This document provides a summary of the Baltic household outlook for April 2014. It discusses topics such as wage and income growth, price changes over 10 years, evaluations of financial situations, income distribution and inequality, housing loan portfolios, non-performing loans, financial vulnerability, savings and investments. The document contains contributions from household experts in Estonia, Latvia and Lithuania on these topics as they relate to the respective countries. Charts and figures are presented alongside analysis to illustrate trends over time.

1. 24.04.2014.
Baltic Household Outlook
April 2014
Estonia
Triin Messimas, Household Expert
Latvia
Edmunds Rudzitis,
Socioeconomics Expert
Lithuania
Julita Varanauskiene,
Household Economist

2. Edmunds Rudzitis
SEB Latvia
Income and Economic
Situation

3. 23.04.14 3
300
400
500
600
700
800
900
4Q08 4Q09 4Q10 4Q11 4Q12 4Q13
Source: National Statistics
Average net wages (in euros)
Estonia Latvia Lithuania
-4%
-2%
0%
2%
4%
6%
8%
Source: National Statistics
Real wages (%, YoY)
Estonia Latvia Lithuania
Average net wage has exceeded the pre-crises level in all Baltic countries
Wage growth continues

4. 23.04.14 4
331
756
196
516
228
501
127
327
92
260
99
238
0
150
300
450
600
750
900
2003 2013 2003 2013 2003 2013
Estonia Latvia Lithuania
Source: National Statistics, SEB calculations
Wages and pensions (EUR)
Average net wage Average retirement pension
+129%
+158%
+163%
+181%
+120%
+141%
52
65
109
65
88
131
46
67
101
0
20
40
60
80
100
120
140
Inflation Food prices Housing expenses
Source: National Statistics
Price changes over 10 years (Dec.2013 vs.
Dec.2003), %
Estonia Latvia Lithuania
Income growth over 10 years outpaced the increase in prices
10 years: boom, bust and recovery

5. 23.04.14 5
85
100
115
130
145
160
175
Source: National Statistics, SEB calculations
Average net wage at constant prices (2003=100)
Estonia Latvia Lithuania
83
100
117
134
151
168
185
Source: National Statistics, SEB calculations
Average old-age pension at constant prices
(2003=100)
Estonia Latvia Lithuania
In 2013 the average real wage (net wage adjusted for inflation) was 57 per cent above the level
of 2003 in Latvia, 52 per cent higher in Lithuania and 50 per cent higher in Estonia.
The purchasing power of households is much higher
compared to 2003 but still below the pre-crises level

6. 23.04.14 6
Evaluation of financial situation
-70
-60
-50
-40
-30
-20
-10
0
10
Financial situation over last 12 months
Estonia Latvia Lithuania
Source: Eurostat
-40
-30
-20
-10
0
10
20
Financial situation over next 12 months
Estonia Latvia Lithuania
Source: Eurostat
Young people aged 16-29 are more positive, while the most pessimistic respondents
are older people aged 65 and over.

7. 23.04.14 7
The distribution of income and inequality
24
27
30
33
36
39
42
Source: Eurostat, National Statistics
Gini coefficient of equivalised disposable income
Estonia Latvia Lithuania EU-27
3
4
5
6
7
8
9
Source: Eurostat, National Statistics
Inequality of income distribution (S80/S20 ratio)
Estonia Latvia Lithuania EU-27
Among Baltic countries the distribution of income is less balanced in Latvia

8. Triin Messimas
SEB Estonia
Liabilities and Financial
Vulnerability

9. 23.04.14 9
Comparison of the growth and the re-adjustment
of total loan portfolios
Ÿ The downward adjustment of total loan portfolios after vigorous increase before the crises has
been relatively modest in all three countries
Ÿ The biggest upsurge in 2005-2008 occurred in Lithuania where the loan portfolio increased
ca 6 times; the strongest cutback was in Latvia where the loan portfolio is still declining

10. 23.04.14 10
Ÿ The loan portfolio is increasing since April 2013 in Estonia, since June 2013 in Lithuania
while in Latvia the decrease continues
Ÿ Households show modest intentions to borrow for consumption in all Baltic countries
where the portfolio of consumer loan and other borrowing continues to decrease
Housing and consumer loan portfolios show
different developments

11. 23.04.14 11
The average interest rate of housing loans
• The biggest drop in the interest rate of housing loans was in Latvia. In Estonia and
Lithuania the interest rates are already on very low level
Ÿ In 2014, there is still room for the interest rates to fall in Latvia

12. The share of non-performing housing loans has been
at very high level in Latvia
23.04.14 12
• The highest peak in non-performing loans (NPL) was in Latvia (16.5% in 2011 Q3) while the Estonian
households have showed the least difficulties in repaying their housing loans. In Estonia, the peak was at 4.5%
in 2010 Q3
Ÿ The repayment problems are related to the income declines during the recession which were experienced by
majority of households
Ÿ The share of NPL at the end of 2013 was in Estonia at 1.4%, in Lithuania at 7.5% and in Latvia at 10.2%

13. Non-performing consumer loans back on track only
in Estonia
23.04.14 13
• The peak in non-performing consumer loans was in Latvia at 22.8% and in Lithuania at
22.8% in 2011 Q2. In Estonia, the peak was at 9.5% in 2010 Q3
Ÿ The share of NPL at the end of 2013 was in Estonia at 4.6%, in Lithuania at 13.1% and in
Latvia at 17.4%
Ÿ The share of population who is eligible for obtaining consumer loans is
significantly lower compared to pre-crisis period

14. The share of financially vulnerable households is
hardly decreasing after the recession
23.04.14 14
• The share of households who have difficulties to cover their everyday expenses is in
Latvia 22%, in Lithuania 13% and in Estonia 9%
• The share of households who are not able to cover unexpected expenses of
200-300 EUR is in Latvia 74%, in Lithuania 60% and in Estonia 45%

15. Most of the reported arrears of households are
on utility bills
23.04.14 15
• Every fourth household in Latvia, every eighth household in Lithuania and every
tenth household in Estonia reports arrears on utility bills
Ÿ There is very slow recovery after the recession regardless the drop of
unemployment rate and the rise in average real wage

16. In comparison to other EU countries, Estonian and
Lithuanian households are financially relatively well
23.04.14 16
• In Estonia and Lithuania, the
share of any kind of arrears (on
utility bills, rent, hire purchase or
loan repayment) is close to the
EU average
Ÿ There were more households in
arrears (15.2%) in Poland which
did not experience economic
recession in 2009 compared to
Estonia and Lithuania.
Ÿ For comparison, 11% households
in Finland and 10% households in
France report arrears.

17. 23.04.14 17
Estonian households are the least distressed from
their housing costs
• In Estonia, 29% of all households feel financial burden of total housing costs (expenses on
utilities, rent or mortgage payments) which is lower than the EU average (37%)
Ÿ Hence, there are more households which can improve their living conditions without facing
difficulties in Estonia than in Latvia and Lithuania

18. Julita Varanauskienė
SEB LithuaniaSavings and Investments

19. 0%
2%
4%
6%
8%
10%
12%
14%
16%
2012 2013 2012 2013 2012 2013
Estonia Latvia Lithuania
Source: National Statistics, SEB calculations
Annual growth in financial assets and compensations
to employees in 2012-2013
(in per cent)
Financial assets growth Household income growth
3,312
3,7313,668
3,899
5,423
5,976
2012 2013
Financial assets per capita
(in EUR)
Latvia Lithuania Estonia
Growth in financial assets slowed down
19
In 2013 assets growth was slower in Estonia and Lithuania
The main reasons – low return and better income expectations
Faster growth in Latvia was determined by cash to deposits allocation

20. Euro introduction decreases cash levels
20
0%
5%
10%
15%
20%
25%
30%
35%
40%
2010 2011 2012 2013
Estonia Latvia Lithuania
Household cash to deposits ratio development
Source: Central Banks
Prior euro introduction those who previously kept cash, deposit their money at financial
institutions seeking to facilitate exchange of their savings into the euro.
The impact in Estonia was temporary

21. Term deposits are not popular for new savings
21
-200
0
200
400
600
800
1000
1200
Overnightdeposits
Termdeposits
Securitiesand
otherfinancialproducts
Lifeinsurance
andprivatepensionfunds
Realestate
transactionvalue
Source: SEB calculations
Estonia
2012 2013
-400
-200
0
200
400
600
800
1000
1200
Overnightdeposits
Termdeposits
Securitiesand
otherfinancialproducts
Lifeinsurance
andprivatepensionfunds
Realestate
transactionvalue
Latvia
2012 2013
-400
-200
0
200
400
600
800
1000
1200
Overnightdeposits
Termdeposits
Securitiesand
otherfinancialproducts
Lifeinsurance
andprivatepensionfunds
Realestate
transactionvalue
Lithuania
2012 2013
Net change in financial assets and real estate transaction value (mEUR)
There is almost no difference between overnight deposits and term deposits return
Households look for alternatives in securities markets but still are risk averse
More funds are allocated for housing and real estate investments

22. Thank you for your attention!