“In addition to maintaining business stability, ensuring business continuity, and availability of services to clients in the conditions of the coronavirus epidemic, as a responsible institution, we have taken a proactive approach to facilitate the impact of the current circumstances for our clients. At the same time, we continued with regular lending activities. New loans to companies kept the similar dinamycs compared to H12019, while new retail loans, after a period of decreased citizens’ demand in April and May, have also recorded recovery and are returning towards  last year's levels,” said Christoph Schoefboeck, Chairman of the Management Board of Erste Bank Croatia while commenting on the business result in the first half of 2020. He added: “Banks in Croatia, in coordination with the Croatian National Bank and in accordance with the recommendations of the Government of the Republic of Croatia, implemented assistance measures and offered support to Croatian citizens and companies in the shortest possible time, reacting to the crisis faster than was the case in most other European countries. The measures offered by Croatian banks to clients followed the standards applied in most Western and Central European countries, while in some elements the Croatian model even took the lead.”

IN BRIEF

According to the non-consolidated financial report, which includes the result of Erste Bank Croatia  (the Bank) without subsidiaries, the Bank’s net profit in H12020 was HRK 171.3 million, down 48.4% from HRK 332.2 million in the same period last year. Increased provision costs, which reflect the impact of the current situation connected to the coronavirus epidemic on the entire economy, had the most significant impact on the net profit decrease, and it is important to emphasise that the future projections based on macroeconomic expectations were also included.

Net interest income decreased by 1.0%, from HRK 808.6 million in the first half of 2020 to HRK 800.2 million in the same period of 2019. At the same time, the net fee and commission income was down 9.2% and amounted to HRK 208.8 million in the first six months of 2020, compared to HRK 229.8 million in the first half of 2019. Net trading and fair value result amounted to HRK 82.7 million in the first half of 2020, down 27.3% compared to HRK 113.8 million in the same period last year.

At the end of June 2020, the Bank’s total assets were HRK 71.4 billion, up 11.7% compared to the end of 2019, when they amounted to HRK 63.9 billion. Total loans to customers as of 30 June 2020 amounted to HRK 44.4 billion, up 8.1% from HRK 41.1 billion at the end of 2019. Total deposits from customers as of 30 June 2020 amounted to HRK 54.0 billion, up 11.4% compared to the end of last year, when they amounted to HRK 48.5 billion.

EBC Group’s* net profit before minority interests in the first half of 2020 was HRK 200.5 million compared to HRK 427.6 million in the same period of 2019. EBC Group’s net interest income was down 1.8%, from HRK 1,022.7 million in the first half of 2019, to HRK 1,004.4 million in the same period last year. Net fee and commission income amounted to HRK 332.5 million, down 9.8% from HRK 368.8 million in the first half of 2019.

EBC Group’s total assets at the end of June 2020 amounted to HRK 81.0 billion, up 9.6% compared to the end of 2019, when they amounted to HRK 73.9 billion. Total loans to customers as of 30 June 2020 amounted to HRK 49.0 billion, up 8.1% compared to the end of 2019, when they amounted to HRK 45.3 billion. EBC Group’s total deposits from customers as of 30 June 2020 were HRK 56.8 billion, up 10.7% compared to the end of 2019, when they amounted to HRK 51.3 billion.

At the end of June this year, the merger of Erste Factoring d.o.o. was formally completed, making the factoring segment an integral part of the operations and an integral part of the Bank’s offer. In addition to providing long-term quality technological and infrastructural support for further development of the factoring, the goal of the merger is to enable faster and easier management of the clients’ core business through the synergy of existing specialised knowledge on factoring and comprehensive consulting support in other aspects of financial operations, which the bank provides through a widespread network of its branches and financial representatives.

*EBC Group’s consolidated financial statement includes the following subsidiaries in addition to Erste Bank Croatia: 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 (until June 18 2020), Erste Group IT HR d.o.o., and Izbor Nekretnina d.o.o.

IMPACT OF THE COVID-19 SITUATION

Since the very beginning of the crisis associated with the coronavirus epidemic, the Bank has taken a proactive and socially responsible approach. It has taken all preventive actions with the goal of protecting the health of its employees and clients, it adequately adjusted the work of the business network, especially bearing in mind the needs of more vulnerable groups of clients, and through donations to health institutions, independently and in cooperation with Erste Card Club d.o.o., it provided support in a broader context of the social community needs.

Taking the objective situation into consideration, it sought to make the maximum contribution so that clients, citizens and companies would be affected as little as possible by the current circumstances and, especially when it comes to companies, maintain the continuity of their operations. There was a clear chronological order of undertaken activities, which can be divided into three basic phases: temporary suspension of the activation of forced collection measures, enabling the contracting of deferred repayment for citizens and companies for up to 6 months, or up to 12 months maximum for clients from the industries most affected by the crisis, such as tourism and dependant activities, and providing new financing in the form of loans to preserve the liquidity of companies. In doing so, the Bank, in cooperation with national and foreign financial institutions, continuously strives to provide adequate sources of financing and favourable warranty schemes, which provide clients with the most favourable possible financing in the current market circumstances.

The Bank received around 9.100 requests from citizens for repayment deferrals, which pertain to slightly less than 13.600 loans. Of these, more than 11.600, i.e. around 85%, were approved. In the case of business entities, around 2.900 requests for repayment deferrals were received, of which around 85% were approved. The remaining number of requests from citizens and companies are cases in which the clients have either given up on their own in the meantime or they have not met the criteria necessary for the realisation of the deferral.

In the first six months of 2020, the bank continued its regular lending activities. In the retail segment, including micro-entrepreneurs, it placed a total of around HRK 2.4 billion of new loans, which is a decrease of around 12.0% compared to the same period in 2019, when new placements amounted to around HRK 2.7 billion. The decrease is the result of objective circumstances related to the coronavirus epidemic, which was especially evident in the fall in citizens’ demand for new lending in April and May. At the same time, a total of HRK 3.9 billion of new loans were realised in the segment of business entities, which is approximately at the same levels as in the comparable period of the previous year.

Overall, in the first half of 2020, the share of NPLs¹ did not change significantly compared to the end of 2019, when it amounted to 7.1%. It is important to emphasise that the level of NPLs was further reduced in the first quarter, while it was expected to increase slightly in the second quarter, and at the end of June 2020 it approached the level from the end of last year. In retail, the share of NPLs at the end of last year was 7.0%, and at the end of June this year is was 7.6%. Overall, in corporate banking, the share of NPLs at the end of last year was 5.8% and at the end of June is was 5.5%.

In the light of the objective economic situation, the continuation of a slight increase in NPL placements can be expected in the coming period, and it is important to emphasise that this will not have a significant impact on the Bank’s regular operations, which are completely stable. As a responsible business entity, the Bank will continue to monitor and manage the loan portfolio in accordance with the business policies and applicable standards in the credit risk management segment, while respecting all regulatory rules and applying a balanced approach that respects the objective market situation and the needs of its clients.

¹ Non-performing loans

OUTLOOK

“With a coordinated approach of all stakeholders, Croatia can overcome the current challenges and minimise all their potential negative effects. Accession to the European Exchange Rate Mechanism (ERM2) takes Croatia another step closer to the introduction of the euro, i.e. the realisation of the strategic goal that will contribute to long-term financial stability for citizens and the economy as a whole. A positive assessment in the process of a comprehensive evaluation of the European Central Bank and the confirmation of the stability of the Croatian banking system are encouraging in the context of the challenges which the Croatian economy is currently facing, whereby a strong and adequately capitalised banking sector will be a pillar and support for recreating economic growth and ensuring the prosperity of the entire social community,” Schoefboeck said.

“Through transparent public communication with clients, business partners and the social community, Erste Bank will continue to be an active participant in seeking and finding adequate solutions that will ensure the fastest possible recovery for the Croatian economy. We have a sufficient amount of liquidity and we will continue to meet all the financial needs of citizens and business entities with our regular lending activities. We will continue to support all quality and sustainable projects, especially in the real sector. We believe that, through synergy and joint work, we will contribute to the number of such projects as much as possible, regardless of the challenges presented by the current situation”, Schoefboeck concluded.