During 2023, HPB recorded NII growth of 69% YoY, while in Q4, the increase amounted to 59%. NFCI decreased both in 2023 YoY and Q4 YoY, by 5% and 8%, respectively, while the net banking income grew, by 55% in 2023 YoY, and 42% in Q4 YoY. Finally, net income amounted to EUR 82.9m, decreasing by 34% YoY. However, if we were to exclude the effect of the negative goodwill from the N banka acquisition (EUR 135.2m), then the net income instead increased significantly (EUR 82.9m in 2023 vs. EUR -8.5m in 2022).

HPB, the only majority-owned Croatian bank, and one of the few listed on the Zagreb Stock Exchange recently published its FY 2023 results, and we’re bringing you our overview.

Starting at the top of the P&L, net interest income increased by 69% YoY to EUR 164.2m, and by 59% YoY to EUR 46.1m in Q4 2023. HPB noted that the significant increase in the interest income came as a result of the increase in income on deposits with the ECB, in line with the movements of the risk-free interest rate in 2023. Besides the higher interest, we can see that HPB also increased the amount held at the ECB, by over 126% YoY to EUR 2.96bn.

On the other hand, loans and advances to customers decreased, by 5% YoY, to EUR 2.93bn. This is a trend that has been visible across the region, albeit it did not hit the larger Croatian banks (e.g. ZABA), as much, as they recorded a 5% increase in loans issued during the same period. Still, the remaining amount of loans held by the banks also yielded higher average interest, especially the variable interest rate loans.

Next up, net fee and commission income amounted to EUR 33.1m during 2023, and EUR 7.7m during Q4, representing a decrease of 5% and 8%, respectively, mainly as a result of lower fee and commission income. In terms of other income, HPB recorded an income of EUR 7.4m (2022: EUR -8.7m), mainly as a result of gains on financial assets held for trading, as well as realized one-off net other income in 2023 as a result of legal actions taken in HPB’s favor.

As a result of these developments, the net banking income grew significantly, increasing by 55% YoY in 2023 to EUR 207.2m, and by 42% YoY to EUR 56.1m in Q4 2023. In terms of expenses, they increased by 2.1% YoY to EUR 44.9m, while employee expenses grew by 14.6% YoY to EUR 51m. The increase in employee expenses was primarily due to the impact of the consolidation of NHB in 2023, and to a lesser extent by labor and service price adjustments due to the inflationary environment and other factors.

Provisions also decreased, from EUR 31.2m to EUR 0.1m, primarily influenced by the positive trends in HPB’s performing portfolio. As a result of these changes, net income amounted to EUR 82.9m in 2023, a 34% decrease YoY, and EUR 14.9m in Q4 2023 (Q4 2022: EUR -22.4m). However, it should be noted that if we were to exclude the one-off impact of the negative goodwill from the N banka acquisition, in the amount of EUR 135.2m in 2022, organic net income growth was even more significant (EUR 82.9m in 2023 vs. EUR -8.5m in 2022, and EUR 14.9m in Q4 2023 vs. EUR -23.2m in Q4 2022).

HPB key financials (2023 vs. 2022, EURm)

Source: HPB, InterCapital Research

Moving on to the balance sheet, total assets amounted to EUR 7.05bn, an increase of 27.2% YoY, mainly as a result of higher cash and cash equivalents (+109% YoY to EUR 3.1bn), and securities (+5.5% YoY to EUR 915m), while loans and advances to customers decreased by 5% YoY to EUR 2.93bn. On the other hand, total liabilities increased by 28% YoY to EUR 6.5bn, due to higher deposits (+27.7% YoY, to EUR 5.93bn), and higher loan liabilities (+45%) YoY, to EUR 468m. For deposits, HPB noted that term deposits decreased the most in the overall deposits (+14. p.p.), primarily due to the success of their new product, HPB Super Štednja.

Meanwhile, loan liabilities refer to the received loans from financial institutions (HBOR, CNB repo loans and foreign financial institutions), and MREL instruments that HPB started contracting in 2022.