OREANDA-NEWS. August 27, 2009. Activity and demand in the credit market are low, which is in line with Estonia's current economic development characterised by modest investment demand and private consumption. In July, the corporate and household loan and leasing stock declined by 1.8 billion kroons, i.e., 0.7%. The loan and leasing stock stood at 259 billion kroons at the end of July, being 3.5% down on a year earlier. The volume of the loan and leasing portfolio has dropped to the level recorded at the end of the first quarter of 2008, reported the press-centre of Eesti Pank.

Across sectors, the portfolio volume decreased the most for real estate and trading companies. However, the volume of consumer credit to households is declining the most rapidly. For instance, compared to the start of 2009, the stock of household car leasing is down by 516 million kroons, i.e., 7%.

The volume of Estonia's household and corporate savings went up by 94 million kroons in July, amounting to 106 billion kroons, which is fairly in the same magnitude as a year ago. The 152-million-kroon increase in household savings offset the 58-million-kroon decrease in corporate savings. The most preferred saving type by households was time deposits, which held some 62% of the total savings.

Overdue loans continued to grow at a rate comparable to earlier months. The share of loans overdue by more than 60 days in the loan portfolio increased from 5.8% in June to 6.2% in July. Growth in the volume of loans with shorter defaults as well as the current economic outlooks suggest that the quality of loans will not improve in the next months.

The loan quality is above the average in the housing loans portfolio, where the share of loans overdue by more than 60 days amounted to 4.1% at the end of July. Problems with paying back loans keep intensifying in the construction sector, where the share of problem loans makes up 20.2% of the stock of loans issued to the sector.

Nevertheless, the capitalisation of the banking sector continues to be high. Additional loan write-downs by banks caused the aggregate capital adequacy ratio to decline by 0.6 pp in July to 21.2%, which still exceeds the compulsory 10% by a sufficient margin.

Though Euribor decreased by 0.2 pp in July, the interest rates on both housing and corporate loans remained unchanged compared to June. In July, the average interest rates on housing loans and long-term corporate loans were 3.8% and 4.3%, respectively.

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/.