In 9M 2022, ZABA recorded an NII increase of 2.2% YoY, NFCI growth of 15.6%, an operating income increase of 9.2%, and a net profit to majority of HRK 1.82bn, an increase of 42.8% YoY.

By the end of 9M 2022, ZABA’s net interest income amounted to HRK 2.18bn, which is an increase of HRK 46m, or 2.2% YoY. Net fee and commission income amounted to HRK 1.21bn, which is an increase of HRK 163m (or 15.5%). Net trading and other income and expenses amounted to HRK 527m, an increase of HRK 120m (of 29.5%) YoY, mainly due to higher trading results.

Overall, ZABA’s operating income amounted to HRK 3.92bn, which is an increase of 9.2% YoY. This growth was driven by all 3 of the aforementioned segments, with the main two drivers being higher NFCI and net trading and other income and expenses. Operating expenses increased only slightly, by 3.5%, to HRK 1.73bn. This would mean that the cost-to-income ratio equals 44.1%.

Moving on, the profit before impairment and other provisions amounted to HRK 2.11bn, representing an increase of 16.4% YoY (or HRK 297m), as a result of the previously mentioned movements in operating income and operating expenses. Meanwhile, impairments and other provisions improved and amounted to positive HRK 42m (vs. 9M 2021: HRK -297m). This would mean that overall, the profit before tax amounted to HRK 2.19bn (+42.7%). Finally, the net profit to majority amounted to HRK 1.82bn, which is an increase of 42.8% YoY.

Moving on to the balance sheet, the total assets in 9M 2022 increased to HRK 169.9bn, which represents a growth of 7.2% YoY. The largest growth in this category was recorded in the financial assets at amortised cost, which increased by 20.3% YoY and amounted to HRK 114.7bn. In this category, loans and advances to credit institutions increased by 76.2% YoY and amounted to HRK 17.9bn. Loans and advances to customers increased by 8.6% YoY and amounted to HRK 88.7bn. This is broadly in line with the Croatian market as Loans to financial institutions grew 7.72% in 8M of 2022, while ZABA is also consolidating its Unicredit Mostar subsidiary results. Finally, debt securities increased by 129% YoY and amounted to HRK 8bn. On the other hand, financial assets at fair value through other comprehensive income decreased by 32% YoY and amounted to HRK 8.74bn. Obligatory reserves with the Croatian National Bank (HNB) decreased by 40.8% and amounted to HRK 3.6bn. On the other hand, financial assets held for trading increased by 176% YoY and amounted to HRK 3bn.

Looking at the liabilities side, total liabilities increased by 9.2% YoY and amounted to HRK 149.8bn. In this category, the largest absolute increase was recorded by financial liabilities measured at amortised cost, which increased by 7.9% YoY and amounted to HRK 143.4bn. Inside the category, the growth was recorded by deposits from customers, which increased by 6% and amounted to HRK 135.1bn, followed by deposits from credit institutions, which increased by 54.7% and amounted to HRK 7.75bn. One other category to experience a notable increase is the financial liabilities held for trading, which grew by 229.9% YoY and amounted to HRK 2.86bn. Meanwhile, equity decreased by 5.7% and amounted to HRK 20.1bn. It is due to securities measured at other comprehensive income, as interest rates are increasing and market values of bonds held for trading are decreasing.

ZABA key financials (9M 2022 vs. 9M 2021, HRKm)

Source: Zagrebačka Banka, InterCapital Research

Impact of the COVID-19 Pandemic and the Russia-Ukraine conflict

Zaba also briefly commented on the impact of the pandemic and the Russia-Ukraine conflict. Starting with the pandemic, they said that the market continued to be affected by the uncertainty about the evolution of the pandemic and the consequent unpredictability of the timing and the extent of the economic recovery. The measurement of financial and non-financial assets recognised in the balance sheet was impacted by the uncertainty on the outcome of the pandemic, the effect of relief measures, and ultimately, the degree of the economic recovery.

Commenting on the Russia-Ukraine conflict, ZABA said that at the end of September 2022, the Group’s assets were not significantly or directly impacted by the geopolitical situation. However, ZABA’s operations are indirectly affected as the overall macroeconomic scenario evolves.