Last week, the largest bank in Croatia, ZABA, published its Q3 2024 results, and today we’re bringing you the highlights. During Q3 2024, ZABA recorded a net interest income growth of 8.2% YoY, net fee and commission income increase of 6.8%, net banking income of EUR 783m, an increase of 10%, and a net income to majority of EUR 455m, an increase of 12.6% YoY.
ZABA’s Q3 results were still positively influenced by the high interest rate environment, although going forward, a slowdown in growth could be expected, as the rate cuts by ECB continue. However, during Q3, these were still not present, and as ZABA maintains marker leader position in Croatia, it benefitted greatly, as is visible from the results.
In Q3, ZABA recorded a net interest income of EUR 544m, growing by EUR 41m, or 8.2% YoY. Net interest income, being one of the main revenue drivers for banks, is influenced by two factors: interest rates, and interest-bearing assets, primarily loans. While ZABA does not provide details about the former, we can take a look at its interest-bearing assets to get a rough idea about the latter.
Compared to the beginning of the year, ZABA did record changes in several important categories of interest-bearing assets. Firstly, the cash and cash balances held at central banks, i.e. the money that is usually put aside when new loans cannot be issued (and/or when the key interest rates are high, such as now) amounted to EUR 4.5bn, declining by 27% since the start of the year. However, the primary drivers of the banking business, i.e. loans, grew by 7.5% YoY to EUR 13.6bn for customers, and by 66% YoY to EUR 3.6bn for loans to other banks.
While this does not translate 1:1 when applying the net interest margin to get the net interest income, it is quite evident that the primarily driver of growth in the NII was volume expansion, with pretty much stable or slightly lower loan interest rates. Moving on, the net fee and commission income amounted to EUR 173m, growing by 7% YoY. While ZABA does not provide a detailed breakdown of why this came to be, as it is the bank with the highest number of customers in Croatia, and as this category is mostly related to transactions, investment funds, and other services the bank offers expect loans, it was expected that this category would see some growth.
Lastly, net trading and other income and expenses amounted to EUR 66m, growing by 47% YoY, supported by positive trading returns on ZABA’s book.
Taken together, this resulted in a net banking income of EUR 783m, growing by 10% YoY. In terms of operating expenses, they amounted to EUR 257m, growing by 5% YoY, mainly as a result of higher admin. expenses. The main driver here was wage inflation, however, the overall number was hanging around the same single-digit levels as the inflation rate this year. The reason expenses haven’t risen as much can be attributed to the number of employees. During the same period last year, ZABA employed a total of 4,597 people, while at the end of September 2024, it employed 4,488 people, a reduction of 2.4% YoY.
In terms of impairments and provisions, they amounted to EUR 24m, remaining the same YoY. This would imply a lower cost of risk overall, as the bank has significantly expanded its asset base YoY while maintaining the same provisions for risk. As a result of all of these developments, ZABA recorded a net income to majority of EUR 455m, an increase of 12.6% YoY.
ZABA key financials (Q3 2024 vs. Q3 2023, EURm)
Source: ZABA, InterCapital Research
Taking a quick look at the balance sheet, the total assets grew by 3.4% YoY to EUR 25.4bn, mainly due to the developments in loans to customers and banks described above. On the other hand, total liabilities grew by 3.7% YoY to EUR 22.7bn, supported both by regular operations in the form of deposits from customers, which have grown by 1.5% YTD to EUR 20.4bn, but also from deposits from other banks, which grew by 27% to EUR 847m, and issued bonds, which increased by almost 3x to EUR 595m from the beginning of this year.
