The banks earned 539 million euros in profit in Estonia in the first nine months of the year, which was some 42 million euros more than in the same months of last year. This represented growth of 9% in profits. The increase in profits was driven by growth in the loan portfolio and a rise in Euribor that boosted the interest income of the banks. Profits also benefited from a reduction in loan write-downs, which means that the banks put a lower estimate than before on their possible loan losses. The administration costs of the banks, particularly their staff costs, increased a little in contrast.

The interest income of the banks has been growing notably faster than their interest expenses. The interest rates on long-term corporate loans and housing loans climbed by 0.5 percentage point over the year, while the average cost of funding for the banks rose by only 0.1 percentage point. The interest expenses of the banks were pushed up by rises in interest rates on deposits and an increase in the share of term deposits, but they still rose much more slowly than interest income.

The growth in the interest income of the banks was also helped by the growth in the loan portfolio. The stock of loans issued by banks operating in Estonia to companies and households increased over the year to the end of September by 9% or 2.5 billion euros. The growth was led by loans related to real estate. The yearly growth in housing loans has held at close to 10% for a long time, and the yearly growth in the portfolio of loans to real estate and construction companies was again 14% in September. The yearly growth in other loans and leases to households remained at 4% at the same time, while other loans issued to companies grew in volume by a total of 5%.

The rapid growth in recent months in the profits of the banks has helped them cover the additional funding needed to cover the growth in lending. The growth in deposits has also supported the ability of households and companies to pay.

The profitability of the banks moving forwards will depend partly on how movements in interest rates pass through into the loan and deposit portfolios. The changes in interest rates have not yet had their full impact on the interest income and expenses of the banks.

Eesti Pank published a statistical release on banks and lease companies in September today, which can be found here.

Additional information:
Hanna Jürgenson
Communications officer
Eesti Pank
Tel 5692 0930

Press enquiries: [email protected]