Additional revenue generated by rising interest rates boosted banks' profits last year. Swedbank saw its revenues grow by 19 percent and SEB's by 17 percent.
In 2022, while banks' profits rose, there were also slight losses in the loan market, Tuesday's "Aktuaalne kaamera" reported.
Olavi Lepp, Swedbank board chairman, said: "The profit margin has come down somewhat over the whole of last year when we talk about housing loans. For business loans, we look at each case individually. At the same time, we have to be prepared for the fact that interest rates that rose quickly may one day come down quickly, so we have to keep looking at our business model all the time to see how it is going."
SEB reported similar findings.
"Our home loan margin is around 2 percent on average, and it has come down by about 20 basis points in the last year," said Allan Parik, SEB board chairman.
"Margins are set by market competition, and if this pressure continues, margins could also see a further decline. But by how much, and when, is difficult to say today."
Banks mostly finance their loans from deposits and a part of revenue from the rising Euribor rate is channeled into growing deposit rates.
"The share of fixed-term deposits is likely to start to rise, we are likely to see more competition there than in loans and margins, banks are likely to focus more on the funding side in terms of competition," said Jaak Tõrs, head of Bank of Estonia's financial stability department.
SEB's Parik said the money can return to the customer.
"Looking at Bank of Estonia statistics, compared to 2021, when an average 0.2 percent was paid on a 6-12-month deposit, last year it was already 1.8 percent. So the rise in money market interest rates is partly coming back to customers," he said.
Editor: Barbara Oja, Helen Wright