The use of internet banking and ATMs has increased

In the second quarter of 2014, an average of 30 million domestic payments were made in Estonia each month with the total value of 13 billion euros. Compared to the same period a year earlier, the number of payments increased by 4%, while the value of payments contracted by 12%. The value of payments did not grow considerably across any method of payment; however, the value of telebank payment orders and payment orders on paper decreased significantly year-on-year. These two methods of payment have been on a downward path for years, but SEPA-related conditions, which entered into force in February, caused the recent sharp fall. The division of payments has remained quite stable over the past four years: more than 60% of domestic payments are made with a bank card, and the share of payments initiated in an internet bank hovers around 20%. At the same time, the majority of the value of payments goes through an internet bank – in the second half of 2014, a total of 75% of the value of payments came from internet banking payments. In the same period a year earlier, the share of internet bank payments in the total value of payments was 10% smaller.

As of February 2014, domestic interbank payments have been made through the pan-European STEP2 system run by EBA Clearing. A fifth of all domestic payment orders are made via STEP2. The payments made through STEP2 make up 26% of the value. Until February, domestic interbank payments were made using the ESTA retail payment system run by Eesti Pank and payments were sent from one bank to another ten times a day. In STEP2, interbank settlement takes place five times a day, which means that a payment from one bank can take three to five hours to reach another bank. If a payment needs to reach another bank on the same day it will need to be made by 15:00 or 16:30, depending on the bank. 80% of domestic payment orders are settled within one bank; these payments are usually settled immediately and around the clock.

In the second quarter of 2014, an average of 1.7 million cross-border payments were made each month with a total value of nearly 6 billion euros. The number of payments was almost the same as a year before, but the value had increased by 16%.

A tenth of cross-border payments are made using STEP2, but these payments make up a fifth of the total value of payments. Cross-border payments made through STEP2 are most often sent to Finland, Germany and Latvia (17%, 16% and 10% of the volume of all cross-border payments, respectively). The most money was also received through the system from these countries.

As at 30 June, banks have issued 1.8 million bank cards, 1.5 million of which are in active use. A few years ago, people tended to use bank cards for cash withdrawal rather than for paying at points of sale. By now, the situation has reversed. Card payments amount to approximately 340 million euros per month, while an average of 316 million euros of cash are withdrawn from ATMs. In the second quarter, people used ATMs to deposit an average of 144 million euros per month, which is 17% more than a year earlier. This increase could be explained partly by the fact that cash payments in bank offices (including depositing and withdrawing cash) have become more expensive and thus, people use more ATMs. The average amount of a card payment has been around 17 euros for more than five years. The average amount withdrawn from an ATM at once is 93 euros and the average amount deposited using an ATM is 364 euros. Both figures are nearly a tenth larger than they were a year ago.

Source: Bank of Estonia

Author: Tiina Soosalu, Payment and Settlement Systems Department of Eesti Pank

The volume of loans and leases increased by 2.8 pct year-on-year

The volume of loans and leases granted to companies and households continued to grow at a subdued pace in June, similarly to previous months. Compared to June 2013, the portfolio increased by 2.8%; its value was 15.1 billion euros.

The annual growth of the portfolio of loans and leases granted to companies was positive in almost all sectors, reaching 4.3% in June. The volume of short-term corporate loans and leases remained at a level similar to previous months, but the volume of loans and leases related to long-term loans (mainly for fixed asset investments) decreased to 170 million euros in June, while in May, the figure had been more than 230 million euros. Companies in the agricultural and industrial sector took out fewer long-term loans than in previous months.

In June, the volume of new loans issued to households remained at the level of earlier months. New housing loans totalled to 66 million euros, which is approximately the same as in the previous three months. The housing loan portfolio continued to increase slowly, with its annual growth reaching 1.7% in June.

Loan interest rates did not change considerably in June. The average interest rate on long-term corporate loans issued in June was 3.2%, while the interest rate on housing loans was 2.5%.

The loan quality of the banks continues to improve. The percentage of loans overdue by more than 60 days fell from 1.8% in May to 1.7% in June.

The total deposits of companies and households at the end of June stood at 9.3 billion euros. Compared to last month, in June the stock of non-financial corporate deposits decreased by 33 million euros and the annual growth of deposits fell to 6.8%. The volume of deposits contracted due to a decrease in corporate deposits – the volume of corporate deposits was almost 100 million euros smaller in June than in the previous month.

Banks earned 113 million euros in net profit in the second quarter. Nearly a third of it came from dividends paid out by subsidiaries. Without it, the amount of profit was similar to that earned in earlier quarters. The profitability of banks has been supported by a decrease in administrative expenses and a reduction of previously made write-downs for loan losses, but on the other hand, the net interest income of banks declined in the second quarter.

Source: Bank of Estonia

Author: Jaak Tõrs, Head of the Financial Stability Department of Eesti Pank

The construction price index continued to fall in 2Q

According to Statistics Estonia, the percentage change of the construction price index in the 2nd quarter of 2014 was –0.7% compared to the 1st quarter of 2014 and 0.8% compared to the 2nd quarter of 2013.

After three years of growth, the construction price index took a downturn in the 1st quarter of 2014 (compared to the previous quarter). This downtrend continued in the 2nd quarter.

In the 2nd quarter, compared to the same quarter of the previous year, the construction price index was primarily influenced by rising labour costs, which accounted for more than three quarters of the total increase of the index.

Compared to the previous quarter, costs of building materials decreased by 1.7%, while the costs of building machines increased by 3.0% and labour costs rose by 0.7%.

In the 2nd quarter of 2014, the percentage change of the repair and reconstruction work price index was –0.6% compared to the 1st quarter of 2014 and 0.7% compared to the 2nd quarter of 2013.

The calculation of the construction price index covers four groups of buildings: detached houses, blocks of flats, industrial buildings and office buildings. The repair and reconstruction work price index covers office buildings. The construction price index expresses the change in the expenditures on construction taking into consideration the price changes of three basic inputs: labour force, building materials and building machines.

Change in the construction price index, 2nd quarter 2014
1st quarter 2014 –
2nd quarter 2014, %
2nd quarter 2013 –
2nd quarter 2014, %
TOTAL -0.7 0.8
labour force 0.7 2.5
building machines 3.0 3.5
building materials -1.7 -0.4
Index of detached houses -0.5 0.2
Index of blocks of flats -1.0 0.6
Index of industrial buildings -0.2 1.2
Index of office buildings -0.9 0.8
Change in the repair and reconstruction work price index, 2nd quarter 2014
1st quarter 2014 –
2nd quarter 2014, %
2nd quarter 2013 –
2nd quarter 2014, %
TOTAL -0.6 0.7
labour force 0.6 2.5
building machines 2.3 5.2
building materials -1.5 -0.5

 

Source: Statistics Estonia

The producer price index of industrial output decreased in June

According to Statistics Estonia, in June 2014, the producer price index of industrial output changed by –0.2% compared to May 2014 and by –3.1% compared to June 2013.

In June, compared to the previous month, the producer price index was more than average influenced by a decrease in prices in the manufacture of electronic equipment, in mining and in the manufacture of food products, but also by an increase in prices in the manufacture of fuel oils, chemicals and chemical products.

Compared to June 2013, the producer price index was more than average influenced by a decrease in prices in electricity, gas, steam and air conditioning supply and in the manufacture of electronic equipment, but also by an increase in prices in the manufacture of wood and wood products.

Change in the producer price index of industrial output by economic activity, June 2014
Economic activity according to EMTAK 2008 June 2014 –
May 2014, %
June 2014 –
June 2013, %
TOTAL -0.2 -3.1
Manufacturing -0.1 -0.4
Mining -4.7 -3.7
Electricity, gas, steam and air conditioning supply -0.2 -23.1
Water supply; sewerage; waste management and remediation activities 0.0 0.8

In June 2014, the export price index changed by 0.4% compared to May 2014 and by –1.9% compared to June 2013.

In June, compared to the previous month, the prices of oil products, wood and wood products and metals increased more than average, whereas the prices of beverages, electricity, textiles and food products decreased more than average.

In June 2014, the import price index changed by 0.1% compared to May 2014 and by –1.2% compared to June 2013.

In June, compared to the previous month, the prices of electricity, oil products and metals increased more than average, whereas the prices of agricultural products, leather products and building materials decreased more than average.

Source: Statistics Estonia

Companies’ increased foreign borrowing led to greater indebtedness in 1Q

The debt liabilities of Estonian companies (loans and issued debt securities) grew by 1.4% in the first quarter compared to last year. Over the quarter, total corporate debt increased by 444 million euros, which is one of the largest quarterly growths of the past years. The majority of the growth was caused by an increase in foreign borrowing; a significant part of the latter was made up of the issue of new bonds in the infrastructure sector. The share of foreign debt liabilities in total corporate debt increased somewhat and reached 37% by the end of the quarter.

Corporate leverage remained unchanged in the first quarter, as both equity and debt continued to grow. The debt-to-GDP ratio, which had been decreasing for a year, went up slightly over the quarter – from 85% to 87%.

The financial assets of households are still increasing at a faster pace than debt liabilities. Compared to last year, households’ financial assets increased almost 10% in the first quarter, while the growth of debt liabilities picked up speed and reached 1.2%. The indebtedness of households as a ratio to GDP remained at 41%.

The Estonian economy as a whole was a net borrower in the first quarter. This means that more funds were taken in from abroad than invested there. A negative balance is quite typical of the first quarter, but larger than usual corporate foreign borrowing also had a considerable impact.

Source: Bank of Estonia

Author:  Jana Kask, Deputy Head of the Financial Stability Department of Eesti Pank

Oleg Ossinovski is the richest person in Estonia

The business daily Äripäev has named transport mogul Oleg Ossinovski as the richest person in Estonia, in its annual list of the 500 richest people in Estonia.

Ossinovski, whose son Jevgeni Ossinovski is a Social Democrat MP and who helped finance the 2011 campaign for the seat, saw his fortunes increase by 75 million euros to 297.9 million, Äripäev said today. Skinest Rail, owned by Ossinovski, had a excellent year, sells and repairs train rolling stock in the Baltics, Ukraine and Russia. Ossinovski also owns Spacecom AS, which leases railroad tanker cars.Oleg Ossinovski

Hillar Teder of food retailer O’Key Group, who had claimed the spot in the previous two years, is now second, with the daily lopping 55 million euros off its estimate of his worth to take him to a mere 295 million euros.

The rest of the top 10 were as follows:

3. Priit Piilmann, major shareholder in Viru Keemia Group – 211.2 million euros (132 million in 2012)

4. Armin Karu, major shareholder of Olympic Entertainment Group – 161.5 million euros (112.5 million)
5. Toomas Annus, chairman and major shareholder of Merko real estate developer – 143.1 million euros (133.8 million)
6. Margus Kangro, major shareholder in Viru Keemia Group – 132.1 million euros (104.4 million)
7. Fjodor Berman, owner and head of BLRT Group – 119 million euros (182.2 million)
8. Marcel Vichmann, owner of Edelaraudtee and GoBus – 117.5 million euros (107.1 million)
9. Sonny Aswani, managing director of the Tolaram Group in Estonia – 117.2 million euros (109.9 million)
10. Roman Stroykov, an industrial wholesaler – 115.1 million euros (89.5 million)

Source: ERR News

Maxima builds a huge logistics center

Retail chain Maxima is building one of Estonia’s largest logistics centers, taking up 45,000 square meters of space, and providing work for 350 people.

The purpose of the logistics center is to create a central storage complex, which will service all Maxima stores across Estonia. The total area of the center encompasses around 45,000 square meters, which will make it one of Estonia’s biggest logistics buildings.

Dry, cold and container storage areas will be built in the complex alongside with 130 docks to move goods. These platforms will service around 300 deliveries daily. The project is expected to cost around 30 million euros.

Work on the center began this week in Harju County and is planned for completion in December 2015.

Source: ERR News

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