Estonia’s banks dismiss market turmoil

TALLINN - The tensions in global financial markets and the growing uncertainties about the global economy did not considerably affect the lending activity of Estonian companies in August, Estonia’s central bank, Eesti Pank, said on Sept. 23, reports LETA. Viljar Vald, senior specialist of the Financial Sector Policy Division of Eesti Pank, said that month-on-month, lending contracted only by 2 million euros, given that lending volumes are typically lower in August.

New loans and leases issued to Estonian companies totaled 576 million euros, including 293 million euros of overdrafts. The volume of long-term loans, which are used to finance investments, increased in most of the sectors year-on-year, to 168 million euros in August. The only exception was manufacturing, where the volume of lending shrank 15 percent.
Consumer confidence has decreased, but household lending was nevertheless quite substantial in August. Housing loans granted to households totaled 44 million euros, just like in July, which is 25 percent more than a year ago. The volume of consumer loans shrank slightly from July, but was up 3.5 percent from the previous year.

The figure for new car leases by both households and companies rose rapidly in August. The new sales of car leases increased 85 percent year-on-year to around 23 million euros. The volume of car leases stood at the level of 2005.
As in the previous months, loan repayments exceeded the amount of new loans issued in August. The stock of the loan and lease portfolio contracted by 26 million euros, to 14.6 billion euros in August. This is about as much as in July and 5.7 percent less than a year ago.

The interest rates on new corporate loans declined somewhat in August, while the interest rates on housing loans did not change. The average interest rate on long-term corporate loans issued within a month dropped below 4 percent in August after a long time, while the interest rate on new housing loans remained unchanged from July at 3.5 percent.
The Euribor, which had been gradually rising for over a year, decreased by 0.1 percentage point in August owing to the lowering of growth expectations in Europe.
The interest margin on long-term corporate loans fell to 2.2 percent, while the interest margin on housing loans rose to 1.8 percent.

The quality of the loan portfolio did not change much in August. The volume of loans overdue for more than 60 days shrank by a mere 3 million euros in August and constituted 6.3 percent of the loan portfolio, just as in July. The volume of long-term corporate loans overdue contracted in August, but the amount of household loans overdue increased by 1.3 million euros.
Household savings continued to grow in August. Although in August households usually withdraw deposits, this August deposits increased by around 10 million euros, posting a 13 percent growth from the previous year. Corporate deposits, on the other hand, contracted by 8 million euros from July, but were nevertheless 2 percent higher year-on-year. The total of non-financial sector deposits was 7.6 billion euros.