Citizens' term deposits down by 677 million euros for the year

Total household deposits at the end of August amounted to 41.9 billion euros, with an annual growth of 3.3 billion euros, while the share of term deposits fell by 677 million euros over the past year, given that interest rates on term deposits almost halved during that period, the Croatian National Bank (CNB) said.

Of total household deposits, 31.5 billion euros relate to overnight deposits, i.e. funds in citizens' transaction accounts, while 10.3 billion euros are term deposits.

Compared to August last year, overnight deposits increased by 3.9 billion euros, while term deposits fell by 677 million euros, according to the Croatian National Bank (CNB) in response to a query by the HINA news agency on the occasion of World Savings Day, which is celebrated on October 31 in memory of the first international savings bank congress held in Milan in 1924.

Thus, the share of term deposits in total deposits for the population, after reaching a peak of 29.2 percent in the middle of last year, has been continuously and gradually decreasing, falling to 24.7 percent in August.

The central bank pointed out that households' decisions on term deposits of available funds have been influenced by the trend of decreasing interest rates on term deposits. Namely, the average interest rate on this type of household deposit in August this year was 1.5 percent, almost halving compared to the middle of last year.

Investments in "national" treasury bills and bonds are the main alternative to term deposits

In addition, they note that during the period in which interest rates were rising and were at a level almost twice as high as today, "depositors' inertia in term deposits" was observed.

They state that the share of term deposits in total household deposits increased by six percentage points in the period from September 2023 to June 2024, from 23.2 to 29.2 percent.

Another factor influencing households' decisions to place term deposits, according to the CNB, is the availability of alternative forms of investment, such as investments in "national" treasury bills and government bonds, which have attracted the attention of households and currently appear to be the main alternative to term deposits.

Looking ahead, given the trend of lowering interest rates, the share of term deposits in total household deposits could likely continue to decrease, the CNB believes, noting that banks regulate interest rates on deposits in accordance with their policy, business model, assessment of the market situation and the need for deposits.

Deposit growth also due to strong credit growth

The CNB also reported that total deposits of domestic sectors with credit institutions, excluding general government, amounted to EUR 62.5 billion at the end of August this year, which is EUR 4.5 billion more than in the same month last year.

“The growth of deposits over the past year was mainly contributed by the increase in claims on domestic sectors, with the strong growth of loans to households during the first half of this year being highlighted. In addition to the growth of loans as the main source of deposit creation, government activities also influenced the increase in deposits. Credit institutions invested in government bonds, which increased claims on the central government, and the government reduced its deposits with the CNB, which also acted in the direction of growth of private sector deposits.

“The growth of deposits over the past year was mainly contributed by an increase in claims on domestic sectors, with strong growth in household loans during the first half of this year being highlighted. In addition to the growth of loans as the main source of deposit creation, the state's activities also influenced the increase in deposits. Credit institutions invested in government bonds, which increased claims on the central government, and the government reduced its deposits with the CNB, which also contributed to the growth of private sector deposits. On the other hand, drain abroad during the last few years has slowed the growth of deposits,” explained the central bank.

Analysis by the Croatian Chamber of Economy (HGK) showed that all counties recorded double-digit growth in overnight deposits on an annual basis, which is closely related to the growth of employment, wages and credit activity. On the other hand, over the past year, term deposits have fallen or stagnated in all counties except Međimurje, which recorded an increase of around seven percent.

The Croatian Chamber of Economy points out that the structure of total household financial assets is still dominated by cash and deposits in banks, but the trend of their share decreasing has continued, while at the same time the share of debt securities is growing, in the context of the aforementioned investments in "national" bonds and treasury bills.

The average amount of deposits per inhabitant of Croatia is 10.7 thousand euros

When looking at the regional distribution of household deposits, the City of Zagreb "accounts for" 28 percent of all deposits, and according to concentration, seven Adriatic counties stand out, to which another 42 percent applies.

According to data from the analysis, the average amount of deposits per capita in Croatia is 10,679 euros.

In terms of per capita, Istria County leads, with an average deposit of 15,120 euros per resident. This is followed by the City of Zagreb with 14,243 euros, Dubrovnik-Neretva County with 13,823 euros, Primorje-Gorski Kotar County with 13,673 euros, Zadar County with 11,672 euros, etc. On the other hand, the lowest deposits per capita are in Vukovar-Srijem County, 5,014 euros, and Virovitica-Podravina County, 5,372 euros.

In the deposit structure of all counties, transaction account deposits continue to dominate, from a minimum of 60.3 percent in Karlovac County to a maximum of 74.5 percent in Sisak-Moslavina County.

When it comes to term deposits in the deposit structure, they are the lowest in Vukovar-Srijem County, at 22.8 percent, and the highest in Karlovac County, at 35.8 percent. Savings deposits, on the other hand, are the least represented in all counties, from a minimum of 2.1 percent in Krapina-Zagorje County to a maximum of 7.8 percent in Primorje-Gorski Kotar County, the Chamber stated.

Source: HRT