The net profit of the banks fell last year
The banking sector in Estonia earned net profit of 285 million euros in 2019, which was one fifth less than in the previous year. The main reason for this was structural changes in the banking market. The net interest income and net service fee income of the banks fell a little as a ratio to total assets, but the ratio of administration costs remained the same as a year earlier. Changes in loan write-downs also affected profits. The net profit of the banking sector was 1% of total assets.
Estonian banks and lease companies had lent 9.2 billion euros to local companies as at the end of last year, which was the same as a year earlier. The portfolio would have grown by some 3-4%, but as two branches in Estonia ended their activities, some loans were moved out of Estonia. Estonian companies were quite modest in their borrowing from the local financial sector, but they offset this by borrowing more from abroad and from other non-financial companies.
There was growth of 7% in loans and leases to households, which stood at 10.1 billion euros in December. The largest share of loans to households are housing loans, and 8 billion euros has been taken in such loans in total. The amount issued in housing loans was 7% more than in 2018, largely because of rising housing prices. The earlier rapid growth in other loans and leases came to a halt in 2019. Demand for loans and leases remains strong, as is shown by the rapid growth in the loan stock. Demand for loans is encouraged by rapid wage growth, which has maintained confidence.
The interest rates on loans issued to households and companies rose a little last year, but the average cost of borrowing was again lower in December. The average interest rate for long-term loans taken by companies was 2.6%, and the rate for housing loans was 2.4%.
Corporate deposits at banks operating in Estonia totalled 7 billion euros, and those of households were 8 billion. This meant the deposits of both companies and households grew by 7% over the year.