Moody's report lauds Croatian banks

Moody's Investors Service's new Banking System Outlook Report said the Croatian banking system boasts an improved and increasing level of stability thanks to a radical recapitalization and restructuring process through which foreign-owned banks now dominate the sector, with a positive impact on overall creditworthiness

Strong household credit demand is driving the growth of the sector, although key challenges persist, such as the high concentration of assets among larger banks and potential risks from increasing net external liabilities, the agency noted.

"The banks' foreign owners - which account for 91% of total assets in the system - have not only provided direct financial support but also improved efficiency levels and risk management techniques and introduced more up-to-date services and instruments," said Nondas Nicolaides, a Moody's analyst and author of the report.

Although further consolidation and the exit of weaker players would improve the quality and stability of the system, Moody's said it expects no dramatic change in this respect over the medium term.

Moody's said it regards the Croatian banking system's asset quality as relatively healthy, limiting risks of a systemic banking collapse and ensuring the efficient use of capital and liquidity.

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