During H1 2024, ZABA recorded NII growth of 15% YoY, NFCI increase of 10%, a net banking income increase of 15% YoY, and a net income to majority of EUR 304m, an increase of 22% YoY.
Yesterday, ZABA published its H1 2024 results, highlighting several key financial metrics. In H1, ZABA’s NII grew to EUR 304m, a 15% increase YoY. Although the bank did not provide specific details on this growth, an analysis of its balance sheet and prevailing industry trends offers us some insights. Some of the main areas to pay attention to include cash and cash balances with central banks which still yield significantly higher returns than the historical average, other demand deposits which have also recorded growth in the margin, as well as financial assets at amortized costs, which includes loans to customers and other banks, as well as bonds held by the Group.
Deposits held at the ECB yielded a return of 3.75% based on the ECB key deposit interest rate effective from June 12, 2024, which decreased by 34% YoY to EUR 3.54bn. This reduction was expected due to the now already calculated 25 bps rate cut from 4%, but also future expected rate cuts. Furthermore, ZABA managed to record a 10% increase in loans to customers to EUR 13.4bn, meaning that a lot of the cash held at the Central Bank was transferred towards customers.
Besides loans and advances to customers, a part of the financial assets at amortised cost, ZABA also recorded an increase in debt securities (bonds) by 11% YoY to EUR 1.6bn, while loans and advances to credit institutions also recorded an even more significant growth of 181% to EUR 3.1bn. This larger asset base, in combination with still elevated interest rates, leads to a 32% increase in interest income.
On the other hand, interest expenses grew by 147% YoY to EUR 114m, outpacing the growth in interest income. This increase was influenced by a slight 0.1% decrease in customer deposits from the beginning of the year, likely prompting ZABA to raise deposit interest rates to attract new deposits. Additionally, the issuance of new debt securities, amounting to EUR 283.6m – a 187% QoQ increase – contributed to higher interest expenses as corporate bonds with the current key interest rates still yield a strong premium.
Meanwhile, net fee and commission income rose by 10% YoY to EUR 114m, reflecting continued customer engagement with ZABA’s services, a notable achievement given the stagnation or decline in this category for other banks. However, given ZABA’s market leadership in Croatia, this was to be expected. Overall, these factors led to a net banking income of EUR 516.5m, a 15% YoY increase. Moving on, operating expenses grew by 4.9% YoY to EUR 170m, while impairments and other provisions increased by 16.7% YoY to EUR 21m, implying a slightly higher cost of risk YoY. As a result of these developments, ZABA reported a net income to majority of EUR 304m, an increase of 22% YoY.
ZABA key financials (H1 2024 vs. H1 2023, EURm)
Source: Zagrebačka banka, InterCapital Research
Taking a quick look at the balance sheet, total assets grew by 5% YoY to EUR 24.5bn, driven primarily by the increase in loans, advances, and debt securities, despite a decrease in cash and central bank balances. Total liabilities also rose by 5% YoY to EUR 22bn, mainly due to the new debt securities issuance. Meanwhile, the company’s equity increased by 5.5% YoY to EUR 2.5bn, primarily due to higher retained earnings.
