Lower interest income reduced bank profits

In March, the annual growth of the loan and lease portfolio in the domestic real sector rose to 2.8%. The corporate loan portfolio grew faster and at the end of March the volume of loans and leases to Estonian firms was 7.1 % larger than at the same point in 2012. During the month the loan and lease portfolio of Estonian companies and households grew by 66 million euros to 14.8 billion euros.

Companies took out 16% more new loans and leases in March than in the same period last year. Almost half, or a total of 96 million euros, of the long-term loans that have been issued have been to the real estate, construction and manufacturing sectors to finance large individual transactions.

Activity in the housing loan market continued at a similar rate to that of the previous months. In March, 22% more housing loans were taken out than a year earlier. Despite this, the annual growth rate of the housing loan portfolio still did not turn positive.

Loan interest rates in March were at a similar level to those of the start of the year. The average interest rate for housing loans granted in March was 2.6%, and the average rate for long-term corporate loans was 3%.

The improvement in the quality of the loan portfolio continued as expected. The volume of loans overdue by more than 60 days fell in March by 25 million euros, and their share in the portfolio fell to 3.1%. The volume of problem loans fell for both firms and households.

The deposits of Estonian companies and households grew at an annual rate of 8% in March. The volume of deposits of the domestic real sector increased on the back of corporate resources to 8.6 billion euros, with 31 million euros added to deposits in March.

Banks earned around 81 million euros in net profit in the first quarter of 2013. The net profit of the banks was 22% lower than in the first quarter of 2012. The main reason for the fall in profits was the drop of 16% in net interest income caused by the low level of base interest rates. In addition, the impairment reserves set up earlier to cover loan losses were reduced by less than a year ago. Net profitability in relation to assets fell from 2.2% a year ago to 1.7%

Source: Bank of Estonia

Author: Kadri Salumaa, Financial Sector Policy Division of Eesti Pank

Tallink buys M/S Isabella from Viking Line

Hansalink Limited, subsidiary of the listed Estonian shipper AS Tallink Grupp, on Monday completed the transaction of purchase of the cruise ferry Isabella from the Finnish shipper Viking Line ABP.

The newer vessel with more passenger and car capacity will replace M/S Silja Festival on the Riga-Stockholm route to meet increased demand on that route. The ship will start service out of Riga under a new name, Isabelle, in the second week of May, Tallink told the stock exchange. According to information released earlier, Tallink Grupp invested approximately 30 million euros in the purchase of the vessel.

The Isabella operated the Turku-Stockholm route until the Viking Grace replaced it in January 2013. Since then, the Isabella replaced M/S Amorella for a few weeks when Amorella was in dock, while lately the Isabella has been in Turku waiting to be docked.

The Isabella was bought by the Tallink Grupp subsidiary Hansalink Limited, which previously was the owner of the Tallink AutoExpress 2. After the sale of AutoExpress 2 the Cypriot- registered company has had no economic activity. The AutoExpress 2 now plies the route to the Caribbean island of Margarita, Venezuela.

Source: Estonian Review