Low Interest Rates Squeeze Estonian Bank Profits Amid Lending Boom
Estonia's leading banks, Swedbank and SEB, reported significant profit declines for 2025 despite expanding their loan portfolios to record levels, revealing the intense pressure of a low-interest-rate environment on the sector's profitability.
- —Swedbank Eesti reported a net profit of 261 million euros for 2025, a decrease of nearly 100 million euros compared to the previous year, while its loan portfolio exceeded 11 billion euros for the first time.
- —SEB's net profit in Estonia for 2025 was 166.9 million euros, a slight decrease of 6 million euros from 2024, with its operational profit at 293 million euros.
- —Both banks saw increases in their loan portfolios, with Swedbank's private client lending up 5% and corporate lending up 3%, and SEB issuing 2.1 billion euros in new loans and leases in Estonia.
- —The decline in profits for both banks is attributed to lower market interest rates and reduced net interest income, impacting profitability despite loan portfolio growth.
- —SEB plans to merge its Baltic subsidiaries into a single bank by 2027, with its regional headquarters to be located in Tallinn.
Recap
The 2025 financial reports from Swedbank and SEB signal a critical inflection point for Estonian banking: loan portfolio growth is no longer a direct path to higher profits. The prevailing low-interest-rate environment has effectively decoupled lending volume from net income, forcing a strategic pivot. SEB's move to consolidate its Baltic operations is a clear reaction to this pressure, representing a push for operational efficiency in a market where traditional revenue streams are shrinking. The results highlight a sector grappling with macroeconomic headwinds that demand structural adaptation, not just business-as-usual expansion.