By the end of December 2023, the Croatian loan growth slowed down to only a 0.05% increase MoM, but still recorded an increase of 5.9% YoY, amounting to EUR 43.09bn. Interest rates across the largest loan categories are still increasing, although their growth has largely stabilized. In this overview, we’ll see how these categories developed.
According to the latest reports on the developments of the Croatian financial institutions published by the Croatian National Bank, loan growth has slowed down by the end of December, also leading to slower YoY growth. In fact, total loans of all Croatian financial institutions amounted to EUR 43.09bn, increasing by only 0.05% MoM, leading to a slowdown of YoY growth to 5.9% (November 2023: 6.7%, 2023 average excl. December: 7.7%). Breaking this development down further, households recorded total loans of EUR 21.7bn, growing by 0.4% MoM, and 9.1% YoY. On the other hand, total corporate loans amounted to EUR 14.6bn, growing by 0.1% MoM, and 5.8% YoY.
Corporate and household loan growth rates (January 2015 – December 2023, YoY, %)
Source: HNB, InterCapital Research
Delving into these categories further and starting with the corporate loans, out of the 3 main loan categories, i.e. working capital loans, investment loans, and other loans, two recorded an increase on the MoM basis, while 1 recorded a decrease. Working capital loans increased by 0.2% (or EUR 7.5m) MoM, investment loans grew by 1.4% (or EUR 78.8m) MoM, while the other loans’ category decreased by 1.1%, or EUR 46.5m. Meanwhile, on the YoY basis, all 3 of the loan categories increased. Investment loans increased the most, by EUR 364m, or 6.5%, followed by other loans at EUR 291m, or 7.4%, and working capital loans, at EUR 184m, or 4.3%.
Moving on to the household loans, growth on the MoM basis can still be seen in housing loans, which increased by EUR 78.7m, or 0.7%, and consumer loans, which grew by EUR 40m, or 0.5%. On the other hand, overdrafts on transaction accounts decreased by EUR 46m, or 5.6%, while the remaining categories remained roughly unchanged. A similar trend is present on a YoY basis, with housing loans increasing by EUR 975m, or 9.8%, and consumer loans growing by EUR 782m or 10.9%. Other loans’ category and mortgage loans also recorded a noteworthy increase, growing by EUR 76.8m (or 6.1%) and EUR 42.5m (or 14.4%) YoY, respectively.
Composition of Croatian loans to households (October 2011 – December 2023, EURm)
Source: HNB, InterCapital Research
In terms of the interest rates on new loans, all 3 main categories, i.e. housing loans, consumer loans, and corporate loans recorded a YoY increase, while on the MoM basis, housing loans’ interest rates decreased, while in the other 2 categories, it still grew. Interest rates on new housing loans amounted to 3.6%, decreasing slightly by 0.04 p.p. MoM, but growing by 0.92 p.p. YoY. Consumer loan interest rates grew by 0.06 p.p. MoM, and 0.92 p.p. YoY, while corporate loan interest rates grew the most, by 0.13 p.p. MoM, and 1.83 p.p. YoY.
Average new housing and corporate loan interest rates (December 2011 – December 2023, %)
Source: HNB, InterCapital Research
For the most part, the demand for loans in Croatia has continued in 2023, although there is a clear trend of a slowdown. This, however, was not nearly as severe as in other European countries, where a slowdown in demand for loans was a lot stronger. Furthermore, the ECB decided to pause the interest rate hikes, and there are signals of a possibility of cuts in the summer of 2024. As such, interest rate growth should also stabilize or even dissipate, but one has to take into account the dynamics of the ECB key interest rates as related to loan interest rates: when the hikes started, loan interest rates did not start growing immediately, and as such there might still be a delay in the coming months where we could still see some slight increases in the rates. This will be especially true if there won’t be a stronger slowdown in demand. Furthermore, vice versa regarding ECB interest rate cuts is also true; even if they begin in the summer, it is unlikely that we will see a reduction in loan interest rates immediately, especially if the cuts are on the lower end ( -25 bps) after each ECB meeting.
