OREANDA-NEWS. September 24, 2010. Jana Kask, Head of the Financial Sector Policy Division of Eesti Pank.

The corporate and household loan and leasing stock stood at 241 billion kroons at end-August. This is 6.4% less than a year ago. The volume of new corporate loans was below 2 billion kroons in August, partly reflecting the seasonally modest borrowing activity of the corporate sector. More than a quarter of the new loans and leasing issued went to the industrial sector, where borrowing remained relatively active throughout summer.

The turnover of housing loans (531 million kroons) remained close to the level recorded in July. Starting from May, each month has seen an increase of some 5% in new housing loans. This means the housing loan market is exiting its low. However, shrinkage in the loan stock would stop, if loan turnover was some 5% higher on the current level.

Although loan demand has been slightly increasing over the past year, especially as regards export-oriented fields of activity, the economy as a whole has included less loan resources than forecasted in spring. Growing investment needs of companies and improving risk assessments and the confidence of borrowers are laying good preconditions for a pickup in lending activity in the near term.

The average monthly margin on housing loans remained unchanged in August and the average interest rate on housing loans grew to 3.4% due to a small EURIBOR increase. The average interest rate on corporate credit was 4.5% in August.

Improvement in loan quality will take time The total volume of overdue loans shrank in August, showing that the number of new customers with loan repayment problems is declining. However, shorter-term defaults in the value of 370 million kroons just turned into loans with longer-term repayment delays, so the share of loans overdue by more than 60 days grew to make up 7.3% of the loan portfolio by end-August. Such loans appeared more in the transport, storage and communications and in the manufacturing sector, whereas the quality of housing loans improved a little.

The volume of corporate and household deposits did not change in August, remaining at 111.1 billion kroons recorded at the end of July. The annual deposit growth rate did not change much either in August, and was 4.8% at the end of the month. Household deposits decreased by 142 million kroons, but the decline was offset by the 178-million-kroon increase in corporate deposits.