These amendments provide for a full transition to electronic document handling in the country’s construction sector starting from 2019. This includes submission, decision-making processes and coordination – all of these processes will be performed using Construction Information System, as confirmed by Economy Ministry.

MPC permit revoked for liquidated Jurmala-based M7 Energy

Latvia’s Economy Ministry has made a decision to revoke the permit that allows selling produced electrical energy within mandatory procurement component system from SIA M7 Energy (previous name SIA KSER) CHP plant in Jurmala.

U.S. looking into Danske Bank operations in Estonia

Danske Bank, the leading bank in Denmark, is being investigated by U.S. authorities in relation to alleged money laundering from Russia involving Danske's Estonia branch, American media report.

Nearly 80,000 people have left Riga to live elsewhere in last seven years

In the past seven years, 78,692 people have left Riga to live in other countries or elsewhere in Latvia, according to data from the Central Statistical Bureau of Latvia.

Estonia's free rural bus rides result in passenger boom

Rural bus lines in the majority of Estonian counties have been offering free trips since early July, and in August an increase of 10,000 more rides was observed, resulting in frequently overcrowded buses.

NP: Riga municipality plans to adopt EUR 5 entry fee to city’s centre

A EUR 5 entry fee to Riga’s centre may be a solution Riga municipality has picked to help solve possible traffic congestion problem that is expected to appear in 2020, when it is planned commence construction of Rail Baltica railway. Because of that, several major streets will be closed down for traffic, according to information from Nekā personīga programme.

State Chancellery: no attempts to influence elections from abroad have been observed

Compared to the attempts to influence election results in other countries, no active attempts to influence 13th Saeima elections have been observed so far, said State Chancellery acting director for prevention of hybrid threats Kaspars Ozoliņš.

Switzerland urges Russia to quit violating law, spying in its territory

Switzerland's foreign ministry has urged Russia to stop illegal activities on its territory after three suspected spying cases have emerged in the country in 2018.