At the end of July 2022, the total loan growth continued its growth, increasing by 7.1% YoY, 1.2% MoM, and amounting to HRK 299.8bn.
The Croatian National Bank (HNB) has recently published its monthly report on the developments and changes that were evidenced by the Croatian financial institutions. In the report, the total loans of Croatian financial institutions increased by 7.1% YoY, 1.2% MoM, and amounted to HRK 299.8bn, almost breaching the HRK 300bn mark. This is also the highest level that has ever been recorded, and this shows that the growth in loans in Croatia continues despite the current macroeconomic and inflationary situation, showing the strength and resilience of the banking system. In fact, if we were to look at the data since the beginning of the year, after the slowdown in February and March, the loan growth accelerated significantly, outpacing the growth in 2021. This would mean that on a YTD basis, the growth in loans amounted to 7%.
Breaking this down further, household loans (which are the largest segment of the total loans) increased by 5.2% YoY (or HRK 7.24bn), and 0.77% (or HRK 1.13bn) MoM. The real growth this month, however, was recorded by the corporate loans, which increased by 15.3% YoY (HRK 13bn), 2.62% MoM (or HRK 2.51bn), and amounted to HRK 98.3bn.
Corporate and household loans growth rate (YoY,%)
The corporate loans growth in particular is interesting. If we were to break down this into its components, then we can see that companies are still maintaining high levels of investments (app. 41% of the total corporate loans, or HRK 40.5bn), which grew by 16% YoY, but the main driver is the working capital loans, i.e. loans that the companies take to maintain normal business operations and liquidity. This category of loans has a lower 35% of the total (or HRK 34.1bn), but it grew faster, at 22% YoY, and also increased its share in the total by 2 p.p. YoY. What this can tell us is two things: On the one hand, companies are increasing their levels of investments, as loans are only a part of the investment (usually a combination of loans and capital), but at the same time, they are taking out more loans to finance their operations, which is also to be expected. This is due to the high operating expenses growth due to rising energy, electricity, material, and staff costs that have been recorded for a year now, but that significantly accelerated since the start of the year, and especially since the start of the war in Ukraine. Overall, the increase in corporate loans is quite positive news, following the recent announcement of a solid GDP expansion, which shows that despite the situation, the situation in Croatia is not as dire as in some other countries.
Moving back to the household loans, the main driver of the increase in this category remains the housing loans (the largest category of household loans at 48.99%), which increased by 9.4% YoY (or HRK 6.21bn), and 1.33% MoM (or HRK 946.5m). This would also mean that housing loans increased by 1.9 p.p. YoY. Next up, we have consumer loans, which accounted for 36.85% of the total household loans, representing a decrease of -0.84% YoY. Even so, the consumer loans increased by 2.8% (or HRK 1.48bn) YoY, and 0.39% (or HRK 213.5m) MoM. This would mean that even though these loans increased, they increased slower than the overall loan growth. The 3rd largest category of household loans, other loans (at 6.15% of the total), increased by 0.04% YoY (or HRK 40m), while on an MoM basis, they decreased by 0.59%, (or HRK -53.6m).
Composition of Croatian loans to households (HRKm)
Overall, the situation in the Croatian financial system, when it comes to loans, is currently positive, despite the geopolitical, macroeconomic, inflation, and cost pressures. Given that the current gas situation in Europe is extremely volatile, this could possibly change. However, it should also be noted that as Croatia is poised to enter the euro-zone in January 2023, this does currently put it in a relatively good position, especially financially.
