Given that all the listed Croatian banks on the ZSE have published their H1 2023 results, we decided to bring you an overview of their H1 2023 results.
The banking sector has been in a lot of focus in the recent period, influenced by the rising interest rate environment on the back of high inflation rates recorded. In this situation, we decided to look at the banks’ performance based on the latest available data, and how they compare to each other. It should be noted that we only looked at the listed banks on the Zagreb Stock Exchange, as these are the ones you can directly trade there. These include Zagrebačka banka, HPB, Agram banka, Podravska banka, Slatinska banka, and Istarska Kreditna Banka Umag(‘IKBA’). To put things into perspective, we included the list of the largest banks operating in Croatia, based on their assets.
List of largest banks operating in Croatia (%)*
Source: HNB, InterCapital Research
*Latest data available as of Q1 2023
Moving on, with the entry of Croatia into the Eurozone, the interest rate hikes by the ECB have had a direct influence on the banking sector (a more detailed explanation at the Croatian National Bank is available here, albeit only in Croatian).
Net interest income comparison of Croatian banks listed on ZSE (H1 2023 vs. H1 2022, EURm)
Source: HNB, InterCapital Research
As we can see, all of the banks managed to improve their net interest income, both under the influence of higher interest rates on loans, but also on continued new loan production. The largest relative increase was recorded by IKBA, with growth of 102% YoY, followed by HPB at 75%, ZABA at 67%, Podravska banka at 59%, Slatinska banka at 22%, and finally, Agram banka, at 19% YoY.
Net fee and commission income comparison (H1 2023. vs. H1 2022, EURm)
Source: Companies reports, InterCapital Research
More tempered growth can be seen for the net fee and commission income, as these depend primarily on various services and offers from banks to customers, rather than the change in the macroeconomic environment. The largest relative increase here was recorded by Slatinska banka, with 14% growth YoY, followed by Podravska banka at 9%, HPB at 5%, ZABA at 3%, while IKBA and Agram banka recorded decreases of 1% and 6%, respectively.
Net banking income comparison (H1 2023 vs. H1 2022, EURm)
Source: Companies reports, InterCapital Research
Taken together, this also led to significant improvements in the net banking income. In fact, HPB managed to achieve 74% growth YoY, followed by IKBA at 43%, ZABA at 31%, Podravska banka at 25%, Slatinska banka at 16%, and finally, Agram banka at 10% YoY. Of course, given the difference in size between these banks, it would also be prudent to look at some operational KPIs, such as ROA or ROE. We would like to note that these are based on the trailling 12 month data, to provide an accurate picture.
ROE comparison (H1 2023 vs. H1 2022, %)
Source: Companies reports, Bloomberg, InterCapital Research
Looking at the return on equity, we can see that the largest change was recorded by HPB, however, it should be noted that this mostly came as a result of the one-off effect of the acquisition of the Sberbank subsidiary in Croatia (Nova hrvatska banka), due to negative goodwill. Moving on, ZABA recorded the largest ROE at 15.02%, representing an increase of 6.27 p.p. YoY, followed by Agram banka at 10.75%, an increase of 2.90 p.p. YoY, and IKBA at 10.43%, a decrease of 1.10 p.p. YoY. The remaining two banks, Podravska banka and Slatinska banka recorded ROE of 2.85% and 2.23%, respectively, also implying a decrease of 0.51 p.p. and 2.15 p.p., respectively.
ROA comparison (H1 2023 vs. H1 2022, %)
Source: Companies reports, Bloomberg, InterCapital Research
In terms of return on assets, the largest amount was recorded by ZABA, at 1.54%, an increase of 0.49 p.p. YoY. Following them we have Agram banka, at 1.17%, an increase of 0.43 p.p. YoY, IKBA at 0.87%, a decrease of 0.12 p.p. YoY, and HPB at 0.53%, a decrease of 2.43 p.p. YoY. Again, it should be noted that the same one-off effect has an influence on HPB’s ROA as on the bank’s ROE.
Overall, here we can see the direct effect of ZABA’s size. Given that it is the largest bank in Croatia, it also has the largest amount of loans issued and the largest potential to produce new loans due to the number of customers. Furthermore, because of this position, it can be the leader in terms of the increases in loan interest rates, which further supports its profitability growth. The smaller banks on the other hand, and especially the ones that are more focused on certain regions of the country rather than the country as a whole, do not have that much of an ability to independently increase interest rates on their loans, as losing customers would have a more immediate and larger impact on them than on the larger banks. On a final note, H1 2023 proved to be quite good of a quarter for the Croatian banks, especially the larger ones. Given that the interest rate hikes take time to pass through the economy and influence everything, and that at least one more interest rate hike is estimated to happen by the ECB, further profitability growth could be expected. This is especially true if the new loan volume production continues at similar rates we have seen thus far.
In H1 2023, Banca Transilvania recorded net interest income growth of 25% YoY, net fee and commission income growth of 10%, op. income growth of 30%, and a net income to majority of RON 1.52bn, an increase of 51% YoY.
Starting off with the net interest income, it amounted to RON 2.52bn, an increase of 24.5% YoY. This was boosted by higher market rates (3M and 6M ROBOR average at app. 7% in H1 2023), as well as the higher loan volume production (+1.9% increase compared to YE 2022). Net fee and commission income increased by 10% YoY and amounted to RON 606.7m, supported by the higher number of transactions, with net revenues from transactions increasing by 15% YoY. Overall, this resulted in a 29.7% improvement in the operating income, amounting to RON 3.68bn.
Moving on to operating expenses, they increased by 6.7% YoY and amounted to RON 1.74bn. Breaking this down further, in H1 2023, there release of provisions for financial assets measured at fair value through P&L, which dropped by 72% YoY to RON 57.6m, positively influencing OPEX, other provisions also reduced by 61% to RON 10m. On the other hand, personnel expenses increased by 19.7% to RON 979.4m, which was both due to an increase in the employee base (+1.7% YoY), and also due to the high inflation rate. Depreciation and amortization also increased, growing by 15.8% YoY to RON 218.3m, and finally, other operating expenses grew by 11.3% to RON 496.7m.
Because of these positive developments, the net profit to majority also recorded a significant increase, growing by 51.2% to RON 1.52bn. In terms of some other KPIs, the cost of risk remained negative at -5 bps, the cost-to-income ratio amounted to 47.3%, the capital adequacy ratio stood at 23.88%, and finally, the NPL ratio stood at 2.36%.
Banca Transilvania key financials (H1 2023 vs. H1 2022, RONm)
Source: Banca Transilvania, InterCapital Research
Taking a quick look at the balance sheet, the total assets grew by 9% YoY and amounted to RON 153.1bn. This was supported by higher cash and current accounts with the Central Banks, which grew by 57% YoY and amounted to RON 22.8bn, which due to the interest rates currently offered (between 6% and 8%), is expected. Growth was also supported by debt instruments (RON 4.34bn, +111% YoY,), financial assets measured at fair value through OCI (RON 45.67bn, +5% YoY), and finally, loans and advances to customers (RON 66.5bn, +2% YoY). Moving on to the passive side of the balance sheet, the total liabilities amounted to RON 140.8bn, an increase of 7%, or RON 9.74bn YoY. This was mainly supported by higher deposits from customers, which increased by 6%, or RON 7.69bn YoY, and amounted to RON 127.4bn. Loans from banks and other financial institutions also increased, growing by 36%, or RON 1.72bn YoY, and amounted to RON 6.56bn. On the other hand, deposits from banks decreased by 73%, or RON 1.22bn YoY, and amounted to RON 453.5m.
Banca Transilvania also recently proposed a dividend payment of RON 1.13 DPS, with a DY of 5.5%. If you would like to read more about this news, click here.
At the end of July 2023, the NAV of the Croatian pension funds equaled EUR 19.2bn, which is an increase of 8.8% YoY, and 1.4% MoM.
Recently, the Croatian Financial Services Supervisory Agency (HANFA) published the latest monthly report with details regarding the performance of the Croatian financial markets. In this article, we’ll focus on the data for the pension funds, as they’re the largest institutional investors in Croatia. According to the report, the NAV of the Croatian pension funds equaled EUR 19.2bn, which is an increase of 1.4% MoM, 9.3% YTD, and 8.8% YoY. Furthermore, the net contributions into the funds amounted to EUR 109.9m in July, while on a YTD basis, it amounted to EUR 705.7m.
Croatian mandatory pension funds AUM structure change (January 2018 – July 2023, EURm)
Source: HANFA, InterCapital Research
In terms of the changes by asset classes, on a monthly basis, the largest growth was recorded by deposits and cash, which increased by 48.1%, or EUR 206.7m, followed by shares, which grew by EUR 112.6m, or 2.7%, receivables, which increased by EUR 64.1m, or 3%, and bonds, which increased by EUR 49.7m, or 0.4%. On the other hand, other assets recorded a decrease of 87.8%, or EUR 182.2m, and the money market holdings decreased by 18.5%, or EUR 59.2m.
Turning our attention to the yearly basis, the largest increase was recorded by shareholdings, which increased by EUR 666.5m, or 18.7%, followed by bonds, which increased by EUR 442.9m, or 3.9%, receivables, which increased by EUR 307.4m, or 16.2%, and the money market holdings, which increased by EUR 141.5m, or 119.2%. On the other hand, other assets recorded a decrease of 75%, or EUR 75.8m, while deposits and cash remained roughly unchanged (-0.9%, – EUR 5.7m) YoY.
Currently, the largest share of the investments is still into bond holdings, which account for 61.7% of the total, decreasing by 0.61 p.p. MoM, and 2.89 p.p. YoY. Following them, we have shares at 22.1%, an increase of 0.28 p.p. MoM, and 1.85 p.p. YoY, and investment funds, which accounted for 11.5% of the total, and recorded an increase of 0.18 p.p. MoM, and 0.73 p.p. YoY.
Current AUM of Croatian mandatory pension funds (July 2023, % of the total)
Source: HANFA, InterCapital Research
Here you can find the dates for the upcoming events of the regional companies.
| wdt_ID | Date | Ticker | Announcement | Country |
|---|---|---|---|---|
| 34 | 30.8.2023 | EL | Electrica Q2 2023 Results Conference Call | Romania |
| 35 | 30.8.2023 | ONE | One United Properties Q2 2023 Results Conference Call | Romania |
| 38 | 31.8.2023 | CICG | Cinkarna Celje Q2 2023 Results | Slovenia |
| 39 | 31.8.2023 | FP | Fondul Proprietatea Q2 2023 Results, Conference Call | Romania |
| 40 | 31.8.2023 | LKPG | Luka Koper Dividend Payment date | Slovenia |
| 41 | 31.8.2023 | ZVTG | Triglav Q2 2023 Results | Slovenia |
Due to the nature of these events, they are subject to change (might be postponed or canceled).