In 9M of 2020, net banking income decreased by 12.8% YoY, while net profit decreased by 29.8%.
Zagrebačka Banka (ZABA) published their 9M report according to which net interest income amounted to HRK 2.32bn (-11.1% YoY). Such a decrease of HRK 290m was mostly influenced by downward pressure on the NIM which has been an ongoing trend on the market. Besides that, the Covid-19 pandemic has left its toll on credit activity, so net loans and advances to customers decreased by HRK 2.2bn to HRK 81.174bn.
When looking at net fee and commission income, it witnessed a decrease of 9% to HRK 962.1m. One could argue that the lockdown has had an impact on the bank’s fees and commissions, however it is difficult to assume to which extent, as the bank did not provide any information on it.
The bank also realized a sharp decrease of 34.9% in income from trading and other income to HRK 252m (decrease of HRK 135m). Such a decrease could be attributed to the deterioration of the financial markets trading as a result of the pandemic. However, the bank does not give much insight into their trading portfolio so it is difficult to estimate the direct cause of such a drop, especially given that financial markets have seen a significant recovery since the March lows. As a result of the above mentioned, net banking income decreased by 12.8% to HRK 3.531bn.
Moving on to operating expenses, they decreased by 3% (or HRK 51m) and currently stand at HRK 1.673bn. To be specific, administrative expenses decreased by 2.8% to HRK 1.36m, while amortization is down by 3.7% and amounts to HRK 312.8m. Such a result puts the CIR at still a relatively low 47.37%.
It is worth adding that the value adjustments and provisions for losses amount to HRK 546m, which was driven by higher credit risk following the COVID-19 pandemic. We note that this represents quite a high QoQ increase of HRK 197m. Meanwhile on a YoY basis the bank observed what can be considered a relatively low increase of HRK 66m. As a reminder, in 9M of 2019 ZABA recorded also high value adjustments and provisions for losses of HRK 480m. However, the mentioned provisions were related mostly to lawsuits to (former) debtors on loans in Swiss francs.
As a consequence of the pandemic, the Group has provided special support measures, including standstill liabilities, repayment delays (moratoriums) and new liquidity credit lines to legal entities and citizens. In accordance with the instructions of the CNB and the ECB, the availability of these support measures to clients does not in itself constitute an automatic criterion for classification into “forborne” category or to conclude that all clients who took advantage of the available measures occurred significant increase in credit risk. This in a way indicates that we might see potentially higher NPLs when the mentioned moratoriums expire.
In 9M of 2020, ZABA recorded a net profit of HRK 1.1bn, representing a decrease of 29.8%.
Turning our attention to the balance sheet, total assets increase by 1.2% and as of end September amount to HRK 147.4bn. Of that, as above mentioned, net loans and advances to customers amounted to HRK 81.174bn. Meanwhile, on the liabilities side, deposits from customer amounted HRK 116.8bn. This represent an increase of HRK 3.5bn or +3.1% YoY. The increase in inflow of deposits has been a trend in the banking sector for some time now and this has only been further boosted by the pandemic as consumer spending has decreased while clients might have also decided to liquidate (or reduce) their positions in other financial assets and decided to hold cash (sight deposits).
