Business News


Perceptions in the Banking Industry of Latvia

Summary of a Survey among Riga Business School (RBS) Alumni


By: Andrejs Jakobsons and William Schaub

Perceptions can play a cruicial role in the banking industry. Bank runs are sometimes trigerred by rumors rather than real problems. When such things happen an average person will not be looking at a bank’s balance sheet, but probably will refer to the perception of the specific bank, its owners, business model and image.

The banking system in Latvia is by no means homogeneous. There are a number of features that distinguish the banks, including the ownership, business model, target customers etc. In this article we explore one dimension of the banking industry in Latvia by carrying out a survey on the perceptions of the potential business customers towards the banks. The survey was carried out in July 2014 among the RBS Alumni – a group of mid- to high-level managers. We attempted to analyze their perceptions about the individual banks competiting in the Latvian marketplace.

The survey examined perceptions regarding the top 13 banks operating in Latvia concerning their business models. Although it is possible that some banks may define themselves differently, we offered to choose from the 3 following types of banks in our survey – Nordic, Foreign Deposit, Pocket Bank. A brief definition of these types follows. The Nordic model refers to banks which have foreign ownership, but are acting primarily in the domestic Latvian market. The Foreign Deposit approach seeks to explore the advantages of the Latvian banking sector by attracting deposits of non-residents (the risks of this model have been discussed in more detail by the Financial and Capital Market Commission, see their 22.11.2012. press release). The Pocket Banks typically serve the shareholders and their inner-circle and have very little to offer in the local marketplace.

The survey responses suggest that the Nordic model is well-defined – the 4 banks identified by respondents to belong to this group (Swedbank, SEB, Nordea and DnB) gathered more than 95% of the responses. The distinction between the other 2 options offered – Foreign Deposit and Pocket Bank – is much less pronounced. For the remaining 9 banks the shares of responses regarding their business models indicate that the respondents may not be able to clearly distinguish between the Foreign Deposit and Pocket Bank models.

The most significant players in the Foreign Deposit model are Rietumu, ABLV, Baltic International and Privatbank, however, only the first 2 of them are mentioned as belonging to this model by more than half of the respondents. The banks mostly perceived as Pocket Banks are – Rigensis, Latvijas Biznesa and Meridian Trade – all receiving more than 55% of corresponding responses. This illustrates an interesting phenomenon of the banking in Latvia – the banks which are attracting their funds outside Latvia (foreign deposits by non-residents) usually have a mixed image in the eyes of the locals. The distinction between banks with a broad-based range of foreign depositors and the banks which mainly service business needs of one specific enterprise is not clear. As a result, the larger banks in Foreign Deposit business are quite often looked at suspiciously – at least domestically.

Interestingly, the state-owned Citadele has a very mixed image – the responses are split between the 3 models with the Pocket Bank model receiving about 47% of responses. This perhaps indicates the perception of the lack of transparency during the ongoing privatization process of the bank. As a result, despite the relatively good recent performance of Citadele, the users of the banking services seem to be quite confused about the strategic path of this bank.


Chart: A Summary of Survey Responses

Source: RBS Survey.


To summarize the results – the key business models followed by the Latvian banks vary quite considerably in terms of the perceptions of the business clients. The Nordic model is much more clearly defined and perceived by the customers. The survey indicates that there are 4 banks following this approach. The public perception of some of the other large banks (which follow the Foreign Deposit model) is less straighforward. Although the 2 largest representatives – ABLV and Rietumu -  have about 60% recognition of their business model, more than a third of respondents consider them Pocket Banks.


This article is based on a white paper prepared by the Riga Business School Center for Competitiveness, a platform for the business community and RBS to share ideas and information.  It focuses on Competitive Advantage for Latvian and Baltic business. Activities are targeted at improving existing positions of Competitive Advantage as well as how to attain and grow it. The Center works directly with businesses and entrepreneurs who seek to work with it. The data it collects, the analysis it performs and the information it presents or makes available is for the express purpose of helping market participants plan and execute and evaluate their business strategies and performance.  The white paper will be posted on the website.

Articles for the Competitive Dialogue Series are published on the AmCham website:

 Competitiveness and Business Transformation

 September 16, 2014 Leading in the New Economy