Comments on banking system developments in the first quarter of 2021

Published: 31/5/2021

In the first quarter of 2021, total assets of credit institutions increased by HRK 8.2bn (1.8%) from the end of 2020, standing at HRK 470.7bn. The largest increase was recorded in deposits with the Croatian National Bank and loans granted.

Total loans and advances increased by 2.0%, while non-performing loans (NPLs) dropped by 0.9%, with the result that the share of NPLs in total loans decreased from 5.4% at the end of 2020 to 5.3% at the end of the first quarter of 2021. NPLs in the household loan portfolio increased, with their share up from 7.1% to 7.2%. The trend in the portfolio of loans to non-financial corporations was the opposite: NPLs dropped and their share in loans granted to this sector decreased from 12.5% to 12.1%.

The operation of credit institutions in the first quarter of 2021 generated HRK 1.1bn in profit, which almost equals the profit generated in the same quarter of 2020. Profitability indicators grew from the end of 2020: return on assets (ROA) increased from 0.6% to 0.9% and return on equity (ROE) from 4.4% to 6.8%.

The key capital adequacy indicators of the banking system were further strengthened in the previous year as a result of the retained profit and targeted regulatory adjustments related to the pandemic. In the first quarter of 2021, these indicators remained at very high levels, with the banking system's total capital ratio amounting to 25.1%. All credit institutions boasted total capital ratios exceeding the minimum 8%.

Credit institutions' liquidity measured by the liquidity coverage ratio (LCR) also remained high. At the end of March 2021, all credit institutions met the prescribed minimum liquidity requirements, while the LCR stood at 187.3%.