At the end of November 2022, the loans of Croatian Financial Institutions amounted to EUR 40.2bn, representing an increase of 8.3% YoY, but a decrease of 0.45% MoM.
Recently, the Croatian National Bank, HNB, published the latest report on the changes recorded by the Croatian financial institutions, for the month of November 2022. According to the report, the total loans of Croatian financial institutions increased by 8.3% YoY and amounted to EUR 40.24bn. On a monthly basis, however, we do see a slight decrease of 0.45%, marking the first decrease since January 2022. This could be an indicator of the slowdown in loan issuance, as high inflation rates and the deterioration in the cost of living are having their influence. However, several more consecutive months of loan decreases are required to truly establish a trend.
Looking at the loan growth drivers, both household and corporate loans are continuing their growth. In fact, household loans amounted to EUR 19.8bn, representing an increase of 5.2% YoY or EUR 976m, while on a monthly basis, they increased by 0.35%, or EUR 70m. At the same time, corporate loans amounted to EUR 13.7bn, representing an increase of 21.9% YoY (or EUR 2.47bn), while on an MoM basis, they increased by 0.34%, or EUR 47m. If we were to look at the corporate loans more closely, we can see that investment loans remain the largest category, at EUR 5.51bn, (or 40.2%), representing an increase of 19% YoY (or HRK 866m), and 1.5% MoM (or EUR 83.6m). Following them, we have other loans, which increased by 27%, or EUR 833.7m, and amounted to EUR 3.87bn, or 28.2% of the total. On a monthly basis, they decreased by 0.7%, or EUR 26.4m. Finally, Working capital loans amounted to EUR 4.34bn, or 31.7% of the total, representing an increase of 21%, or EUR 767.8m YoY, but a decrease of 0.2%, or EUR 10.3m MoM.
The data from corporate loans is still quite encouraging, especially the data for investment loans, meaning that despite the current situation of high costs and inflation growth, companies are still continuing to invest in their operations. Even though the monthly data is less of a representation of companies’ operations, as requirements for new loans vary by industry and the current time/season, the decrease in working capital loans and other loans could be pointing towards two things: requirements for operations aren’t as high as they seemed to be, which could again be tied to the stabilization of energy prices; or companies are reducing their operations (albeit slightly) due to the recession fear.
Corporate and household loans growth rate (January 2015 – November 2022, %)
Source: HNB, InterCapital Research
Moving onto the household loans, the largest category is still the housing loans, at EUR 9.83bn, representing an increase of 9.81% YoY (or EUR 878.6m), and 0.68% MoM (or EUR 66.3m). Following them, we have consumer loans, at EUR 7.22bn, representing an increase of 2.1% YoY (or EUR 147.7m). On an MoM basis, they increased by 0.26%, or EUR 18.9m.
Composition of Croatian loans to households (October 2011 – November 2022, EURm)
Source: HNB, InterCapital Research
Even though Croatia is now part of the Eurozone, and as such looking at the loans issued in HRK will not make much sense when the data catch up, due to the c. 2-month delay in data delivery by the HNB, we can still see how the new loans and as such, the effective interest rates on those loans developed.
In November 2022, consumer loans in HRK issued to households had an effective interest rate of 6.46%, representing an increase of 1.11 p.p. YoY, but a decrease of 0.40 p.p. MoM. Housing loans issued in HRK had an effective interest rate of 3.79%, representing an increase of 0.53 p.p. YoY, and 0.14 p.p. MoM. Meanwhile, housing loans issued in EUR had an effective interest rate of 4%, representing an increase of 0.95 p.p. YoY, and 0.82 p.p. MoM. Consumer loans issued in EUR had an effective interest rate of 5.98%, which is an increase of 0.1 p.p. YoY, and 0.02 p.p. MoM.
Looking at the corporate clients, loans issued in EUR with the size of EUR 7.5m or lower, had an effective interest rate of 2.69%, representing an increase of 1.21 p.p. YoY, and 0.69 p.p. MoM. For loans that are larger than EUR 7.5m, the effective interest rate amounted to 2.42%, an increase of 1.64 p.p. YoY, and a decrease of 0.32 p.p. MoM.
Corporate and housing loans in EUR effective interest rates (January 2012 – November 2022, %)
Source: HNB, InterCapital Research
What all of this data can tell us, is that the loans being issued are still not slowing down, despite the macroeconomic situation. Furthermore, one should expect an increase in the interest rates, especially for new loans issued, as Croatia now being part of the Eurozone means that the reference interest rates are set up by the ECB, and as they were already increased and are expected to be increased even further, banks will have to issue loans at higher interest rates in order to maintain their margins.
