Due to the long-term insolvency issues that burden almost one in three business in Croatia, commercial courts are getting ready for a wave of bankruptcies in liquidations in 2012. The cleaning of the market from companies that meet the conditions for elimination will be done in several groups.

About 5,000 companies do not even have a business account. Also, some 14,000 companies that meet the terms for deletion based on the Court Registry Act will also be deleted. After that, several dozen thousands short bankruptcy proceedings will be launched in insolvent companies that have little or no assets. In worst case scenario, the market cleaning could result with up to 46,000 bankruptcies in 2012.
(www.banka.hr, Poslovni dnevnik)

28.12.2011 | Author/Source PressCut

Interest income was increased by 25.9 percent, while commission and fees income rose 12.2 percent

09.12.2011

The processing industry operated with the highest gross profit, overtaking commerce

Croatia will enter the European Union in 2013 even if it doesn’t fulfill the remaining obligations by then, primarily the one about the sale of shipyards, Paul Vandoren said

As the year is coming to a close, the activity in the financial markets is subsiding, so the last week brought no surprises in the money market. There was no need for a treasury bills auction of the Ministry of Finance, while interest rates for t-bills with a maturity up to three months had a mild downward tendency.

On the other hand, interest rates on the opposite end of the ZIBOR are still at relatively high levels, thus reflecting lack of trading and caution by investors. The liquidity in the system is still high (close to HRK 5bn), but a clear message by the Central Bank that it will stay committed to the policy of stable kuna does not exclude the possibility of withdrawing a part of the liquidity in case of stronger depreciation pressures.
Author/Source PressCut - (RBA analysts)

Croatia’s tourism industry welcomes the new government and new tourism minister Veljko Ostojic with relatively high expectations, which include a tourism strategy, an adequate VAT rate, smart privatization, and labor rights.

Companies expect next year to be even more demanding. In statements given to the Croatian news agency HINA they said they were willing to work with the new government and minister to solve the issues that burden the sector and make it uncompetitive. The hotel industry has earlier requested the VAT rate to be reduced to 8 percent for all the services in tourism.
Author/Source PressCut - (Poslovni.hr)

The total value of outstanding payment orders of 68,489 businesses in Croatia exceeded HRK 40bn at the end of October (HRK 40.19bn). According to the data provided by the Financial Agency (FINA), 1-year liabilities or older account for more than 83 percent.

This represents a small increase compared with the month before, when total liabilities reached HRK 39.96bn. More than 76 percent of businesses have their accounts frozen for 360 days or more, while the amount of their outstanding liabilities account for 83.4 percent of the total debt (HRK 33.5bn). Among them, 35.7 percent have been frozen for 5 years or more.
Author/Source PressCut (www.liderpress.hr)

With all the economic problems, year 2010 also led to a drop in credit and debt. Something like this last time happened in early 2000 and analysts estimate that a significant increase in demand could come only in one year.
National Bank of Croatia reported that at the end of February total loans of commercial banks amounted to more than 250 billion, which is something fewer than 1% less than same time last year. A decline in loans to financial institutions and individuals contributed to this decline.
In February, decline of credit to households continued for the fifth month in a row, and they were eventually totaled to about 120 billion, 3.5% lower than at the end of the same month in 2009. Analysts believe that the reason behind this is the growth of unemployment and reduction of income due to falling wages. Housing loans, which account for about 40% of total loans to households, still recorded an annual growth, but only 0.2%.
The annual growth rate of loans to enterprises fell to just over 1%, and their amount at the end of February is about 100 billion.
Lending to the government in early 2009. reached almost record amounts of growth. Towards the end of the year the need to fund reduced and so did the loans from domestic banks, so the growth rate became less and less. Thus, at the end of February loans to the state totaled about 30 billion, which is almost 4% more than in February 2009.
Analysts believe that government incentives for buying a first property could only slightly improve the demand for housing loans, but without an increase in employment there will not be a true recovery in loans market. The growth of seasonal employment during the summer could increase demand for short-term loans, but this is questionable because of the pessimism that prevails among Croatian citizens.
Since the situation is worse in domestic firms because of the crisis, rapid financial recovery and increased demand for loans in the economic sector is not realistic. However, measures of financial assistance by the Government might improve the situation a bit.

Suppose that a Croat with an average salary wants to buy an ordinary one bedroom apartment with a living room for some € 80,000. How to get credit for such purchases? Fairly easy if you are willing to offer a mortgage and are able to find two guarantors with above-average salaries in these economic conditions. Sounds simple enough? You may have another property to offer a mortgage? Then you don’t have to find a guarantor! Of course, it is desirable that the guarantor’s pay is completely unburdened. There are a lot of people like these in Croatia, right?
Croatian newspapers Vecernji List made a survey among banks and customers. Payment of loans is getting worse, so credit conditions toughened. Some banks have a maximum amount of installment in relation to the salary, some have conditions that you need a guarantor or not, some are looking for life insurance, some determine the maximum loan amounts in relation to the value of the property … Each bank has different policies.
Potential buyers are quite disappointed with such a situation and often give up on buying their apartment. All are hoping that government incentives in the housing market in Croatia will bring some changes that could facilitate availability of loans, but the whole situation is not encouraging.
Croatian property market is in great crisis, and neither the banks nor the Government are not ready to make any concrete measures to change it. Of course, the government announced incentives, but their impact is uncertain and it is questionable whether there will be any significant change. Most economic analysts agree with this. The banks also do not help very much. Extremely stringent credit conditions do not lead to anything in the long term. Without money there is no investment, no new buildings, no jobs and without all that there no new cycle of growth.
This situation is not good for anyone in the market. Croatian real estate agencies and construction contractors are facing the future with great interest and uncertainty.

10% of loans to enterprises is not payable and total loans to private companies are falling from month to month. The crisis that hit the economy and property market hit the banks too, which means that in the case of bankruptcy of a company it is difficult to settle the remaining property.
The banking rule is that the bank finances the business project, not a company, that is her name or property, but the instruments of insurance still play a major role in the overall job. So when it comes to issuing new loans, banks are more cautious than before, especially when it comes to real estate offered as collateral, which eventually results in smaller loans.
In Zagreb bank there are different approaches and the bank has various insurance instruments. There are promissory notes and bills, mortgages on property assets of a company or private persons. Most loans are repaid according to contracted terms, but there is a small proportion of loans in which the inability to charge results in implementing execution or bankruptcy, which must be initiated by other creditors because the bank can not legally run bankrupcy claims if there is a mortgage on the property of the client. Even if someone else starts the bankruptcy, the bank is charged separately from the amount obtained by selling the pledged property. Appraisal of the property is based on location, quality, age and current condition of the property.
The Hypo Alpe-Adria-Bank said that despite all the problems payments are still satisfactory. There are some problems with credit entities and entrepreneurship, where the increased number of requests for reprogramming in long-term commitments led to a postponement of repayment. Termination of loan agreements are not increased, but the bank is trying different interventions to help clients more easily pass through this crisis period.
The Raiffeisen Bank in cases of enforced collection charges out of all available collateral until all possibilities have been exhausted. The amount that the bank fails to charge is written off the business books. The mere payment out of the insurance is led in accordance with the Enforcement Law. At this point the bank has no losses due to reduced market prices of real estate.
Revaluations of market value of real estate are regularly conducted. In the event that the value is to diminish so much that insurance becomes unacceptable in relation to exposure, the bank may require amendment of insurance.
Basically, the Croatian banks for now deal well with an adverse situation that prevails in the economy, but are much more cautious when making decisions about entry into new projects and loans.