Banks active in Estonia earned an aggregate net profit of €89 million in the first quarter of this year, with the profitability of the banking sector remaining unchanged compared to the first quarter of 2016.
The net profit of €89 million euros is equivalent to 1.5 percent of the sector's total assets on an annualized basis. Increased interest income and a reduction in provisions contributed to profit, with interest income itself driven by growth in the loan portfolio and an increase in the interest margin on the portfolio. The fall in net service fee income and income tax expenses had a negative impact on profit, the Bank of Estonia said.
In the first quarter of 2017, the portfolio of loans and leases to Estonian companies and households continued to grow rapidly. The total volume of loans and leases was 6.5 percent bigger in March than in year before. During the first quarter, the portfolio increased by €220 million to €17.3 billion.
The total volume of loans and leases increased quickly, although somewhat slower than in the final quarter of 2016. The portfolio of loans and leases to companies was seven percent bigger in March than the year before. Companies received €584 million in new long-term loans during the quarter, which is about 10 percent less than during the same quarter of last year.
Growth in the housing loan portfolio accelerated. The total volume of housing loans was 5.9 percent bigger in March than in March 2016 and there was more activity in the housing loan market in the first quarter than during the same three-month period in 2016. Both the number of loans and the average loan size increased. The portfolio of car leases to households was bigger by 14 percent and the volume of overdraft credit and credit card loans was bigger by 3 percent.
The average interest rates on new loans moved higher. The average interest rate on housing loans issued during the month climbed in both February and March, with the average interest rate in March being 2.3 percent. The average interest rate on loans to companies also rose in March. However, the margins on loans to companies are quite variable depending on the timing of the particular project.
The quality of the loan portfolio of the banking sector remained good at the beginning of 2017. The stock of loans overdue for more than 60 days shrank primarily due to a decline in the long-term overdue loans of industrial companies. At the end of March, loans overdue for more than 60 days accounted for one percent of the loan portfolio of the banking sector.
Deposits of companies and households once again grew faster than the loan and lease portfolio. Total deposits increased by 11 percent year over year to €12 billion. Corporate deposits grew somewhat faster and were bigger by 14 percent in March than during the same month last year, while the deposits of households were bigger by 8.1 percent.
Editor: Aili Vahtla