ZAGREB, March 12 Lending by Croatia's
state-owned bank HBOR fell by almost 25 percent in 2013 as many
local firms in the newest European Union state struggled with
debts, its chief executive said on Wednesday.
However, net profit soared thanks to lower interest rate
payments to its creditors, Anton Kovacev said.
HBOR's 2013 net profit rose 41 percent year-on-year to 189.2
million kuna ($34.3 million). The bank extended loans worth 7.8
billion kuna in 2013 compared to 10.2 billion kuna a year
before, while its overall assets rose by two percent in 2013 to
26.2 billion kuna.
"The fall in crediting activity is mostly due to lower
demand for liquidity loans, while a considerable number of local
companies are in a pre-bankruptcy settlement procedure, which
reduces the overall demand for loans," Kovacev said.
The pre-bankruptcy settlement was devised by the current
government to help indebted companies strike a deal with
creditors and sustain healthy business instead of going bust. In
such settlements, part of the debt is written off.
There is plenty of liquidity in the local banking sector, 90
percent of which is in foreign hands, but local firms complain
that high risk aversion and unfavourable interest rates deter
Croatia has suffered five recession years in a row, shedding
more than 12 percent of economic output since 2008. Analysts
blame slow progress in tackling red tape, inflexible labour
rules, a high tax bite and excessive public spending.
This year the government projects growth of 0.2 percent,
while most analysts, including the International Monetary Fund,
see another contraction of up to one percent.
HBOR offers investment loans at interest rates ranging from
two to five percent, while the average level of local long-term
corporate loans is slightly over six percent.
HBOR said it had initiated talks with local banks, pension
funds and international financial institutions on creating a
local development-investment fund worth between one and two
"Companies that successfully complete a pre-bankruptcy
settlement cannot easily get a loan from commercial banks, so
this would be a way to help their business and economic growth,"
($1 = 5.5224 Croatian Kunas)
(Reporting by Igor Ilic; Editing by Zoran Radosavljevic/Ruth