The Euribor, Europe's interbank lending index, continued to fall this year and is now down from 2.8 percent to 1.9 percent. The profits of Estonia's major banks have also fallen in line with the Euribor. Swedbank in Estonia earned a net profit of €128 million in the first half of the year, down nearly 30 percent from a year ago, while SEB's profit was €86 million, down 8 percent on year.

"There is a normalization of profits and profitability. Base interest rates are falling, so borrowers are paying less interest and therefore the bank's income is lower. At the same time, of course, over time, depositors will earn less, so it will have an impact on both sides of the balance sheet," said Olavi Lepp, head of Swedbank Estonia.

"The main reason is the fall in the Euribor. This drop in profits was entirely to be expected. The Euribor has been falling, but now it has stabilized at around 2 percent. Our expectation is that it could drop a little bit more, but it is not falling at the same rate," said SEB Estonia board member Peep Jalakas.

It's the height of summer outside and whoever can be is on vacation. But those who are not are the bankers, as they say new projects are constantly coming in.

"Whereas in the past it was mainly renewable energy projects, and also the defense industry, nowadays it is more broadly based. We are also seeing different projects in agriculture, healthcare, and maybe one of the key things is that the volume of acquisitions has increased proportionately," Jalakas said.

"Real estate is one area that is benefiting from the fall in interest rates. Real estate development. You can see that in the city, too, that there are more cranes here than there were on average a while ago, but somebody has to do something within that real estate. Somebody has to do retail, somebody has to do service, somebody has to do manufacturing. Maybe these projects today are equally attractive. So ,there is that activity and you can see that there are actually projects in the works in both manufacturing and energy. Whether they are on the back burner or not, there are a lot more plans than there were three months ago," Lepp said.

Borrowing in Estonia has picked up as interest rates have fallen.

The Ministry of Finance says the fall in banks' profits is in line with their forecast. At the same time, the ministry is also seeing an increase in activity.

"The forecast for the economy is still more optimistic, because there have been more deals. Borrowing activity has increased. It is still rather positive, the trend that can be seen here," said Kadri Klaos, head of the public finance service at the Ministry of Finance.

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