Moody's: Concern for Latvian banks

The stable outlook and ratings for Latvian banks reflect their improving credit quality, their efforts to grow market share and their good profitability, Moody's Investors Service said in a report for Latvia.

The ratings also incorporate a number of challenges facing the banks, such as maintaining a good asset quality in their fast-growing and unseasoned loan portfolios, the agency said.

Although the Latvian banks demonstrate good credit quality and have implemented more stringent credit underwriting and supervisory practices, one of Moody's primary concerns is the rapid growth in loans in recent years - largely driven by commercial and residential real estate lending, which has led to less seasoned portfolios.

Moody's said it will continue to monitor closely for a potential negative impact on the banks' quality of assets, especially if the Latvian economy and real estate prices continue to deteriorate, the agency said.

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