At the end of January 2023, the loans of Croatian financial institutions amounted to EUR 41.3bn, representing an increase of 10.9% YoY, and 1.57% MoM.
Despite the ongoing inflationary pressures and macroeconomic developments, the loan development in Croatia is still quite strong and resilient. In fact, by the end of January 2023, the total loans of the Croatian financial institutions amounted to EUR 41.34bn. This represents an increase of 1.57% (EUR 640.7m) MoM, and 10.86% (EUR 4.05bn) YoY. As Croatia officially entered the Eurozone in January, the month to the latest report from the Croatian National Bank, HNB, there were some changes in the classification and the breakdown by categories. As such, some of our numbers might differ from the ones before as some of the data is no longer available in the same format.
With that out of the way, we can break down the two main drivers of loan growth, i.e. household and corporate loans. In January 2023, household loans amounted to a total of EUR 19.86bn, representing a decrease of 0.14% (or EUR 28.6m) MoM, but an increase of 5.21% (or EUR 983.1m) YoY. On the other hand, corporate loans amounted to EUR 13.9bn, an increase of 0.73% (or EUR 101.2m) MoM, and 21.54% (or EUR 2.46bn) YoY. As such, and as we have already seen in the previous couple of months, corporate loans remain the main drivers of loan growth.
Corporate and household loans growth rate (January 2015 – January 2023, %)
Source: HNB, InterCapital Research
Looking at corporate loans more closely, and breaking them down by purpose, we can see several interesting things. Investment loans still remain the largest category, holding 39.7% (or EUR 5.5bn) of the corporate loans, followed by working capital loans at 31.2% (or EUR 4.3bn), and other loans at 29.1% (or EUR 4.05bn). In terms of growth, on an MoM basis, other loans recorded the largest increase, growing by 2.99%, followed by working capital loans by 0.90%, while investment loans decreased by 0.99%. The decrease in investment loans could be the beginning of a cooldown in investment activity, however, it will require several months of decreases in this loan form to establish a trend and conclusively affirm this. Meanwhile, on a YoY basis, all of the corporate loan categories recorded significant growth, which was to be expected as 2022 was the first year after the start of the COVID-19 pandemic that companies could operate relatively normally. In terms of growth, other loans grew the most, increasing by 30.6%, followed by working capital loans at 20.6%, and investment loans, at 16.3%. In absolute terms, these represent increases of EUR 947.7m, EUR 774.1m, and EUR 739.9m, respectively.
Moving on to the other category of loans, household loans, housing loans still have the largest percentage in the total, at 49.95% to be exact. Following them, we have consumer loans at 36.26%, and other loans, at 6.24%. In terms of growth, on an MoM basis, all household loan categories remained roughly the same, changing only slightly. On a YoY basis, a larger difference can be seen, with housing loans increasing by 9.93% (or EUR 896m) YoY, followed by consumer loans, which increased by 1.77%, or EUR 125.6m.
Composition of Croatian loans to households (October 2011 – January 2023, EURm)
Source: HNB, InterCapital Research
The continued growth of housing loans and their resilience to the current macroeconomic shocks is closely tied to several factors. First, of course, the fact that housing is one of the fundamental requirements for living, and as it is also seen as a form of saving/investment in Croatia, there is an even larger incentive to take housing loans. Also, the subsidies on loans issued by the government also play a factor here. Finally, the imbalances of the supply/demand in the real estate market in Croatia, in general, are driving up the requirement for higher loan amounts, which would mean that even if the same amount of loan volume is issued, they’re issued in the higher amounts. Lastly, this does not take into account the interest rate on these loans. According to the latest data for January 2023, the average interest rate on new housing loans amounted to 2.89%, representing an increase of 0.21 p.p. MoM, and 0.32 p.p. YoY, meaning that the vast majority of the increase in the interest rate came in the last month. This, however, is to be expected, as the increase in interest rates by the ECB, which started in the middle of 2022, is finally having its effect on the new loan issuances.
The increase in consumer and other loans, as well as corporate loans, is even higher. In fact, at the end of January 2023, the average interest rate on consumer and other loans amounted to 5.36%, an increase of 1.33 p.p. YoY, and 0.34 p.p. MoM, while the average interest rate for corporate loans amounted to 3.37%, an increase of 1.51 p.p. YoY, but a decrease of 0.10 p.p. MoM.
Average new housing and new corporate loan interest rates (December 2011 – January 2023, %)
Source: HNB, InterCapital Research
