Page 94 - SE Outlook Regions 2023

The country became part of the eurozone on January 1, 2023. Several
months earlier, the authorities started preparations, including with
information campaigns. In December, banks started selling euro coins
starter kits.

Croatian commercial banks remained profitable through 2022.
According to the latest available central bank data, the total profit of
Croatian commercial banks increased by 20% compared to
end-December 2021 to HRK5bn (€660mn) in the first nine months of
2022.

The total assets of Croatian banks increased by 10.1% compared to
end-December to HRK551.4bn through September.

Loans and advances increased by 9% from end-December, while
non-performing loans (NPLs) decreased by 17.1% compared to six
months ago. The share of NPLs fell further to 3.3% at the end of
September from 4.3% at the end of December.

The share of NPLs fell in both the portfolio of loans to non-financial
corporations (to 6.5% from 9.9%) and in the portfolio of loans to
households (to 5.5% from 6.6%).

Commercial banks’ return on assets (ROA) increased slightly at the end
of September to 1.3% from 1.2% at the end of 2021, while return on
equity (ROE) rose to 10.2% from 8.8%.

The total capital ratio of the banking system edged down from 25.9% at
the end of 2021 to 24.0%. All credit institutions boasted total capital
ratios in excess of the minimum prescribed of 8%.

The liquidity measured by the liquidity coverage ratio (LCR) remained
high at 198.8% on average with all commercial banks meeting the
prescribed minimum liquidity requirements.

At the end of November, the European Investment Fund (EIF) signed a
€50mn guarantee agreement with Erste Bank Croatia under the
InvestEU Fund to back sustainability, innovation and digitalisation of
local SMEs, as well as the development of the cultural and creative
sectors.

The financing will support SMEs and mid-caps to introduce more
sustainable, climate-friendly technologies and operating practices. It will
also back innovation and digital transformation by securing easier
access to finance for research and technologically-driven companies.

3.4.3 Industry

Croatia’s industry was affected by the disruptions in global supply
chains caused by the Russian war in Ukraine.

In March, oil and gas company INA said it planned to invest HRK4bn
(€530mn) in the upgrade of its refinery at Rijeka in a project that should
be completed by the end of 2023. The project envisages construction of

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