Last year, Estonian banks earned €960 million in profit and this year has also started well, Monday's "Aktuaalne kaamera" reported.

The first quarter profit totaled €444 million and half of it was earned from foreign branches, which is why the Estonian profit is €200 million – approximately the same as in 2023.

A decline in the sector's total profit is expected year-on-year.

Jaak Tõrs, head of the Bank of Estonia's Financial Stability Department, said: "Last year, when interest rates started to rise, the rise in the interest rate was faster on interest income and slower on interest expenditure. The main reason for this was that a large number of deposits were in the form of demand deposits and the share of time deposits was low. Over time, the share of time deposits has risen, and with it banks' interest costs. And another reason why banks' revenues are likely to fall is if interest rates start to fall."

Head of Swedbank Estonia Olavi Lepp said: "When interest rates go down, the business model of banks in Estonia generally reduces their profitability because the part that is earned on loans generally falls faster than the cost of deposits. In this sense, yes, the profitability of banks will start to decline."

Some Riigikogu members have called for a bank tax, similar to those in Lithuania and Latvia. Swedbank does not support this.

"Talk of a bank levy by sector is not very appropriate, because it raises the question of which sector is next. I believe that equal treatment of capital is important," said Lepp.

Minister of Finance Mart Võrklaev (Reform) is also not in a hurry to create a new tax. He says large bank profits are positive.

"The high profits of banks are positive for the state because, as we know, banks in Estonia have an advance payment tax. It's like a classic income tax that other companies don't have, 14 percent. Next year it will rise to 18 percent and all the profits that the banks make, that's where the state will get the tax revenue from on a quarterly basis. So if the banks have big profits, we will get tax revenue from that," Võrklaev told AK.

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