Banks, Estonia, Financial Services, Good for Business

Banks' net profit in 2018 totaled 356 mln euros and the rise resulted from dividend income received from subsidiaries, without which the profit would have decreased. While net interest income grew compared with 2017 and income was earned on loans previously provisioned, income tax and personnel costs increased even more, the Bank of Estonia said.

"Hence net profit after the deduction of dividend income measured as a ratio to total assets grew from 1.2% in 2017 to 1.0% in 2018. Pretax profit leaving aside dividend income remained on the same level as in 2017, but declined a bit when measured as a ratio to total assets -- from 1.4% to 1.3%," Mari Tamm, economist at the central bank, said in a press release. 

In December the volume of loans of individuals and companies continued to grow at a rapid speed, although new loans were added at a slower rate than earlier. Deposits at banks continued to grow faster than loans.

The volume of loans and leases of individuals also kept growing fast in December just like in previous months.

The stock of housing loans grew by 7% on year, but 12% fewer loan contracts were concluded in December than the year before. The average size of a loan continued to grow.

The number of purchase and sales transactions on the housing market declined in the second half of the year. While prices kept growing, they grew at a lower speed than earlier. 

The portfolio of car leases expanded by approximately 20% year over year. The number of new leases in December was smaller than earlier, however. 

The stock of the corporate loan and leasing portfolio increased by 5.8% over the year. Corporate borrowing has been supported by a certain increase in investment activity and also a bigger number of loans being refinanced, Tamm said. 

New loans drawn by companies in December were bigger by 9% than in the same month a year ago. New long-term borrowing meanwhile was broadly unchanged. In December, real estate companies stood out for more active borrowing than other sectors, the economist added.

The average interest rate on new housing loans declined a bit following a rise registered in the first half of the year. The average interest rate of new housing loans in December was 2.4%, Tamm said.

The average interest rate on new long-term loans drawn by businesses in December was 1.95%.

The volume of deposits of businesses and individuals at banks continued to increase at a rapid rate in December, hitting 14.1 bn euros at the end of the month. Deposits of companies grew by 8% and deposits of individuals by 10% over the year.

"Thus deposits continued to grow faster than loans and the financial buffers of both companies and individuals increased," the economist added.