IC Market Espresso 2 Mar 2023

HPB Group Publishes FY 2022 Results

In 2022, HPB Group recorded a net interest income growth of 40% YoY, net fee and commission income growth of 30%, op. income increase of 25%, and a net income of HRK 961.9m, an increase of more than 3.7x YoY.

2022 was marked as the best year on record for HPB Group, supported by solid organic growth, but also by the acquisition of Sberbank’s subsidiary in Croatia (renamed Nova hrvatska banka) back in April 2022, which due to the circumstances of the agreement, boosted the bottom line significantly.

Net interest income amounted to HRK 733.3m, an increase of 39.9% YoY, or HRK 209.2m. This growth was supported by loan portfolio growth, as well as interest rate growth (especially in Q4 2022), as well as effective management of interest costs. Net fee and commission income amounted to HRK 263.5m, an increase of 30% YoY, or HRK 60.9m. This in turn was supported by a higher volume of transactions and thus higher fees in Q3 2022 (tourist season), but the Company notes that the NFCI declined somewhat in Q4, but also that this decline is to be expected due to the seasonal nature of this income stream.

Together, this resulted in the op. income of HRK 1.02bn, an increase of 25.1% YoY, or HRK 203.5m. Moving on to operating expenses, it amounted to HRK 800.4m, an increase of 54% YoY. This was mainly driven by higher administrative expenses, which grew by 56.8%, or HRK 237.4m YoY, and amounted to HRK 655.6m. Of this, employee expenses grew by 37.3% YoY, and amounted to HRK 342.2m, while other administrative expenses increased by 85.5% YoY, and amounted to HRK 313.3m. Here we can see both the inflationary pressures, but also the costs of integration of Nova hrvatska banka.  Due to the higher amount of assets received after the acquisition, amortization also increased, growing by 47% and amounting to HRK 99.8m.

Moving on, the net profit of the Group amounted to HRK 961.9m, an increase of more than 3.7x YoY. This came as a result of the aforementioned acquisition, which caused badwill, or as HPB named it, a bargain purchase of HRK 1.01bn, increasing the net profit significantly.

HPB key financials (2022 vs. 2021, HRKm)

Source: HPB, InterCapital Research

Of course, the main highlights of the Group’s performance can be seen in the balance sheet. Here we can see that the total assets amounted to HRK 41.8bn, an increase of 50% YoY. This would also mean that on a 9M 2022 basis (for which comparable results for all companies is available), HPB placed 6th in terms of market share, owning a total of 5.5% of the total assets in the Croatian banking system.

The growth was driven by the inclusion of Nova hrvatska banka’s assets, but also by organic growth. If we broke the assets down further, we can see that financial assets at amortised cost increased the most, growing by 80.6% and amounting to HRK 28.8bn. In this category, loans and advances to customers increased by 46.4% YoY and amounted to HRK 23.4bn, while debt securities increased from HRK 454.3k to HRK 5.46bn, a significant increase. Cash, cash balances at central banks, and other demand deposits also recorded a significant increase, growing by 79.6% YoY and amounting to HRK 11.9bn. This was primarily driven by higher cash balances at central banks, which grew by 127% YoY and amounted to HRK 9.8bn. On the other hand, the total liabilities increased by 52% YoY and amounted to HRK 38.3bn. This was primarily driven by higher deposits, which increased by 51% YoY and amounted to HRK 37.4bn.

Kraš Publishes FY 2022 Results

In 2022, Kraš recorded a sales revenue growth of 8.7% YoY, an EBITDA growth of 22.4%, and a net income to majority of HRK 44.9m, an increase of 49% YoY.

Starting off with the revenue, sales revenue amounted to HRK 1.2bn, an increase of 8.7% YoY. Of this, sales on the domestic market amounted to HRK 630.3m, an increase of 9.9% YoY, while sale revenue abroad amounted to HRK 498.3m, an increase of 6.7% YoY. The revenue growth was recorded across all product categories, while the volume of products sold is slightly lower on a YoY basis. In fact, the total sales volume amounted to 36.4k tonnes, which is 1.4% or 505 tonnes less YoY. Of this, the domestic market recorded a decrease in volume of 1.9%, while the volume on the international market recorded a 4% decrease.

This would imply that the growth in sales revenue came as a result of higher prices of products, and given that the revenue increased by 8.7% while the volume decreased by 1.4%, proves that Kraš is on average able to charge higher prices for their products with negligible reduction in volume. Furthermore, this can also show us that Kraš has solid market shares across its product segments, which combined with its effort of inventory optimization led to the aforementioned increase in sales.

Moving on, the EBITDA amounted to HRK 116.2m, an increase of 22.4% YoY, implying an EBITDA margin of 10.20%, an increase of 1.15 p.p. YoY. This growth was primarily driven by several things. Firstly, higher material expenses, which increased by 16.3% YoY and amounted to HRK 744.5m. Secondly, higher reservations (in this case, for retirement, severance packages, and other similar liabilities to employees), which increased by over 3x, to HRK 23.5m. Lastly, the changes in the value of the inventory of products in production but also finished products amounted to HRK -36.5m in 2022 (2021: HRK 919k).

Finally, the net profit amounted to HRK 44.9m, an increase of 49% YoY, implying a net profit margin of 3.94%, an increase of 1.07 p.p. YoY. In fact, this growth was really supported in the last quarter, as the Company recorded a net profit of HRK 8.7m in Q4 2022, while in the same period last year, they recorded a net loss of HRK 4.07m.

Kraš key financials (2022 vs. 2021, HRKm)

Source: Kraš, InterCapital Research