The year 2013 was not a propitious one for Croatia or its banking industry. As the country’s gross domestic product (GDP) sank for a fifth successive year, its banks remained in the black but saw profits tumble 73% to Hrk757m (€99m), according to the Croatian National Bank.
Naturally, the two are linked, says Alen Kovac, chief economist at Erste Bank Croatia. “There are two key drivers, one being the lengthy recession and the NPLs [non-performing loans] coming from economic activity. There are also one-offs, one being the new pre-bankruptcy procedure allowing some debt relief, which has increased the dynamics of NPLs affecting banks. The other one-off is regulatory, because the central bank has demanded that the banks have higher provisioning for their NPLs.”
