Financial result in 2015 heavily influenced by CHF loan conversion expenses

“Although the biggest impact on our financial result in 2015 came from the legal changes concerning CHF loans, we are pleased by the fact that we maintained a stable trend of our operating result and further strenghed our position on the Croatian banking market. Thereby, we remained a reliable partner to our clients, enabling them to realise their financial needs and business plans. Innovation, creativity and an emphasis on the digitalisation of business operations, alongside continued investments in technological development, remained and will be in the focus of our efforts in the future,” said Christoph Schoefboeck, Chairman of the Management Board, Erste&Steiermärkische Bank d.d. (ESB).

HIGHLIGHTS

In 2015 ESB Group* recorded a net loss of HRK 769.0 million, compared to the net profit of HRK 412.0 million recorded in 2014. The biggest impact on this result came from CHF loan conversion expenses, amounting to HRK 986.0 million. Although ESB fully complied with the legislative changes, placing special emphasis on communication with clients in this context, the Bank had petitioned for assessment of constitutionality with the Constitutional Court of Croatia with the aim of protecting its interests. Additionally, ESB Group’s financial result in 2015 was affected by one-off expenses related to the impairment of goodwill for Erste Card Club d.o.o. (ECC), in the total amount of HRK 334.0 million. Low macroeconomic growth rates, increased regulatory requirements, accelerated digitalisation process and increased competition, especially foreign, are all factors that pose a major challenge for the credit card business in the long run.

Total assets of ESB Group amounted to HRK 68.2 at 2015e, which is 2.2% less compared to HRK 69.8 billion at 2014e. The Group’s total loans were worth HRK 46.2 billion at 2015e, down by 1.2 % from HRK 46.7 billion at 2014e. The Group’s total deposits were increased by 9.0% from HRK 38.0 billion at 2014e to HRK 41.4 billion at the end of December 2015.

At the same time, according to the unconsolidated financial statement, which includes the results of Erste&Steiermärkische Bank d.d. without affiliates, the 2015e net loss amounted to HRK 1.0 billion, compared to the net profit of HRK 232.0 million in 2014. The biggest impact on this result came primarily from CHF loan conversion expenses, as well as the impairment of the investment in the subsidiary of ECC. The ESB’s total assets at the end 2015 stood at HRK 59.0 billion and were down by 2.0% compared to HRK 60.2 billion at 2014e. The ESB’s total loans were worth HRK 38.8 billion at 2015e, down by 2.0% from HRK 39.6 billion at 2014e. Total deposits were increased by 6.7% from HRK 37.2 billion at 2014e to HRK 39.7 billion at 2015e.

OUTLOOK

Several important prerequisites must be fulfilled in order to stay on the recovery course of the Croatian economy in 2016. The most important one hinges on a stable political and legal framework, without which there can be no investor confidence, investment growth and no real economy development. The banks in Croatia are able to and want to financially support positive initiatives and good projects of the private sector, which has to become the generator of economic growth and new jobs. The banks’ focus must primarily remain on the client and the client’s needs, with a minimal level of government interventions, and with fewer new regulatory requirements.

Apart from residents’ financial needs, in 2016 ESB will keep an intensive focus on supporting SME segment and all quality project that drive the development of the real economy and boost employment. By maintaining partnership relations, fostering open communication and understanding each-other's needs, ESB will continue to build a successful business in the future, thereby making an adequate contribution towards the development of the Croatian economy as a whole, with the goal of realising all of its potential. ESB wants to play an active role in attaining these goals, which will contribute towards the improvement of the quality of living of all Croatian citizens.

̽ ESB Group’s consolidated financial statements includes Erste&Steiermärkische Bank d.d. and the following affiliates: Erste Nekretnine d.o.o., Erste&Steiermärkische S-Leasing d.o.o, , Erste Bank a.d., Podgorica, Erste Card Club Group, and Erste Factoring d.o.o.

Statement of Profit or Loss

Statement of Financial position as at 31 December 2015