In Q1 2022, Banca Transilvania recorded a net interest income increase of 29.3%, net fee and commission income increase of 21.5%, an increase in operating income of 11.7%, and a net profit of RON 400.3m, a decrease of -39% YoY.

The Group’s net interest income amounted to RON 969.4m, an increase of 29.3% YoY. This growth was driven by the increased levels of lending, as app. 63k loans were granted by the bank during Q1, amounting to RON 6.4bn, an increase of 61% YoY. This would also mean that the bank has expanded its loan balance by RON 2.5bn, an increase of 5% compared to the end of 2021. Net fee and commission income increased by 21.5%, and amounted to RON 259m, driven by the increased activity of the bank. Finally, this led to an operating income of RON 1.29bn, an increase of 11.8% YoY.

Operating expenses more than doubled, and amounted to RON 822.9m. There were several factors that drove the increases in the OPEX, but the main one for sure is the impairment or reversal of impairment. In Q1 2021, this number reduced OPEX by RON 137.1m, while in Q1 2022, it increased it by RON 142.2m, leading to an overall increase in impairment costs of RON 279.2m. The growth can be attributed to the current geopolitical uncertainty, as the energy costs, inflation, and geopolitical uncertainty are posing a lot of challenges to the European economies, Romania included. As such, Banca Transilvania is evaluating all of the possible scenarios, and in order to quickly respond to any of them, they have increased provisions (impairments), particularly for loans to customers.

Another factor that had an influence is uncertainty regarding the current interest rate increases, and after yesterday’s announcement, the Romanian National Bank has raised key interest rates from 3% to 3.75%. Considering this will have a direct influence on all loans issued, increasing the risk of the people’s inability to pay back the loans, an increase in provisions is expected.

All of these reasons had an influence on the bottom line, with the bank’s net profit amounting to RON 400.3m, a decrease of -39% YoY.

Balance Sheet

Meanwhile, the Group’s total assets decreased to RON 128.3bn, a decrease of 3.2% YoY. The main driver of this decrease was the reduction of Cash and current accounts with the Central Banks, which decreased by -21.8% and amounted to RON 14.3bn. At the same time, financial assets at amortized cost decreased by -3.65% and amounted to RON 65.1bn. Inside this category, placements with banks decreased by -46.6%, and amounted to RON 5.5bn, while at the same time, loans and advances to customers increased by 4.4% and amounted to RON 57bn.

Moving on the liabilities side, the Group’s total liabilities decreased by -2.9% YoY and amounted to RON 118.5bn. This was driven by a decrease in loans from banks and other financial institutions, which fell by -47%, and amounted to RON 4.2bn, followed by the decrease in deposits from customers, which decreased by -0.6% and amounted to RON 107.4bn.

Banca Transilvania Key Financials (Q1 2021 vs. Q1 2022, RONm)

By the end of March 2022, the total deposits in Croatia amounted to HRK 364.6bn, a decrease of -0.4% MoM, but an increase of 9.5% YoY.

The Croatian National Bank (HNB) has published its monthly consolidated statement of financial positions for the monetary financial institutions. In the report, we can see that at the end of March 2022, the total deposits in Croatia amounted to HRK 364.6bn, an increase of 9.5%, but a decrease of -0.4% MoM. The decrease on an MoM basis marks the first time deposits decreased since April 2020, after the beginning of the COVID-19 pandemic.

If we were to break down the deposits by their components, on a YoY basis, demand deposits increased by 17% and amounted to HRK 153.4bn, while saving deposits grew by 4.6% YoY and amounted to HRK 211.2bn. On an MoM basis, however, both the demand deposits and saving deposits decreased, by -0.3% and -0.5%, respectively. Breaking the saving deposits into domestic and foreign currency saving deposits, the saving deposits denominated in HRK decreased by -6.5%, after last month’s decrease of -5.6%, ending March at HRK 28.9bn. At the same time, foreign currency deposits decreased slightly (-0.4% MoM), and remained roughly unchanged YoY, at HRK 182.3bn.

This would also mean that saving deposits in HRK amounted to 13.68% of all saving deposits, a decrease of 12 bps MoM. Meanwhile, foreign currency saving deposits accounted for the remaining 86.32% of all saving deposits. The decrease in deposits denominated in HRK can be attributed to the expected switch to Euro in Croatia (which should happen in January 2022), as well as the current inflationary pressure which means people are more like to increase their savings in “stronger” foreign currencies like the USD or EUR.

Looking over to the household deposits by themselves, they grew by 8.8% YoY, but decreased by -0.5% MoM, amounting to HRK 248.6bn at the end of the month. This would also mean that 68.18% of all deposits were the household deposits, representing a -43 bps YoY, and -1 bp MoM.

Deposits breakdown (HRK bn)