OREANDA-NEWS. March 11, 2014. The annual growth of the loan and lease portfolio in the Estonian non-financial sector slowed in January to 0.7%. The total volume of loans and leases to companies and households shrank over the month by 8 million euros to 14.8 billion euros.

Demand for credit was held down in January by the low level of investment activity among Estonian companies. Companies took 660 million euros in loans and leases during the month, which was 10% less than in January 2013.

The January turnover of long-term loans was half the level of the previous year at 111 million euros but the turnover of short-term loans remained close to the monthly average for the last quarter of 2013. Loan turnover was higher than usual in the infrastructure sector in January.

In contrast, household borrowing in the housing loan market is growing as before. Households signed around 1300 new loan contracts in January and banks issued housing loans worth 45 million euros to them. This was 23% more than a year earlier, though it was one fifth less than the monthly average for last year. Annual growth in the housing loan portfolio reached 1% in January.

Interest rates for loans did not change much in January. Despite the small rise in the 6-month EURIBOR that serves as the basis for most loan contracts, the average interest rate on long-term corporate loans fell to 2.9% while the average interest rate on new housing loans was 2.6%.

The steady improvement in the quality of the loan portfolio of the banks halted. The stock of loans overdue for more than 60 days increased in January by around 1 million euros as the quality of the housing loan portfolio declined. Overdue loans continued to make up 1.9% of the total loan portfolio.

Annual growth in deposits accelerated in January from 5% to 8%. Deposits by households and companies grew by 76 million euros in total to 9.2 billion euros. Corporate deposits supported growth in time deposits and savings deposits.