Croatia's banks, almost all of them owned from Milan, Vienna or Budapest, are among the most profitable in Europe. A new 50% tax on excess profit is aimed squarely at them.

The sector cleared €1.4bn in net profit in 2025, down 6.1% on the record set a year earlier but still enough to return 14.6% on equity, the Croatian National Bank (HNB) reported. Bad loans sat at 2.3% of the book, capital at 22.7% of risk-weighted assets — a picture of comfort that has caught the government's eye.

Prime Minister Andrej Plenković's cabinet unveiled the charge in May as part of a broad anti-inflation package: a 50% levy on “excessive” gross profit, measured against each firm's 2023-2025 average plus a 15% buffer, with exporters largely spared. Banks, which earn their money at home, have nowhere to hide.

“Croatia has experienced above-average growth in economic activity in recent years, which in itself produces an overheating of the economy,” Finance Minister Tomislav Ćorić said as he presented the measures, framing the tax as a way to “distribute the burden more fairly”.

The euro dividend

Croatia's banks have had an extraordinary three years. The country adopted the euro on January 1, 2023, scrapping the kuna and the currency risk that had shadowed a system where most loans were already priced in or linked to euros. Overnight the lenders lost their foreign-exchange margins but shed a layer of risk, and gained direct access to European Central Bank (ECB) funding.

The bigger windfall came from rates. As the ECB lifted its deposit rate to counter inflation, Croatian banks — flush with cheap current-account deposits from a cash-rich, tourism-fed economy — watched their net interest income balloon. Croatia's record visitor numbers pour euros through the banking system every summer, and the lenders have converted that float into some of the fattest margins in the European Union.

The macro backdrop has rarely looked better. S&P raised Croatia to 'A' in March, citing reforms and resilience; the treasury sold a €2bn 10-year Eurobond into strong demand in February; and Zagreb's former central-bank governor, Boris Vujičić, recently started his term as ECB vice-president. A trade deficit that widened to €10.2bn in the first half is the main blemish on an otherwise gilded run.

Owned from abroad, run from two towers

For all the national success, the profits mostly leave the country. Croatia runs one of the EU's most concentrated and foreign-owned banking systems. The two largest lenders — Zagrebačka banka (ZABA), part of Italy's UniCredit, and Privredna banka Zagreb (PBZ), owned by Intesa Sanpaolo — between them hold roughly 46% of banking assets, with market shares near 25% and 20% respectively.

Behind them, Erste&Steiermärkische Bank (Austria's Erste Group) holds about 18%, OTP banka Hrvatska (Hungary's OTP) around 10% and Raiffeisenbank Austria (RBA) some 8%. The one substantial domestically controlled name is Hrvatska poštanska banka (HPB), 77% state-owned and ranked fifth, whose after-tax profit edged up just 0.4% in the first half. Smaller independents such as Agram banka fill out the tail.

That ownership map means the sector's fortunes are booked as much in Milan and Vienna as in Zagreb. Raiffeisen Bank International, RBA's parent, lifted first-half profit 25% at group level excluding Russia, with a non-performing exposure ratio of just 1.6% — an all-time low. Croatia is a small, steady, high-return contributor to each of these groups, rarely the source of their troubles.

Consolidation, not fresh competition, is the pattern. RBI spent much of 2026 in a bruising bidding war with Slovenia's NLB for control of Addiko Bank, the Balkan lender spun out of the failed Hypo Alpe Adria, in a contest that will further thin the field across the former Yugoslavia.

A regional pattern of squeezing the banks

Croatia is not acting alone. From Bratislava to Budapest, cash-strapped governments have spent the past two years reaching into bank profits swollen by the same rate cycle. RBI has calculated that by early 2025 the great bulk of central and southeast European banking assets were subject to some form of special taxation, warning the levies risk hardening into permanent fiscal fixtures.

The design of Croatia's tax leaves questions. It is pitched as temporary and anti-inflationary rather than a standing bank levy, and by keying off a 2023-2025 baseline it targets exactly the firms whose earnings jumped during the boom. Foreign parents are likely to argue, as they have elsewhere, that the charge eats into the capital their Croatian units need to keep lending — even as those units sit on capital ratios above 22%.

For now the strains are hard to find. Bad debts are low, deposits plentiful and the ECB's rate path is easing funding costs after the tightening cycle. The HNB has flagged imported inflation and external shocks — from US tariffs to Middle East tensions — as the main risks to the outlook, not the health of the banks themselves. The open question is whether a government that has discovered how much money its banks make will treat this year's tax as a one-off, or the start of a habit.