Banks worried about low activity and falling small business loan volume

High-rises in Tallinn.
High-rises in Tallinn. Source: Siim Lõvi /ERR

The housing loans portfolio continued to grow in recent volume in April, gaining €194 million, while the preparedness of companies to invest with the help of loans is dwindling, the Estonian Banking Association said.

The Estonian Banking Association said that companies' loan portfolio fell short of €300 million for the fourth consecutive month.

The private loans portfolio exceeded €10.5 billion by late March. Banks are seeing much lower-than-usual corporate loan gains this spring, while the portfolio still grew a little and is nearing €8.5 billion.

The volume of loans with payments over 60 days late grew for the second month in a row to reach €23.4 million. The volume of problematic private loans also started growing and now amounts to €18 million. The relevant volumes were €28 million and €41 million a year ago.

Even though Estonian households and companies are managing and the next heating season is still some way away, rapid and broad-based price advance will soon start to affect subsistence, with preparations in order, Allan Parik, CEO of SEB bank and chairman of the board of the Estonian Banking Association, said.

"We are made cautious by companies' lower-than-usual activity and slightly growing arrears. Unfortunately, uncertainty is still growing and we will have to buckle in – stock market fluctuations and rapid inflation are likely to continue in the coming months," Parik suggested.

The executive said that problems are bound to pile up in some industrial sectors and construction that require production inputs that used to come from Russia or Ukraine. "Highly unstable energy prices and uncertainty heading into the new heating season are only adding to the confusion."

The association remarked that banks are willing to deploy various solutions to help companies in cooperation with the public sector.

"The Estonian Banking Association has sent a number of proposals to the Ministry of Economic Affairs and Communications on how to support Estonian businesses that in turn helps maintain jobs," Parik said, adding that he hopes the association and ministry can craft solutions before they are needed.

Commercial banks continue to be bothered by various phone and online fraud cases. Monthly fraud damages still stretch into hundreds of thousands of euros, with no signs of improvement on the horizon, the association said.


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Editor: Marcus Turovski

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