HPB, the only large domestically owned bank, has recently published its 9M 2025 results. According to the report, NII recorded a decline of 15% YoY, NFCI grew by 4%, resulting in a 10% decline in net banking income. Lastly, net income amounted to EUR 51.4m, down 17% YoY.
Starting off at the top of the P&L, net interest income (NII) declined by 14.5% YoY, or EUR 19.5m in absolute terms, to EUR 115.6m. The primary driver of this decline is the roughly halved rates on overnight deposits placed with the ECB, which cut income from the large liquidity the Bank has placed with the ECB. This drop was to be expected; the interest rate cuts started in June 2024, and while it took time for this to be visible on the banking sector’s balance sheets, the effect can be fully visible now. Due to this reduction in the rate of return, HPB also significantly reduced its cash and cash equivalents (overnight deposits) held at the ECB, by 38% YoY to EUR 2.3bn.
This drop was partly offset by higher lending volumes and higher income from securities, and the Bank did note that this downward trend stopped during the current quarter. Looking at all of this more closely, the ECB dropped the rate from 4% to 2%, leading to lower average loan yields (from 3.9% to 4% down to 3.5% to 3.7%), while securities’ yield also declined (from 4% to 3.5% – 3.9%). As a result of the rate cuts, the Bank shifted focus to Croatian Government bonds and T-bills and stepped up lending to cushion this drop. As a result, securities grew by 74% YTD to EUR 1.9bn, with a heavy government share. HPB noted that this was their way of optimizing the yield with low risk. Part of the liquidity released from the ECB was also recorded in the loan growth. Net loans grew by 17% YTD to EUR 3.36bn, supported by strong new production across retail/SME/corporate and products like HPB Super stambeni kredit. In fact, new lending more than doubled versus prior years.
HPB key financials (9M 2025 vs. 9M 2024, EURm)
Source: HPB, InterCapital Research
Next up, net fee and commission income amounted to EUR 28.1bn, growing by 4.4% YoY. The growth was supported by higher transaction volumes and activity, driven by stronger economic activity and greater use of HPB’s digital channels and payment services. The increase was also supported by a larger customer base and cross-selling opportunities, especially after the integration of Nova Hrvatska Banka. Combined, this led to a net banking income of EUR 149.6m, declining by 10.5% YoY. The decline in NII was the primary driver of the decline, while NFCI growth and net other income increased to a lesser extent, lessening the blow from the drop.
In terms of the operating expenses, total OPEX amounted to EUR 81.9m, up 2.2% YoY. By categories, the largest increase was recorded by employee expenses, which grew by 5.5% YoY to EUR 43m, as well as a slight uptick in depreciation, which grew by 0.5% to EUR 7.8m. Admin. expenses, on the other hand, declined by 1.7% YoY to EUR 31.2m. Breaking this down further, employee expenses grew due to higher wages, while the headcount remained almost unchanged (+1 employee YoY to 1,721). The growth was also supported by higher HR investments connected to the Bank’s digital transformation, requiring upskilling staff to manage new systems and consumer processes. On the flip side, the decline in the admin. expenses came as a result of efficiency gains and cost discipline, as well as a reallocation toward IT & process upgrades.
Next up, impairments and provisions amounted to EUR -5.1m (net), declining by 59% YoY, which helped cushion the 10% decline in operating income. This increase was driven by strong loan growth but low defaults, with the performing portfolio, i.e., Stage 1 & Stage 2 loans, expanding significantly due to doubled new lending volumes across all segments. Despite the increase, the credit quality remained stable. As such, Stage 1 & Stage 2 provisioning rose only slightly with loan volume growth, but was offset by income from Stage 3 recoveries. In fact, HPB realized EUR 3m of income from the reversal of provisions for NPLs. NPL ratio is also indicating this; during 9M 2025 it dropped to 2.4%, down 0.2 p.p. YoY.
While HPB does not provide Cost of Risk numbers, the items used to calculate it are available, and we can get a rough estimate. According to our calculations, CoR stood at app. 44 bps during 9M 2024, dropping by app. 27.5 bps YoY to 16.4 bps, further indicating the improvement in the risk & provisioning. As a result of all of these developments, net income amounted to EUR 51.4m, declining by 17% YoY.
Taking a quick look at the balance sheet, besides loans & amounts held at ECB on the asset side, one should also take a look at the liabilities side, especially deposits. For HPB, total deposits amounted to EUR 6.63bn, declining by 1.6% YoY. It should be noted that this decline is more of a normalization effect. HPB said that it recorded exceptionally strong deposit inflows at the end of 2024. However, early 2025 did record an outflow, leading to the YoY decline seen here. On a quarterly basis, Q3 deposits grew 5.5% QoQ, almost reaching the Ye 2024 values. By segments, retail accounts for 48-50% of the total, with stable growth. SMEs, holding 10% share, recorded a slight dip, while corporate, public sector & financial segment held 40% of the share, and the majority of the volatility recorded above was present in this segment.