Companies Requested Moratoriums or Refinancing for Loans Worth Up to 29 Billion Kuna

Banks in Croatia have maintained credit activity approximately at pre-crisis levels, and by the end of July, bank placements increased by 3.8 percent year-on-year, while legal entities requested moratoriums or refinancing for about 29 billion kuna, and citizens for 9.3 billion kuna, according to HUB data.  

"Data on credit activity as of July shows that the outbreak of the pandemic and recession in Croatia did not lead to a reduction in credit activity. Total bank placements amounted to 234.3 billion kuna at the end of July, which is 3.8 percent higher than in July 2019. The simple average year-on-year growth rate for the first seven months of this year also stood at 3.8 percent, while the same indicator for the first seven months of 2019 was 2.7 percent," according to the Croatian Banking Association (HUB) in a publication released on Wednesday. 

According to data from that publication titled "Banks in Croatia Maintain Credit Activity Despite the Pandemic," total loans approved to households amounted to around 135 billion kuna at the end of July, which is 4.1 percent higher than in July last year and 0.5 percent higher than before the outbreak of the Covid-19 crisis at the end of February.

HUB notes that credit growth in some market segments has accelerated, such as in housing loans to the population, which recorded a high growth of 8.8 percent compared to July last year. The maintenance of this segment of credit activity during the crisis, they say at HUB, is evidenced by the change rate compared to the last pre-crisis month of February, which stands at 3.4 percent.

"Data shows that this year, due to market activity, the share of housing loans in total loans to the population has significantly increased (from 43.1 percent to 44.3 percent), while the share of pure kuna housing loans has also increased (from 30.5 percent to 31.3 percent)," it is emphasized in the statement.

According to HUB’s tables, at the end of July this year, housing loans reached an amount of 59.8 billion kuna. Of this, 18.7 billion kuna relates to pure kuna housing loans, while 41.1 billion kuna relates to loans with a currency clause, of which the largest part, 40.5 billion kuna, is housing loans tied to the euro.

Loans to Companies Grew by 5 Percent

Loans to companies amounted to 85.6 billion kuna at the end of July, which is 5 percent higher than in July 2019, and 2.2 percent higher than before the outbreak of the pandemic in February.

"Loans surged at the very beginning of the lockdown in March when many companies rushed for liquidity loans to better cope with the closure of economic activities," HUB notes.

The banking association also reminds that credit activity can be measured in several ways – through the total placements in bank balance sheets, through the state of loans by individual sectors, with the help of the amount of newly approved loans, and through the calculation of credit transactions.

"The mentioned measurement methods point to the same conclusion – after the onset of the crisis in March 2020, banks maintained credit activity approximately at pre-crisis levels, and in some market segments, such as housing loans to the population, credit growth has accelerated," HUB emphasizes.

They also note that loan balances in balance sheets often do not reflect the real picture due to changing repayment dynamics, valuation effects, and sales of credit portfolios. They state that gross newly approved loans to companies from March to July reached 64.4 billion kuna, which is as much as 31.2 percent higher than gross newly approved loans in the same period last year.

"Banks have satisfied the sharply increased demand for short-term liquidity loans, part of which has since been repaid, as well as the demand for refinancing older loans. Hence the significant difference between the growth rates of newly approved (flow) and net loans in the consolidated balance sheet of the banking system (stock)," they explain from HUB.

Companies Requested Moratoriums and Refinancing

In contrast, they add, in the household sector, there was no increased reliance on short-term sources of financing (overdrafts, credit cards, etc.), and the gross flow of newly approved loans in the same period slightly decreased by about 1 percent. Companies requested moratoriums or refinancing for 29 billion kuna, citizens for 9.3 billion kuna.

HUB also notes that loans to households were also "under weaker influence from requests for moratoriums and refinancing in recent months."

Citing data from the Croatian National Bank (HNB), HUB states that legal entities requested moratoriums or refinancing for exposures amounting to about 29 billion kuna by the end of July, of which special measures were approved in the amount of 24.8 billion or 85.6 percent of the total requested amount and 29 percent of the total portfolio of loans to non-financial companies.

Citizens submitted requests amounting to a much smaller 9.3 billion kuna, of which measures were approved for exposures amounting to 7.7 billion kuna or 82.8 percent of the total requested amount and 5.7 percent of total credit exposure. The remaining requests were not all rejected but were mostly in processing at the time of collecting statistics, HUB notes.

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