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15.12.2003

BA-CA analysis: Croatia's banking market moves closer to the EU

  • Reforms bear fruit.
  • Growth opportunities with room for consolidation.
  • Bank Austria Creditanstalt is the largest Austrian bank in Croatia.

Four years after the banking crisis in 1999, Croatia's banking industry is in good shape. Banks have adequate capital resources, they operate profitably and their efficiency is steadily increasing. On the whole, the restructuring and privatisation process in the banking sector is complete.

Nevertheless, economists at Bank Austria Creditanstalt (BA-CA) think that there is a need for further consolidation. "Cross-ownership structures and the large number of small banks with a regional business focus suggest that another wave of mergers will take place in the near future," says Marianne Kager, Chief Economist of Bank Austria Creditanstalt.

Further efforts will also be required for adjusting Croatian banking law to EU standards. "As Croatia intends to join the European Union, there is keen interest in implementing reforms," Marianne Kager adds. In this context, the outcome of the parliamentary elections held at the end of November 2003, which will probably result in a change in government, will probably not have an influence.

Eventful history
The road to an efficient banking market in Croatia was long. Against the background of the war in the Balkans following the disintegration of Yugoslavia, and given Croatia's political isolation under Franjo Tudjman, until the late 1990s only half-hearted attempts were made to restructure Croatia's banking market. But after the fundamental banking crisis in 1998 and 1999, Croatia launched comprehensive reforms in the area of bank privatisation and restructuring. In 1999 and 2000, almost all large state-owned banks were privatised. As a result, over 90 per cent of total assets in the banking industry were in foreign hands at the end of 2002. 

Today Zagrebacka Banka is the undisputed leader in the Croatian banking market, accounting for about one-quarter of the market as a whole. Privredna Banka Zagreb is in second place, with a market share of 18 per cent. Splitska Banka, a subsidiary of Bank Austria Creditanstalt, ranks third, with a market share of 9.1 per cent. This makes Bank Austria Creditanstalt the largest Austrian bank in Croatia.

Positive outlook
The Croatian banking market continues to enjoy good growth prospects. The level of intermediation (aggregate total assets of the banking industry expressed as a percentage of GDP) is just under one-half of the average level of intermediation in the European Union (200 per cent). This suggests further growth potential.

Against the background of measures which the National Bank has taken recently (capital required to be held if specific lending growth levels are exceeded) to dampen the rapid growth of loans, growth of the banking market and of the economy as a whole is slowing down for the time being. But this does not affect the good medium-term and long-term prospects.


 Table 1: The ten largest Croatian banks by total assets (as at 30 September 2003, in EUR million)

 Table 2: The Croatian banking market (1998 – 2002)

Enquiries: Bank Austria Creditanstalt Group Public Relations
Edith Holzer, tel. +43 (0)5 05 05-57126
e-mail: edith.holzer@ba-ca.com