The average interest rate on housing loans in Estonia was 2.6% and the average rate for corporate loans 2.9% in June, which might indicate reduced competition in some segments of the loan market, Bank of Estonia economist Raido Kraavik said in the central bank’s statement on June banking sector statistics.
The average rate of 2.6% for housing loans remained slightly above than the long-term average; the average rate for such loans was 2.4% in 2017 and 2.5% in 2018.
Interest rates for corporate loans have grown even faster, reaching 2.9% on average in June. This, among other things, may be indicative of reduced competition in some segments of the loan market. Borrowing remains rather favorable, however, said Kraavik.
According to banking sector statistics published on July 23, demand for loans generally remained at the usual level in June.
Businesses have begun leasing more vehicles again, however. The total value of car leases concluded over the past year grew by 16% YoY.
As of the end of June, the balance of companies’ loans and leases was EUR 9.5 billion, up by 5%.
The portfolio of businesses’ loans has grown at a similar pace in previous years as well. Loan growth has been supported by large borrowing transactions concluded by the energy sector at the end of last year and in early 2019, without which total growth would have been half as small.
Households’ demand for loans remained rather high in June. The balance of loans grew by 7.5%, to EUR 9.7 billion. In recent months housing loans and car leases for private individuals have grown at a similar pace as a year ago. Of other consumption loans, one tenth more was issued than during the previous year. Demand for loans is facilitated by rapid wage growth and low unemployment, which increases households’ feeling of security.
Households’ deposits have continued to grow at a very rapid rate. Over the past year, the volume of deposits has grown by almost one tenth, to EUR 7.9 billion in total. Corporate deposits stood at EUR 6.6 billion, remaining steady YoY. The sum total of deposits in banks increased 5%.
Not considering dividend income and income tax expenses, the banking sector’s total profit amounted to EUR 68 million in the second quarter of 2019, or 1% of total assets. This profit was boosted by a 10% increase in net interest income. Personnel expenses, meanwhile, have grown by 15%. (ERR/Business World Magazine)