In the third quarter, the banks operating in Estonia earned 138 million euros of net profit in the local market, which is 26% less than a year earlier. The profit primarily decreased because of a fall in Euribor, which lessened the interest profit earned on loans more quickly than the banks' own funding costs did.

Bank profitability or the ratio between bank profits and assets, decreased to 1.2% in the third quarter, which is close to the average seen over the past ten years. Thus, that can be considered the norm in Estonia. Euribor has remained at around the same level since spring and the financial markets expect the interest rates to also remain close to their current levels for the next few years. That means bank profits can also be expected to stabilise over the coming quarters. Going forward, their profits will become more dependent on the growth in the banks' loan portfolios.

Even though the banks' interest income has decreased, their profits are bolstered by growth in both the housing loan and corporate loan portfolios. By late September, the amount of outstanding housing loans in Estonia was around 10% and the amount of outstanding corporate loans 9% higher than a year before. It has to be noted that the growth of these indicators was slower in most other euro area countries. The average growth in housing loans and corporate loans was 2% for the euro area as a whole.

The fast growth in borrowing in Estonia shows that the banks' ability to lend is good and they are intent on growing. It is also evident that the willingness to invest is rebounding among both companies and individuals despite the complex geopolitical situation. For companies, growth is mainly driven by the real estate sector. Companies in professional, scientific and technical activities, which cover the activities of head offices, have also been borrowing actively. The amount of outstanding loans has increased well over 10% in both sectors, and other larger sectors have also seen growth of at least 5%. The only exception is the trade sector, where the amount of outstanding loans decreased by 3% over the year. The good news is that the majority of companies and individuals have coped well with repaying their loans, as the share of problematic loans has stopped rising over the past six months and compared to the last ten years, it is even low.

For further information:
Hanna Jürgenson
Communications officer
5692 0930
Email: [email protected]
Press enquiries: [email protected]