With the end of March, the Q1 of 2023 has come to an end. In this brief analysis, we’ll look at how many different indices and companies performed, both in the region, Europe, and the US.
Q1 2023 proved once again to be a quarter of both ups and downs for the global equity markets. Filled with positive sentiments such as a milder winter and a reduction in oil&gas prices, the slowdown of inflation, as well as more positive GDP growth numbers. On the other hand, the continued war in Ukraine, the geopolitical and macroeconomic consequences of it, as well as the latter addition of bank collapses and Central bank interventions, have also marked this quarter.
To see how this affected the equity markets, we took a look at many indices and companies, in Europe as well as the US.
Select US indices performance (2020 – 2023 YTD, %)
Source: Bloomberg, InterCapital Research
Q1 2023 recorded somewhat of stabilization and growth in the US equity market, despite the challenging macroeconomic situation. In this environment, it almost felt that investors were tired of negative news, and were willing to be more hopeful about the future. This is reflected in the indices, with Nasdaq Composite increasing by 16.8% during Q1 2023, and 34.7% since 2020. S&P 500 increased by 7.0% during the quarter, as well as 27.1% since 2020. Finally, DJI recorded a slight increase of 0.38% during the quarter, but a more notable 17.3% increase since 2020.
Select European indices performance (Q1 2023, %)
Source: Bloomberg, InterCapital Research
The story is quite similar in Europe, with the French CAC 40 index leading the pack, with a growth of 13.6% in Q1 2023, followed by DAX with an increase of 12.3%, the pan-European STOXX 600 with an increase of 7.9%, WIG with an increase of 3.6%, and finally, FTSE 100 with an increase of 3.2%. Since 2020, double-digit growth was recorded by CAC 40 (+23%), DAX (+18%), and STOXX 600 (+10.3%).
Select regional indices performance (Q1 2023, %)
Source: Bloomberg, InterCapital Research
Moving on to the region, the largest increase in Q1 2023 was recorded by SBITOP, which increased by 14.3%. Following it we have CROBEX10, at 10.3%, BELEX15, at 7.9%, BET, at 4.8%, and finally, SOFIX at 1.5%. If we look at the data since 2020, there are some similarities and differences. SBITOP still leads the way, with 30.8% growth, followed by BET at 23.6%, and BELEX15 at 10.4%. Meanwhile, SOFIX grew by 7.6% in this period, while CROBEX10 increased by 7.1%.
SBITOP constituents’ performance (Q1 2023, %)
Source: Bloomberg, InterCapital Research
Slovenian blue chips also recorded noteworthy growth in Q1 2023. Leading the way, we have Cinkarna Celje, which grew by 26.1%, followed by Krka at 16.3%, Triglav at 15.9%, Petrol at 14.5%, and Sava Re, at 13.8%. In fact, only Luka Koper and Equinox recorded single-digit changes, at 3.6% and -3.6%, respectively. Overall, Q1 2023 proved quite good for the Slovenian equity market.
Finally, one last noteworthy mention is the performance of the banking sector, due to the recent developments we have witnessed.
Select regional, European, and global banks’ performance (Q1 2023, %)
Source: Bloomberg, InterCapital Research
If we look at the numbers, it isn’t surprising that the banks are in such focus. Credit Suisse, a bank that was operating with a loss for years, and in the last couple of weeks almost collapsed. It was saved only by the timely intervention of the Central Bank, afterward being acquired by the largest Swiss bank, UBS. Because of these developments, it lost 70.8% of its value just in this quarter. The situation isn’t better in the long term, as Credit Suisse had lost 93.5% of its value since 2020.
The story for the remaining banks is mixed. Bank of America also recorded a noteworthy decline in the quarter, at 13.7%, followed by Deutsche Bank at 9.6%, Wells Fargo at 9.5%, and BRD Group, at 7.7%. On the other hand, there are also clear holdouts & winners in this situation. ZABA, the largest bank in Croatia, recorded an increase of 39.8% in Q1 2023, followed by the majority shareholders of ZABA, Unicredit, at 34.5%, Banco Santander, at 24.1%, and Intesa Sanpaolo, at 14.8%.
Since 2020, ZABA is once again at the top, with an increase of 46.4%, followed by HPB at 45.7%, Unicredit at 40%, and Deutsche Bank at 36.7%. It should be noted that ZABA’s increase (and stable) share price in Q1 2023 can be attributed to its decision to pay out a sizable dividend, with a DY before the announcement of 16.3%. If you would like to read more about this, click here. Furthermore, we have also made a broader overview of the banking sector’s performance in the last couple of months, which is available here.
By the end of February 2023, the total loans of all Croatian financial institutions amounted to EUR 41.5bn, which would amount to an increase of 10.7% YoY, and 0.42% MoM.
Recently, the Croatian National Bank, HNB, published its latest monthly report on the developments and changes recorded by Croatian financial institutions, including the data for loan changes and interest rates. According to the report, in February 2023, the total loans of all Croatian financial institutions amounted to EUR 41.5bn, representing an increase of 10.7% YoY, and 0.42% MoM.
This would mean that despite the current macroeconomic environment, which has already caused a slowdown in loan issuance across Europe, the demand for loans is still present and resilient in Croatia. This growth was mainly supported by the development of household and corporate loans. Starting off with the household loans first, they amounted to EUR 19.9bn in February 2023, growing by 0.39%, or EUR 78.4m MoM, and 5.33%, of EUR 1bn YoY. On the other hand, corporate loans amounted to a total of EUR 14bn, increasing by 0.84%, or EUR 117.3m MoM, and almost 20%, or EUR 2.3bn YoY. Here we can see that the main driver of the overall loan growth remains the corporate clients, who need funding for this such as investments, working capital, or any other type of funding, depending on the company and situation. What’s also interesting is the fact that this growth isn’t slowing down, which is quite contrary to a lot of information that can currently be heard in the news, such as the expected slowdown in the economy, and the potential for failures of companies across sectors. As mentioned, this has yet to happen, at least by this metric.
Corporate and household loans growth rate (January 2015 – February 2023, %)
Source: HNB, InterCapital Research
To better understand this, one can also take a more detailed look at the corporate loan issuances, also provided by the central bank. The breakdown includes an overview of the companies by size, but also by the purpose of loans. Here we are more interested in the loans by purpose, with the main three categories being loans for working capital, investment loans, and other loans. Of these three categories, investment loans are the largest, standing at EUR 5.6bn, and increasing by 0.73% MoM, and 16.2% YoY. Next up, we have working capital loans, which amounted to EUR 4.4bn in February 2023, an increase of 0.9% MoM, and 15.6% YoY. Finally, other loans amounted to EUR 4.1bn, representing an increase of almost 1% MoM, and 31.1% YoY. As we can see, all categories of corporate loans are increasing significantly, both on a monthly but especially on the yearly basis.
Turning our attention to households, housing loans still constitute a majority (almost 50%), amounting to EUR 9.9bn in February 2023. This represents an increase of 0.3% MoM, and 9.7% YoY. Following them, we have consumer loans, which with the amount of EUR 7.26bn, accounted for 36.3% of all household loans. This would also amount to an increase of 0.81% MoM, and 2.4% YoY.
Composition of Croatian loans to households (October 2011 – February 2023, EURm)
Source: HNB, InterCapital Research
Finally, taking a look at the interest rate development, in February 2023, interest rates on newly issued housing loans amounted to 3.17%, an increase of 0.56 p.p. YoY, and 0.21 p.p. MoM. On the other hand, newly issued corporate loans had an interest rate of 3.92%, an increase of 2.34 p.p. YoY, and 0.55 p.p. MoM.
Average new housing and corporate loan interest rates (December 2011 – February 2023, %)
Source: HNB, InterCapital Research