What challenges is the Latvian financial sector facing?
One challenge for the Latvian banking sector is the number of banks. There are far too many banks in Latvia for such a small economy. Over the next five years, we will definitely see further consolidations taking place. This consolidation is necessary. A positive aspect of the sector is that we see no credit bubbles in the Latvian economy. Hence, the expectation is that banks will be growing their books in the coming five-year cycle. It has taken some time for Latvia to leverage and work out the problems resulting from the 2008 bubble burst. However, I see no bubbles in the economy at the moment. In fact, 2016 was the first year Latvia saw positive growth in bank lending, and I foresees further growth.
I am confident tax reform will have a positive affect in reducing the grey economy which is in the range of 20%. There are approximately two hundred thousand small and medium-sized companies registered in Latvia. Only half submit annual reports which means there is a lot of clean up necessary by the state revenue service. Moving these companies into the white economy will facilitate credit availability.
What are some interesting growth segments?
Since we expect a consolidation, Swedbank will be open to looking at attractive corporate and/or private portfolios if they become available. An interesting growth segment could be investment products. Latvian and Baltic populations are not advanced when it comes to investing in stocks and bonds. As the population accumulates more wealth over the coming years, investment products could become an important growth area for the sector moving forward. Swedbank will maintain its current role within Latvia. We are a big bank in our four markets and play a very strong role in boosting private and corporate businesses. Swedbank will work to become even more attractive, interesting and modern for all our clients including retail and corporate. We would like to play a big role in the corporate market and aim to grow all corporate business in Latvia.
How important is digitalization?
Swedbank’s ambition is to be one of the most digitally advanced banks, not only in the region but in the EU. We are now in a digitalization cycle which demands a lot of investments. All banks need to go into an investment phase in order to improve customer-related experiences. The latest digitalization for Swedbank has been Smart-ID, our mobile app for online banking. At the end of 2017, we will also be launching our mobile wallet which will be evolving in many ways over the next couple of years.
How will Swedbank continue innovating?
At the end of 2017, we plan to have launched an accelerator within Swedbank for the coming two years. We are going to free up one floor within the Swedbank building where we will be inviting startups, especially Fintech to come and test their ideas with us. Good ideas will be offered access to Swedbank’s client base. It is cheaper to test in Latvia than in the United Kingdom. So I would expect that this will be a borderless testing site open to regional applicants. We would like to be a leading digital bank in the region so we will be testing new innovative ideas.
What Corporate Social Responsibility programs is Swedbank currently undertaking?
We strongly support education programs and have launched various initiatives. One of them being Mission Possible which recruits young teachers. It inspires young teachers to become better teachers and supports them in different kinds of schools. We also motivate our own employees to go back to school and teach a subject. The program works throughout Latvia.