Friday, 15 April 2022

Nova Hrvatska Banka/New Croatian Bank Begins Operations

April the 15th, 2022 - Nova Hrvatska Banka, or the New Croatian Bank, is set to start operations formally within the wider Hrvatska postanska banka (HPB) group following a long and extensive rehabilitation process.

As Poslovni Dnevnik writes, after a record year in which it achieved the best net profit in history in the amount of 202 million kuna, asset growth of 27.9 billion kuna and a capital adequacy ratio of 25.7 percent, Hrvatska postanska banka successfully implemented another demanding project - the rehabilitation of Sberbank d.d., more precisely the future New Croatian Bank d.d.

The Council of the Croatian National Bank (CNB/HNB) has made a decision on the successful completion of the rehabilitation procedure, which will formally start the New Croatian Bank's operations as Nova hrvatska banka d.d. within the HPB group. With this takeover, the completion of the rehabilitation process and the merger of the New Croatian Bank, HPB is ultimately strengthening its future position here on the Croatian market. The rehabilitation process itself was completed in a short time and the bank has been stabilised and is operating successfully.

Implementing this demanding process is a new step in strengthening HPB's business overall. As a new member of the HPB group, the New Croatian Bank brings with it a significant customer base, a complementary portfolio and additional strength for business growth and further expansion.

"After the record result we had last year, we believe that the synergy effects will bring new benefits to our customers, shareholders and employees," said Marko Badurina, President of the Management Board of HPB.

The Management Board of the New Croatian Bank was appointed as follows: Tadija Vrdoljak, President of the Management Board, Boris Bekavac and Ognjen Brakus, members of the Management Board.

For more on Croatian banks and financial institutions, make sure to check out our dedicated business section.

Wednesday, 13 April 2022

Croatian Banks Continue to Create Stricter Loan Conditions

April the 13th, 2022 - Croatian banks are placing stricter and stricter conditions on those they provide loans to as rising interest rates are anticipated by the financial system.

As Marina Klepo/Jutarnji/Novac writes, in anticipation of rising interest rates, customers of Croatian banks are already noticing heightened caution, and loan offers are somewhat less "generous", especially when it comes to cash loans. As such, some clients have been noticing quite an unusual trend - larger Croatian banks refer them to smaller ones, which have less rigorous procedures, and often lower interest rates.

The Croatian National Bank's comparative list of credit terms shows that "cash" can now be obtained in sixteen different banks, but only half of them, the smaller and medium-sized ones, actually offer fixed and variable interest rates. Today, all large Croatian banks are approving these loans exclusively at a fixed interest rate.

In an effort to protect themselves from increased repayment installments, many people over more recent years have decided to take out loans with fixed interest rates, not only for long-term housing loans, but also for non-purpose cash loans, which are now mostly being approved for a period of ten years. Over the past year and a half, judging by the Croatian National Bank's comparative list, it's fairly clear that large banks have eliminated variable interest rates that were more favourable. The reason for this could be the effort to keep the existing, very high interest rates, as they are.

In the case of kuna cash loans, the fixed interest rate effectively (with all costs) ranges from 5.5 percent, as offered by two small Croatian banks, Imex and Karlovacka banka, to as much as 7.32 percent in Zagrebacka banka and 7.49 percent in Samoborska banka. Since October last year, Croatian banks have slightly revised their fixed interest rates, some are higher, some are lower. For Zagrebacka banka, for example, their interest rate was raised from 7.16 to 7.32 percent, for RBA it was lowered from 7.42 to 6.9 percent, while a number of banks kept about the same figures.

The real boom in approving these loans occurred back in 2018 and 2019, when they increased by about 5.5 billion kuna per year. Today, the total amount of these loans, according to the Croatian National Bank for the month of February 2022, reached 53.4 billion kuna, while the amount of housing loans amounted to 68.3 billion kuna.

Who are the clients of Croatian banks who are taking out cash loans? A recent Croatian National Bank survey "Which loans do we take? A microanalysis of Croatian household debt" shows that more expensive loans are more often used by households whose income isn't sufficient to finance their current consumption. It's very likely, the study concludes, that some households use “unsecured loans” to consolidate overdrafts or credit card debts, and for most households these efforts have proved unsuccessful. In the end, they end up with even more indebtedness.

In some cases, people took out cash loans and to, at least in part, finance the purchase of properties. Since the beginning of the coronavirus pandemic, interest in cash loans has fallen sharply and banks have approved many more housing loans. According to the latest Croatian National Bank data for that same month of February, housing loans were eight percent higher than they were back in the same month last year, slightly slower than they were in January, when the growth rate was 8.4 percent, and non-purpose cash loans accelerated slightly, from 3.3 to 3.4 percent.

When it comes to housing loans, Croatian banks still offer all kinds of interest rates, and they generally range from three to four percent. Those who need a smaller amount, up to 500,000 kuna, can currently get the best loan from the Istrian Credit Bank.

For more, check out our lifestyle section.

Monday, 7 March 2022

RBA Marks Down Forecast of Croatia's 2022 GDP Growth to 4%

7 March 2022 - Raiffeisenbank Austria (RBA) analysts on Monday revised down their estimate of Croatia's economic growth in 2022 from 4.4% to 4%, underscoring uncertainty and negative risks, particularly regarding investments.

The analysts said that in light of the war in Ukraine and growing uncertainty, their forecast for the euro area economy has been marked down by 0.7 percentage points to 3.3%.

"The expected trends will have a negative, albeit a limited impact on Croatia's GDP. In the scenario that excludes the possibility of the war spreading to other countries of the EU and/or Western Balkans and implies, at least for the time being, that the tourism season will be successful, the forecast for the real annual GDP growth rate for 2002 has been revised from 4.4% to 4%," the analysts said.

The analysts however remain cautious, underscoring uncertainty and negative risks, particularly with regard to investments.

Inflation in 2022 at 4.9%

They also see a more significant risk in the spilling over of the global increase in energy and food prices, and have therefore revised up their inflation forecast.

RBA estimates that this year's inflation rate in Croatia will be 4.9% whereas previously it was forecast at 3.6%.

Data from the Croatian Bureau of Statistics (DZS) indicated an increase in inflation of 5.7% in January this year compared to January 2021, which is the highest increase since October 2008.

"We expect that this year will see stronger inflationary pressure, directly on food prices, and that the impact of price growth on producers will also affect consumers, which will negatively impact available income. In such circumstances we cannot rule out the possibility of additional fiscal support," the analysts said.

Thursday, 3 March 2022

Croatian HPB Takes Over Sberbank, Clients Can Breathe Easy

March the 3rd, 2022 - Following alarming reports of Zagreb and Split residents lining up outside Sberbank branches to withdraw any cash they had in accounts there after harsh sanctions were imposed by most of the world on Russia, the Croatian HPB has taken over and clients can now breathe easy.

As Poslovni Dnevnik writes, Croatian Sberbank clients' money is safe yet again, and business conditions remain unchanged. On Wednesday, March the 2nd, at 12:00, the bank opened its branches for all of its clients and continued its regular operations as part of the HPB Group,'' the statement reads.

"We reacted in an extremely short time and enabled our fellow citizens to freely deposit their funds. At the same time, the acquisition of Sberbank strengthens the Croatian HPB's future position on the market, which is great news for our employees and shareholders alike. As of today, our new clients can continue to use all of their financial services normally, without any restrictions, and as such I'd like to congratulate everyone who did their best to resolve this situation as soon as possible,'' said HPB CEO Marko Badurina.

The Croatian National Bank (CNB/HNB) announced earlier not so long before that that the Single Resolution Committee had made a decision on Tuesday, in co-operation with the Croatian National Bank as the national resolution authority, initiating the resolution process over Sberbank d.d. Zagreb, and the new owner is now the Croatian HPB (Hrvatska postanska banka).

HPB is one of the leading banks in the Republic of Croatia, and back in 2021 it achieved the best result in 30 years of the bank's history and a record net profit of 202 million kuna.

HPB pointed out that this bank is one of the leaders in innovation and digitalisation of the sector, and for many years it has stood out as the most active in the programme of subsidised housing APN loans.

For more, make sure to check out our lifestyle section.

Monday, 28 February 2022

New Zagrebacka Banka Instant Payment Option Introduced for Clients

February the 28th, 2022 - A brand new Zagrebacka banka instant payment service has been introduced for the clients of this Croatian bank, be they business or private customers.

As Poslovni Dnevnik writes, Zagrebacka banka has introduced a new instant payment service for all its private and business users who have transaction accounts with the bank, and the new Zagrebacka banka instant payment service will be able to be used for up to a maximum of 100,000 kuna. Instant payments in Croatia can be made in the Croatian national currency (kuna), and can be carried out every day, including during weekends, over bank holidays and on public holidays.

Clients of Zagrebacka banka will thus be able to execute their transactions in almost real time, meaning in just a few seconds. Instant payments are made by online banking via a mobile application (m-zaba) and the Internet (e-zaba), through existing forms of Zagrebacka bank account, and then by checking the ''instant payment'' option.

Filling out Zagrebacka banka instant payment orders will be exactly the same as it is with standard payment orders, and the payer can immediately see if their payment has been successfully completed and sent to the correct individual.

For example, if a client needs to pay money on Friday night to a person who has a transaction account with another bank, it would have been an issue owing to bank processing times. Until now, it would have been necessary to wait until Monday to see the money appear in the desired bank account.

Now, with the introduction of this new Zagrebacka banka instant payment service, the money heading for the recipient's account will be available immediately. Payments are made through NKSInst, a national clearing system for instant payments developed by the Financial Agency (Fina) and approved by the Croatian National Bank (CNB/HNB).

For more on Croatian banks and their services, make sure to check out our dedicated lifestyle section.

Wednesday, 16 February 2022

Central Bank Warns of Continued Financial Stability Risks

ZAGREB, 16 Feb 2022 - Financial stability risks remain increased compared to the period before the crisis due to uncertainties surrounding the end of the pandemic, rising inflation, residential real estate price hikes, and geopolitical risks, the Croatian National Bank (HNB) Council concluded on Wednesday.

The economy continued to grow in the last quarter of 2021, albeit at lesser intensity than previously in the year, with industrial production increasing, while the real retail turnover and construction stayed at Q3 levels, the HNB said in a press release.

In Q4 2021, employment continued to increase while the unemployment rate dropped, making their levels better than before the pandemic. Nominal pay growth also continued to accelerate, while inflation resulted in a decrease of the real pay average.

In December, the annual inflation rate increased to 5.5% from 4.8% in November. Higher food prices contributed the most to that. Together with energy prices, they are increasingly influencing inflation.

The continuation of expansionary monetary policy continues to stimulate the fall of banks' interest rates. Keeping interest rates on the money market at zero is accompanied by a mild increase in sovereign bond yields.

At the end of last year, bank lending increased 3.9% year on year, just as it did at the end of 2020. Household lending went up from 2.1% in December 2020 to 4.5% last December, primarily as a result of a strong increase in housing loans. Corporate lending decreased from 5.6% to 2.3%.

Although a strong economic recovery enabled a gradual revocation of government aid to businesses, new waves of the pandemic continue to cause problems in global supply chains, stimulating price growth.

Hence, there is a prominent risk of long-term inflationary pressures and higher inflation than currently forecast, which could prompt a faster and stronger tightening of the monetary policies of the largest monetary markets' central banks.

Increased volatility on financial markets at the start of this year is reflected in uncertainty about inflation trends, the evolution of monetary policies and expected interest rate growth.

Residential real estate prices increasingly further from fundamentals

Last year saw a strong increase in housing loans in Croatia as well as residential real estate prices, which went up to 9% in Q3. Those prices are moving further and further from long-term trends and macroeconomic fundamentals, increasing the risk of their fall in case of economic disruptions.

Increased household borrowing is accompanied by relatively mild borrowing standards which again this year, will be supported by government subsidies. These may, at the start of the repayment period, pose a smaller burden on borrowers but when the subsidies expire, they increase repayment costs as well as vulnerability to possible shocks.

In response to the continued accumulation of cyclical systemic risks, notably the rise in residential real estate prices and housing lending, the HNB has announced increasing the countercyclical capital buffer rate for Croatia from 0% to 0.5% as of 31 March 2023.

The aim is to set aside additional capital in time in order to boost the resilience of credit institutions to possible losses due to cyclical risks, the press release said.

For more, check out our business section.

Friday, 11 February 2022

Zagrebacka Banka Instant Payment Option to Make Life Easier for Clients

February the 11th, 2022 - The new Zagrebacka banka instant payment offer is likely to delight the popular bank's clients, making life much easier when sending money quickly and easily in amounts up to 100,000 kuna.

As Poslovni Dnevnik writes, the brand new Zagrebacka banka instant payment option has been introduced as a new service intended for all its private and business users who have transaction accounts. They can execute their payments with this new option up to a maximum of 100,000 kuna. Zagrebacka banka instant payment is available here in Croatia and are possible in kuna despite the country's impending Eurozone accession, and can also be carried out every day, including weekends, bank holidays and public holidays.

Clients of Zagrebacka banka will thus be able to execute their transactions in almost real time, meaning in just a few seconds. Zagrebacka banka instant payment transactions are made by online banking via the mobile application (m-zaba) and on the Internet (e-zaba), through existing forms of Zagrebacka banka accounts by checking the ''Instant payment/placanje'' option. Filling out Instant Payment orders is exactly the same as it is with standard orders, and the payer can immediately see if their payment has been successfully completed.

Let's say that a client needs to pay some money on Friday night to a person who has a transaction account with another bank. Until now, it would be necessary to wait until Monday to process such a payment. But with the introduction of this service, the money will be made available in the recipient's account immediately.

Payments are made through NKSInst, a national clearing system for instant payments developed by the Financial Agency (Fina) and approved by the Croatian National Bank.

Instant payments are possible between Zagrebacka banka and other banks included in the NKSInst system. The same applies to instant payments from other banks in the NKSInst system that are made to transaction accounts of Zagrebacka banka clients. Clients will be informed when preparing an order and choosing an instant option if the recipient's bank is not included in the NKSInst system, and they can check the list of all involved banks on Fina's website.

For more on Croatian banks, loans and services, make sure to check out our dedicated lifestyle section.

Saturday, 27 November 2021

80-100 Million Euro Costs for Croatian Banks to Switch to Euro

November the 27th, 2021 - Croatian banks will have a hefty sum on their hands as the country's Eurozone entry approaches. The costs of the transition alone are eye-watering.

As Poslovni Dnevnik/Jadranka Dozan writes, based on the Action Plan for the Adjustment of the Financial System to the Introduction of the Euro as the Official Currency, about a month ago the Croatian National Bank instructed commercial Croatian banks to prepare a simulation of the costs of adjusting to the euro.

Estimates of the expected effects on revenues and expenditures directly related to the adjustment process, from the beginning of this year to 12 months after the date of the introduction of the euro, must be submitted to the CNB by the end of this year.

According to the CNB's instructions, the simulation includes all points of the Action Plan related to the implementation of the conversion, the double reporting of prices, the notification of users and adjustments following the introduction of the euro.

Among other things, it should include all foreseeable costs of pre-supply, indirect pre-supply and the cost of additional processing and the transportation of cash and additional cash insurance in branches of Croatian banks, as well as all foreseeable costs related to changes in the operation of payment systems. In addition, Croatian banks are expected to calculate related to regulatory reporting requirements, but also with all the expected savings associated with the conversion.

On their behalf, the Croatian Association of Banks provided a rough estimate. "For the needs of the technical process of adjusting the banking system, one-time costs are estimated at between 80 and 100 million euros. In addition to the above, the turnover on the foreign exchange market of kuna/euro will stand at about one billion kuna per year,'' stated the director of HUB, Zdenko Adrovic. One-time costs related to the introduction of the euro, he says, are primarily related to the adjustment of information systems and ATM networks.

However, HUB emphasised that both Croatian banks and their clients will find it easier to manage any currency risk in the long run, which means that risks will generally be reduced, and the collectibility of placements will be higher on average than it would be if Croatia were to keep the kuna.

HUB also emphasised that the introduction of the euro is extremely important for increasing investment, financing conditions and long-term growth of the Croatian economy. They add that the technical introduction of the euro is a very complex process that requires intensive engagement and cooperation of all bank employees.

"Croatian banks will play an important role in the whole process, given that they'll adjust the software of their POS devices and digital services and the entire ATM network so that people have the opportunity to use all banking services and withdraw their cash from the moment the euro is introduced. In addition, banks will convert deposits and loans and inform their clients in a timely and detailed manner about all they need to know,'' they concluded.

In any case, despite the instructions of the CNB to Croatian banks, this year was largely marked by the preoccupation with the euro project and all of the related preparatory activities. Although the Government continues to insist on the "fast track" move, so the target date for entry into the Eurozone is still the 1st of January 2023 (the earliest possible date according to the rules related to ERM II), the exact date will be known only next year.

Whether it is the beginning, middle or end of the year, operational activities to replace the kuna require very careful coordination. This is especially true for IT system customisations, which also account for a large share of the aforementioned costs. Regarding technical and technological adjustments to the transition to the common European currency, it is enough to mention, for example, that the number of devices on which payment cards are accepted in Croatia exceeds 113 thousand.

Most of them, slightly less than 108 thousand, refer to EFTPOS devices for payments at points of sale, and despite the long-term trend of reducing the ATM network, there were almost 4900 ATMs at the beginning of this year. Like most other banks, Erste Bank says they're already working intensively on the euro adjustment process to prepare in time for the introduction of the new currency. In terms of costs, most of it relates to the IT segment.

For more, follow our politics section.

Wednesday, 27 October 2021

Zagrebačka Banka Makes HRK 1.07bn in Profit After Taxes

ZAGREB, 27 Oct 2021 - In the first nine months of 2021, Zagrebačka Banka generated HRK 1.07 billion in profit after taxes, up 22% on the year, according to an unconsolidated financial report released on Wednesday.

Operating revenue was HRK 2.8 billion, down 1.8% on the year, while operating costs were HRK 1.2 billion, up by HRK 9 million on the year. The cost-revenue ratio was 42.3%.

The bank's assets totaled HRK 131.3 billion, up 5.5% on the year, while net lending totalled HRK 68.6 billion, up by HRK 1.1 billion as a result of higher exposure to the government.

Client deposits were the primary source of financing and totalled HRK 106.9 billion, including a HRK 8.7 billion increase resulting mainly from household and corporate deposits.

Deposits by credit institutions were HRK 2.6 billion, down by HRK 3.1 billion.

According to a consolidated financial report for the first nine months of 2021, the Zagrebačka Banka Group generated HRK 1.28 billion in profit after taxes, up 16.2% on the year, the main contributors being Zagrebačka Banka, UniCredit Bank Mostar and UniCredit Leasing Croatia.

The group's operating revenue was HRK 3.6 billion, down 3.9% on the year, while operating costs were HRK 1.7 billion, down by HRK 4 million.

(€1 = HRK 7.5)

 

Thursday, 2 September 2021

Governor Says Legal Changes to Cut Banks' Revenue by More Than HRK 100mn Annually

ZAGREB, 2 Sept 2021 - Croatian National Bank (HNB) governor Boris Vujčić has said that the HNB's legal proposal is aimed at regulating tacit overdrafts the same way authorized overdrafts are regulated, which would result in greater consumer protection but also cause a drop in bank revenue of more than HRK 100 million annually.

Addressing a news conference on Thursday, Vujčić recalled the HNB's proposal for amendment of the Consumer Credit Act in the segment concerning authorized and tacit overdrafts. The HNB will agree to those changes with the government and it will also meet with bank representatives, Vujčić said, noting that the final form of the bill had still not been defined.

Vujčić said that the HNB completed a market analysis in Q1 2021 and that its findings, together with legal proposals, were presented to the Finance Ministry in April.

The analysis of the overdraft market was launched in 2020, showing that a large portion of overdrafts had changed from authorized to tacit overdrafts.

Vujčić stressed that the Consumer Credit Act, adopted much earlier, was designed to make tacit overdrafts an exception, but that when it was established that most overdrafts had turned into tacit overdrafts, a decision was made to impose the same regulation mechanism for those overdrafts as for authorized overdrafts.

In the case of authorized overdrafts, the effective interest rate is capped and banks have the obligation, when opting to cancel that service, to offer their client the possibility of repaying their debt in 12 installments.

"This legal proposal is an attempt to set a maximum effective interest rate (on tacit overdrafts) and make banks offer repayment in installments if their clients get into problems. Banks can do that now but they are not obliged to. In the future, they will have to do just that," said Vujčić.

He noted that the legal proposal was not about abolishing tacit overdrafts.

New agreements on tacit overdrafts will thus have to be limited to 90 days and HRK 1,500, and Vujčić said that the adoption of the new law could result in a drop in bank revenue of HRK 100 million annually, noting that that would depend on the final version of the bill, however, the estimate was not expected to change significantly.

Depending on the type of loan, wage, and overdraft amount, consumers would be able to save between HRK 150 and 450 a year.

Interest rates should reflect product-related risks 

Vujčić also said that of some 1,000 consumer complaints the HNB received in 2020, seven referred to tacit overdrafts, and when asked if the HNB could have reacted sooner, he said that this was not a problem previously as the effective interest rate on tacit overdrafts was not high.

The average effective interest rate for overdrafts grew in 2020 because banks raised their fees, not interest rates. "Before that, we did not have any reason to intervene, and now we do," he said.

Vujčić said that the matter was a very complex and sensitive one and that putting a cap on the interest rate was not, as believed by some, necessarily the best solution because it could exclude a large number of citizens from the market.

He noted that interest rates should reflect product-related risks and that in principle tacit overdrafts indeed entailed the most risk as there was no collateral and the client's creditworthiness was not checked, hence the high-interest rate.

He added that interest rates on tacit overdrafts in Croatia were lower on average than in EU countries that had not introduced the euro and higher than in those that were part of the euro area, but that that was not the case with other financial products.

Speaking of inflation, Vujčić said that there was no risk of very high inflation rates.

"However, in the euro area the inflation rate is slightly higher than forecast but we are still between 2% and 3%, which should not be worrying," he said.

For more on politics, follow TCN's dedicated page.

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