The share of overdue loans did not increase in October
Jaak Tõrs, Head of the Financial Stability Department of Eesti Pank
The volume of the deposits of Estonian households and non-financial enterprises decreased by 240 million kroons, i.e., 1.5% in October. The annual growth rate dropped to 6.3%. Since the culmination of the international financial crisis at the end of September and beginning of October increased also the uncertainty of Estonian depositors for a couple of weeks, banks had to include funds from their foreign parent banks to manage during the temporary decline in domestic deposits. Compared with earlier months, the growth of time deposits has picked up even more. In October, the volume of household time deposits increased by 1.3 billion kroons, so the share of time deposits in total deposits went up to 58%.
In October, the corporate and household loan and leasing stock decreased by 1.07 billion kroons, i.e., 0.4%. The annual growth rate declined to 12%. The reason behind the statistical decrease of the loan portfolio was the reclassification of some large state enterprises to general government agencies. As a result, the volume of loans issued to the general government sector "grew" by 1.4 billion kroons. Leaving aside the change in statistics, the balance of the corporate loan portfolio increased by an estimated 760 million kroons. The balance of household loans and leasing grew by a half less in October compared with previous months - just 290 million kroons. Smaller credit demand has been brought about by diminishing interest in investing due to changes in the economic environment as well as by more cautious attitudes, which have led banks to establish stricter credit conditions.
The share of loans overdue for more than 60 days - an indicator of banks' loan quality - did not change compared to September, remaining at the level of 2.2%. The growth rate of overdue loans has been slowing since September. This may partly be explained by banks' more efficient prevention of solvency problems. Loan write-downs grew by 119 million kroons in October with write-downs accounting for 1% of the total loan portfolio. The share of both overdue loans and write-downs was the highest in the real estate and construction sector, and with respect to households, in the consumer credit segment.
In October, the average interest rates on housing loans and long-term corporate loans were 6.22% and 6.99%, respectively. Though the EURIBOR started to decline fast in the middle of October, the cost of financing for banks did not change. This was, in turn, reflected in higher interest margins on loans to customers.
Figure 1. The annual growth of household and corporate loans and leases in Estonia
Figure 2. The volume of corporate and household deposits (EEK million) in Estonia and the annual deposit growth rate
Figure 3. The weighted average interest rate on housing loans and long-term corporate loans issued within a month and the 6-month EURIBOR
The financial sector statistics and release calendar are available on the web site of Eesti Pank at www.bankofestonia.info/pub/en/dokumendid/statistika/pangandusstatistika/tabelid/.
For further information:
Public Relations Office
Telephone: +372 6680 745; +372 5291 449
E-post: livia.kulm [at] epbe.ee