ZAGREB, 13 July (Hina) - Croatia has issued two bonds, worth a total of €1.2 billion, on the domestic capital market to refinance a bond maturing in the second half of July.

The first bond, in the nominal amount of €400 million, falls due in 2026 and has a yield of 2.17%, while the second one, in the nominal amount of €800 million, matures in 2032 and has a yield of 3.47%, the Ministry of Finance announced in a statement on its website on Wednesday.

The proceeds will largely be used to refinance a €1 billion bond that falls due on 22 July and to finance the needs of the state budget. The Ministry noted that compared with the refinancing amount, nearly €36 million will be saved in interest annually.

By choosing the mid-and long-term maturity, the Ministry achieved the optimum level of demand on the domestic capital market, covering a wide range of institutional investors, including banks, mandatory and voluntary pension funds, insurance and investment funds, with more than 50 domestic institutional investors participating, the statement said.

Investors' interest exceeded €1.75 billion.

The Ministry said that the latest issue reaffirmed Croatia as an attractive issuer on the domestic capital market.

The issue was arranged by Erste & Steiermärkische Bank, OTP Bank, Privredna Banka Zagreb, Raiffeisenbank Austria and Zagrebačka Banka and co-arranged by Hrvatska Poštanska Banka.

For more, check out our politics section.

ZAGREB, 5 June 2022 - In the first quarter of 2022, banks in Croatia recorded a total profit of HRK 1.57 billion, up 46% on the year, the central bank said earlier this week.

The profit improved the indicators of banks' profitability in relation to the end of 2021, with the return on assets increasing from 1.2 to 1.25% at the end of March and the return on equity from 8.8 to 9.5%.

All 23 banks operated at a profit. The highest profit was generated by Zagrebačka Banka (HRK 618 million), followed by Erste (HRK 279.4m) and Privredna Banka Zagreb (HRK 227.5m).

In Q1 2022, credit institutions' assets totalled HRK 506.2 billion, up 1.1% from the end of 2021.

Zagrebačka Banka had the highest assets at the end of March (HRK134.3 billion, up 1.41% from the end of 2021), followed by Privredna Banka Zagreb (HRK 107bn, up 2.14%) and Erste (HRK 86.9bn, up 5%).

The key indicators of the banking system's capitalisation in Q1 2022 remained high. The system's total capital rate dropped to 25.6 from 25.9% at the end of 2011. All credit institutions had a higher total capital rate than the required 8% minimum.

(€1 = HRK 7.5)

For more, make sure to check out our dedicated business section.

March the 1st, 2022 - We recently wrote about Croatian Sberbank clients lining up outside Sberbank in Split and Zagreb to withdraw their cash as countries across Europe and the rest of the world imposed harsh sanctions on Russia following its recent invasion of Ukraine. How safe are Croatian Sberbank savings in reality?

As Poslovni Dnevnik/Ana Blaskovic writes, the sense of general nervousness over sanctions imposed against Russian banks by many countries has resulted in the aforementioned queues in front of Sberbank's branches in both Zagreb and Split as Croatian Sberbank savings are withdrawn. The Croatian Deposit Insurance Agency says, however that ''there is no reason to panic, Croatian Sberbank savings are safe regardless of the war and the sanctions''.

“The deposit insurance system has been in place for more than twenty years now, there is no reason to panic about deposits in any bank. At the moment, Sberbank Croatia has slightly more than 69,952 clients, of which 69,858 clients are insured and protected,'' said the director of the Agency, Marija Hrebac. All deposits up to 100,000 euros have been secured, and DAB currently has over 5.6 billion kuna at its disposal.

More about that can be read by clicking here.

The Croatian National Bank (CNB/HNB) has stated that the impact of the sanctions imposed against Russia following the invasion of Ukraine is divided.

"Given the first initial insight into European sanctions, Sberbank Croatia is not directly affected. However, there are also American sanctions, and under them are all institutions, including Sberbank Croatia,'' explained Vice Governor Michael Faulend, saying that the CNB will continue to look into all of the effects.

He said that the Croatian banking system was "very stable and well-capitalised and that it was important to emphasise that Sberbank occupies approximately two percent in this system. If something were to happen to the bank in an undesirable scenario, its impact on the financial system would not be so disruptive to overall relations,'' he assured those with Croatian Sberbank savings.

For more, check out our lifestyle section.

February the 26th, 2022 - Croatian Sberbank clients have begun withdrawing cash from their accounts held with the well known Russian bank following sanctions placed on the country as a result of its unjustified invasion of Ukraine.

As Poslovni Dnevnik/Ana Blaskovic writes, growing anxiety over sanctions against Russia and as such Russian banks, imposed by the West over the illegal invasion of Ukraine, sparked queues in front of Sberbank branches in the cities of Zagreb and Split on Friday as Croatian Sbernank clients waited to remove their money.

Fearing for their cash held in that bank, Croatian Sberbank clients began lining up to withdraw their money. The State Deposit Insurance Agency, under the auspices of the Ministry of Finance, convened an emergency press conference, telling people that their savings are safe regardless of the current tragic events in Ukraine and sanctions against Russia.

"I'd like to remind people about the deposit insurance system that has existed for more than 20 years now and that there's no reason to panic about deposits in any bank in that system, including those in Sberbank. Sberbank RH currently has slightly more than 69,952 clients, of which 69,858 clients are insured and protected,'' said the director of the Agency Marija Hrebac, noting that all deposits up to 100,000 euros are insured in case of a bank failure.

"Even if there were serious problems, theoretically, if all other systems failed, the Croatian deposit insurance system wouldn't fail and would certainly protect Croatia's financial stability. If the worst-case scenario occurs, we can pay off all Croatian Sberbank clients who have deposits of up to 100,000 held with Sberbank,'' said Hrebac, saying that there is approximately 3.8 billion kuna of insured savings in that Russian bank. She added that only about 80 clients are currently not protected, and they're primarily financial institutions.

"We have the funds at our disposal, if the worst-case scenario happens by chance, those who have saved with Sberbank will be able to access their funds, which they keep there," Hrebac emphasised. According to the Croatian National Bank (CNB/HNB), as of June the 30th, 2021, total deposits entrusted to Sberbank RH amounted to 9.5 billion kuna.

Sberbank itself previously said that they would continue to operate as usual. “Sberbank Croatia (RH) will be operating as usual, providing all products and services to all its clients. Sberbank Croatia is part of the Sberbank Europe Group - a European financial institution with a European banking license. We operate here on the local market, primarily at the service of Croatian Sberbank clients, under the regulation and supervision of the European Central Bank and the local Croatian National Bank,'' reads the statement on the website.

To briefly recall, back in November, the Russian Sberbank announced that it was withdrawing from the markets of Central and Eastern Europe. The bank's operations here in Croatia, Slovenia, Bosnia and Herzegovina, Serbia and Hungary were sold to Miodrag Kostic's group, known and often referred to be regional media as the "Serbian sugar king". The sale was agreed between Sberbank Europe on the one hand, and Belgrade's AIK Bank, Gorenjska Bank from Kranj and AEC Ltd. on the other.

The value of the transaction is unofficially estimated at 500m euros, and its completion and formal completion is expected later this year, provided regulators give the green light for it.

"Sberbank Europe AG has decided to reduce its geographical presence in the CEE region in order to focus on key markets," said the then-largest Russian bank, which has been under sanctions since 2014 over the Russian annexation of Crimea.

For more, check out our dedicated lifestyle section.

February the 16th, 2022 - Croatian National Bank economist Vedran Sosic has spoken out about interest rates and when prices in general might return to some form of normality.

As Poslovni Dnevnik writes, economist Vedran Sosic has stated that currently, inflation is expected to peak in the second quarter, after the peak of electricity and gas prices, and should calm down entirely by the end of the year. Raw material and energy prices have boosted inflation and it's normal that we're currently troubled by the price of oil, it is difficult to predict what will happen there. A slight descent is expected towards the end of the year, but all this is all still shrouded in uncertainty.

''Energy prices have quickly made their mark on prices being paid for fuel at the pumps, although we still have a limit on petrol prices, we'll see what happens with fuel costs in April - we have a package that should alleviate this spillover. Food is currently the largest contributor to inflation, with prices rising by around 8 percent, sometimes by even more. Producer food prices rose by about 4 percent, less than the case with retail. Traders say they're trying to take on part of the cost growth on margins, but according to statistics, it seems that margins haven't yet been reduced. A lot of what happened last year has already been absorbed in terms of prices, so that's something we shouldn't be seeing in the coming months,'' explained economist Vedran Sosic.

He also spoke to N1 and said that it is possible to use the growth of raw material prices to increase the price of the final product: "It's possible for that to happen. That is the greatest danger. Inflation is also a psychological phenomenon, the more we talk about it, the greater the risk that the inflationary spiral will roll, which is harder to bring back down again.''

"Interest rates will rise, but people can protect themselves now"

Commenting on interest rates on loans, CNB's main economist Vedran Sosic explained:

“Back in October last year, when it became apparent that inflation was going on, we warned people that interest rates would rise. The normalisation of monetary policy was expected, those expectations haven't really altered and so these jumps shouldn't be sudden. For the European Central Bank, the market expectation is about half a percentage point increase in interest rates. In some markets, this growth can be seen, Croatia borrowed more when it issued bonds, so the growth of interest rates is already visible.

Every loan is different - those that come with a fixed rate are protected. Those who have a variable, again, aren't the same as what's tied in with the interest rate. An increase of one to two percentage points for those who have a loan for a period of 20 years, could mean a 10 to 20 percent higher installment, that would of course be the worst case scenario - so about 400 kuna on a loan of 4,000 kuna. The suggestion to people is to look at what rates they have, maybe reprogramme things, change the bank… Let them ask personal bankers, inquire about protection, there's still time to change those loans.'' concluded economist Vedran Sosic.

For more, check out our dedicated lifestyle section.

ZAGREB, 31 January 2022 - In 2021, household loans went up by 4.5% to HRK 141.5 billion on the year on the back of a strong rise in housing loans, while household deposits went up by 9.2% to HRK 246.1 billion, the Croatian National Bank (HNB) said on Monday.

At the end of 2021, monetary institutions' lending to domestic sectors, except the central government, totalled HRK 245.8 billion, up 3.9% on the year.

Loans totalled HRK 238.9 billion, of which HRK 141.5 billion were household loans, HRK 86 billion were corporate loans, and HRK 11.4 billion were loans to other domestic sectors.

Housing loans totalled HRK 67.8 billion, up 9.2% from the end of 2020. Non-purpose cash loans went up by 2.3% to HRK 53 billion.

Loans to non-financial companies went up by 1%, as against a 6% increase at the end of 2020. Their bonds went up by 58.7%. Corporate loans went up by 2.3%, as against a 2.3% increase at the end of 2020.

Month on month, monetary institutions' lending in December 2021 was up by HRK 2.8 billion (+1.1%). Loans went up by HRK 1.7 billion (+0.7%). Loans to non-financial companies were up by HRK 1.4 billion (+1.6) and those to other domestic sectors by HRK 400 million (+3.6%).

Household loans decreased by HRK 100 million month on month, as did non-purpose cash loans, while housing loans increased by HRK 300 million.

At the end of 2021, deposits reached HRK 365.8 billion, up by 35.5 billion on the year (+10.8%). Money on transaction accounts increased by HRK 13.6 billion (+21%).

(€1 = HRK 7.5)

For more, check out our dedicated business section.

October the 18th, 2021 - As many as half of all Croatian ATMs could end up being put out of use as a result of incoming regulations which involve the safety and security of ATM machines.

As Poslovni Dnevnik writes, there are very many Croatian ATMs, and it's always quite amusing to be strolling through an ancient street steeped in history and come across an ATM lodged in the wall. While perhaps not always that tasteful, they're certainly handy.

The Republic of Croatia has 6,000 ATMs, and half of them could be shut down and removed due to the introduction of additional regulations for the protection and security of ATMs, as was reported by HTV's Potrosacki kod (Spender's code). That's a very large expense indeed for banks should it occur.

They have already abolished Croatian ATMs for which they estimated that the cost of their maintenance is greater than the benefit they have from the amount of turnover and the number of customers they get. According to these new regulations, greater security of the banking network is necessary in order to reduce criminal actions taking place at ATMs.

Banks should therefore invest several thousand euros into ATM security, and as a result of that expensive move, some have announced the withdrawal of some Croatian ATMs from use entirely, especially those in rural areas which simply can't afford such a security undertake.

However, not everything is so bleak and the banks are asking the Ministry of the Interior (MUP) for a compromise solution regarding the security of Croatian ATMs, because they are now investing 80 to 100 million euros into their IT systems in order to convert the kuna into the euro, which is necessary due to Croatian Eurozone accession, which is edging ever closer now.

The Ministry of the Interior says that it is prescribed that ATMs are protected by an electrochemical protection system which permanently marks and destroys banknotes in an attempted violent burglary. ATMs protected by this system already must bear a prominent indication of that type of protection in a visible place so that all users are aware of it.

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

ZAGREB, 8 Sept, 2021 - Finance Minister Zdravko Marić said on Wednesday a solution to current account overdrafts was expected in the days or weeks ahead and that it remained to be seen if the law would need to be amended.

He was speaking to the press after Prime Minister Andrej Plenković's meeting with representatives of banks' management boards, which was also attended by central bank (HNB) governor Boris Vujčić and Economy Minister Tomislav Ćorić.

Marić said the purpose of the meeting was to exchange information and views on current account overdrafts with a view to finding an adequate and satisfactory solution in which, he added, the government emphasised consumer protection.

He said several good proposals crystallised at the meeting, aimed at protecting social sensitivity, fairness, information and transparency as well as at reaching a solution under which authorised overdrafts would again dominate, as they are regulated by law in much more detail, much more clearly and transparently than tacit overdrafts.

The 2010 Consumer Credit Act recognises authorised and tacit overdrafts, but since 2018 the latter have become prevalent, accounting for almost 95% of all overdrafts, Marić said. Tacit overdrafts have been approved for almost 1.8 million consumers and are being exercised by 840,000.

That happened because under a central bank decision from the end of 2017, pursuant to European regulations, the calculation of the effective interest rate includes the fee for having a current account. As a result, authorised overdrafts became less available to lower income citizens and banks switched to tacit overdrafts.

Marić said a solution should be prompt but not rushed and to the benefit of all consumers. He told people living with tacit overdrafts that the government did not intend to nor would support a solution that would result in a drastic cancellation of overdrafts because that would put additional pressure on their everyday lives and livelihoods. "We'll dispel all fears that this instrument will be annulled and disappear."

A solution may be found by changing the decision within the central bank's remit, but if necessary, the law will be adjusted, he said, adding that if the former option was chosen, that would be known in the next few days, and in case of the latter, in the next few weeks. "We are really not talking about months."

The minister said it was necessary to continue to work on people's financial literacy as well as on product transparency.

Vujčić: The goal is that lowest income citizens don't lose current account overdraft option

The central bank governor said that since Croatia was the only country limiting effective interest rate on overdrafts, the inclusion of the current account fee in the rate as of 2018 resulted in the fee "swallowing" interest, primarily on small overdrafts.

He said that, for example, no interest was paid on overdrafts up to HRK 2,000 and a current account fee of HRK 12.

"We have several different regulations which produce such results and that should be put in order, so that for those with the lowest incomes, and consequently overdrafts, those products don't become unprofitable for banks and they start cancelling them."

Vujčić said the point was to return tacit overdrafts under the same regulations that applied to authorised overdrafts, without a certain number of people with the lowest incomes losing the overdraft option in the process.

"That's the point and that's what we'll do," he said, adding that it remained to be agreed on how to do it.

Croatian Banking Association (HUB) director Zdenko Adrović said that representatives of the banking sector spoke at the meeting about practices in other European countries, expressing hope that the new solution would be in line with those practices.

He stressed that there was no cap on the effective interest rate in other countries, so one of the proposals presented was for the cap on the effective interest rate to be removed and a cap on the nominal interest rate to be possibly introduced.

Adrović said that one of the proposals was for costs related to current account overdrafts to be calculated at "a slightly higher minimum amount", but noted that this was a technical solution that still had to be discussed with the HNB.

Asked by reporters how citizens would now be able to trust banks after they had switched their authorised overdrafts to tacit ones, Adrović claimed that everything was done in line with the law and that authorised and tacit overdrafts were two equal products.

He said that he "assumed" that a "vast majority" of citizens had been informed by their banks about tacit overdrafts, but that a large number of citizens, including himself, "relatively rarely" read notices about possible changes.

Marić: No reduction of VAT on food in 2022

Asked is VAT, including on food, would be lowered considering current price hikes, Finance Minister Marić said that the government had already reduced the VAT rate on some food products, including fresh meat and fish, and fruit and vegetables, and that it planned to reduce VAT on all food products during the current term in office.

But that will happen only after the necessary conditions are met, he stressed, noting that currently and in 2022 there was no fiscal room for such a move.

For more about politics in Croatia, follow TCN's dedicated page.

ZAGREB, 2 Sept 2021 - Attorney Nicole Kwiatkowski, who represented holders of loans previously pegged to the Swiss franc who won a class action against banks, said on Thursday that banks would not cancel tacit overdrafts abruptly.

"That is not something banks could afford because... this case indicates very non-transparent behaviour by the banks with regard to tacit overdrafts, and I think (cancelling tacit overdrafts) would be too big a reputation risk," Kwiatkowski said in a comment on the Croatian National Bank's initiative to change regulations on overdraft to cap the interest rate on tacit overdrafts.

Bank clients in Croatia who use authorised overdraft have in the past two and a half years been charged HRK 350 million more than they should have, Jutarnji List daily reported in early August.

Clients using overdraft in their current accounts should be charged a maximum interest rate of 7.61% by their banks, however, banks have found a way to charge them close to 10%, without clients even being aware of it, the daily said.

Asked if there were grounds to sue banks and if they had mislead their clients, the attorney said that a decision on that could be made on a case-by-case basis.

"If a bank, having approved a tacit overdraft failed to inform its client of it and of the interest charged and the period during which it would be charged, there would be grounds to seek damages regarding the interest rate on overdraft," she said.

Kwiatkowski noted that the central bank should have reacted sooner because authorised overdraft was almost no longer a bank product, with banks having approved only tacit overdrafts.

The state should have controlled banking transactions more regularly to see what banks were offering their clients, she said.

For more on politics, CLICK HERE.

ZAGREB, 5 June 2021 - Sberbank CEO Herman Gref has said the Russian bank's goal with Croatian conglomerate Fortenova Group is to increase its value and exit without losses in the next two years, as reported by the Moscow newspaper Vedomosti, the Jutarnji List daily reported on Saturday.

Gref was speaking about that at an international economic forum in Saint Petersburg and his announcement that Sberbank will sell its share in Fortenova within two years has been carried by Bloomberg, citing the Russian news agency RIA.

Sberbank was the biggest creditor of Croatia's now-defunct conglomerate Agrokor with €1.1 billion and now holds 44% in Fortenova Group, which was formed in April 2019 following a settlement reached by Agrokor's creditors.

Fortenova's consolidated revenue in 2020 totalled HRK 21 billion, while EBITDA was HRK 1.3 billion. It employs 50,000 people and is probably the biggest employer in the region.

Asked for a comment, Fortenova chairman of the board of directors Maksim Poletaev said on Friday that Gref's announcement was a continuation of what Sberbank had been saying since Agrokor was restructured and Fortenova Group was formed.

As a financial investor, Sberbank plans to sell its stake when the company's value grows, he added.

(€1 = HRK 7.5)

For more, follow our dedicated business section.