In 2020, major Croatian banks all faced similar challenges due to the Covid-19 pandemic. Here you can find the results of ZABA, PBZ and HPB.

ZABA FY 2020

In 2020 ZABA’s net interest income amounted to HRK 3.07bn, representing a decrease of 11.2%, or HRK 386m. The company attributes such a high decrease mostly to a continued pressure on NIM. Net fee and commission income stood at HRK 1.27bn, representing a decrease of HRK 116m or 8.4%.

Meanwhile, net banking income stood at HRK 4.54bn, representing a decrease of 12.1%. Within the net banking income, ZABA noted a decrease in gain on financial assets held for trading of 54.6% or HRK 205.8m. Meanwhile, the bank recorded a loss on financial assets measured at fair value through P&L of HRK -98.2m, compared to a gain of HRK 166.4m in 2019 (HRK -264m YoY). On this assets position banks equity investments are held that at the end of 2019 amounted to HRK 344m. ZABA’s major equity equity investments are 17% of share in Allianz Zagreb insurance and Optima Telekom 37% shareholding, that Hrvatski Telekom, 17% owner an operator of Optima Telekom is due to concentration is suppose to divest by it June 2021. It is highly likely that ZABA will tag along in this transaction, and it will be interesting to see if there was decrease in value of this asset at the end of 2020.

Operating expenses amounted to HRK 2.2bn, representing a decrease of 2.8% or HRK 63m. Such a decrease was due to lower administration costs and depreciation.

Looking at value adjustments and provisions for losses, they were up 39% YoY, amounting to HRK 1,148m stemming from growth of impairments for financial assets not measured through P&L that more than doubled (up 2.5x) and amounted to HRK 905m. This is position were majority of bonds portfolio is located which has realized decrease in prices as a result of increase in bonds yields. On the other hand provisioning for risk was down 50% (HRK 224m), as majority of loans is put on hold as deferral of payment of obligations under the loan is made while some of the interest is paid at the agreed interest rate during the moratorium. Growth of credit risk following the COVID-19 pandemic after the measure will not be in place anymore is yet to come. As a result of growth in impairments, the bank recorded a sharp decrease in net profit to majority of 42.9%, to HRK 1bn.

Turning our attention to the balance sheet, total assets amounted to HRK 149.85bn, representing an increase of 2.9% YoY. Of that, loans to customers account for 54.6% or HRK 81.83bn, representing a decrease of 1.5bn or 2% YoY. Such a decrease could be attributed to slowed credit activity during the pandemic. On the flip side, deposits from customers amounted to HRK 117.21bn, representing an increase of 3.4%, in line with banking trends in the region. Such a result puts the L/D ratio at 69.4%.

ZABA Financials (HRK m)

PBZ FY 2020

In 2020 PBZ reported a net interest income decrease of 6.7% to HRK 2.59bn, which came on the back of all segments, with NII from corporates leading the list (-9.8% or HRK 69m). Meanwhile, NII from retail clients dropped by only 1.3% or HRK 24m. Such a decrease could be arguably attributed to a continued pressure on NIM. Meanwhile, net fee and commission income amounted to HRK 1.382bn, showing a decrease of 10.4%. The aforementioned decrease came mostly on the back of a sharp drop in NFCI from card business of 25.9%. Such a strong decrease does not surpirse given the slowdown in card use as a result of the lockdowns.

In 2020 the PBZ Group reported a net gain of financial assets (and liabilities) held for trading of HRK 319.9m, while net banking income decreased by 8.9% YoY to HRK 4.08bn.

On the operating expenses side, one could observe an increase of 7.5% in administration costs (to HRK 1,94bn). Despite such an increase the bank standalone still operates with a relatively low CIR of 42.3%.

In 2020, PBZ Group reported a net profit decrease to majority of 40.8% to HRK 977.99m.

Turning our attention to the balance sheet, PBZ Group reported a very solid increase in assets of 8.8% (to HRK 128.4bn). Such an increase could mostly be attributed to a still solid loan growth in 2020 of 7.1%. The increase mostly came on the back of  higher corporate loans by 11%. Although the bank does not provide much information to the specificity of the loan growth, one could argue that  the pandemic increased the demand for working capital facilities of corporate clients. Deposits, on the other hand have increased by as much as 10.8%, to HRK 107bn. The largest increase was witnessed on the sight deposit side of 19.8%, which does not surprise given that 2020 was marked by lower spending/higher savings.

PBZ Financials (HRK m)

HPB FY 2020

HPB, although the smallest among observed banks, ended up being the most transparent in their FY 2020 reporting. In 2020, the bank reported a decrease of net interest income by merely 1.5% or HRK 537.2m, which could arguably be attributed somewhat better interest expense management. Meanwhile, net fee and commission income witnessed a sharp decrease of 13.2%, due to the Covid-19 pandemic. Such a decrease could be attributed to a temporary halt of fees on all ATMs (March – July) and lower economic activity. As a result of the aforementioned, net banking income decreased by 10.1% to HRK 757.5m.

Operating expenses remained relatively flat at HRK 515m which puts the CIR at 64.1% (+2.8 p.p. YoY).

We also note that provisions amounted to HRK 62m vs 228m in 2019. To be specific, in 2019 the bank noted an increase in provisions of HRK 56m, while in 2020 a release of provisions of HRK 79m (related to lawsuits). As a result of this, HPB recorded an increase in net profit (to majority) by as much as 24.9%, to HRK 183.4m.

Turning our attention to the balance sheet, as of end 2020, the bank operates with HRK 25.5bn in total assets (+7.1% YoY), making it the 6th largest bank in Croatia.  Such an increase came on the solid rise in gross loans of 9.5% to HRK 16.23bn. Of that, almost entirety of loan growth came on the back of loans to central government and households, which combined make for three fourths of gross loans.

In terms of NPL ratio, the HPB reported a decrease of 1.7 p.p. to HRK 8.7%, which does not surprise given that moratoriums were in place in 2020. Meanwhile, NPL coverage ratio stood at 62.2%.

When looking at the bank’s corporate portfolio, 48% has no to low impact by the pandemic, 44% has a moderate impact while 8% is strongly affected. Within the strongly affected segment, 69% relates to tourism and related activities. A total of HRK 1.9bn of moratoria was approved to corporate clients (22.6% of gross loans to corporates). Meanwhile, tourism accounts for only 6% gross loans to corporates.

As of end 2020, HPB reported a CET 1 of 24.1%, indicating a very solid level of capitalization. The increase of 2.3 p.p. came mostly on the back of retention of earnings.

HPB Financials (HRK m)