During Q1 2025, ZABA recorded a net interest income decrease of 4.4% YoY, net fee and commission income growth of 8.8%, op. income increase of 4%, and a net income of EUR 151m, down 2% YoY.

Last week, ZABA, the largest bank in Croatia, published its Q1 2025 results, and today, we are bringing you an overview of the main changes. In Q1 2025, ZABA recorded a net interest income of EUR 173m, down 4.4% YoY. In banking, net interest income is a function of two sides of the same coin: loans outstanding (both newly issued and old ones) and net interest margin on those loans. While ZABA does not disclose the net interest margin, due to the decrease in the key interest rates by the ECB (currently standing at 2.25% for deposit facility, vs. 3% at the beginning of 2025, and at 4% during Q1 2024), a decrease in loan interest rates was also forthcoming.

What can be done is to look at the overall loan interest rates indirectly; according to the Croatian National Bank, HNB, average loan interest rate for consumer loans amounted to 4.96% at the end of March 2025, up slightly from 4.93% at the end of December 2024, while the average housing loan interest rate amounted to 2.94%, down over 70 bps from December 2024. Compared to March 2024, consumer loans are actually standing at 0.2 p.p. higher levels, while housing loans are standing at over 0.8 p.p. lower levels currently vs. March 2024. Corporate loans demonstrate a similar situation, standing at 5.9% in March 2024 and 5.27% in March 2025. All of this would imply a lower net interest margin, especially for ZABA, as it is the bank with the largest market share.

On the other hand, loans and advances to customers grew by 4.1% YoY to EUR 14.2bn at the end of Q1 2025, meaning that even though new loans were being issued, they were getting issued at lower interest rates, leading to an overall decline in the net interest income. Moving on to net fee and commission income, it amounted to EUR 62m, up 9% YoY, and while there are no details here, the higher number of card transactions in this segment, as well as higher fees on certain services, are the probable drivers. ZABA also recorded an 87% increase in net trading and other income and expenses, to EUR 28m. All of this combined led to an operating income of EUR 263m during Q1, an increase of 4% YoY.

In terms of operating expenses, they amounted to EUR 85m, up 4% YoY, mainly as a result of higher admin expenses, which amounted to EUR 70.4m, a 4% increase YoY. ZABA also recorded impairments and provisions of EUR 4m during Q1 2025, down 73% YoY. This directly influences net income, and as a result, it amounted to EUR 151m in Q1 2025, down 1.9% YoY.

ZABA key financials (Q1 2025 vs. Q1 2024, EURm)

Source: ZABA, InterCapital Research

In terms of other items, deposits from customers amounted to EUR 20.9bn, up only 0.6% YoY. This was mainly realized in retail. Deposits from credit institutions, on the other hand, amounted to EUR 873m, an increase of 5.1% YoY.

Overall, Q1 results are indicative of the trend that has been present in the banking sector for some time now. The decrease in the key interest rates, while they don’t take effect immediately, did start taking effect as of 2025. New loan issuances are occurring, but at lower interest rates, leading to slower profitability growth. This trend is expected to continue going forward.