Comments on banking system developments in 2023

Published: 29/2/2024

In 2023, total assets of credit institutions increased by 3.5% from the end of 2022 and stood at EUR 78.6bn. Most credit institutions’ assets increased. The number of credit institutions dropped to twenty in 2023 due to the merger by acquisition of Nova hrvatska banka d.d. with Hrvatska poštanska banka d.d. in July that year.

Total loans and advances grew by 2.0% relative to the end of 2022, whereas non-performing loans (NPLs) decreased by 11.4%. Such developments were observed in both of the two most important sectors (household and non-financial corporations sectors), with the growth of total loans mainly driven by household loans and NPLs decreasing the most in the portfolio of loans to non-financial corporations.

As a result, the share of NPLs in total loans and advances fell from 3.0% to 2.6% at the end of 2023, continuing its years-long downward trend. The share of NPLs declined from 6.4% to 5.1% in the portfolio of loans to non-financial corporations and from 5.0% to 4.2% in the portfolio of household loans.

Credit institutions’ operations generated EUR 1.4bn in profit in 2023. Profitability indicators rose from the end of 2022. The return on assets (ROA) increased from 1.0% to 1.8% and return on equity (ROE) from 8.2% to 15.5%. This was due to a rise in profit for the year, driven by the strong growth of interest income, with a marked contribution to this growth coming from income from overnight deposits with the CNB.

The key indicators of banking system capitalisation remained high, while the banking system total capital ratio edged down to 23.6% due to a decrease in total capital and an increase in risk exposure. All credit institutions boasted total capital ratios exceeding the minimum prescribed ratio of 8%.

Credit institutions' liquidity measured by the liquidity coverage ratio (LCR) also remained very high. At the end of 2023, all credit institutions met the prescribed minimum liquidity requirements, with the average LCR standing at 238.1%.

Supervisory indicators