Entrepreneur and Hansapank founder Indrek Neivelt, believes that, in the light of soaring profits, the Estonian state could do more to regulate banks and redistribute their revenues.
"In my opinion, a move like this would be the right thing to do from a fairness point of view," said Neivelt on ERR's Russian-language show "Direct from the Newsroom," when asked to comment on reports that the Lithuanian government is planning to take a share of its banks' profits into the state budget.
Last year, commercial banks operating in Estonia earned total profits of over €500 million, or more than one percent of the country's gross domestic product (GDP), largely as a result of the rise in loan costs. At the same time, there has also been a sharp increase in public expenditure due to the current crisis.
Neivelt said, that Nordic banks are taking the profits generated by their Estonian banks out of the country, as they do not need the additional capital.
While the average profit margin for banks in Europe is less than one percent, in Estonia the figure is around two percent. At a time when the cost of borrowing is rising due to the increase in the Euribor, deposit interest rates are still low. According to Neivelt, if the Euribor rises, banks should reduce their lending margins.
"We should make it a requirement for banks to do this," he said. However, he also admitted, that it remains unlikely that the Estonian state would be able to bring about these changes, as banks' rights are well protected.
Neivelt said it was unlikely that any new banks would start operating in Estonia. However, he added, that competition in the banking sector is weak meaning deposit interest rates remain low.
"In my opinion, as the market leader, Swedbank is too greedy. There is a very high threshold for gaining entry into the banking sector and the competition is weak," he said.
Banks operating in Estonia recorded a combined profit of €566 million last year.
Swedbank's profit increased by 25 percent on year and SEB's was up by 17 percent. LHV's revenues grew by 26 percent, while Coop Pank's saw a 51 percent rise. Luminor's profits were 67 percent higher in 2022, than for the previous year for the Baltics as a whole.
Neivelt is one of the founders of Hansapank, once Estonia's biggest bank, which was acquired by Swedbank in 2005.
Editor: Michael Cole