“We are happy with the results achieved in 2021. We maintained the stability of our business operations and, at the same time, provided adequate support to our clients in these challenging times marked by the pandemic. Through our regular lending activities, we continued to support the financial needs of citizens, businesses and local municipalities. A strong emphasis was placed on further development of our digital solutions, the George on-line banking and KEKS Pay app. We also have continued implementing our free-of-charge program School of Smart Finances, through which almost 10,000 participants received personal finance training so far,“ Christoph Schoefboeck, CEO of Erste Bank Croatia, pointed out while commenting on the business results in 2021 and added:
“We are happy with the results achieved in 2021. We maintained the stability of our business operations and, at the same time, provided adequate support to our clients in these challenging times marked by the pandemic. Through our regular lending activities, we continued to support the financial needs of citizens, businesses and local municipalities. A strong emphasis was placed on further development of our digital solutions, the George on-line banking and KEKS Pay app. We also have continued implementing our free-of-charge program School of Smart Finances, through which almost 10,000 participants received personal finance training so far,“ Christoph Schoefboeck, CEO of Erste Bank Croatia, pointed out while commenting on the business results in 2021 and added:
“At the end of June 2021, as the first bank in Croatia, we successfully carried out our first bond issue in the international capital market, setting new standards on the Croatian banking market. ltimately, receiving a higher credit rating and maintaining the highest grade currently held by any bank in the Croatian market, while further increasing our advantage over competitors, represents another confirmation of the quality of our business strategy and sends a clear message to our current and future clients that Erste Bank Croatia is their reliable and stable financial partner”.
In brief
According to the unconsolidated financial report, which includes the results of Erste Bank Croatia (the Bank) excluding subsidiaries, the Bank's net profit in 2021 amounted to HRK 847.0 million, compared to HRK 390.0 million in 2020. Higher net profit is primarily the result of significantly lower risk cost, which in 2021 amounted to HRK 144.0 million, compared to HRK 627.0 million a year earlier. The Bank’s total assets at the end of December 2021 were HRK 82.8 billion, or 13.0% more than at the end of 2020, when they amounted to HRK 73.2 billion. Total loans to customers as of 31 December 2021 amounted to HRK 45.7 billion, 1.1% more than HRK 45.2 billion at the end of 2020. Total deposits of the Bank's customers as of 31 December 2021 amounted to HRK 64.9 billion, which is 13.3% more than at the end of 2020, when they amounted to HRK 57.3 billion.
EBC Group’s1 net profit before minority interests amounted to HRK 1,069.0 million in 2021, compared to HRK 472.0 million in 2020. EBC Group’s total assets at the end of December 2021 amounted to HRK 92.3 billion, which is 11.9% more than at the end of 2020, when they amounted to HRK 82.5 billion. Total loans to customers as of 31 December 2021 amounted to HRK 50.0 billion, which is 0.4% more than HRK 49.8 billion at the end of 2020. Total deposits from EBC Group's customers as of 31 December 2021 amounted to HRK 68.3 billion, which is an increase of 13.6% compared to the end of 2020, when they amounted to HRK 60.1 billion.
1EBC 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 Group IT HR d.o.o., and Izbor Nekretnina d.o.o.
Downward Trends of NLPs
In 2021, risk cost continued to decline, while the Bank's total NPL share was additionally reduced from 6.7% at the end of 2020, to 5.3% at the end of last year. With respect to private individuals, the NPL share reached 6.6% at the end of 2021, compared to 8.2% at the end of 2020. In the corporate segment, the NPL share was 4.3% at the end of last year, compared to 6.4% at the end of 2020. As a responsible business entity, the Bank will continue to monitor and manage its loan portfolio, in accordance with its business policies and applicable credit risk management standards. At the same time, the Bank will respect all regulatory rules and adopt a balanced approach that respects the objective market situation and the needs of its clients.
Euro Bond Issue - Entering The International Capital Market
At the end of June 2021, the Bank successfully carried out the first issue of its own bonds in the international capital market, in the total nominal amount of EUR 400 million. By realizing the transaction, the Bank made a new breakthrough and added the first international euro bond to its existing securities circulating in the domestic capital market. Thus, the Bank became the first bank in Croatia to successfully carry out an own bond issue in the international capital market. This not only confirmed the Bank’s position as the most active bond issuer among financial institutions in Croatia, but also allowed the Bank to set new standards in the Croatian banking market. In addition to the bank's core business, the funds raised by the issue will be used to stimulate green and sustainable investments, which will in turn keep the Bank on the path to a successful and long-term sustainable business in the domestic market.
The primary purpose of the issue is to meet the regulatory requirement which the Bank must comply with by 1 January 2024, and the first binding requirement in the transitional period needed to be met by 1 January 2022. The requirement in question is the so-called MREL requirement (Minimum regulatory capital requirement and eligible liabilities), which is part of the EU regulatory framework aimed at strengthening the financial system, with a focus on credit institutions, in order to increase resilience to shocks, unforeseen stress scenarios and prevent systemic risk.
Business Model Quality Confirmed By Credit Rating Update
In November 2021, the renowned credit rating agency Fitch Ratings raised the Bank’s credit rating from BBB+ to A-, with a stable outlook. The bank’s rating is positioned at the highest possible level with respect to the so-called Croatian Country Ceiling and is in the investment grade, two levels above the rating currently held by the Republic of Croatia. At the same time, it represents the highest rating of any bank or any other company on the Croatian market. The so-called standalone Viability Rating (VR) remained “bb”. Ukupna imovina povećana je na 307,4 milijarde eura (+10,8 %; 277,4 milijarde eura). Što se tiče aktive, novac i novčana sredstva porasli su, prvenstveno u Austriji, na 45,5 milijardi eura (35,8 milijardi eura), dok su se krediti i potraživanja od banaka smanjili na 21,0 milijardi eura (21,5 milijardi eura). Krediti i potraživanja od klijenata (neto) porasli su na 180,3 milijarde eura (8,6%; 166,1 milijardu eura). Na strani pasive, depoziti banaka znatno su porasli na 31,9 milijardi eura (24,8 milijardi eura) kao rezultat povećanog refinanciranja ESB-a (TLTRO III). Depoziti klijenata porasli su na svim ključnim tržištima – ponajviše u Austriji i Češkoj – na 210,5 milijardi eura (+10,2 %; 191,1 milijarda eura). Omjer kredita i depozita pao je na 85,6 % (86,9 %).
Outlook
“On the road towards important events that will shape Croatia's economic and political future: joining the Schengen Area, where Croatia is making good progress, and joining the Eurozone, with a target date of 1 January 2023, Croatia’s entire economy is facing a major and demanding task. That is why we initiated the adjustment process for the adoption of the new currency already in 2021. With positive economic trends, stable public finances and the potential that lies in using EU funds under the Next Generation instrument, Croatia is looking towards the future with optimism. At the same time, continuous work on further improving the investment and legal security remains a fundamental precondition for long-term sustainable economic growth and development”, Schoefboeck underlined.
„Although it is still too early to draw concrete conclusions about long-term effects of the conflict in Ukraine on the Croatian economy as a whole, our business operations have not been affected and we do not expect any deviations from usual trends. The scope of business activities that concern clients or payments related to Russia or Ukraine within Erste Bank Croatia's total portfolio is very small. Furthermore, our parent Erste Group does not have subsidiaries on Russian and Ukrainian markets, and its exposure to those countries is negligible," Schoefoeck pointed out, adding: „We must all take responsible action in response to the tragic plight of the people of Ukraine in this war. Erste Bank Croatia created a package of measures to mitigate, at least partially, the impact on Ukrainian nationals who are fleeing their country and seeking refuge in Croatia. Erste Group is working to provide help and support in all its countries in various forms and through various measures, aware of the seriousness of the situation, and is committed to humanitarian efforts and to providing care for the people. With hopes that war operations and the suffering will end as soon as possible, we stand in solidarity with and express our support to the people of Ukraine. Our thoughts are with them.”
„ESB Group is one of leading banking groups on the Croatian market, and is a part of one of the largest providers of financial services in Eastern Europe, which bases its business operations on a sustainable business model. Through our business operations we will continue to support economic development, with the aim of promoting the prosperity of our clients and employees, but also the Croatian society as a whole. We have substantial liquidity at our disposal and we will continue to support all quality and sustainable projects, particularly in the real sector, as well as the financial needs of citizens and local municipalities. Further development of digital solutions, even greater focus on consulting services that our clients can receive at branch offices, and continued pursuit of ESG principles in all business segments will be the fundamental strategic orientations of our business operations in the future," Schoefboeck concluded.