Corporate and household deposits grew fast during the crisis
Economist at Eesti Pank
The bank deposits of the Estonian non-financial sector have grown strongly in recent years, and since the start of the coronavirus crisis the rate of growth of deposits has increased even further. The yearly growth in deposits was 11% in July. Corporate deposits grew by 226 million euros over the month to 7.7 billion, while household deposits grew by 71 million euros to 8.8 billion. Deposits were able to grow so fast during the economic difficulties as companies reduced their investment and households reduced their consumption. It is probable though that the growth in deposits was distributed unevenly between companies and between households.
Borrowing by Estonian companies revived in July. Although 17% less was taken out in long-term loans than in July 2019, over a third more was issued in such loans than in the previous three months, during which uncertainty about the coronavirus meant that companies were very reticent about investing. The slightly more optimistic attitude is shown by the increase in borrowing in July in all the major sectors.
The market for car leases gives quite a good picture of the expectations of companies and households for the future. Some 60% fewer cars were leased in April and May than a year earlier, but over the summer the demand for leases has grown steadily. The demand from households for car leases recovered faster, but the turnover of leases to companies was only 16% lower in July than a year earlier.
No real sign of recovery in the market for housing loans has yet been seen. One reason for this may be the longer time required for purchasing property, meaning that borrowing in July largely reflects the demand for loans in the preceding months. Transactions have been clearly down since the start of the coronavirus crisis, and so the turnover of loans is some 30% lower than before the crisis. The size of the average housing loan increased during the crisis though. This may have been partly due to the increase in the share of transactions with new developments.
The average interest rate on loans issued remained stable in July. The average interest rate for long-term loans taken by companies was 2.9%, and the rate for housing loans with collateral was 2.3%.
The share of the loan portfolios of the banks that is overdue has not yet started to increase. The share of loans that were overdue by more than 60 days in July was close to its lowest ever level at 0.5%. It should be noted though that borrowers fearing payment difficulties have been able to access payment holidays quite easily, which may have prevented their loans becoming overdue.
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