“We are happy with the results achieved in the first half of 2022. Positive indicators of business operations, exceeding the level of HRK 100 billion when it comes to the total assets of our local group, growth of total loans with a steady growth of deposits, the influx of new customers and increase in the number of users of our digital solutions — George on-line banking platform and KEKS Pay app — are factors influencing our optimistic outlook for the rest of the year, which also affirm that our business model is effective," said Christoph Schoefboeck, CEO of Erste Bank Croatia, commenting on the business results achieved in the first half of 2022 and added: "Approval of Croatia’s entry into the European monetary union with the first day of next year is certainly one of the most important news that marked the year so far. Joining the eurozone will lead to further integration of the Croatian economy into the European financial and economic flows, positively increasing its competitiveness and attractiveness to investors, which will ultimately ensure further intensification of the process of convergence. At the same time, the demanding criteria that Croatia had to fulfil as part of the euro adoption process will positively contribute to the achievement of the basic objective — a high-quality and long-term sustainable position of the Croatian economy based on solid foundations.”
IN BRIEF
According to an unrevised unconsolidated financial report, which includes the results of Erste Bank Croatia (“the Bank”) excluding subsidiaries, the Bank’s net profit in the first half of 2022 amounted to HRK 745.0 million, which is 45.8% higher than HRK 511.0 million in the same period of 2021. Net profit growth is the result of a further reduction in risk costs and an improved operating result, supported primarily by growth in income from transaction operations in the post-COVID period and by positive trends in the trading segment. Net interest income increased by 0.7%, from HRK 811.0 million in the first half of 2021 to HRK 817.0 million in the same period this year. At the same time, the net fee and commission income increased by 24.3%, from HRK 218.0 million in the first half of 2021 to HRK 271.0 million in the same period this year. Net trading and fair value result in the first six months of 2022 reached HRK 154.0 million, 49.5% more than HRK 103.0 million in the same period a year earlier.
The Bank’s total assets at the end of June 2022 were HRK 92.3 billion, or 11.5% more than at the end of 2021, when it amounted to HRK 82.8 billion. Total loans to customers as of 30 June 2022 amounted to HRK 50.7 billion, 10.9% more than HRK 45.7 billion at the end of 2021. Total deposits of the Bank's customers as of 30 June 2022 amounted to HRK 74.7 billion, which is 15.1% more than at the end of 2021, when they amounted to HRK 64.9 billion.
EBC Group’s[1] net profit before minority interests amounted to HRK 867.0 million in the first half of 2022, 42.6% higher than HRK 608.0 million in the same period in 2021. ECB Group’s net interest income amounted to HRK 1,002.0 million, compared to HRK 1,006.0 million in the first six months of 2021. Net fee and commission income amounted to HRK 396.0 million, 13.5% more than HRK 349.0 million in the first half of 2021.
EBC Group’s total assets at the end of June 2022 amounted to HRK 101.6 billion, which is 10.1% more than at the end of 2021, when it amounted to HRK 92.3 billion. Total loans to customers as of 30 June 2022 amounted to HRK 55.1 billion, which is 10.2% more than HRK 50.0 billion at the end of 2021. Total deposits from EBC Group's customers as of 30 June 2022 amounted to HRK 77.6 billion, up 13.6% compared to the end of 2021, when they amounted to HRK 68.3 billion.
GROWING DEMAND FOR NEW LOANS
Demand for new loans in the first six months of 2022 recorded positive trends and growth rates. In the retail segment, the Bank placed a total of over HRK 2.9 billion in new loans, which represents an increase of 22.0% compared to the same period of 2021. The increase in new household placements was mainly driven by the growth of new housing loans, while the placement of new cash loans was at approximately the same levels as in the previous year. In the corporate segment, the Bank placed a total of over HRK 6.5 billion in new loans in the first six months of 2022, which represents a 22.0% increase compared to the same period in 2021. Most of the newly generated exposure in the corporate segment stems from financing clients from natural resources, construction, production of consumer products, hotels and real estate segments, whether micro, small or medium-sized clients. A very similar situation is present in the segment of large-size clients, where the increased exposure in the health care industry is additionally emphasized.
In the first half of 2022, risk costs continued to decline, while the share of the Bank’s so-called NPLs was additionally reduced from 6.7% at the end of 2021 to 4.3% at the end of June 2022. With respect to private individuals, the NPL share reached 5.7% at the end of June 2022, compared to 8.2% at the end of 2021. In the corporate segment, the NPL share was 3.2% in mid-2022, compared to 6.4% at the end of 2021. 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, while respecting all regulatory rules and applying a balanced approach that takes into account the objective market situation and customer needs.
USE OF BANK'S DIGITAL SOLUTIONS ON THE RISE
The use of digital solutions of Erste Bank, George on-line banking platform and KEKS Pay app, has continued to grow in the first half of 2022. George online banking platform recorded a total of nearly 388 thousand users at the end of June 2022, 13.5% more than at the end of 2021, when there were about 342 thousand users recorded. The total volume of transactions in the first half of 2022 was about HRK 16.3 billion, 43.0% more than HRK 11.4 billion recorded in the same period last year. At the same time, KEKS Pay app recorded almost 279 thousand users at the end of June 2022, of which 76% are not the Bank’s customers. Compared to about 233 thousand of users at the end of 2021, this is an increase of 19.7%. The total volume of transactions in the first half of 2022 amounted to HRK 387.3 million, which is an increase of 75.5% compared to the same period last year, when it amounted to HRK 220.7 million.
OUTLOOK
“After a prolonged period of gradual decline in interest rates, it was likely to expect a stabilisation of this trend in 2022, also influenced by inflationary developments, consequences of monetary policy stance and global geopolitical developments,” Schoefboeck stressed and continued: “The recent reduction in regulatory cost, resulting from the accession of the Republic of Croatia to the eurozone, is certainly one of the components that will have a positive impact on the level of interest rates in the medium term and the overall lending conditions in Croatia. Among other benefits of integration into the monetary union, such as the practical elimination of currency risk and the contribution to reducing the risk premium, and bearing in mind the fact that the banking system in Croatia has already been highly liquid, the expected increase in interest rates in Croatia, especially in relation to some other European countries, should certainly be mitigated to some extent. However, in the short term, in the coming period, the level of interest rates will depend dominantly on the moves of monetary policy-makers in the segment of raising reference interest rates, notably the European Central Bank, in response to the current high inflation environment and the ensuing uncertainties associated with the conflict in Ukraine.”
"It should be stressed that global factors, such as geopolitical risks, continuing problems in supply chains, strong inflation, and monetary policy responses, will also largely determine economic perspectives in the coming period. Nevertheless, membership in the monetary union, in addition to entering the so-called Schengen zone, will, I am convinced, place the Republic of Croatia on the map of the European Union as a fully integrated member which will make further progress in terms of economic growth and development in the coming period. 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.
[1]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, Erste Group IT HR d.o.o. and Izbor Nekretnina d.o.o.