By the end of November 2022, the total deposits of the Croatian financial institutions amounted to EUR 54bn, representing growth of 11.9% YoY, but a slowdown of -0.1% MoM.
Recently, the Croatian National Bank (HNB) published the newest monthly report on the consolidated positions of the monetary financial institutions, for November 2022. In the report, we can see that the total deposits in Croatia amounted to EUR 54bn, which is an increase of 11.9% YoY, but a decrease of 0.1% MoM. This marked the 2nd month in a row when the deposits decreased, implying a slowdown in their growth trend. This could be attributed to several things, such as the fact that during the summer, the deposit growth increases the most, and following the end of the summer season, the slowdown is always recorded. However, as the switch to Euro has already happened, the monthly statistics for December should show an increase, as citizens got ready to switch their HRK to EUR.
Looking at the deposits by their components, on a yearly basis, demand deposits increased by 16.9%, and amounted to EUR 23.4bn. On the flip side, saving deposits increased by 8.3% YoY and amounted to EUR 30.7bn. Meanwhile, on an MoM basis, the growth in demand deposits amounted to 2.4%, while saving deposits decreased by 1.8%.
Croatian deposits breakdown (November 2012 – November 2022, EURm)
Source: HNB, InterCapital Research
Turning our attention to household deposits, they increased by 10.7% YoY and amounted to EUR 35.8bn. On a monthly basis, this growth amounted to 0.8%. This would mean that in total, 66.3% of all deposits are household deposits, which is an increase of 0.69 p.p. YoY, but an increase of 0.59 p.p. MoM. As Croatia is officially part of the Eurozone, the interest rate hikes that we have witnessed by ECB, and which are expected to continue in the coming period to combat inflation, is applicable to Croatian money moarket. The rate on the deposit facility, which banks may use to make overnight deposits with the Eurosystem is from 21 December set at 2% which is now also available to Croatian banks which will help them to boost their interest income. The rate on the marginal lending facility, which offers overnight credit to banks from the Eurosystem is set at 2.75% from Dec 2022. When we look at Croatian monthly weighted average interest on housing loans in banks that has in November amounted to 4%, we can see that it is 125 bp above marginal lending facility rate. In November there were EUR 262m housing loans issued, which is double than the amount issued in November 2021. This means that this core business of banks is growing at the formidable rates
On the other hand, deposits rates on Euro in the banks stood at app. 0.17% for long-term deposits, while this switch to Euro should gradually influence deposit rates growth. However, the growth in deposit rates is usually a lot slower and in a lower amount than ECB reference rates growth or even loan interest rates growth that is directly affected by the expected growth of reference rate in the near future. In this year market expects that on at least 5 out of 8 ECB meetings, EUR interest rates will be increased. Implied rate at the end of 2023 currently stands at 3.36%, which is 130 bps higher than current target rate of 2%.