Annual growth in the loan portfolio remained at a modest 1.3% in August
Acting Head of the Financial Stability Division of Eesti Pank
Large refinancing transactions raised the monthly volume of new loans to businesses in August to its highest level in recent years. During the month banks granted 350 million euros of long-term loans and leases to companies in Estonia, which was almost double the amount of a year ago and meant that new lending reached close to the levels seen in the spring of 2008. Some very large individual transactions were behind this major growth, mainly to finance infrastructure, but also for real estate, industrial production and trading. Without these unusually large transactions, loan volumes were generally what they have been in recent months. As growth in the economy has slowed, there has been a decline in the growth in short-term financing for companies since the end of 2012.
As companies used the majority of their borrowings for refinancing earlier loans, the high volume of new loans did not increase the total portfolio in August. The total volume of loans and leases to companies grew during the month by 54 million euros and the annual growth rate accelerated from 2.4% to 2.8%.
Activity in the housing loan market remained relatively high in August. Households took out 61 million euros of new housing loans, which was a little less than they did in July. The annual growth in new loans has varied widely from month to month, but for the last three months together it was around 15%. The total housing loan portfolio remained at the same value in August as a year earlier at 5.8 billion euros.
The annual growth in the total stock of loans and leases to companies and households accelerated in August from 1% to 1.3%. The annual growth in the loan and lease portfolio has been in positive territory for a whole year now. However, loan growth has been somewhat slower than Eesti Pank forecast as companies have borrowed less than expected. The low growth can partly be explained by structural and technical factors, such as the exit of the branch of one foreign bank from the Estonian market or the reclassification of loans. Borrowing activity has also weakened somewhat as the macroeconomic outlook has become more modest. The total volume of loans and leases increased in August by 59 million euros to 14.8 billion euros.
Interest rates on loans have remained unchanged this year. The average interest rate for housing loans granted in August was 2.6% and that for long-term corporate loans was 3%.
The share of loans overdue by more than 60 days in the loan portfolio fell during the month from 2.8% to 2.7%. The main cause of the decline in overdue loans and loan provisions continues to be write-offs. The ability of households and companies to service their loans has remained strong enough and has not caused any significant new problems in loan quality for banks.
The annual growth in deposits remained at 3%. The total deposits of households and companies have been fairly stable since the spring of this year and remained at 8.7 billion euros at the end of August. The annual growth in corporate deposits in August was negative at -0.4%, as it was in the previous month, due to the high comparison base and reclassifications. Annual growth in household deposits stabilised at the same time at close to 6%.
Financial sector statistics and their publication schedule can be found on the website of Eesti Pank at http://statistika.eestipank.ee/?lng=en#treeMenu/FINANTSSEKTOR
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