The Profitability of Smaller Banks in the Republic of Croatia

According to the criteria of the market share in the assets of the banking system, the Croatian National Bank classification distinguishes large, medium and small banks. The aim of this paper is to compare the profitability of small banks with the profitability of medium and large banks. The results of the small banks profitability analysis show that small banks have significantly lower profitability than large banks and thus encounter difficulties in terms of more demanding regulatory requirements. Economies of scale and cost efficiency suggest that the small banks merger and acquisition process should be strengthened since this is the key to their survival on the Croatian market.