SEB Estonia CEO Allan Parik said his bank's strong results were driven by higher fee income and business volumes, which offset declining interest rates.

Home loan approvals rose by a third year-over-year to Q1 2025, while SEB's loan portfolio for individuals grew by over 6 percent, and for companies by 8 percent.
SEB's profit was mainly affected by lower income tax payments, as more was paid last year before the tax increase.

"The decline in interest rates has significantly affected banks' ability to generate revenue. But in Q1 2025, the comparison base was lower, with less corporate tax paid, which made profits appear higher. Without that, our profit would have fallen," Parik said.

Swedbank's profits fell by nearly €30 million year-over-year to Q1 2025. Swedbank Eesti CEO Olavi Lepp cited one-off costs and lower loan margins as key factors.

"Falling interest rates mean borrowers pay less, savers get less, and banks earn less. This is an adjustment to the new environment. All banks are looking for internal efficiency to cope with lower revenues," Lepp said.

Both SEB and Swedbank's revenue bases dropped by nearly 20 percent. Peter Priisalm, head of investments at Avaron Asset Management, noted that alongside falling interest rates, smaller local banks had an advantage due to stronger growth.

"In the case of Swedbank, loan growth was zero, SEB's was around 7 percent, while banks like BigBank and LHV grew by up to 30 percent. Larger loan volumes helped them mitigate revenue declines despite lower margins," Priisalm said.

Swedbank spokesperson Katri Link rejected Priisalm's claim of zero loan growth, stating: "Swedbank's loan volume grew by 6 percent, and credit quality remains strong."

Priisalm also noted intensified competition among Estonian banks, with stronger performances in Eastern Europe, especially in Poland, where loan interest rates are higher and have not dropped as Euribor has.

"This means banks in some markets perform much better than those in Estonia," Priisalm said.

The Bank of Estonia (Eesti Pank) reported a combined total revenue of €368 million for all banks in Q1 2025, down from €444 million in Q1 2024.

Banks' revenues depend on interest rates, and the decline in rates is the main factor behind the profit drop. A year ago, the six-month Euribor stood at 3.8 percent, compared with 2.1 percent now.

Despite a slight dip, bank balance sheets and deposits grew year-over-year, with strong increases in housing and business loans. Term deposits held by residents rose 5 percent, while nonresident deposits made up 15% of the total. However, overdue loans and non-performing debt continue to rise, while interest rates on loans and deposits keep declining.

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