„Further interest margin decrease, upward trends in transaction business, continuation of the risk cost reduction and substantial focus on operational efficiency as a response to the growing market challenges of the digital age, are the four basic trends that mark the banking business in the current year,” said Christoph Schoefboeck, Chairman of the Management Board of Erste Bank Croatia, commenting on the business results for H1 2019 and added: „Despite the one-time costs, which have a significant impact on the achieved financial result, in H1 2019 Erste Bank achieved a stable operating result, focussing on the strategic goals. These are: sustainable and long-term business success, based on following of sound and profitable projects, strong focus on digital innovations and maintenance of a partnership relation with clients and all stakeholders in the social community. Our goal is the growth of the Croatian economy as well as stimulation and expansion of the prosperity of society in Croatia as a whole, and we want to contribute to this with the quality of our financial as well as non-financial business segment, based on an open communication and mutual understanding.”

IN BRIEF

According to the non-consolidated financial report for Erste Bank Croatia (the Bank), without subsidiaries, the Bank’s net profit in 2019 was HRK 332.0 million, down 34.3% from HRK 505.0 million in the same period last year.
One-time provision costs, which arose from a litigation case which is still ongoing and was filed by a creditor of one of the contracting parties in a deposit contract, had the most significant impact on the net profit decrease.

Net interest income decreased by 4.8%, from HRK 849.0 million in H1 2018 to HRK 809.0 million in H1 2019, primarily as a result of further interest margin reduction. Net fee and commission income was up 9.6%, primarily led by upward trends in the transaction banking segment, and in H1 2019 it reached HRK 230.0 million in comparison with HRK 210.0 million in H1 2018. Net trading and fair value result increased by 14.0%, from HRK 100.0 million in H1 2018 to HRK 114.0 million in H1 2019, boosted by upward trends of the foreign exchange transactions.

At the end of June 2019 the Bank’s total assets were HRK 64.2 billion, up 4.6% from HRK 61.4 billion at 2018YE. As of 30/06/2019, total loans were HRK 40.3 billion, up 1.4% from HRK 39.8 billion at 2018YE. Total deposits as of 30/06/2019 were HRK 46.8 billion, down 0.3% from HRK 47.0 billion at 2018YE.

EBC Group’s* net profit in H1 2019 was HRK 428.0 million compared to HRK 596.0 million in H1 2018. EBC Group’s net interest income was down 3.3%, from HRK 1.06 billion in H1 2018 to HRK 1.02 billion in H1 2019. Net fee and commission income was up 8.0%, from HRK 342.0 million in H1 2018 to HRK 369.0 million in H1 2019.

EBC Group’s total assets in late June 2019 were HRK 73.5 billion and were up 5.5% from HRK 69.7 billion at 2018YE. Total loans as of 30/06/2019 were HRK 44.1 billion, up 2.1% from HRK 43.2 billion at 2018YE. EBC Group’s total deposits at the end of June 2019 were HRK 49.6 billion and were up 0.8% from HRK 49.2 billion at 2018YE.

OUTLOOK

“We assess the continuation of the fiscal consolidation process as positive, which resulted in an upgrade of the credit rating of the Republic of Croatia to an investment level, as well as continuation of the Croatian path to the Eurozone, which was confirmed by acceptance of Croatia’s letter of intent to enter the European Exchange Rate Mechanism (ERM2). The recent issue of state bonds at a record-low price additionally points to the importance of a responsible fiscal policy and achievement of a stable economic growth and, especially, implementation of structural reforms so that the growth would be sustainable over the long run. Apart from finding an adequate response to the current migration trends, work on strengthening of the legal and investment safety still calls for further efforts,” Schoefboeck underlined.

“Acceleration of the so-called time-to-market, more frequent changes and adjustments of existing products, i.e. a sort of a comprehensive digital transformation of the banking business, will continue its process in the remainder of this year, as well as in the coming years. It is important to stress that banks are increasingly converting from traditional providers of financial products and services into institutions of financial knowledge which provide their clients with a comprehensive counselling service and take care of their financial health. The smart finance school or free educational workshops on personal finance management, which have been attended by more than 3,000 Croatian citizens so far, is one of the example how banks can contribute to the segment. This is an important precondition for a successful and sustainable business in the future,” Schoefboeck concluded.

EBC 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.