Jana Kask, Deputy Head of the Financial Stability Department of Eesti Pank 24.01.2014
The total volume of loans and leases to Estonian companies and households grew by 1.3% in 2013. The loan and leasing portfolio increased over the year by 185 million euros to 14.9 billion euros.
Growth in the corporate loan portfolio decelerated to 2% by the end of the year. Companies took out about the same amount in long-term loans and leases in December as they did in November, while the volume of short-term loans climbed to its highest level in five years. Strong growth in short-term loans and leases at the end of the year is quite typical and borrowing was again driven up mainly by companies in trading and manufacturing.
The housing loan portfolio increased over the year by 50 million euros, or 0.9%. The annual growth in new housing loans accelerated to 25% in the fourth quarter. However the number of new contracts grew by only 14%, indicating that loans are being used to finance more expensive properties than before.
Loan interest rates remained low throughout the year. The average interest rate for housing loans granted in December was 2.5%, and that for long-term corporate loans was 3.1%. Interest rates on loans have been at around the same level for more than a year now as EURIBOR has been low and interest margins fairly stable.
The deposits of Estonian companies and households grew by 5.1% in 2013. At the end of the year they totalled 9.1 billion euros in value, with households holding 5 billion euros in deposits and companies 4.1 billion euros. Households increased their bank deposits by 297 million euros over the year, while companies increased theirs by 143 million euros.
The share of loans overdue by more than 60 days in the loan portfolio fell during the year from 3.2% to 1.9%. There was no change in December in the volume of long-term overdue loans, but there was again a decline in the volume of loans that have been restructured due to repayment problems in the preceding years. The improvement in loan quality allowed most banks to continue reducing their provisions for loan losses.
The banking sector earned 5% more net interest income in the fourth quarter than a year earlier. The negative impact of low base interest rates on the profitability of the banks started to recede in the middle of last year. This was partly because the banks managed to earn more interest income as the loan portfolios grew and interest margins were higher than on earlier loans, and partly because the costs of funding fell for banks due to the increase in demand deposits. Banks operating in Estonia earned a total of 444 million euros in net profit in 2013, 28% of which came from dividends from subsidiaries and 9% from written-down loans returning to profit. Without the income from these, the net profit of the banking sector would have been 7.5% smaller than in 2012.
Financial sector statistics and their publication schedule can be found on the website of Eesti Pank at http://statistika.eestipank.ee...
Banks earned 5% more net interest income in the fourth quarter than a year earlier (1)