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Siret Vildo, Financial Sector Policy Division of Eesti Pank, Specialist in Charge

The corporate and household loan stock decreased in February by 1.9 billion kroons, i.e., 0.8%, amounting to 250 billion kroons at the end of the month. The portfolio shrank by 6.2% year-on-year. Leaving aside the extraordinary increase in financing portfolios in January, the decline followed the previous months' trend of contracting financing portfolios.

The development of loan stocks in the first months of this year is in line with the low investment demand. The stock of corporate loans decreased by 1.3 billion kroons, i.e., by 1% in February. The stock of loans to the trading sector shrank the most - by 760 million month-on-month.

Households' credit demand is largely affected by low confidence resulting from the situation in the labour market. Compared to housing loans, consumer credit to households has been much more sensitive to the low level of confidence. Since the maturities of housing loans are long, their stock has been rather stable over the past year. The stock of consumer credit, including the car lease portfolio, decreased by some 2% in February, reducing the stock of the entire portfolio to 25.6 billion kroons. Consumer credit is the credit segment that has underwent the steepest fall, contracting by 11.6% in the course of the past year.

The volume of household deposits continued to grow in February, whereas corporate deposits declined somewhat. However, the aggregate deposit volume increased by 255 million kroons, i.e., 0.2%, and the total volume of deposits was 110.6 billion kroons at the end of February. Since interest rates on time deposits have declined quite a lot, the volume of such deposits is shrinking.

The interest margin on housing loans remained at 2.4% level, which is comparable to earlier months. The average interest margin on corporate loans declined by 1 pp, to 2.5% in February. This was caused by one-off factors. Since Euribor dropped to the level of 0.96%, the average interest rates on corporate and housing loans issued during February were the lowest in recent years, amounting to 3.5% and 3.4%, respectively.

The share of the loans overdue by more than 60 days increased by 0.2 pp on January and amounted to 6.6% of the loan portfolio in February. The volume of loans that are in default for a shorter time is relatively volatile in the portfolio. At the same time, long-term arrears of payments are unlikely to recover in the short run. Thus, the share of overdue loans is declining slowly.

Figure 1. Monthly growth of household and corporate loans and leases in Estonia

Figure 2. Share of loans overdue by more than 60 days in the portfolio

Figure 3. The weighted average interest rate on housing loans and long-term corporate loans issued within a month and 6-month EURIBOR

The financial sector statistics and publication calendar are available on the web site of Eesti Pank at www.bankofestonia.info/pub/en/dokumendid/statistika/pangandusstatistika/tabelid/.