Croatian Prime Minister Praises High Citizen Response to Treasury Bond Subscription

Croatian Prime Minister Andrej Plenković has commended the robust response from citizens to the latest government-issued treasury bond subscription. The initiative saw 32,000 citizens purchasing approximately €800 million in securities, just shy of the government's €900 million target.

Why this matters: The strong response to the treasury bond subscription reflects the public's confidence in government-backed investments, which has significant implications for the country's financial sector. This could lead to a shift in the banking industry's approach to interest rates, potentially affecting the overall economy.

The third offering of treasury bills, which expired on June 3, 2024, featured securities with maturities ranging from three months to one year. The high level of participation highlights the public's confidence in government-backed investments, driven primarily by the safety and attractive interest rates of these securities.

The final day of registration witnessed a surge in interest, with many citizens arriving just minutes before the deadline. Gordana Soldo, an advisor to the FINA financial agency, noted, "We noticed increased payments of funds on Friday and this morning, which also means the reinvestment of those citizens whose treasury bill was due on Friday."

The government has already paid the annual interest on bonds purchased by citizens in March, and last week, the payment for treasury bills issued three months ago came due. Much of this money has been reinvested in the latest issuance, indicating strong ongoing support for government securities.

The positive response from citizens has prompted local banks to reassess the competitiveness of their savings interest rates. With the next bond issue announced for early July, financial institutions are under pressure to offer more attractive rates to retain and attract depositors.

Croatian credit institutions reported a cumulative profit of euro 413.4 million in the first quarter of 2024, an increase from €301.2 million in the same period of 2023. Despite a 1.5% decrease in total assets, the banking sector has shown improved profitability indicators, with the return on assets (ROA) rising from 1.8% to 2.1% and the return on equity (ROE) increasing from 15.5% to 18.1%.

The share of non-performing loans and advances (NPLs) has also decreased by 2.7%, primarily in the portfolio of loans to non-financial corporations. This reduction in NPLs indicates a healthier banking system, further supporting the overall stability of the financial sector, as reported in Croatia, today, edition.

The strong citizen response to the treasury bond subscription reflects public trust in government-backed investments and has significant implications for the banking sector. As banks reevaluate their interest rate offerings, the financial environment in Croatia is set for further adjustments.

Key Takeaways

• Croatian citizens buy €800m in government bonds, near target of €900m.
• Strong response reflects public trust in government-backed investments.
• Banks may adjust interest rates to compete with government securities.
• Croatian banks report €413.4m profit in Q1 2024, up from €301.2m in Q1 2023.
• Non-performing loans decrease by 2.7%, indicating a healthier banking system.