Based on the resolutions at the 34th GSM of Petrol, the Management Board of the Company will do a 1:20 split of PETG shares. This would mean that 1 share would be split into 20 new shares, implying that the overall number of shares would increase from the current 2,086,301 to 41,726,020, whereas the share capital of EUR 52,240,977.04 will remain the same. The action will take place on 1 November 2022, but due to it being a public holiday, trading with the new price and number of shares will start on 2 November 2022.
Yesterday, Petrol published an announcement on the resolution of the GSM of the Company to do a 1:20 share split. According to it, this corporate action will be implemented on the accounts of those holders of PETG shares who will be holders of such shares in the central register of the information system closing on 28 October 2022. The corporate action will be executed on 1 November 2022. Due to that date being a public holiday, the trading will not take place on it. 26 October 2022 will be the last day when PETG share trading and trades settlement will be conducted entirely the same as before. On 27 and 28 October 2022, PETG shares will be traded without any change, but all trades concluded during these two days will be settled by taking into consideration the split ratio.
This would mean that the publicly presented price, orders, and trades will be the same, yet trades will not be settled as concluded and publicly presented – the price per share and the number of shares will be automatically adjusted in line with the 1:20 share split ratio. This will not affect the economic content of the concluded trades in any way because the same share in the issuer’s equity will be exchanged at the same purchase price. From 2 November 2022, inclusive, trading and settlement of trades will be conducted under a new regime, meaning that the volume of shares on the market will increase to 41,726,020, and their price will decrease, that is, it will be divided by 20. Ljubljana Stock Exchange will delete all orders entered prior to that date, meaning that the order book for PETG shares will be empty at the beginning of the trading day on 2 November 2022.
The PETG share split will be performed automatically for the holders of shares via KDD d.o.o. in the central securities registry. Holders of PETG shares will not need to pay anything for the shares obtained based on the PETG share split. The PETG share split costs will not be charged on the PETG share split. The share split has no tax implications since this is a corporate action where the asset value in the form of PETG shares does not change.
This is a positive development as it does not fundamentally change the value of the Petrol stock, but it makes it more available to a wider number of investors. As such, it will surely increase the trading of the stock and thus promote liquidity for the Company, but also the SBITOP index as Petrol is one of its larger constituents. The practice of share splits has been quite popular over the last couple of years, especially in the US, but also in the region. Examples of this in the region are Cinkarna Celje (1:10 share split) and Atlantic Grupa (1:4 share split). This makes Petrol the 3rd regional Company to do a share split in 2022. As the news was announced yesterday, Petrol’s stock price increased by 1.53% by the closing time and amounted to EUR 398.
Petrol share price (2020-2022 YTD, EUR)
Source: LJSE, InterCapital Research
In 9M 2022, ZABA recorded an NII increase of 2.2% YoY, NFCI growth of 15.6%, an operating income increase of 9.2%, and a net profit to majority of HRK 1.82bn, an increase of 42.8% YoY.
By the end of 9M 2022, ZABA’s net interest income amounted to HRK 2.18bn, which is an increase of HRK 46m, or 2.2% YoY. Net fee and commission income amounted to HRK 1.21bn, which is an increase of HRK 163m (or 15.5%). Net trading and other income and expenses amounted to HRK 527m, an increase of HRK 120m (of 29.5%) YoY, mainly due to higher trading results.
Overall, ZABA’s operating income amounted to HRK 3.92bn, which is an increase of 9.2% YoY. This growth was driven by all 3 of the aforementioned segments, with the main two drivers being higher NFCI and net trading and other income and expenses. Operating expenses increased only slightly, by 3.5%, to HRK 1.73bn. This would mean that the cost-to-income ratio equals 44.1%.
Moving on, the profit before impairment and other provisions amounted to HRK 2.11bn, representing an increase of 16.4% YoY (or HRK 297m), as a result of the previously mentioned movements in operating income and operating expenses. Meanwhile, impairments and other provisions improved and amounted to positive HRK 42m (vs. 9M 2021: HRK -297m). This would mean that overall, the profit before tax amounted to HRK 2.19bn (+42.7%). Finally, the net profit to majority amounted to HRK 1.82bn, which is an increase of 42.8% YoY.
Moving on to the balance sheet, the total assets in 9M 2022 increased to HRK 169.9bn, which represents a growth of 7.2% YoY. The largest growth in this category was recorded in the financial assets at amortised cost, which increased by 20.3% YoY and amounted to HRK 114.7bn. In this category, loans and advances to credit institutions increased by 76.2% YoY and amounted to HRK 17.9bn. Loans and advances to customers increased by 8.6% YoY and amounted to HRK 88.7bn. This is broadly in line with the Croatian market as Loans to financial institutions grew 7.72% in 8M of 2022, while ZABA is also consolidating its Unicredit Mostar subsidiary results. Finally, debt securities increased by 129% YoY and amounted to HRK 8bn. On the other hand, financial assets at fair value through other comprehensive income decreased by 32% YoY and amounted to HRK 8.74bn. Obligatory reserves with the Croatian National Bank (HNB) decreased by 40.8% and amounted to HRK 3.6bn. On the other hand, financial assets held for trading increased by 176% YoY and amounted to HRK 3bn.
Looking at the liabilities side, total liabilities increased by 9.2% YoY and amounted to HRK 149.8bn. In this category, the largest absolute increase was recorded by financial liabilities measured at amortised cost, which increased by 7.9% YoY and amounted to HRK 143.4bn. Inside the category, the growth was recorded by deposits from customers, which increased by 6% and amounted to HRK 135.1bn, followed by deposits from credit institutions, which increased by 54.7% and amounted to HRK 7.75bn. One other category to experience a notable increase is the financial liabilities held for trading, which grew by 229.9% YoY and amounted to HRK 2.86bn. Meanwhile, equity decreased by 5.7% and amounted to HRK 20.1bn. It is due to securities measured at other comprehensive income, as interest rates are increasing and market values of bonds held for trading are decreasing.
ZABA key financials (9M 2022 vs. 9M 2021, HRKm)
Source: Zagrebačka Banka, InterCapital Research
Impact of the COVID-19 Pandemic and the Russia-Ukraine conflict
Zaba also briefly commented on the impact of the pandemic and the Russia-Ukraine conflict. Starting with the pandemic, they said that the market continued to be affected by the uncertainty about the evolution of the pandemic and the consequent unpredictability of the timing and the extent of the economic recovery. The measurement of financial and non-financial assets recognised in the balance sheet was impacted by the uncertainty on the outcome of the pandemic, the effect of relief measures, and ultimately, the degree of the economic recovery.
Commenting on the Russia-Ukraine conflict, ZABA said that at the end of September 2022, the Group’s assets were not significantly or directly impacted by the geopolitical situation. However, ZABA’s operations are indirectly affected as the overall macroeconomic scenario evolves.