25.10.2023.
At a time of high inflation, when the European Central Bank has sharply increased Euribor interest rates, businesses have a good opportunity to earn on deposits.
For many years, low interest rates made term deposits unattractive to customers as a financial service. With the changing market situation, we now offer our customers increasingly higher interest rates on term deposits, and customers are keen to benefit from this. As the end of the year approaches, deposits may become increasingly important for businesses, so we would like to draw your attention to the current increased rates for term deposits.
In line with the financial market situation and increasing demand, Luminor raised the term deposit rates for its corporate clients in Latvia for various periods. The longer the deposit term, the higher the interest rate — for example, we currently offer the highest rates for deposits with terms between 9 and 12 months.
Still, according to our observations, Latvian businesses usually place term deposits for a period of up to 3 months and only a small share of them choose to invest in deposits for a longer term.
“This year the situation has changed significantly and interest rates on term deposits have risen sharply, amounting to 4%, depending on the chosen term. We also offer individual interest rate options for larger deposit amounts, so you are welcome to contact your corporate project manager at Luminor bank in such cases,” says Mareks Gurauskas, Head of SME at Luminor Latvia.
With rising uncertainty, increasing interest rates and other costs, it is advised to also think about setting aside a certain reserve - the so-called financial safety cushion.
Each company is different: their variations in nature of activity, sector, structure of liabilities, business models require different safety cushion levels. Our Head of SME at Luminor Latavia Mareks Gurauskas suggests companies to identify potential risk scenarios, assess how long the risks could have a negative impact on their activity, and how companies could finance themselves during turbulent times. These are the main factors to be considered when calculating the size of a financial reserve.
It is important to evaluate the risks and future cash flows objectively and not to only rely on the optimistic scenario, as no one knows what factors could affect the business in the future. Businesses should also have a fall-back scenario for adverse circumstances outlining how to optimise operations and cut costs.
Over the past year, we have observed an increase in corporate deposits in all three Baltic countries. The highest increase in demand this year was experienced in June at Luminor in Latvia and Lithuania, due to the rise in interest rates, followed by a sharp increase in the number of corporate deposits.
“Businesses made good use of the opportunity to earn profits by depositing spare funds in term deposits. Before the rise in interest rates, the share of term deposits held by corporate customers at Luminor was relatively small compared to their current account deposits. This year, the share has increased significantly, as there is a good opportunity to earn,” says Mareks Gurauskas.
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