Due to unfavorable developments in the real sector, no significant increase in demand for loans is expected by the end of this year, especially not in the household sector, which is negatively affected by the decline in employment and disposable income. However, corporate lending could increase due to government measures, analysts at Raiffeisen Consulting believe.
According to the latest data from the Croatian National Bank (HNB), total loans at the end of March amounted to 257.4 billion kuna, što is 0.04 percent less than at the same time last year. On a monthly basis, however, there was an increase of 3.6 billion kuna, or 1.4 percent."However, the increase in the kuna amount of total loans was also contributed by the weakening of the euro against the švicarski frank, or indirectly the weakening of the kuna against the frank. Namely, the kuna’s depreciation against the frank of 2.1 percent on a monthly basis caused an increase in the kuna value of the loan portfolio related to the švicarski frank," analysts at Raiffeisen Consulting state in their analysis of the HNB’s report on lending. Although loans to households recorded a slight increase in March compared to February, they show a decline on an annual basis, marking the sixth consecutive month of decline. Loans to this sector amounted to 122.7 billion kuna at the end of March, što is 3.2 percent less than at the end of March last year and 0.4 percent more than at the end of February.
"The decline in creditworthiness due to the drop in employment and the reduction in disposable income of remaining employees negatively affects lending to households. Housing loans, whose share in total loans to households continues to increase, reaching 43.7 percent, still record low annual growth of 1.1 percent," write analysts at Raiffeisen Consulting. Corporate lending has slightly intensified, with loans to this sector reaching 101.4 billion kuna at the end of March. Loans to the government, which amounted to 32.1 billion kuna at the end of March, increased by 2.8 percent compared to last March, što is significantly lower annual growth than a year ago when the government financed rising obligations in the domestic market."Although the supply of loans should be more pronounced due to extremely high liquidity in the market, risk aversion and low demand limit the activity of the banking sector. Due to unfavorable developments in the real sector, we do not expect a significant increase in demand for loans by the end of this year. However, in the corporate sector, an increase in loans is possible due to government measures to support the economy, Model A and B, which should mitigate the riskiness of companies. On the other hand, unfavorable developments in the labor market and still relatively high levels of consumer pessimism will continue to affect lending to households, so the recovery of demand in this sector should be linked to a significant increase in employment," analysts at Raiffeisen Consulting state in their analysis. (H)
