As Novac/Marina Klepo writes, with the beginning of the tourist season, when Croatian companies working in the field of tourism and transport start generating income, the Croatian Banking Association believes that their creditworthiness will increase and that there will be no additional need for moratoriums.
Referring to the latest guidelines of the EBA, the EU banking regulatory body, on extending the moratorium to nine months, Zdenko Adrovic, the director of the Croatian Banking Association, stated that an expiration to that will take place on March the 31st this year, which means that the moratorium may last until the end of 2021.
¨I believe that this should be long enough, provided that everything starts to return to normal in the next few months,¨ said Zdenko Adrovic during a presentation. However, he added that he will have a much better picture of the state of Croatian companies and what happened in regard to the economy at the end of June. Whether the moratorium will be extended, obviously, will depend on further instructions from the EBA, but what is quite likely is that the share of so-called bad loans/credit will continue to grow, as well as banks’ provisions for value adjustments.
The importance of support
The year of the coronavirus crisis in regard to the banking system, according to Zdenko Adrovic of the Croatian Banking Association, will be remembered for three characteristic trends: the growth of deposits, stable interest rates and the growth of loans. Back in January this year, household deposits were seven percent higher than they were in the same month last year, and compared to the end of 2019, they increased by as much as 15.6 billion kuna.
Profit and capitalisation
As expected, the public health crisis led to a deterioration in overall bank performance, with their profits more than halved last year (down 53.3 percent). Their net interest income decreased by 5.7 percent, and income from fees and commissions down by 10.5 percent. Banks responded to the decline in income with better cost management, but “costs are more rigid than income and cannot be reduced at the same pace.” Despite this, Croatian banks remain “among the best capitalised banks in the world”. The total capital ratio of 24.9 percent and the entry into the banking union in parallel with the entry into ERM II “guarantees stability, transition through the crisis and the readiness of banks to respond to the increased demand expected by offering new loans in the period ahead as we exit this crisis.¨
