As Croatian banks ZABA, PBZ and HPB published their 9M reports, we are bringing you key takes from them.
In the first nine months of 2019, Croatian banks witnessed a solid growth of topline, with net banking income of the 3 banks rising. Despite the existing pressure on the NIM, most banks recorded an increase in net interest income.
Q3 also brought a spike in provisions, which came as a result of lawsuits to (former) debtors on loans in Swiss francs. ZABA seems to be the most affected by the mentioned provisions, which led to a decrease in net profit of 12% YoY. Meanwhile HPB, as a mostly state-owned bank, does not have an exposure to “Swiss Franck” loans, so it did not observe a spike in provisions which would affect the company’s P&L.
ZABA
In the first nine months of 2019, ZABA recorded a 1.9% YoY increase in net interest income, amounting to HRK 2.6bn. The mentioned increase could be attributed to the change in the structure of the balance sheet, coupled with a stable loan growth and lower financing costs. Meanwhile, net fee and commission income remained relatively flat, amounting to HRK 1.06bn. Consequently, the bank observed a 3.7% YoY increase in net banking income, which amounted to HRK 4.3bn.
Going further down the P&L, operating expenses observed an increase of HRK 37m (+1.9% YoY), amounting to HRK 1.98bn, which mostly came from a rise in other operating expenses. As a result, CIR stands at 45.9%, which represents a decrease of 0.8 p.p. YoY.
Despite the solid performance of the bank’s topline, ZABA observed a decrease in net profit, which can be attributed to a sharp increase in value adjustments and provisions of HRK 380m, amounting to HRK 480m. Of that, provisions account for HRK 356.5m, which are 3 times higher compared to the same period in the previous year. Such a high increase could be attributed to higher provisions for lawsuits to (former) debtors on loans in Swiss francs.
As a result of the above-mentioned, ZABA recorded a net profit of HRK 1.57bn, representing a decrease of 12% YoY.
Turning our attention to the balance sheet, total assets amounted to HRK 143.5bn, representing an increase of 3.6% YoY. Of that loans to customers amount to HRK 81.26bn, which is a slight decrease of 0.3% YoY. The decrease could be attributed to a sale of a part of portfolio and lower loans to corporate, which was partially offset by an increase in loans to retail clients.
Deposits from customers account for 95.6% of the total liabilities, which is a decrease of 1.3 p.p. YoY. At the end of Q3 2019, they amounted to HRK 109.9bn representing a strong increase of 7.3% YoY, which mostly came from a rise in sight deposits and deposits from the corporate segment. Consequently, L/D ratio stands at 73.9%.
ZABA Performance (9M 2018 vs 9M 2019) (HRK bn)
PBZ
In 9M 2019, PBZ recorded flat net interest income of HRK 2.08bn. The result remained flat, even though the Group recorded a solid loan growth, as the Group is observing a pressure on the NIM. Meanwhile, net fee and commission income observed an increase of 2.2% YoY, amounting to HRK 1.17bn. As a result, net banking income recorded an increase of 1.9%, amounting to HRK 3.7bn.
Going further down the P&L, operating expenses observed a decrease of 3% YoY, amounting to HRK 1.85bn. The mentioned decrease could be attributed to lower administrative expenses by HRK 81.2m. As a result, CIR stood at 50.1%, a decrease of 2.6 p.p. YoY.
In the first nine months, the company recorded HRK 272.5m of value adjustments and provisions. Meanwhile, in Q3, provisions amounted to HRK 53.87m, while on a 9M level they amount to HRK 0.24m, since the bank recorded a release of provisions of HRK 53.6m in H1 2019.
As a result, the mentioned value adjustments and provisions did not have a significant effect on the company’s bottom line, which amounted to HRK 1.3bn, showing an increase of 8.4% YoY.
Turning our attention to the balance sheet, total assets amounted to HRK 115.9bn, representing an increase of 3% YoY. Of that loans to customers account for 70%, amounting to HRK 81.18bn (-1% YoY).
Meanwhile, deposits amounted to HRK 95.2bn, representing a strong increase of 4% YoY. As a result of a solid deposit growth, L/D ratio observed a decrease of 4 p.p., amounting to 85.3%.
PBZ Performance (9M 2018 vs 9M 2019) (HRK bn)
HPB
In the first nine months, HPB recorded a net interest income of HRK 402.4m, representing an increase of 3.5% YoY, which could be attributed to a solid loan growth. Meanwhile, net fee and commission income amounted to HRK 165.5m, showing strong growth of 8.9%. Consequently, net banking income recorded a solid increase of 16% YoY, amounting to HRK 665.5m.
Operating expenses, amounted to HRK 372.1m, which is an increase of 9% YoY. Such an increase was mostly caused by an increase of administrative expenses by HRK 28.1m and an increase in amortization by HRK 3.7m. However, as a result of a strong net banking income growth, CIR stood ad 55.9%, which is a 3.5 p.p. lower compared to the same period in the previous year.
As a reminder, as a mostly state-owned bank, HPB does not have an exposure to “Swiss Franck” loans, so it did not observe a spike in provisions which would affect the company’s P&L.
Going further down the P&L, HPB recorded a strong increase in net profit of 46% YoY, amounting to HRK 178.6m.
Turning our attention to the balance sheet, total assets amounted to HRK 24.3bn, representing an increase of 5.4% YoY. Of that, loans to customers amounted to HRK 14.7bn, showing strong growth of 8.7% YoY.
Meanwhile, deposits account for 98% of total liabilities, amounting to HRK 21.45bn (+3.3% YoY). Such a strong loan growth lead to an increase in L/D ratio by 3.4 p.p., amounting to 68.4%, showing room for further loan growth.
HPB Performance (9M 2018 vs 9M 2019) (HRK m)
