Neivelt: There has been no competition in banking for 25 years

Bank headquarters in Tallinn.
Bank headquarters in Tallinn. Source: Siim Lõvi /ERR

Major banks operating in Estonia made profits in the first half of this year, which were almost as high as those for the whole of 2022. According to entrepreneur Indrek Neivelt, the banking sector should be treated as part of the infrastructure and there is no competition in the sector.

In the view of entrepreneur Indrek Neivelt, competition in the Estonian banking market is not something to be expected, and in most countries, the banking market is an oligopolistic one. "For me, the question is, why the state doesn't regulate it?," he said.

In Neivelt's opinion the competitive situation in the banking market is not much different to that of water or heating companies, which are subject to restrictions from the Competition Authority. "No competition has emerged in 25 years, and it probably won't. We shouldn't count on it."

According to Neivelt, Estonia should treat the banking sector in the same way as Lithuania, which additionally taxes bank's profits and considers banking as part of the infrastructure. "Then the rest of the economy can develop," he said.

Neivelt added, that Lithuania has applied the bank tax very sensibly, and taxing bank profits is more beneficial than having high taxation for other sectors.

"It's embarrassing for us to see VAT added to hotels and media companies and the state gets an additional income of €20 million per year. Under the Lithuanian system, banks would have received six to seven times more. And the banks wouldn't have even realized it," he said.

Over the first six months of the year, Swedbank made a net profit of €214 million, while its total profit in 2022 was €224 million.

LHV's profit for the first half of the year was €68.9 million, compared to €61.4 million by the same time last year. SEB's made €113.3 million net profit in the first half of 2023, compared to €116 million throughout the whole of 2022.


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Editor: Michael Cole

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