The profits of commercial banks in Estonia have surpassed pre-crisis levels, mainly due to the growing volume of loans.
Banks’ lending portfolios are growing thanks to the increasing number of people who decide to undertake the long-planned purchase of residential property, as well as the growing volume of loans to commercial firms.
However, banks have enough funds on deposits to finance any type of loan, reported “The Current Chamber”.
“If last year there was a fear that credit losses might arise during the coronacrisis, then to date they have not been realized, and the profits of banks and leasing companies have remained relatively good.”, comments by Bank of Estonia economist Raido Kraavik.
The situation in Estonian credit institutions resembles climbing the stairs. Last summer, banking sector profits plummeted from €113 million to €66 million as a result of the crisis, but since then profits have been rising: $93 million in the last quarter after €100 million in the first quarter of the year.
However, profits in the second quarter exceeded last year’s level.
“Banks do well when they do well with customers, with the economy. It’s a very logical connection. During the coronary, when customers were anxious and waiting, banks were also quiet. And as customer demand grew, so did bank performance,” Coop Bank Chief Margus Rink explained.
“In the long run, the biggest risk for the bank is credit risk. The question is whether we are properly assessing the risks of the deals we are now making in a very competitive market, and whether the money will eventually come back to us,” he added.
Competition creates market entry for five relatively small banks along with two large Swedish banks. So far, it’s not very big, but people have started distributing to banks, doing calculations on one, and leasing and borrowing at another bank.
Nevertheless, there is still room in the Estonian banking sector to improve the terms and conditions of loans.