The yearly growth in the portfolio of loans and leases to households accelerated to 8% in February
Economist at Eesti Pank
- Estonian companies were active in borrowing from banks and leasing companies operating in Estonia
- The share of loans overdue for more than 60 days in the loan portfolio was below 1%
- Bank deposits continued to grow rapidly and were up 10% on February 2017
Estonian companies borrowed actively in early 2018 from banks and leasing companies operating in Estonia in the same way as at the end of last year. Borrowing activity was boosted by somewhat higher investment and the good access to domestic bank loans. Some 30% more was taken in new long-term loans and leases in the first two months of the year than in the same months of last year. Companies in almost all sectors took out more long-term loans than a year earlier, and the largest taker of the new loans was the real estate and construction sector. The portfolio of corporate bank loans was still smaller than a year ago though, as one bank transferred a part of its loans to the portfolio of its foreign parent bank in the autumn. Without this the portfolio of corporate loans, leases and factoring would have grown by 6-7% over the year.
Demand from households for loans remains strong. The yearly growth in the portfolio of loans and leases to households accelerated to 7.7% in February. Housing loans, consumption loans and car leases were all taken out more than previously. The amount taken in new housing loans was 14% more in February than a year earlier, and the portfolio of housing loans increased by 6.9% over the year to 7.1 billion euros. The car lease portfolio grew by 19% over the year. The growth in car leases has partly been driven by the change that came in from the start of 2018 to the taxation of vehicles owned by companies, which has led to company cars being registered to private individuals. The yearly growth in the portfolio of overdrafts and credit card loans slowed to 1.7%.
The average interest rates on new loans have risen slightly at the start of this year. The average interest rate on new housing loans issued in February was 2.3%, which is similar to the average rate last year. The average interest rate on new long-term corporate loans was 2.6% in February. The average interest rate depends largely on which companies have signed loan contracts for which projects in the particular period, and so can fluctuate quite widely.
The good state of the economy and low interest rates mean that the loan quality of the banks remains good. There were 146 million euros of overdue loans to companies and households at the end of February, accounting for only a small share of the portfolio at less than 1%. The share of loans that are overdue was smaller than in February 2016 in almost all sectors.
As companies and households have borrowed extensively, so financial buffers have also continued to increase. The bank deposits of Estonian companies and households grew by 10% over the year to 13 billion euros. Growth in the deposits of households has been built on strong growth in incomes. Deposits grew a little more slowly in February than at the end of last year, but at a rate that is still rapid. The bank deposits of households grew by 9.4% over the year to 7 billion euros, while the deposits of companies were up 11% over the year in February.
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