The Estonian credit market

The deteriorating external environment has not yet significantly affected the Estonian credit market. The volume of long-term loans and leases issued to companies in October was only a few per cent smaller than in September, totalling 145 million euros. Year-on-year, new lending has increased 36 per cent. However, the slowdown in growth in Europe may soon start reflecting in the revenue and investment of Estonian companies, and thus also lending growth may moderate in the future.

The volume of new housing loans grew by a third in October from a year ago. The number of loan contracts, on the other hand, increased only 6 per cent, which means that the average loan amount has risen. This is in line with this year’s developments in the real estate market, where the transaction activity is low with focus being on relatively more expensive residential premises.

The sale of car leasing, which almost doubled in the spring of 2011, has remained stable in autumn. Even though annual growth in car leasing has slowed considerably in the past few months, it was still strong at 52 per cent in October due to last year’s low comparison base.

The loan portfolio of banks has been contracting at a slower rate. The volume of new lending was smaller than the repayments of loans issued earlier, and so the loan portfolio kept shrinking in October. At the end of the month, the stock of loans and leases granted to Estonian companies and households was 14.5 billion euros; that is 4.9 per cent lower than it was a year ago.

The average interest rate on housing loans issued in October did not change from 3.4 per cent. The average interest rate on long-term corporate loans, which tends to fluctuate from month to month, dropped to this year’s average level of 4.3 per cent.

The share of overdue loans in the loan portfolio shrank to 5.7 per cent. The level of loans overdue for more than 60 days decreased by 31 million euros in October. Two thirds of that decrease arose from the improving loan portfolio of companies.

Annual growth in household deposits picked up to 14 per cent. The total deposits of Estonian companies and households totalled 7.8 billion euros at the end of October, up 7.1 per cent from a year ago. Month-on-month, the total of deposits grew by 74 million euros, with both companies and households relatively equally contributing to growth.

Author: Jana Kask, Head of the Financial Sector Policy Division of Eesti Pank

Read more from Bank of Estonia

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