ESB Group achieves strong financial results in H1 2016

ESB Group achieves strong financial results in H1 2016

"The achieved financial results in the first half of 2016 confirms the quality, accuracy and sustainability of ESB Group's business model in Croatia. The stability of the operating business, responsible management of risk policies, growing trends in new loans and in the use of bank's digital channels additionally consolidate our position on the Croatian banking market and create solid foundations for long-term business success. We aim to remain a reliable partner to our clients in the realisation of their financial needs and business plans, while at the same time maintaining an intense focus on further digitisation of business operations," said Christoph Schoefboeck, Chairman of the Management Board of Erste&Steiermärkische Bank d.d., commenting on the business results for the first half of the year.

IN BRIEF

In the first six months of 2016, ESB Group* has achieved strong business results. Net profit amounted to HRK 608.4 million, compared to HRK 200.3 million in the same period of 2015. The most significant impact on its increase came from lower risk costs, a stable and slightly rising trend in operating results, as well as the one-off effect of the sale of a share in the company VISA Europe Limited, amounting to HRK 74.9 million. ESB Group's total assets at the end of June 2016 amounted to HRK 65.6 billion and were down by 3.9 % compared to the end of June 2015, when they had amounted to HRK 68.2 billion. Total loans as of 30 June 2016 amounted to HRK 42.5 billion, 6.1% less compared to HRK 45.2 billion as of 31 December 2015. Total deposits as of 31 June 2016 amounted to HRK 44.0 billion and were 4.3% lower compared to 31 December 2015, when they amounted to HRK 45.9 billion.

According to the non-consolidated financial report for Erste&Steiermärkische Bank d.d., without subsidiaries, net profit in H1 2016 amounted to HRK 425.0 million, compared to HRK 82.0 million in the same period of 2015. The bank's total assets in the first six months of 2016 amounted to HRK 56.4 billion and were down by 4.4% compared to the end of 2015, when they had amounted to HRK 59.0 billion. Total loans as of 30 June 2016 stood at HRK 34.9 billion and were down by 6.7% compared to the end of June 2015, when they had stood at HRK 37.5 billion, which was in part due to the effects of CHF loan conversion, i.e. the reduction of loan principal following the conversion. Total deposits as of 31 June 2016 amounted to HRK 42.5 billion and were 3.6% lower compared to 31 December 2015, when they amounted to HRK 44.2 billion. However, retail deposits retained a stable trend of mild growth, having increased from HRK 25.0bn at the end of last year to HRK 25.1bn at the end of June 2016.

In general, in the first half of 2016, Erste bank has recorded stable trends in new loans. For example, in the retail segment, which includes micro-companies as well, an increase in new loans of about 20% was achieved, from around HRK 1.5 billion in H1 2015 to around HRK 1.8 billion in the same period this year. In the segment of retail home loans and home improvement loans, growth of almost 80% was achieved, from about HRK 151.7 million in new loans in H1 2015 to around HRK 272.3 million in the same period this year. The rising trend in digitalisation was evident through the increased use of the bank's online channels. For example, the share of cash loans realised through online channels in the first half of 2016 amounted to 34% by number of loans, or 47% by volume. In housing loans, this share amounted to 18% by number, or 16% by loan volume. Positive trends have also been recorded in the corporate segment, which reflects the improvement of the business environment for corporate clients and the rising demand in the investment loans segment. In this segment, Erste bank has achieved growth in new loans of about 18% from HRK 2.1 billion in the first six months of 2015 to about HRK 2.5 billion in the same period this year.

Adopting the position that a gradual development of an adequate market environment and conditions beneficial for stronger affirmation of the option to sell non-performing loans in the banking sector are evident in Croatia, Erste banka has decided to make use of this option and, implementing a business practice common in many European Union member states including markets in which the international Erste Group is present, to offer a selected share of its non-performing loans to interested companies. It is important to note that this was limited to reputable and established companies which came forth as buyers of such receivables. The purpose of such a decision was, on one hand, to reduce the NPL ratio in the total loan portfolio, which amounted to 12.4% at the end of June 2016 (on 31 December 2015 it stood at 14.9%), but also to focus on new lending opportunities and increased support of quality projects on the market.

OUTLOOK

The most important prerequisite for the Croatian economy's continued recovery in 2016 is certainly the stability of the 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.

In the next period, Erste banka will continue to follow the financial needs of the retail segment, while maintaining a strong focus on the SME segment, supporting quality projects driving the development of the real economy and employment. By maintaining partnership relations, fostering open communication and understanding each-other's needs, Erste bank 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. The bank 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 statement includes the following subsidiaries in addition to Erste&Steiermärkische Bank d.d.: Erste Nekretnine d.o.o., Erste & Steiermärkische S-Leasing d.o.o., Erste Bank a.d., Podgorica, Erste Card Club group, Erste Factoring d.o.o., Erste Group IT HR d.o.o. and Izbor Nekretnina d.o.o.