OREANDA-NEWS. May 27, 2009. The volume of the portfolio of loans and leasing issued to enterprises and households declined by 1.5 billion kroons, i.e., 0.6% in April with the year-on-year growth rate withdrawing to 0.7%. The development of the banking sector is in line with the current economic situation in Estonia. Thus, it was not surprising the annual growth of both corporate loans and leasing and household consumer credit was negative, i.e., the volume of financing portfolios has decreased year-on-year, reported the press-centre of Eesti Pank.

The volume of loans overdue by more than 60 days increased in April, making up 5.2% of the portfolio. In March the respective indicator was 4.5%. Considering the recent months’ changes in the major economic indicators, the April deterioration in the loan portfolio quality was a logical outcome. Nearly 75% of the loan portfolio quality deterioration in April derived from the corporate credit sector; households have so far been more successful in loan servicing. Thus, loans overdue by more than 60 days accounted for 6.4% of the credit issued to enterprises and 3.9% of the credit to households.

Households’ loan servicing ability is affected by declining key interest rates. The interest rate on new housing loans (3.84%) is considerably lower both month-on-month (4.16%) and year-on-year (5.5%). The interest rate on new loans to enterprises has somewhat increased, from 4.8% in March to 5% in April, reflecting changes in banks’ risk assessments as regards corporate credit.
Corporate and household deposit volume did not change considerably in April compared with March. The volume of corporate deposits has declined slightly both month-on-month and year-on-year. Household deposit volume remained the same compared to March, but has increased by 3.1 billion kroons year-on-year. Although the yield of financial markets has improved this year, time deposits are still the main means of investment – their share in the volume of household deposits grew to 61.5% in April.

The average capital adequacy of the banking sector stayed at the level of 22% in April. Banks have made remarkable provisions during this year in order to accumulate buffers for covering possible loan losses. Irrespective of the provisions and accompanying losses, the capitalisation of banks continues to be sufficient to cope with the forecasted loan losses.