By the end of February 2024, the loans of all the Croatian institutions grew by 0.5% MoM, and 3.7% YoY, amounting to EUR 43bn. This represents an increase on a monthly basis, as compared to a decrease a month ago, and a slight acceleration on a YoY basis. Furthermore, loan interest rates have also largely stabilized, with interest rates on new housing loans amounting to 3.7%, and interest rates on new consumer loans amounting to 6.1%, while new corporate loans had an interest rate of 5.2%. All of these categories recorded MoM and YoY increases.
According to the latest report by the Croatian National Bank, HNB, the new Croatian loan production has largely stabilized in February 2024, with increases recorded both on the MoM and YoY basis. In total, loans issued by all the Croatian institutions amounted to EUR 43bn, growing by 0.5% MoM, and 3.7% YoY. This is positive news for the Croatian banking sector, as many countries across Europe have experienced a complete slowdown in new loan production, or even negative growth, on the back of the higher interest rates now completely present in these economies.
Breaking down the loan growth into two main categories, i.e. household loans and corporate loans, household loans amounted to EUR 22bn at the end of February 2024, growing by 0.8% (or EUR 176m) MoM and 10.4% (or EUR 2.07bn) YoY. Corporate loans, on the other hand, amounted to EUR 14.3bn, growing by 0.4% (or EUR 52m) MoM, and 2.2% (or EUR 305m) YoY.
Corporate and household loans growth rates (January 2015 – February 2024, YoY, %)
Source: HNB, InterCapital Research
Taking an even closer look at these categories, inside the household loans, on the MoM basis, the largest increase came from consumer loans, which grew by EUR 101m, or 1.3%, followed by housing loans at EUR 65m, or 0.6%. The flip side is true on a yearly basis, as housing loans grew by EUR 1.07bn, or 10.8%, while consumer loans increased by EUR 905m or 12.5%. Of course, these two categories make up the vast majority of household loans, at 87% of the total when combined.
On the other hand, breaking down the corporate loans, the largest MoM increase came from the other’ loans category, which increased by EUR 40m, or 1%, followed by investment loans at EUR 18m, or 0.3%, while working capital loans decreased slightly, by 11m, or EUR 0.2%. On the YoY basis, the story is a little bit different, with the largest increase coming from investment loans, which grew by EUR 412m, or 7.4%, followed by working capital loans with an increase of EUR 63m, or 1.5%, while the other loans’ category decreased by EUR 110m or 2.7%.
Composition of Croatian loans to households (October 2011 – February 2024, EURm)
Source: HNB, InterCapital Research
Turning our attention to the other side of the loan story, i.e. interest rates, we can see that they largely stabilized in February 2024. Average interest rates on newly issued housing loans amounted to 3.72%, growing by 0.08 p.p. MoM, and 0.55 p.p. YoY, and average interest rates on consumer and other loans amounted to 6.08%, decreasing by 0.03 p.p. MoM, and growing by 0.66 p.p., while average new corporate loan interest rates amounted to 5.2%, increasing by 0.06 p.p. MoM, and 1.28 p.p. YoY.
Average new housing and corporate loan interest rates (December 2011 – February 2024, %)
Source: HNB, InterCapital Research
The newest loan data does not show us a significant change from the previous period. We can see that there is still demand for loans in Croatia, despite the increasing cost of debt driven by the higher interest rates. Fortunately for Croatia, as part of the Eurozone, the ECB is the one that decides the average deposit interest rates, which directly or indirectly affect all other interest rates. This is fortunate because other countries across Europe recorded a more significant deceleration in growth, and with inflation subdued this would mean that several interest rate cuts should happen this year. When it does, this could have a positive impact on the new loan volume production, which at lower interest rates would benefit not only consumers but also the banks themselves. However, it should be noted that it takes time for the interest rates to make their way through the economy, so it might take longer than expected for interest rate cuts’ effect to be seen by the general public and corporate clients alike.
