Corporate and household borrowing has witnessed stable growth in 2011. The turnover of loans and leases granted to companies posted the highest growth rate in May at 630 million euros, increasing by over a third from previous months as well as from a year ago. The previous months saw growth in the level of short-term loans only, while in May also the volume of long-term loans issued to the real estate and construction sectors contributed to growth. The coming months will reveal whether this was a one-off development or a general change in borrowing activity.
Compared to companies, households express lower confidence and willingness to borrow. As in the previous months, the turnover of car leases continued to grow and reached 84% in May in annual terms. The turnover of housing loans, on the other hand, increased at a modest rate of 10% in May.
The loan and lease portfolio of banks increased for the first time over the past year and a half owing to increased borrowing, and totalled 14.8 billion euros at the end of May. Both the corporate and housing loan segments recorded growth, while the portfolio of consumer credit shrank further. The loan and lease portfolio contracted in the previous months as well, and so in May it was 6% smaller than it was a year earlier.
Interest rates are still being shaped by diverging determinants: the rise in the Euribor on the one hand and the drop in interest margins on the other. The average interest rate on housing loans remained unchanged from previous months at 3.4% in May. However, the average interest rate on corporate loans declined to 4.0%, partly because of the increased share of long-term loans with lower interest rates, compared to previous months.
The quality of loans has not changed much. The percentage of loans overdue for more than 60 days in the loan portfolio continued to shrink, standing at 6.3% at the end of May. The percentage of loans overdue has decreased, both in the segments of corporate and household loans.
Along with the pick-up in borrowing, the annual growth in the volume of deposits is slowing, standing at 4% in May. The slowdown in growth mainly concerns corporate deposits, which contracted by 3% year-on-year. The volume of household deposits keeps growing at rates close to those in the previous months, with annual growth totalling 10% in May.
Figure 1. Corporate loans and leases issued in a month
Figure 2. The weighted average interest rate on housing loans and long-term corporate loans issued in a month and 6-month Euribor
Figure 3. The volume and annual growth of corporate and household deposits
The financial sector statistics and publication calendar are available on the web site of Eesti Pank at www.bankofestonia.info/pub/en/dokumendid/statistika/pangandusstatistika/tabelid_eur/.
Source: Bank of Estonia
Author: Jaak Tõrs, Head of the Financial Stability Department