Bank Credit Placements Increased to 278 Billion Kuna

Recent data from the Croatian National Bank (HNB) indicates an increase in total bank credit placements in September by 3.8 billion kuna or 1.4 percent compared to the same period last year, with analysts from Raiffeisenbank Austria (RBA) noting that this is their highest growth since August 2012, primarily due to borrowing by the public sector.

According to HNB data, total bank credit placements at the end of September amounted to 278.7 billion kuna, što je za 192 milijuna kuna ili 0,1 posto više u odnosu na prethodni mjesec, odnosno za  3,8 milijardi kuna ili 1,4 posto više nego krajem rujna lani.

“The relative growth of total loans on an annual basis is the highest since August 2012, and is primarily a result of borrowing by the public sector,” emphasize RBA analysts.

Although loans to local government units recorded a decline on a monthly and annual basis in September, at the end of that month, loans to the central government reached 53.6 billion kuna, što je 15,8 posto više nego u istom lanjskom razdoblju, ističe se u analizi RBA.

“Although they recorded a decline on a monthly basis for the second consecutive month, the relatively strong double-digit annual growth rate of loans to the central government is the highest recorded in the last two years,” RBA explains.
In September, along with the positive effect of deleveraging by local units, the total debt of the public sector from domestic bank loans amounted to 57.8 billion kuna, što je za 7 milijardi kuna ili za 14 posto više u odnosu na isti mjesec lani, navodi se u analizi.

While loans to the government show a trend of growth on an annual basis, September data confirms the continuation of deleveraging in the private sector. Thus, loans to non-financial corporations at the end of that month amounted to 89.7 billion kuna, čineći trećinu ukupnih kredita. Uz tek blagi mjesečni rast od 103 milijuna kuna ili 0,1 posto, na godišnjoj razini su zabilježili smanjenje za 2,7 milijardi kuna ili 2,9 posto.

“Thus, in September, the continuation of the trend of annual decline in domestic loans to companies, which has been ongoing since mid-2012, was confirmed,” states the RBA analysis.

However, according to HNB data, the deleveraging of the corporate sector towards domestic banks occurs simultaneously with an increase in their foreign borrowing. Namely, despite improved financing conditions in the domestic financial market, as bank interest rates on loans to non-financial companies are at pre-crisis levels around 5 percent, some Croatian companies with higher credit ratings are utilizing more favorable foreign financing sources, thus substituting more expensive domestic bank financing, the RBA analysis emphasizes.

It is also noted that loans to the household sector at the end of September amounted to 126 billion kuna, što čini preko 45 posto udjela u strukturi ukupnih kredita. Premda su na mjesečnoj razini porasli za 493 milijuna kuna ili 0,4 posto, u odnosu na prošlogodišnji rujan krediti stanovništvu zabilježili su pad od 688 milijuna kuna ili 0,5 posto.
“Although in the first half of the year loans to the household sector recorded a slight recovery on an annual basis, during the third quarter, deleveraging in this sector again became evident, partly due to cross-currency changes,” RBA notes.

Namely, considering that over two-thirds of loans or 72.3 percent are tied and/or granted in foreign currency, the depreciation of the kuna against the euro – 0.1 percent on an annual basis and 1.2 percent monthly – statistically reduced the amount of loans expressed in kuna.

“By the end of the year, we expect the continuation of the trend of deleveraging in the private sector with a relatively high share of loans to the public sector,” conclude RBA analysts.