By the end of January 2024, the total equity turnover on ZSE further grew by 7% MoM, and a much as 78% YoY. At the same time, the main index on the exchange, CROBEX, increased by 5.2% MoM and amounted to 2,665,94 points.

During January 2024, the equity turnover on the Zagreb Stock Exchange, ZSE, picked up pace significantly, both on an MoM and YoY basis. As such, during the month, the total equity turnover amounted to EUR 29.7m, further increasing by 7% MoM, and noting a strong 78% YoY growth. Furthermore, equity block turnover amounted to EUR 2.4m. Excluding the block trades, the total equity turnover during January amounted to EUR 27.3m. As such, the average daily turnover also picked up, amounting to EUR 1.3m during January.

Monthly equity turnover on ZSE (January 2022 – January 2023)

Source: ZSE, InterCapital Research

In terms of the most traded stocks, Ericsson NT leads the way at EUR 3.2m, or 10.9% of the total equity turnover. Following Ericsson NT, there is Podravka ad HPB, both at EUR 3m, or 9.9% of total equity turnover. ZABA is to follow at EUR 2.7m, or 9.1%, Atlantska Plovidba, at EUR 2.4m, or 8%, and Span at EUR 2.3m, or 7.7% of total turnover on ZSE. Together, the top 5 most traded stocks made up 47.9% of the total equity turnover during January, while the top 10 most traded stocks made up 77.6%. This is in sharp contrast to the Ljubljana Stock Exchange, where trading is concentrated to a high degree in the first 5, and especially the first 10 most traded stocks. Of course, given the difference in the number of listed companies on ZSE/LJSE, this is to be expected.

Turning our attention to the performance of the Croatian blue chips, during January, the largest increase was recorded by ZABA with an increase of as much as 15.3% MoM, closely followed by both Končar’s subsidiary, Končar D&ST (pref.) and Končar Group with 15.1% and 12.3% MoM growth, respectively. Following them there is Ericsson NT, at 5.5%, Arena Hospitality Group and Adris (pref.) both at 4.6%, Podravka at 4% and HT at 2.2%. On the other hand, AD Plastik recorded a decline of 2.2%, while Atlantic Grupa  noted a decrease of 0.9%. Finally, HPB and Span remained flat during January. Overall, CROBEX noted a strong increase of 5.2% during months.

Performance of select Croatian companies (January 2024, MoM, %)

Source: Bloomberg, InterCapital Research

By the end of December 2023, the Croatian loan growth slowed down to only a 0.05% increase MoM, but still recorded an increase of 5.9% YoY, amounting to EUR 43.09bn. Interest rates across the largest loan categories are still increasing, although their growth has largely stabilized. In this overview, we’ll see how these categories developed.

According to the latest reports on the developments of the Croatian financial institutions published by the Croatian National Bank, loan growth has slowed down by the end of December, also leading to slower YoY growth. In fact, total loans of all Croatian financial institutions amounted to EUR 43.09bn, increasing by only 0.05% MoM, leading to a slowdown of YoY growth to 5.9% (November 2023: 6.7%, 2023 average excl. December: 7.7%). Breaking this development down further, households recorded total loans of EUR 21.7bn, growing by 0.4% MoM, and 9.1% YoY. On the other hand, total corporate loans amounted to EUR 14.6bn, growing by 0.1% MoM, and 5.8% YoY.

Corporate and household loan growth rates (January 2015 – December 2023, YoY, %)

Source: HNB, InterCapital Research

Delving into these categories further and starting with the corporate loans, out of the 3 main loan categories, i.e. working capital loans, investment loans, and other loans, two recorded an increase on the MoM basis, while 1 recorded a decrease. Working capital loans increased by 0.2% (or EUR 7.5m) MoM, investment loans grew by 1.4% (or EUR 78.8m) MoM, while the other loans’ category decreased by 1.1%, or EUR 46.5m. Meanwhile, on the YoY basis, all 3 of the loan categories increased. Investment loans increased the most, by EUR 364m, or 6.5%, followed by other loans at EUR 291m, or 7.4%, and working capital loans, at EUR 184m, or 4.3%.

Moving on to the household loans, growth on the MoM basis can still be seen in housing loans, which increased by EUR 78.7m, or 0.7%, and consumer loans, which grew by EUR 40m, or 0.5%. On the other hand, overdrafts on transaction accounts decreased by EUR 46m, or 5.6%, while the remaining categories remained roughly unchanged. A similar trend is present on a YoY basis, with housing loans increasing by EUR 975m, or 9.8%, and consumer loans growing by EUR 782m or 10.9%. Other loans’ category and mortgage loans also recorded a noteworthy increase, growing by EUR 76.8m (or 6.1%) and EUR 42.5m (or 14.4%) YoY, respectively.

Composition of Croatian loans to households (October 2011 – December 2023, EURm)

Source: HNB, InterCapital Research

 In terms of the interest rates on new loans, all 3 main categories, i.e. housing loans, consumer loans, and corporate loans recorded a YoY increase, while on the MoM basis, housing loans’ interest rates decreased, while in the other 2 categories, it still grew. Interest rates on new housing loans amounted to 3.6%, decreasing slightly by 0.04 p.p. MoM, but growing by 0.92 p.p. YoY. Consumer loan interest rates grew by 0.06 p.p. MoM, and 0.92 p.p. YoY, while corporate loan interest rates grew the most, by 0.13 p.p. MoM, and 1.83 p.p. YoY.

Average new housing and corporate loan interest rates (December 2011 – December 2023, %)

Source: HNB, InterCapital Research

For the most part, the demand for loans in Croatia has continued in 2023, although there is a clear trend of a slowdown. This, however, was not nearly as severe as in other European countries, where a slowdown in demand for loans was a lot stronger. Furthermore, the ECB decided to pause the interest rate hikes, and there are signals of a possibility of cuts in the summer of 2024. As such, interest rate growth should also stabilize or even dissipate, but one has to take into account the dynamics of the ECB key interest rates as related to loan interest rates: when the hikes started, loan interest rates did not start growing immediately, and as such there might still be a delay in the coming months where we could still see some slight increases in the rates. This will be especially true if there won’t be a stronger slowdown in demand. Furthermore, vice versa regarding ECB interest rate cuts is also true; even if they begin in the summer, it is unlikely that we will see a reduction in loan interest rates immediately, especially if the cuts are on the lower end ( -25 bps) after each ECB meeting.