At the end of May 2023, the total loan amount of all Croatian financial institutions equaled EUR 42.1bn, representing an increase of 7.5% YoY, and 0.5% MoM.

The Croatian National Bank has published its latest monthly report on the changes recorded by the Croatian financial institutions, for the month of May 2023. In the report, we can see that the total amount of loans of all Croatian financial institutions amounted to EUR 42.1bn, which would mean that they grew by 7.5% YoY, and 0.5% MoM.

Breaking this growth down further, we can see that the largest contribution came from the loans issued to both households, as well as corporate clients. By the end of May 2023, household loans amounted to EUR 20.5bn, an increase of 1.2% (or EUR 242m) MoM, or 6% (or EUR 1.16bn) YoY. Corporate loans also continued their growth momentum, albeit slowing down on a monthly basis, with a growth of 0.8% (or EUR 108.9m), while on a YoY basis, they grew by 13.5% (or EUR 1.72bn). In total, the loans issued to corporate clients amounted to EUR 14.4bn.

Corporate and household loans growth rate (January 2015 – May 2023, %)

Source: HNB, InterCapital Research

Breaking the corporate loans further into 3 main categories, i.e. working capital loans, investment loans, and other loans, we can take a more detailed look at this development. The largest of these categories, investment loans, which accounted for 39.2% of the total corporate loans, increased by 0.1% (or EUR 7.2m) MoM, and 10.7% (or EUR 547m) YoY. The 2nd largest category, i.e. working capital loans (which account for 30.8% of the total) recorded an increase of 0.9% (or EUR 38m) MoM and an increase of 2.4% (or EUR 105m) YoY. Finally, the other loans category which accounts for the remaining 29.95%, recorded an increase of 1.5% (or EUR 63.6m) MoM, and 32.76% (or EUR 1.06bn) YoY.

The increase in corporate loans is quite a good sign, especially in the current macroeconomic environment of high-interest rates and geopolitical uncertainty. The continued growth of investment loans in particular is a piece of positive news, as these ones yield returns in the future, while the decline in working capital loans can be attributed to the seasonality & requirements of individual companies and doesn’t have to represent a negative trend.

Moving on to households, housing loans still account for the majority of these loans (49.7% of the total) which saw an increase of 1.4% (or EUR 140m) MoM, and 9.4% (or EUR 873m) YoY. Next up, we have consumer loans, which with EUR 7.5bn account for 36.6% of household loans. These loans have increased by 0.97% (or EUR 72m) MoM, and 4.64% (or EUR 333m) YoY.

Composition of Croatian loans to households (October 2011 – May 2023, EURm)

Source: HNB, InterCapital Research

Taking a look at the value and volume of loans issued would not make much sense without looking at one of the most important factors influencing this development, the interest rates. Given that Croatia is part of the Eurozone, the interest rate hikes we are witnessing by the ECB will have an influence on the interest rates of newly issued loans. On average, the newly issued housing loans had an interest rate of 2.97%, representing an increase of 0.7 p.p. YoY, but a decline of 0.02 p.p. MoM. Consumer loans meanwhile, increased by 0.13 p.p. MoM, and recorded an increase of 1.29 p.p. YoY, amounting to an interest rate of 5.6%. Finally, average corporate loan interest rates amounted to 4.65%, increasing by 0.04 p.p MoM, and 3.23 p.p. YoY.

Average new housing and corporate loans interest rates (December 2011 – May 2023, %)

Source: HNB, InterCapital Research