Comments on banking system developments in the first half of 2021

Published: 30/8/2021

In the first half of 2021 the total assets of credit institutions rose from the end of 2020 by HRK 15.5bn (3.4%) and stood at HRK 478.0bn. Deposits with the Croatian National Bank and loans and advances granted accounted for the bulk of the increase in assets.

The increase in total loans and advances of 3.2% (gross amount) and the decrease in non-performing loans (NPLs) of 3.5% resulted in a further decline in the share of NPLs in total loans, from 5.4% at the end of 2020 to 5.1% at the end of the first half of 2021. The decline in total NPLs was driven by their decline in non-financial corporations, with the share of this sector’s NPLs in loans falling from 12.5% to 11.6%. NPLs continued to rise in the portfolio of household loans, however, owing to a rise in loans and advances to that sector, the share of NPLs held steady at 7.1%.

At the end of the first half of 2021, the operations of credit institutions generated a profit of HRK 2.6bn, an increase of 51.3% from the same period of 2020. As a result, profitability indicators rose relative to their value at the end of the same period of last year. The return on assets (ROA) thus rose from 0.8% to 1.1% and return on equity (ROE) rose from 5.6% to 8.1%.

The effects of last year’s retained profit and targeted regulatory adjustments related to the pandemic continue to be mirrored in very high values of key indicators of banking system capitalisation. At the end of the first half of 2021, total capital ratio of the banking system stood at 25.4% with all credit institutions maintaining total capital ratios above the minimum of 8%.

Banking system liquidity measured by the liquidity coverage ratio (LCR) continues to be high (186.0%), with all credit institutions meeting the minimum liquidity requirements.