The real slowdown in the growth rate of loans, at least on a monthly basis, started last month, i.e. December 2023. This trend worsened in January, with the MoM loan amount declining by 0.6%, leading to a slowdown in YoY growth to 3.6%. As such, the total loan amount issued in Croatia amounted to EUR 42.8bn. The situation with the interest rates is a bit more varied, with several categories still recording MoM and YoY growth, while one category recorded YoY growth, but a MoM decline.
According to the latest report on the changes recorded by the Croatian financial institutions, January 2024 recorded the first real decline in the growth of the loans, at least on a MoM basis. As such, total loans issued amounted to EUR 42.8bn, decreasing by 0.6% MoM (or EUR -246m), but still growing by 3.6% YoY. However, YoY growth did slow down, down from app. 11% YoY in the same month last year, down to mid-single-digit levels, and now to this level. This was to be expected of course, as the higher interest rates on loans due to the elevated interest rates from the ECB have finally circulated through the economy.
Breaking the largest categories of loans down, to household and corporate loans, we can see that household loans grew by 0.6% MoM, and 9.9% YoY to EUR 21.8bn, while corporate loans decreased by 2.3% MoM, but still grew by 2.7% YoY to EUR 14.2bn. This would imply there is still demand for household loans, but that corporate loan demand has slowed down significantly.
Corporate and household loans growth rates (January 2015 – January 2024, YoY, %)
Source: HNB, InterCapital Research
Taking a closer look at these categories, inside the household loans, the largest absolute MoM increase was recorded by consumer loans, which grew by 0.9%, or EUR 72m, followed by housing loans, which increased by 0.6%, or EUR 64m. The only 2 other notable categories were overdrafts on transaction accounts, which grew by 1.6%, or EUR 12m MoM, while the other loans’ category decreased by 0.9% or EUR 12.6m. A similar situation is present in the YoY data, albeit this time housing loans take the lead, growing by 10.4%, or EUR 1.03bn YoY, followed by consumer loans at 12%, or EUR 862m, and the other loans’ category, with an increase of 6.7%, or EUR 83m.
Composition of Croatian loans to households (October 2011 – January 2024, EURm)
Source: HNB, InterCapital Research
Meanwhile, corporate loans fared worse, with the other loans’ category decreasing by EUR 283m or 6.7% MoM, followed by working capital loans at EUR -32.7m, or -0.7%, while investment loans increased by EUR 15m or 0.3%. On the other hand, on the YoY basis, investment loans grew by 7.9%, or EUR 434m, followed by working capital loans at 2.6%, or EUR 112m, while the other loans’ category declined by 2.7% or EUR 110m.
Moving on to the other side of the coin and taking a look at the loan interest rates, the average new housing loan interest rate amounted to 3.64%, growing by 0.04 p.p. MoM, and 0.75 p.p. YoY. Consumer loans also grew, by 0.17 p.p. MoM, 0.75 p.p. YoY to 6.11%, while corporate loans declined on a MoM basis, by 0.16 p.p., but increased on the YoY basis, by 1.77 p.p., to 5.14%.
Average new housing and corporate loan interest rates (December 2011 – January 2024, %)
Source: HNB, InterCapital Research
As we can see, both the loan growth and interest rate growth have slowed down according to the latest available data. Given this dynamic, it shouldn’t be expected that further loan interest rate growth will be recorded, at least in a significant amount. Furthermore, as the ECB interest rate cuts are expected by summer, and at the latest the 2nd half of the year, loan interest rates could also start coming down. However, it should be noted that when the interest rate hikes began in July 2022, it took time for the loan interest rates to increase. As such, one shouldn’t expect a 1:1 reduction in the loan interest rates when the cuts begin.
