Positive operating trends and new loan growth dominant in H1 2018

“We are pleased with our H1 2018 results. Stable operation, new loan growth in both segments, retail and corporate, along with responsible risk policy management, provide a confirmation that we are following the right business model and give us cause for optimism in the remainder of the year“, said Christoph Schoefboeck, Chairman of the Management Board of Erste Bank Croatia, commenting on the business results for H1 2018, and added: “We want our success to be sustainable and long-term, to result from the quality selection and financial backing of those projects that are sound and profitable, to be based on partnership relations that we maintain with our clients and other stakeholders in the social community. Our common goals are success, satisfaction, and prosperity – of our clients and of society in Croatia as a whole.”

In brief

According to the non-consolidated financial report for Erste Bank Croatia (the Bank), without subsidiaries, net profit in H1 2018 was HRK 505.4 million, up 53.0% from HRK 330.4 million in H1 2017. Lower provision costs in comparison with H1 2017, partly a result of the general positive portfolio trends and the lower NPL share, and partly a result of the fact that provision costs increased in H1 2017 due to the situation of the Agrokor conglomerate and its associate companies, were the main driver of the increase in net profit. At the same time, net income from business before value adjustment and loan loss provisions was up 3.1%, from HRK 608.3 million in H1 2017 to HRK 627.5 million in H1 2018. Net interest income was up 4.0%, from HRK 812.7 million in H1 2017 to HRK 845.1 million in H1 2018, and net fee and commission income maintained a stable trend and amounted to HRK 209.6 million in H1 2018, up 0.6% from HRK 208.3 million in H1 2017.

The bank’s total assets on 30/06/2018 were HRK 58.3 billion, up 1.8% from HRK 57.2 billion at 2017YE. As of 30/06/2018, total loans were HRK 36.2 billion, up 3.3% from HRK 35.1 billion at 2017YE. Total deposits as of 30/06/2018 were HRK 44.8 billion, up 2.3% from HRK 43.8 billion at 2017YE.

In H1 2018, the bank continued to record stable trends in the segment of new loans. In the retail segment, which includes micro-companies, new loans grew by around 50%, from around HRK 1.9 billion in H1 2017 to around HRK 2.8 billion in H1 2018. Increase in retail segment was around 52%, from HRK 1.7 billion in H1 2017 to HRK 2.6 billion in H1 2018, and increase in micro-companies segment was around 26%, from HRK 186 million in H1 2017 to HRK 235 million in H1 2018. Positive trends were also recorded in the corporate segment, where new loans were up around 9%, from around HRK 3.7 billion in H1 2017 to around HRK 4.0 billion in H1 2018. 

EBC Group’s net profit* in H1 2018 was HRK 595.7 million compared to HRK 24.5 million in H1 2017. Increase in net profit is largely due to the substantially lower provision costs compared to the previous year, when provision costs had been impacted by the situation in the Agrokor conglomerate and its associated companies. EBC Group’s operating net income before value adjustment and loan loss provisions increased from HRK 764.4 million in H1 2017 to HRK 803.6 million in H1 2018. EBC Group’s net fee and commission income increased from HRK 1,028.8 million in H1 2017 to HRK 1,054.7 million in H1 2018. Net fee and commission income was up 3.3%, from HRK 330.8 million in H1 2017 to HRK 341.7 million in H1 2018.

EBC Group’s total assets on 30/06/2018 were HRK 67.1 billion and were up 1.7% from HRK 65.9 billion at 2017YE. Total loans as of 30/06/2018 were HRK 43.1 billion, up 2.8% from HRK 42.0 billion at 2017YE. EBC Group’s total deposits on 30/06/2018 were HRK 46.7 billion and were up 2.4% from HRK 45.6 billion at 2017YE.

Outlook

“The Croatian banking system is stable and the banks continue to have the capacity and the opportunity to adequately support positive initiatives and sound projects in the private sector, which should be the driver of healthy economic growth and new job generation, ensuring long-term stability. This year, economic trends are expected to remain beneficial for growth and, hopefully, for maintaining the fiscal discipline. However, the need remains to reinforce the efforts in conducting structural reforms in order to raise the potential growth rate, increase resilience to possible global shocks, and set a sustainable course for the positive trends. It is also important to find a political and economic response to the demographic challenges and the growing emigration trend“, Schoefboeck underlined.

“The clear message that introduction of the euro is a strategic goal sends a positive signal. Reduction of foreign exchange risk and access to euro area financial stability mechanisms will further increase financial stability in Croatia. In terms of challenges, legal and political stability remain the fundamental prerequisites of continued recovery. Investment security should be built, and initiatives that could undermine it by changing the rules of the game as we go should be avoided. Banking is the bloodstream of any economy, and only a stable blood count can help improve the quality of its functioning“, concluded Schoefboeck.