The Croatian banking system still has one of the highest capital adequacy ratios in Europe and may be considered extremely safe. The first signs of growth in activity and profitability have also emerged. However, they have stayed within "crisis parameters". Household deposits have been growing, but loans levelled-off. By contrast, corporate deposits are on the decline, while loans are on the rise. After a long time, profit recorded substantial growth in the first half of the year. This was above all due to the fact that deposit rates fell faster than lending rates. Somewhat surprising is the steady increase in loan loss provision expenses. Their reduction offers the best opportunity for continued growth in profit and competition among banks. Coupled with a faster exit from the crisis, this could further reduce interest rates. However, it is uncertain when the impact of this reduction will become stronger as the real sector recovery has been slower than expected.