By the end of September 2023, the total loans issued by the Croatian financial institutions grew by 0.9% MoM, and 6.3% YoY. At the same time, the average housing loan interest rate equaled 3.54%, an increase of 0.08 p.p. MoM, and 0.87 p.p. YoY. Furthermore, the average consumer loan interest rate also grew, by 0.05 p.p. MoM and 0.64 p.p. YoY, reaching 5.92%.  

According to the latest report released by the Croatian National Bank, the growth in the amount of loans issued by the Croatian financial institutions continues. This has happened despite the elevated interest rates, whose growth we have seen across the main categories, both household and corporate alike. As such, at the end of September 2023, the total loans issued by all the Croatian banks amounted to EUR 42.6bn, an increase of 0.9% (or EUR 380m) MoM, and 6.3% (or EUR 2.5bn) YoY.

Breaking this growth into the two main categories, i.e. household and corporate, we can see that growth was recorded across both categories, including on a MoM and YoY basis. For households, they grew by 0.9% MoM, 7.5% YoY to EUR 21.2bn. On the other hand, corporate loans grew by 0.1% MoM, and 6.7% YoY, reaching EUR 14.4bn.

Corporate and household loans growth rate (January 2015 – September 2023, %)

Source: HNB, InterCapital Research

Delving further into the corporate loans, on an MoM basis, working capital and investment loans recorded increases, of 0.7% and 0.9%, respectively, while other loans category decreased, by 0.7%. Meanwhile, on a YoY basis, all 3 categories recorded growth, at 2.7% for working capital loans, 7.9% for investment loans, and 12.6% for the other loans category. This would mean that despite the increase in interest rates and pressure on companies due to higher costs, they’re still willing to use loans to finance their operations and future investments.

Moving on to household loans, the largest absolute MoM increase was recorded by housing loans, which grew by 0.8%, or EUR 81.7m, followed closely by consumer loans, at EUR 81.5m, or 1.1%, as well as the other loans category, which increased by EUR 10.6m, or 0.8%. Furthermore, on a YoY basis, housing loans were once again the category that grew the most, at 9.9% or EUR 962m. Following them there are consumer loans at 8%, or EUR 578m, and other loans, at 4.3%, or EUR 54m.

Composition of Croatian loans to households (October 2011 – September 2023, EURm)

Source: HNB, InterCapital Research

To fully understand the story, however, we should also look at the other side of the loan equation, that is interest rates. For households, the average housing interest rate for a new loan amounted to 3.54% in September 2023, an increase of 0.08 p.p. MoM, and 0.87 p.p. YoY. Consumer loans also grew, by 0.05 p.p. MoM, and 0.64 p.p. YoY to 5.92%. Finally, the corporate loan avg. interest rate decreased by 0.09 p.p. MoM, but increased by 2.2 p.p. YoY, amounting to 4.89%.

Average new housing and corporate loan interest rates (December 2011 – September 2023, %)

Source: HNB, InterCapital Research

In 9M 2023, Romgaz recorded a revenue decrease of 37% YoY, an EBITDA growth of 48%, and a net income of RON 2.17bn, a 3% decline YoY. Furthermore, during Q3, the revenue decline amounted to 42% YoY, EBITDA grew by 56%, while the net income amounted to RON 483m, a 6% decrease YoY.

Starting off with the revenue, the decline during 9M 2023 came due to lower natural gas sales, which declined by 36% YoY. This came mostly due to regulation, which obliged Romgaz to sell most of its gas production at a regulated price of RON 150/MWh. Also, sales dropped by 71% YoY, to RON 288m, also due to the same regulation, which states that Romgaz electricity production is sold at RON 450/MWh.  Finally, revenue from underground storage activities grew by 31% YoY, to RON 424.3m, mainly due to an increase in capacities booked by clients for underground gas storage. As the regulation is still in place in Q3, a similar situation happened, leading to the overall revenue decreasing by 42% YoY.

In terms of operational indicators, gas production dropped by 4.7% to 3.52m m³ during 9M, while in Q3, it decreased by 3.5% to 1.1m. Petroleum royalty remained roughly the same, condensate production increased by 5.4% and 10.2% during Q3 and 9M, to 16.5k tons and 5.5k tons, respectively. Electricity production decreased by 23.6%, and 51.2% during 9M and Q3, to 641.5 GWh and 143.9 GWh, respectively. The main two indicators, gas and electricity production were influenced by several factors. For gas, a decline in production specific to the exploitation of hydrocarbon reservoirs was recorded, gas consumption dynamics in some subsystems of NGTS, as well as other factors. For electricity, quantities produced were influenced by energy demand, the evolution of prices on the competitive market, and the quantity of natural gas allocated to the production of electricity and the efficiency of said activity.

Moving on to operating expenses, during 9M 2023, they amounted to RON 3.15bn, a 62% decrease YoY, while in Q3 they amounted to RON 1.03bn, a 64% decline. Inside this category, employee benefit expenses increased by 14% YoY during 9M, and by 6% YoY during Q3, in line with the elevated inflation in Romania. However, the main contributor to the decrease in expenses came from the “other expenses” category, inside which there is the windfall tax and royalty expenses. These refer to the higher taxations on sales that Romgaz recorded last year, as the Romanian State put regulations in place to redistribute the excess profit from energy producers to those in need. As a result, other expenses decreased by 74.5% YoY, RON 5.2bn. Royalty expenses decreased by 71% YoY to RON 425m, while windfall tax decreased by 83.8%, or RON 3.98bn to RON 769.7m.

As a result of these developments, the EBITDA improved significantly, by 48% YoY during 9M, and by 56% YoY during Q3, amounting to RON 4.28bn and RON 1.1bn, respectively. As such, the EBITDA margin improved by 36 p.p. and 36.8 p.p. to 62.8% and 58.3%, respectively. Finally, even though the net income decreased in absolute amounts, by 3% YoY to RON 2.17bn during 9M, and by 6% to RON 483m during Q3, respectively, due to the aforementioned lack of tax expenses, the net income margins still improved. In fact, during 9M, it improved by 11.2 p.p. YoY to 31.8%, while during Q3 it improved by 27.9 p.p. to 43.3%.

Romgaz key financials (9M 2023 vs. 9M 2022, RONm)

Source: Romgaz, InterCapital Research

Romgaz key financials (Q3 2023 vs. Q3 2022, RONm)

Source: Romgaz, InterCapital Research

In terms of investments, Romgaz recorded total investments of RON 817m during 9M, a decrease of 85% YoY. This came mainly due to lower expenses related to studies and projects, which decreased by 92% YoY to RON 399.8m. On the other hand, as compared to the 9M 2023 plan, Romgaz achieved 64% of the target set (RON 1.27bn). Among many investments, Romgaz pointed out that they completed 6 wells, 11 wells are in the drilling phase, while 23 are in the design phase. If you would like to read more about this or the Company in general, you can access the 9M 2023 results here.

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