At the end of September 2022, the loans of Croatian financial institutions increased by 8.83% YoY, marking the highest growth since September 2009. This would mean that by the end of the month, they amounted to HRK 303.1bn.
The Croatian National Bank (HNB) has published its latest monthly report on the changes recorded by the Croatian financial institutions, for the month of September 2022. Within the report, we can see that the total loans of Croatian financial institutions grew by 8.83% YoY, which is also the highest growth since September 2009. On a monthly basis, they grew by 0.84%, and in total, they amounted to HRK 303.1bn by the end of the month. The growth in loans is quite encouraging, especially when considering the current macroeconomic situation in Europe and of course, the high inflation rates. This would mean that despite these challenges, the loans issued are not only slowing down or stagnating but actually accelerating, which by itself is quite noteworthy as they can support both households and corporate consumers alike.
In terms of the drivers of this growth, both corporate and household loans continued growing, albeit the household loan growth did slow down somewhat, while the corporate loan growth accelerated significantly. Starting with the household loans first, they increased by 5.1% YoY, which is a slight slowdown compared to the previous month, when they grew by 5.3%. In total, by the end of September, they amounted to HRK 148.3bn. Of this, household loans issued in HRK amounted to HRK 74.1bn, which is a decrease of 2.3% MoM and 4.8% YoY. On the other hand, household loans issued in EUR amounted to HRK 74.2bn, an increase of 2.9% MoM, and 17.3% YoY.
Meanwhile, corporate loans increased by 21.2% YoY and amounted to HRK 101.6bn. Of this, corporate loans issued in HRK amounted to HRK 38.1bn, a decrease of 2.6% MoM, but an increase of 22.4% YoY. Corporate loans issued in EUR amounted to HRK 63.5bn, an increase of 6.5% MoM, and 20.6% YoY.
Corporate and household loans growth rate (January 2015 – September 2022, YoY, %)
Source: HNB, InterCapital Research
What the data for both household and corporate loans can tell us is, that both citizens and corporate entities are increasing the loans that they are taking in foreign currency, especially EUR, which is to be expected, due to the fact that the switch to Euro will happen in January 2023. At the same time, the increase on a yearly basis of corporate loans can be attributed to all categories; meaning that loans for investments grew, loans for working capital grew, and loans for other purposes grew as well. This is supported if we divide the corporate loans by purpose. On a yearly basis, loans for investments, which amounted to HRK 40.3bn (or 39.7% of the total) increased by 17% or HRK 5.9bn YoY. Working capital loans, which amounted to HRK 33.1bn (or 32.6% of the total), increased by 23% or HRK 6.08bn YoY. Finally, other loans, which amounted to HRK 28.2bn (or 27.7% of the total), increased by 25% or 5.72bn YoY. On a monthly basis, however, the main driver of growth was the other loans, which increased by 11.6%, or HRK 2.93bn, while other loan categories remained roughly the same.
Moving back to household loans, housing loans still remain the largest category, at HRK 73.3bn, or 49.4% of the total. They increased by 9.7% YoY, or HRK 6.46bn, while on an MoM basis, they grew by 0.8%, or HRK 578.6m. Following them, we have consumer loans, which amounted to HRK 54.2bn, or 37.7% of the total, representing an increase of 1.9% YoY, but a decrease of 0.5% MoM.
Composition of Croatian loans to households (October 2011 – September 2022, HRKm)
Source: HNB, InterCapital Research
In terms of the effective interest rates, they have increased for both corporate clients and households alike. In terms of households, the most common housing loans are taken in EUR, and the effective interest rates for newly issued loans in this category increased by 0.11 p.p. YoY, 0.15 p.p. MoM, and amounted to 3.15%. Consumer loans in EUR had an effective interest rate of 6.36%, an increase of 1.49 p.p. YoY, and 1.15 p.p. MoM. For corporate clients, loans issued in euros that amounted to HRK 7.5m or less, had an effective interest rate of 1.64%, which is an increase of 0.5 p.p. YoY, and 0.3 p.p. MoM. Meanwhile, loans issued in euros that were larger than HRK 7.5m had an effective interest rate of 1.99%, which is an increase of 0.52 p.p. YoY, and 0.14 p.p. MoM. Furthermore, the loans issued in HRK, with a size up to HRK 7.5m, had an effective interest rate of 3.62%, an increase of 0.83 p.p. YoY, and 0.28 p.p., MoM. Loans that were larger than HRK 7.5m, had an effective interest rate of 3.99%, an increase of 1.61 p.p. YoY, and 1.64 p.p. MoM.
Foreign currency corporate and housing loans effective interest rates (January 2012 – September 2022, %)
Source: HNB, InterCapital Research
This can tell us several things: First of all, the loans issued in EUR have lower interest rates, which is due to the switch to the euro in January 2023, and higher strength of the currency overall is expected. However, both the loans issued to households and corporate clients, both in HRK and EUR, are increasing their effective interest rates, which given the rising interest rate environment we are witnessing, and the expectations of further interest rate hikes by the ECB is expected.
