Banks increased loan portfolios and profits in first quarter ({{contentCtrl.commentsTotal}})

Luminor headquarters in Tallinn.
Luminor headquarters in Tallinn. Source: (Rene Suurkaev/ERR)

The annual growth of Estonian banks' loans was almost 1 percent higher in the first quarter of this year compared to the same period last year. Excluding Luminor's Latvian and Lithuanian branches, the loan balance grew by as much as 5.7 percent.

Compared to the last quarter of the previous year, banks' loans increased by 0.5 percent. Loan growth was driven by households, whose interest in housing loans remained high, according to a review of the banking sector published by the Financial Supervision Authority. 

Loans to individuals grew by 3.6 percent year-on-year. At the same time, the loan stock of private companies decreased.

The loan balance of the Estonian banking sector was €27.76 billion at the end of the first quarter of this year.

The rapid growth of deposits continued in the first quarter. Deposits increased by 12 percent compared to the same period last year and by one percent compared to the last quarter of the previous year.

At the end of the first quarter, the balance of deposits in the banking sector was €28.67 billion.

The banks' total profit in the first quarter was €109 million, which is €35 million more than in the previous quarter and €24 million more than a year earlier. The banking sector earned a higher income mainly due to dividends and lower interest and service fee expenses.

According to the Financial Supervision Authority, the profitability of banks - 9.2 percent - remained good and exceeded the European Union's average.

The COVID-19 crisis did not significantly affect the Estonian banking sector in the first quarter, which lasts from January to March, and banks' liquidity remained good, the Financial Supervision Authority said.

In terms of assets, Luminor has the largest market share of Estonian banks at 35.1 percent, but Luminor's Latvian and Lithuanian branches are also included. Swedbank's market share was 30 percent, SEB Bank's 18.7 percent and LHV Bank's 8.6 percent.

The Financial Supervision Authority noted that compared to the EU average, Estonian banks have a larger share of housing loans (15 and 29 per cent, respectively) and a smaller share of trading assets and derivatives (18 and 0.4 per cent). This means that Estonian banks take more credit risk and other European Union banks take more financial market risk.

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Editor: Helen Wright

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