The profits of the banks were increased last year by dividends received from subsidiaries
Economist at Eesti Pank
The growth in the volume of loans to individuals and companies was strong in December, though new loans were added at a slower rate than before. Bank deposits continued to grow faster than loans. The total profit of the banks operating in Estonia was 6% more in 2018 than a year earlier because of dividends received from subsidiaries.
The volume of loans and leases to private individuals grew strongly in December, as it had in previous months. The stock of housing loans was up 7% over the year, but 12% fewer new housing loans were issued in December than a year before. The average value of the loans continued to rise. The number of sales transactions in the housing market was also down in the second half of last year, and while prices still climbed, they did so more slowly than before. The stock of car leases continued to grow fast, increasing by around 20% over the year, though new car leases were also added at a slower rate in December than earlier.
The stock of loans and leases to companies grew by 5.8% during the year. Lending to companies was supported by some increase in investment activity and by the refinancing of a larger volume of loans than previously. Companies took out 9% more new loans in December than a year earlier, but the value of new long-term loans was about the same. Real estate companies stood out as more active borrowers than other companies.
The average interest rates on loans remained low. The average interest rate on housing loans fell a little in the second half of 2018, having climbed in the first half of the year. It was 2.4% on new housing loans in December. The average interest rate on long-term corporate loans was very variable throughout 2018, but as an average for the year it was still higher than that for the previous year. The average interest rate on new long-term loans to companies in December was 1.95%.
The total value of personal and corporate bank deposits grew fast in December and was 14.1 billion euros at the end of 2018. Corporate deposits were up 8% on a year earlier and those of individuals were up 10%. This meant that deposits again grew faster than loans and both companies and individuals increased their financial buffers.
The banks earned 356 million euros of net profit in total in 2018, which was 6% more than in the previous year. The growth in profit came from the dividend income received from subsidiaries, without which profits would have declined. Net interest income was larger than in 2017 and income was earned from loans that had been written off previously, but income tax expenses and staff costs increased by more. In consequence net profit, from which dividend income is excluded, fell as a ratio to total assets from 1.2% in 2017 to 1.0% in 2018. Pre-tax profit excluding dividend income remained at the same level as in 2017, but it also fell as a ratio to total assets from 1.4% to 1.3%.
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