By the end of October 2022, the loans of Croatian financial institutions increased by 9.06% YoY, continuing their trend of strong growth. By the end of the month, they amounted to HRK 304.6bn.

The Croatian National Bank (HNB) has recently published its latest report on the developments and changes recorded by the Croatian financial institutions, for October 2022. During the month, we can see that the total loans of Croatian financial institutions increased by 9.06% YoY, while on a monthly basis, they increased by 0.48%, amounting to a total of HRK 304.6bn. The continued growth in the loans issued is a positive indicator in the current macroeconomic environment, especially on a monthly basis. This would mean that despite the challenges like inflation, and high costs of living faced by the citizen and corporate clients alike, the demand for loans, as well as the banks’ willingness to lend, is still strong.

If we looked at the loan growth more closely, we can see that growth was recorded by both corporate and household loans, albeit the corporate loans remain the main driver of growth. Starting off with the household loans first, they amounted to HRK 148.7bn in October 2022, representing an increase of 4.9% YoY, or HRK 7bn. Meanwhile, on a monthly basis, they increased by 0.26%, or HRK 385m. On the other hand, corporate loans increased significantly, growing by 22.1% YoY, 1.39% MoM, and amounting to HRK 103bn. Breaking the growth of the corporate loans further, we can see that on a YoY basis, investment loans increased by 18%, or HRK 6.1bn, and amounted to HRK 40.9bn. Following them, we have working capital loans, which increased by 20% YoY (or HRK 5.56bn), and amounted to HRK 32.8bn, and finally, other loans, which increased by 31% (or HRK 6.98bn), and amounted to HRK 29.4bn.

On a monthly basis, the main driver of growth was the other loans, which increased by 4.2% (or HRK 1.18bn), followed by investment loans, which increased by 1.4% (or HRK 553m), while working capital loans decreased by 1% (or HRK 324m). What can be taken away from this data is that despite the environment of high inflation and cost growth, companies are still investing a lot of money, and are also taking working capital loans. Even though a month is too short of a period to tell, the reduction in working capital loans issued could be seen as both a positive and a negative; positive in the sense that companies might not need as much money as they thought to finance their operations, but also negative, as the reduction in operations could be due to the reduction in orders and in general, expectations of a recession.

Corporate and household loans growth rate (January 2015 – October 2022, %)

Source: HNB, InterCapital Research

Moving on to household loans, housing loans are the largest category, at HRK 73.6bn, or 49.5% of the total. On a YoY basis, they increased by 9.6%, or HRK 6.4bn, while on an MoM basis, they increased by 0.41% or HRK 302.8m. Next up, we have consumer loans, which amounted to HRK 54.3bn, or 36.5% of the total, representing an increase of 1.62%, or HRK 826.6m YoY, and 0.1%, or HRK 51.8m MoM.

Composition of Croatian loans to households (October 2011 – October 2022, HRKm)

Source: HNB, InterCapital Research

Looking at the effective interest rates, they have increased for both household and corporate clients. For households, the most common housing loans are in EUR, and the effective tax rate for newly issued loans in this category amounted to 3.18%, an increase of 0.11 p.p. YoY, and 0.03 p.p. MoM. Consumer loans in EUR had an effective interest rate of 5.96%, representing an increase of 0.69% YoY, but a decrease of 0.40% MoM. In terms of corporate clients, loans issued in euros with the size of EUR 7.5m or less, had an effective interest rate of 2%, an increase of 0.49 p.p. YoY, and 0.36 p.p. MoM. For loans bigger than EUR 7.5m, the effective interest rate increased significantly, growing to 2.74%, an increase of 1.84 p.p. YoY, and 0.75 p.p. MoM.

Foreign currency corporate and housing loans effective interest rates (January 2012 – October 2022, %)

Source: HNB, InterCapital Research