OREANDA-NEWS. September 25, 2009. Siret Vildo, Financial Sector Policy Division of Eesti Pank, Specialist.

The share of loans overdue by more than 60 days in the loan portfolio increased less in August than in previous months. The respective indicator grew by 0.2 pp, reaching 6.5% of the entire portfolio. The quality of loans issued to the construction and transport sector and to the hotel and restaurant sector improved somewhat, whereas problems aggravated in the agricultural sector. Earlier developments continued in respect to loans issued to households - consumer credit constitutes the most of problems with the share of problem loans soaring to 9.5% of the portfolio. The quality of housing loans was better than the average of the total financing portfolio, i.e., 4.2% of the issued housing loans are overdue by more than 60 days.

Corporate and household loan behaviour has in recent months been influenced by low interest rates, which have considerably reduced monthly loan repayments. In August, both the interest margin and the key interest rate lowered. The latter is positive news to households and enterprises that have already taken a loan. The interest rates on issued loans have fallen to the level of 2005.

The volume of corporate and household savings grew by 163 million kroons in August, reaching 106.1 billion kroons. But annual deposit growth dropped from 0.8% in July to 0.4% in August. Corporate deposits increased in August, whereas the total volume of household deposits shrank. Corporate deposits declined mostly on account of decreasing demand deposits; time deposits increased both in volume and as a share of the total volume of deposits. In August, 62.4% of household deposits were time deposits, which continue to be a popular form of saving for households.

The corporate and household loan and leasing stock declined by 1.3 billion kroons, i.e., 0.5% in August. The loan and leasing stock stood at 258 billion kroons at the end of the month, being 4.7% down on a year earlier. The volume of loans issued to the trading sector has experienced the steepest fall - it is a quarter smaller relative to the same period a year earlier. The volume of loans issued to the energy sector has moved in the opposite direction, being 25% up on a year earlier. The volume of household consumption credit and car leasing has shrunk by some 9% over the past year. The annual growth of housing loans was for the first time negative in August: the volume of housing loans was 0.3% down year-on-year.

The capital adequacy ratio of banks grew by 0.6 pp in August, mainly because of decreasing risk-weighted assets, standing at 21.8%.Based on the size of capital buffers it can be said banks have enough funds to meet the credit demand of the non-financial sector in the next periods.