In September, the decline in loans to companies continued on an annual basis

Data from the Croatian National Bank (HNB) shows that in September, loans to companies for working capital and investments fell by 4.7 percent year-on-year, to 65.8 billion kuna, continuing the decline in these loans that has been ongoing since May 2012, reported analysts from Raiffeisenbank Austria (RBA).

During the first nine months of this year, total loans to companies for working capital and investments decreased by 1.5 billion kuna compared to the end of last year, or by 2.2 percent, according to RBA’s commentary on HNB data.

“The latter is a result of the continuous deleveraging present in both groups of earmarked loans to non-financial trading companies, which has been evident since mid-2012, with two sporadic exceptions in working loans,” emphasize RBA analysts.

Total loans to companies for working capital at the end of September fell to 34.8 billion kuna, recording a monthly and annual decline of 1.3 percent and 3.2 percent, respectively.

At the same time, loans to companies intended for investments in September amounted to 31 billion kuna, which is a monthly decline of 0.5 percent, while on an annual basis they continued to decline by 2 billion kuna or 6.3 percent.

Looking at the currency structure, the latest data shows that since February of this year, there has been a trend of annual growth in kuna loans to companies for working capital and investments, while at the same time, foreign currency loans to companies, including kuna loans with a currency clause, continue to record a decline on an annual basis, RBA points out.

Consequently, they add, the share of kuna loans in total loans to companies for working capital and investments has increased, reaching 36.9 percent at the end of September, which is 4.4 percentage points higher compared to the end of last year.

The latter confirms the growing tendency of companies to borrow in the domestic currency, which has been visible over the last two years, RBA emphasizes.

They add that the reduction in the cost of borrowing in kuna decreases the attractiveness of alternative borrowing in euros, thereby increasing the demand for kuna loans granted by local banks.

“An additional incentive for increased demand for loans in the domestic currency comes from the expansive monetary measures of the HNB through repo and structural operations. This should increase the medium-term supply of kuna sources at more competitive prices, therefore, in the upcoming period, we expect a continuation of the growth of borrowing by companies in kuna from domestic banks, while simultaneously reducing the share of direct borrowing from abroad,” conclude RBA analysts.