The year-on-year increase in corporate loans of some 9% is very dynamic, among the highest in Europe, and is a bit surprising given the economic stagnation and the fast growth of lending to the government, HUB director Zoran Bohacek said.

This trend shows that the banks are willing to take more risk in providing corporate loans, and Croatia's forthcoming accession to the European Union is having a positive effect on that, which helps long-term stability, he added.

Household loans are mostly stagnating, which is a clear consequence of the recession, while deposits are on the rise. The situation with companies is the other way round -- as a result of growing illiquidity, deposits are on the decline, while loans are on the rise.

The banks' profit in the first half of the year was 14.4% up on the year, which Bohacek said was in line with increases in the profit of most companies included in the Crobex index. However, the total profit of the banking sector of HRK 2.1 billion was still lower than that of the INA oil company, which was HRK 2.5 billion.

Bohacek said that such a rise of profitability was still affected by the crisis, because return on capital was still below the 10% mark, slightly more than the long-term kuna bond yield of 6.6%.

The decline in the profit rate was reversed primarily thanks to a faster reduction of passive interest rates than of active ones and partly to cost efficiency.

The capital adequacy of the Croatian banks was about 18%, among the highest in Europe, so the Croatian banks have enough capital to endure an even worse crisis than the present one, Bohacek said.