OREANDA-NEWS. June 28, 2012. Corporate borrowing grew also in May. In the first five months of 2012, the banks operating in Estonia issued 28% more long-term loans to Estonian companies than they did a year before. Long-term corporate loans and leases totalled 211 million euros in May, with about 30 per cent of that issued to the real estate sector. Year-on-year, average credit growth picked up also in trade and agriculture, reported the press-centre of Eesti Pank.

The housing market is recovering. Low interest rates and income growth have improved household confidence, which has boosted demand for housing loans. Over 1,500 new housing loan contracts were concluded in May, 6 per cent more than a year ago. The stock of new housing loans was 31 per cent bigger compared to the year-ago figure.

Car lease transactions recorded the highest level since the past four years. Even though growth in car leases picked up primarily in 2011, the nearly 30 per cent annual growth for the first five months of 2012 can be considered remarkable too.

Increased borrowing boosted banks' loan portfolios. The volume of loans and leases granted to Estonian companies and households grew by 74 million euros, or 0.5 per cent, in May. Banks' financing portfolio totalled 14.5 billion euros at end-month, having declined by 2.3 per cent from a year before.

The average interest rate on housing loans dropped below 3 per cent. The 6-month Euribor, which serves as the basis for the majority of Estonian housing loans, fell to 0.97 per cent in May. Given that the average interest margin on housing loans did not change, the fall in the Euribor also lowered the average loan interest rate. The average interest rates on housing loans and long-term corporate issued in May loans stood at 2.9 and 3.4 per cent respectively.

The quality of loans improved further. The volume of loans overdue for more than 60 days decreased by around 19 million euros in May. The share of long-term overdue loans dropped from 4.6 to 4.4 per cent.

Annual deposit growth remained high at 9.7 per cent. The volume of deposits shrank by 20 million euros from April as a result of a decline in corporate deposits. At the end of May, the total volume of household and corporate deposits was 8.2 billion euros.