In January 2011, corporate credit volume recovered somewhat. The pickup in borrowing activity is best reflected in short-term financing, which has been increasing for the past few months. It was nearly 70% higher in January year-on-year, reaching close to the pre-crisis level of January 2008. In the first month of 2011, Estonia’s corporate sector was issued long-term loans and leasing worth 105 million euro. Compared to January 2010, new lending has increased in most sectors, including agriculture, manufacturing, construction, real estate and trade.
The volume of housing loans continued to grow modestly. In January as a seasonally less active month, new lending was notably smaller compared to December 2010, but was more than 6% higher compared to January 2010. Nevertheless, the 24.4 million euro volume of housing loans is only comparable to the level of the start of 2003.
The volume of car lease to both companies and households has been on a steady increase since spring 2010. In January, the real sector’s car lease volume was more than twice higher year-on-year, amounting to more than 14.9 million euro.
The financing portfolio of the real sector shrank to 15 billion euro by end-January. The stock of the loan and leasing portfolio decreased by 0.7% within a month due to amortization, reaching the level of August 2007.
Interest margins on long-term loans fell slightly in January. The average interest margin on housing loans dropped below 2% for the first time in two years, reflecting favourable credit conditions to creditworthy customers. The more volatile interest margin on long-term corporate loans fell to 2.8%. The interest rate on long-term corporate loans was 4% in January, and that on housing loans constituted 3.2%.
Loan quality improved for the fifth month in a row. The share of loans overdue by more than 60 days decreased by 21.6 million euro in a month, so the share of such loans in the loan portfolio declined to 6.4% by the end of the month.
As expected, annual deposit growth slowed in January to 5.6%. In addition to seasonal factors, deposit growth was also affected by the adoption of the euro, since the real sector’s deposits decreased in January after active depositing in the last months of 2010. The incentive of long-term depositing is subdued by low interest rates, so the share of time deposits has dropped below 42% – the lowest level in the past couple of years. At end-January, Estonia’s companies and households had a total of 7.45 billion euro in bank accounts.
Source: Viljar Vald, specialist, Financial Sector Policy Division of Eesti Pank
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