Banks: Croatia experiencing upsurge in business activity

NEWS 04.09.2018 17:09
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Source: Pixabay

Croatia is again experiencing an upsurge in business activity and the related credit growth, declining interest rates, and declining loan loss provisions, said the latest issue of the Croatian Banking Association (HUB) publication, Reviews, published on Tuesday.

“The recovery of all segments of lending, notably household lending, is taking place in the context of declining interest rates and interest margin. The interest margin has dropped to 2.80 percent, and interest rates on loans, including interest rates on housing loans, are moving within the euro zone range,” HUB said, adding that recovery of lending became evident in Q1 2018.

The rate of return on capital is around 9 percent, still below the global average, which is owing to significantly reduced risks that result in lower costs of loan loss provisions. Those costs have dropped from more than one billion kuna (€134.5 million) in Q2 2017, when the crisis in the Agrokor conglomerate broke out, to 322 million kuna (€43.3 million) in Q2 2018, HUB said.

“With a capital adequacy rate of about 22 percent, Croatian banks are among the best capitalised banks in the world, ready and capable of supporting the credit cycle growth for a long time to come,” HUB says.

HUB added that not enough emphasis was put on the fact that the Q2 GDP growth of 2.9 percent constituted a quarterly growth  of 1.1 percent and an annual growth of more than 4 percent, which was one of the fastest growing GDP rates in the EU in Q2, owing partly also to banks’ lending activity.