Strong Deposit Growth in July Compared to June, Corporate Lending Slowed

The strong seasonal increase in total domestic deposits in July did not significantly affect the trend of slowing annual growth rates that began at the start of this year, following the introduction of the euro. On the other hand, total loans continued to grow strongly, primarily in the segment of housing and consumer lending to households, while corporate lending was subdued, as was the case in June, according to the new Commentary on the Movements of Loans and Deposits of the Croatian National Bank.

Strong Deposit Growth

The expected good financial results of the main part of the tourist season stimulated a strong seasonal increase in total domestic deposits in July, primarily from households and businesses. However, on an annual basis, their growth slowed, which can mainly be attributed to specific factors that increased deposits in the second half of the previous year. Total deposits thus increased by 1.5 billion euros (or 2.8 percent, based on transactions) in July.

Overnight deposits increased by one billion euros, while term deposits rose by 500 million euros. Sectorally observed, overnight deposits of households grew the most (500 million euros), followed by non-financial enterprises (400 million euros), while overnight deposits of other financial institutions grew more modestly (100 million euros). The growth of term deposits was primarily contributed by the non-financial enterprises sector (300 million euros) and, to a lesser extent, other financial institutions (100 million euros), while term deposits of households only slightly increased.

On an annual basis, total domestic deposits did slow their growth (from 5.8 percent in June to 5.2 percent in July, based on transactions) due to the base period effect, i.e., more pronounced growth in the same month of the previous year. Namely, mid-last year saw significant borrowing by enterprises following the rise in raw material and energy prices, as well as an increase in cash inflows to banks ahead of the euro’s introduction. Sectorally observed, deposits of non-financial enterprises and households slowed their annual growth from 8.2 percent in June to 5.4 percent in July, and from 7.4 percent in June to 7.2 percent in July (Figure 1).

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photo HNB

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Most Growth in Housing Loans

Total loans continued to grow in July (by 246 million euros or 0.7 percent) at a relatively strong pace, as in previous months. Housing loans recorded the strongest growth in the past year (158 million euros), reflecting a new round of government subsidies for housing loans, and cash non-purpose loans also saw a significant increase (67 million euros).

In the segment of loans to non-financial enterprises, investment loans increased, and to a lesser extent, loans for working capital. However, at the same time, loans for tourism, factoring, and shares in syndicated loans decreased, which dampened the overall increase in loans (27 million euros) to enterprises.

On an annual basis, the growth of loans to households continued to accelerate, from 6.6 percent in June to 6.9 percent in July (based on transactions), with the acceleration of growth in cash non-purpose loans (from 6.3 percent to 6.8 percent) and housing loans (from 9.2 percent to 9.5 percent). Loans to enterprises in July slowed their annual growth (from 13.5 percent to 10.8 percent), which led to a slowdown in the growth of total loans from 9.2 percent to 8.2 percent (Figure 2.).

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photo HNB

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