OREANDA-NEWS. January 27, 2012. In December 2011, new corporate lending was the highest of the year, due to some single large-scale projects. Whereas the turnover of short-term loans and leasing remained at its usual level, that of long-term loans and leasing was about a third larger, amounting to more than 250 million euros. Owing to the pickup in lending, the corporate loan portfolio increased month-on-month, reaching 7.1 billion euros by the end of December. Meanwhile, the corporate loan and leasing portfolio decreased by 5.9%, year-on-year, reported the press-centre of Eesti Pank.

The household loan portfolio decreased by 2.6%, year-on-year, in December, whereas the stock of existing loans kept shrinking throughout 2011. Different from corporate credit turnover, household credit turnover has been on the decline since September, reflecting changes in the economic environment in the last quarter of 2011.

The euro-area sovereign debt crisis has increased loan interest margins on both corporate and household loans. Interest margins grew in both November and December, whereas the base rate, the 6-month EURIBOR, declined slightly. The interest margin on corporate loans rose to 2.7% and on housing loans to 1.8% in December.

The loan portfolio quality improved markedly in December, when the share of loans overdue by more than 60 days decreased by half a percentage point, to 4.8%, reaching the level of spring 2009. The loan portfolio quality improved across almost all sectors, mostly due to the write-off of uncollectible loans, but also owing to the rapid economic growth of 2011.

Corporate and household deposits increased to 7.9 billion euros in December. While in earlier months, deposit growth was driven by household savings, December saw a larger increase in corporate deposits. Year-on-year, total bank deposits have increased by 6.6%, household deposits by 10.6% and corporate deposits by 2.2%.

Banks' net interest income decreased by about 4 million euros in the fourth quarter, mostly due to the ongoing shrinkage in the loan portfolio. In 2011 as a whole, banks earned net interest income in the amount of 380 million euros, about 21% more than in 2010. Interest income was supported by an increase in the reference interest rates, which lasted until the fourth quarter.

Banks' net profit amounted to 97 million euros in the last quarter of 2011, which is 3.3 times more than in the fourth quarter of 2010. As a total of 2011, banks earned 633 million euros of net profit of which 51% was extraordinary financial income arising from a commercial bank's structural changes. Reduction in the loan write-down reserve has supported profitability over the past five quarters. This has taken place along with the improving loan portfolio quality accompanying economic growth. Loan write-downs decreased by 5.5 million euros in the fourth quarter and by 18.8 million euros during the year.