VILNIUS — Spurred by news of Estonia’s likely joining of the eurozone in 2011, interbank lending rates hit a 12-year low as they slipped down to 2.59 percent Tuesday.
That’s a massive drop from just nine months ago — on June 26, 2009, interbank loans went to a sky-high 29.8 percent interest rate because of speculation about the [private_supervisor]devaluation of the lat, the new lending policies should encourage lending and shows that the turnaround seen in the economies of Estonia and Lithuania is materializing into results.
Nordea Bank announced that it sees the difference between lending in krooni and euros diminishing. SEB told Baltic Reports that good liquidity and greater confidence from the international community is allowing the banks to lend at a lower rate.
“The first is good liquidity of the banks, it is very high and they have a lot of resources — they are not borrowing too much money. The next reason is lower country risk by the banks and we see the first signs of economic recovery and the situation is slightly improving,” SEB economist Vilija Tauraitė said. “Plus, the rumors of currency devaluation are gone. These pushed the rates up when they were here, but now the country risk is treated as lower now and this has a positive effect on interest rates.”
The interbank lending rates should give some confidence to consumers, many who have been suffering over the last year. Borrowing money in litai attracted higher interest rates and fees, but those who borrowed in euros lived in constant fear of a devaluation of the currency, which would have left their repayments much higher compared to income.
“For consumers, this is good news. People who borrowed in litai suffered over the last year. There was also a wave of people changing their loan agreements in currency. Now the situation is a lot better. The bulk of Lithuanian loan portfolio are in euros,” Tauraitė said.
It is not expected, however, that the bulk of consumers will immediately benefit from the new rates. While some interest rates are softening, the majority of the banks still apply a minimum 2 to 3 percent margin on the loans when lending out to customers.
Return to profitability
Last year was one to forget for the Baltic banks, most of them posting multi-million euro losses. It is expected that those banks that were quick to write off their bad loan portfolios will have kept the losses confined to 2009, but slower banks may still be in the red this year. [/private_supervisor] [private_subscription 1 month]devaluation of the lat, the new lending policies should encourage lending and shows that the turnaround seen in the economies of Estonia and Lithuania is materializing into results.
The Finnish branch of Nordea Bank announced that it sees the difference between lending in krooni and euros diminishing.
SEB Bank told Baltic Reports that good liquidity and greater confidence from the international community is allowing the banks to lend at a lower rate.
“The first is good liquidity of the banks, it is very high and they have a lot of resources — they are not borrowing too much money. The next reason is lower country risk by the banks and we see the first signs of economic recovery and the situation is slightly improving,” SEB Bank economist Vilija Tauraitė said. “Plus, the rumors of currency devaluation are gone. These pushed the rates up when they were here, but now the country risk is treated as lower now and this has a positive effect on interest rates.”
The interbank lending rates should give some confidence to consumers, many who have been suffering over the last year. Borrowing money in litai attracted higher interest rates and fees, but those who borrowed in euros lived in constant fear of a devaluation of the currency, which would have left their repayments much higher compared to income.
“For consumers, this is good news. People who borrowed in litai suffered over the last year. There was also a wave of people changing their loan agreements in currency. Now the situation is a lot better. The bulk of Lithuanian loan portfolio are in euros,” Tauraitė said.
It is not expected, however, that the bulk of consumers will immediately benefit from the new rates. While some interest rates are softening, the majority of the banks still apply a minimum 2 to 3 percent margin on the loans when lending out to customers.
Return to profitability
Last year was one to forget for the Baltic banks, most of them posting multi-million euro losses. It is expected that those banks that were quick to write off their bad loan portfolios will have kept the losses confined to 2009, but slower banks may still be in the red this year. [/private_subscription 1 month] [private_subscription 4 months]devaluation of the lat, the new lending policies should encourage lending and shows that the turnaround seen in the economies of Estonia and Lithuania is materializing into results.
The Finnish branch of Nordea Bank announced that it sees the difference between lending in krooni and euros diminishing.
SEB Bank told Baltic Reports that good liquidity and greater confidence from the international community is allowing the banks to lend at a lower rate.
“The first is good liquidity of the banks, it is very high and they have a lot of resources — they are not borrowing too much money. The next reason is lower country risk by the banks and we see the first signs of economic recovery and the situation is slightly improving,” SEB Bank economist Vilija Tauraitė said. “Plus, the rumors of currency devaluation are gone. These pushed the rates up when they were here, but now the country risk is treated as lower now and this has a positive effect on interest rates.”
The interbank lending rates should give some confidence to consumers, many who have been suffering over the last year. Borrowing money in litai attracted higher interest rates and fees, but those who borrowed in euros lived in constant fear of a devaluation of the currency, which would have left their repayments much higher compared to income.
“For consumers, this is good news. People who borrowed in litai suffered over the last year. There was also a wave of people changing their loan agreements in currency. Now the situation is a lot better. The bulk of Lithuanian loan portfolio are in euros,” Tauraitė said.
It is not expected, however, that the bulk of consumers will immediately benefit from the new rates. While some interest rates are softening, the majority of the banks still apply a minimum 2 to 3 percent margin on the loans when lending out to customers.
Return to profitability
Last year was one to forget for the Baltic banks, most of them posting multi-million euro losses. It is expected that those banks that were quick to write off their bad loan portfolios will have kept the losses confined to 2009, but slower banks may still be in the red this year. [/private_subscription 4 months] [private_subscription 1 year]devaluation of the lat, the new lending policies should encourage lending and shows that the turnaround seen in the economies of Estonia and Lithuania is materializing into results.
The Finnish branch of Nordea Bank announced that it sees the difference between lending in krooni and euros diminishing.
SEB Bank told Baltic Reports that good liquidity and greater confidence from the international community is allowing the banks to lend at a lower rate.
“The first is good liquidity of the banks, it is very high and they have a lot of resources — they are not borrowing too much money. The next reason is lower country risk by the banks and we see the first signs of economic recovery and the situation is slightly improving,” SEB Bank economist Vilija Tauraitė said. “Plus, the rumors of currency devaluation are gone. These pushed the rates up when they were here, but now the country risk is treated as lower now and this has a positive effect on interest rates.”
The interbank lending rates should give some confidence to consumers, many who have been suffering over the last year. Borrowing money in litai attracted higher interest rates and fees, but those who borrowed in euros lived in constant fear of a devaluation of the currency, which would have left their repayments much higher compared to income.
“For consumers, this is good news. People who borrowed in litai suffered over the last year. There was also a wave of people changing their loan agreements in currency. Now the situation is a lot better. The bulk of Lithuanian loan portfolio are in euros,” Tauraitė said.
It is not expected, however, that the bulk of consumers will immediately benefit from the new rates. While some interest rates are softening, the majority of the banks still apply a minimum 2 to 3 percent margin on the loans when lending out to customers.
Return to profitability
Last year was one to forget for the Baltic banks, most of them posting multi-million euro losses. It is expected that those banks that were quick to write off their bad loan portfolios will have kept the losses confined to 2009, but slower banks may still be in the red this year.[/private_subscription 1 year]
— This is a paid article. To subscribe or extend your subscription, click here.
