The funding position of companies was relatively good in 2013 and that of households improved. The financing position of companies was good and their business operations and investments were not much restricted because of their increased current internal resources, the buffers they have built up, their increased ability to borrow and the low base interest rates on bank loans. Higher incomes and an improved financial position meant that the capacity of households to consume and to invest also increased.

Weak demand and investment meant that the borrowing activity of Estonian companies was low. The lack of demand coupled with uncertainty about the future for the economy discouraged companies from significantly increasing their investments in fixed assets. As corporate profitability remained relatively high and current revenue was enough to finance investment, companies did not have a great need to access external funds.

Household borrowing has picked up somewhat due to increased confidence and an improved financial position. This is most noticeable with housing loans but also to a lesser degree with consumer loans. The volume of housing loans issued has been larger than repayments of old loans since March 2013 and as a result the housing loan portfolio has grown by 0.9% over the year. The volume of new consumer loans has also started to grow, though the growth has not passed that of repayments of earlier loans.

Both corporate and household borrowing will remain moderate in the coming years. Loan growth will be supported by the expected growth in demand and in investment activity. The Eesti Pank forecast of December 2013 expects the total stock of domestic bank loans to companies and households to increase by 4% in 2014 and by 6% in 2015.

Interest rates remain favourable for borrowers. Domestic deposits and loan repayments were again sufficient in 2013 to cover the new loans that were issued. Even though the interest margins on new bank loans are somewhat higher than in the past couple of years, the interest expenses of companies and households are small because base interest rates are very low.

The Lending Review 2014 will be published on the Eesti Pank website in English soon.

The Lending Review is an annual publication by Eesti Pank on the financing needs and borrowing of the non-financial sector. It contains statistics on banking and leases, and analysis of financial accounts and credit supply and demand.

Additional information:
Ingrid Mitt
Public Relations Office
Eesti Pank
Eurosystem
Tel: +372 668 0965, +372 512 6843
Email: [email protected]
Press enquiries: [email protected]