Banking

Czech Banking Sector and Economy

As of the end of 2024, there were 43 banks and foreign bank branches operating in the Czech Republic. The total assets of the Czech banking sector amounted to CZK 10,638 billion at the end of December 2024. The Czech financial sector remains sound and resilient to potential adverse shocks. According to the Czech National Bank (CNB), the regulator of the Czech financial market and resolution authority, the Czech economy is entering the growth phase of the financial cycle.

Loans and Deposits

Loans to residents are the dominant asset category, totaling CZK 7,090 billion. Deposits from residents, the most significant liability item in the banking sector, reached CZK 7,062 billion. Regarding the structure of loans to resident non-financial corporations by original maturity, long-term loans continue to make up the largest share. The volume of loans to resident households stood at CZK 2,379 billion in December 2024. When broken down by purpose, loans for house purchases were the largest category, amounting to CZK 1,834 billion in December.

Digitalization and Personalization

The trend in Czech banking is the digitalization of banking services, which has been accelerated by the COVID-19 pandemic. Banks are now focusing on improving the user experience, tailoring their services to individual client needs, and utilizing artificial intelligence. We are witnessing strong growth in online deposit, loan, and investment products, including the digitalization of mortgages. Digital progress is being accelerated by extensive investments in innovation and technology. According to the Digital Banking Maturity 2024 study by Deloitte, simplicity in using banking systems is what users now appreciate the most.

Commitment to Sustainability

Banks operating in the Czech market have openly committed to strengthening ecological and socially responsible business practices in the Czech Republic. Based on the Czech Banking Association's Memorandum for Sustainable Finance, banks commit to applying sustainability principles not only in managing their business activities but also in their relationships with clients, suppliers, shareholders, and other partners, and to transparently and regularly review the impacts of their business in the ESG area. Part of the commitment also includes intensive and continuous cooperation with the government and regulators.

Monetary Policy

In response to easing inflationary pressures, the CNB implemented a total of 275 basis points in policy rate reductions throughout 2024. Analysts expect the policy rate to remain in the 3.00-3.25% range by the end of 2025.

Inflation

After a period of heightened price pressures, headline inflation significantly moderated through 2024, averaging 2.4% - the lowest level in the last six years. The market expects inflation to remain close to the CNB's 2% target in 2025.

GDP Growth Outlook

The Czech economy showed resilience in 2024, posting growth of 1.0%, supported by a recovery in household consumption, which benefited from positive real wage growth. However, both investment activity and net exports were constrained due to challenging external conditions. For 2025, growth is projected to strengthen to 2.1%, nearing potential growth, driven by stronger domestic demand.

Labor Market Stabilization

The Czech Republic continues to have the lowest unemployment rate in the EU. While unemployment rose slightly in 2024, beyond seasonal patterns - reflecting below-potential growth and weak external demand - most experts expect stabilization in 2025.