The share of bad loans fell to 1.9 pct

Annual growth in new housing loans slowed to 10%. Housing loans worth 62 million euros were taken out in November, which was a little less than in September and October. More was taken out in loans during the month than was repaid from earlier loans, meaning that the housing loan portfolio grew by 10 million euros. Annual growth in the loan portfolio was the same as in October at 0.5%.

Large loans granted to the real estate sector boosted the turnover of corporate loans. Almost half of the 206 million euros in new long-term loans and leases that were granted in November went to real estate and construction companies. Borrowing was somewhat more modest in most other sectors of the economy, as it was in October.

The annual growth in the loan and lease portfolio of the banks remained at a modest 1.3%. During the month the total volume of loans and leases to Estonian companies and households grew by 35 million euros to 14.9 billion euros. Although borrowing has been somewhat more active this year than last, this has not led to any rapid growth in the volume of loans. Growth in the volume of loans in November was restrained not only by the natural amortisation of the portfolio and write-offs of problem loans, but also by the reclassification of non-financial companies as financial companies.

Loan interest rates have been kept down by EURIBOR. The average interest rate for housing loans granted in November was 2.7%, and that for long-term corporate loans was 3.2%. Interest rates on loans have been at around the same level for more than a year now.

The share of loans overdue by more than 60 days in the loan portfolio fell to 1.9%. At the end of November the loan portfolios of the banks contained 256 million euros of overdue loans, which is close to the pre-crisis level of early summer 2008. Most of the reduction in problem loans has come in the corporate portfolio, where the volume of loans overdue by more than 60 days in November was half that of a year earlier.

Deposits of the Estonian non-financial sector passed the 9 billion euro mark in November. During the month the deposits of Estonian companies and households grew by 138 million euros and the annual growth rate accelerated from 5% to 6%. This notable growth in deposits was driven by companies while the deposits of households remained at the same level in November as in the previous month.

Source: Bank of Estonia

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

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