Banks earned 9% more profit in the third quarter

Kadri Salumaa
Kadri Salumaa
Financial Stability Department of Eesti Pank

High levels of activity in the real estate market were reflected in the housing loan market figures for September. Households took out 65 million euros in new housing loans in September, which is 14% more than a year before and the largest amount given out during a single month since the end of 2008. The outstanding loan stock increased by around 10 million euros over the month. As the academic year started, more student loans were taken but still around 22% less than in September 2012.

Although corporate loan turnover in September was lower than in August, the volume of loans issued to companies was relatively high in monthly terms. New long and short term loans worth 796 million euros were issued, which was 15% more than in the same month of the previous year. There was stronger growth in long-term loans, which made up one third of the total value of loans. Loan turnover continued to grow fastest in the real estate, infrastructure and trade sectors due to some large individual transactions.

Somewhat greater lending activity in the non-financial sector in September supported the quite significant growth of 111 million euros to 14.9 billion euros in the volumes of loans and leases to companies and households in Estonia. The annual growth in portfolio volumes remained modest at 1.3%.

The average interest rates on long-term corporate loans remained unchanged at 3% as did those on housing loans to households at 2.5%. The 6 month Euribor, which serves as the base rate for the majority of loan contracts, was also unchanged at 0.34%.

Loan quality continued to improve in both the corporate and household loan portfolios. The percentage of loans overdue by more than 60 days in the loan portfolio fell in September to 2.4%. Long-term overdue loans declined in September by around 34 million euros.

The annual growth in the deposits of the Estonian non-financial sector accelerated during the month from 3% to 5%. The volume of deposits increased during the month by 75 million euros to 8.8 billion. The main contribution to the growth in deposits came from the 53 million euros deposited by companies, though the annual growth rate was faster for households at 7%.

Banks operating in Estonia earned 85.6 million euros in profit in the third quarter of 2013. This was 9% more than in the same quarter of the previous year. Profits were driven by the growth in income from service fees resulting from the increased number of transactions, while net interest income in total remained at almost the same level as in the third quarter of last year. Profitability has also been supported for the past three years by the recognition of earlier write-downs as profit

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