In 2017, interest rates on loans decreased by between 0.5% and 0.6% in nominal terms, the largest decrease in the last ten years. Interest rates on housing loans, which account for most household loans, fell from 4.56% to 3.90% on average, which is also the largest drop in the last decade.
"In Croatia, we have seen a delayed reaction, a delayed exit from the recession. After this adjustment in 2017, Croatia actually joined its peers in terms of levels of interest rates," HUB director Zdenko Adrovic said.
Banks' net profit fell by 30%, from HRK 5.1 billion 2016 to about HRK 3.6 billion in 2017, mostly as a result of costs of value adjustment and provisions due to the Agrokor crisis.
Adrovic said that no increases in loan loss provisions were expected this year. He said that the main question was what would happen with Agrokor, adding that everyone was hoping for a settlement.
He said that last year banks' operations were marked by tougher competition which prevented a more perceptible reduction of operating costs. He said that only increases in the volume could result in considerably higher revenues in the future.
Non-performing loans have seen the biggest decline since the outbreak of the financial crisis. Last year bad loans reached HRK 8.4 billion and 70% of them related to companies.
As for the liquidity of the banking system, Adrovic said that the reserve requirements rate was 12% and was basically the highest in the European Union. "We have an old-fashioned and rigid system that does not suit the needs of either the banking system or the economy. That's why more than 50 million kuna is still blocked with the central bank. In that regard, there is a great reserve of liquidity," he said.
Adrovic said it was difficult to predict a possible rise in lending this year given that the economy grew just 2% in the last quarter of 2017, there was a lack of investment and the chief GDP driver was personal consumption.