"We recorded good business results in the first half of this year, with stable and growing basic financial indicator trends. Our business was characterized by a continued growth of total loans, alongside a significant growth impulse of new retail loans, and partnership cooperation with our clients that is reflected in the very high ratings of their user experience. At the same time, our digital channels are also recording continued growth, while by successfully issuing our own bond as well as playing the role of the issuing agent for the bonds of the Republic of Croatia and ZG Holding, we continued to support the development of the domestic capital market overall," said Christoph Schoefboeck, President of the Management Board of Erste Bank Croatia ("the Bank"), commenting on the business results achieved in the first half of 2023.
IN BRIEF
According to the unconsolidated financial report, which includes the results of the Bank excluding subsidiaries, the net profit in the first half of 2023 amounted to EUR 119 million, which is 20.2% higher than the EUR 99 million recorded in the same period last year. Higher net profit was the result of the improved operating result which primarily stemmed from increased interest income as a consequence of the monetary policy-maker's actions and the growth of the market interest rates, as well as the total loans volume increase. As a result, net interest income increased from EUR 108 million in H1 2022 to EUR 164 million in the same period this year, while net fee and commission income increased from EUR 36 million in H1 2022 to EUR 40 million in the same period in 2023. Net trading and fair value result expectedly declined with the introduction of the euro, amounting to EUR 8 million in the first half of this year, compared to EUR 20 million in the same period 2022.
EBC Group's[1] net profit before minority interests amounted to EUR 131 million in the first half of 2023, up 13.9% compared to the EUR 115 million in the same period in 2022. ECB Group's net interest income amounted to EUR 192 million, up 44.4% compared to EUR 133 million in the first half of 2022. Net fee and commission income amounted to EUR 58 million, up 9.4% compared to EUR 53 million in the first half of 2022.
EBC Group’s total assets at the end of June 2023 amounted tot EUR 13.9 billion, which is 7.5% less compared to the end of 2022 when they amounted to EUR 15.0 billion. Total loans to customers as of 30 June 2023 amounted to EUR 8.2 billion, which is 5.7% more compared to the end of 2022 when they amounted to EUR 7,7 billion. Total deposits of EBC Group's customers as of 30 June 2023 amounted to EUR 10.5 billion, which is 6.3% less compared to the end of 2022 when they amounted to EUR 11.2 billion.
[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.
GROWTH OF DIGITAL CHANNELS
The Bank's digital solutions continued their upward trend in the first half of 2023. The total number of users of George online banking was around 470,000 at the end of June this year, up 10% compared to the end of 2022 when there were around 428,000 users. At the same time, the total volume of transactions in the first half of 2023 amounted to around EUR 2.9 billion, up 34% compared to the same period last year. The number of KEKS Pay users reached 365,000 at the end of June 2023, up 15% compared to the 318,000 users at the end of 2022. The total volume of transactions made using KEKS Pay amounted to EUR 101 million in the first half of 2023, almost 100% more compared to the same period last year, when it amounted to EUR 51 million.
CONTRIBUTION TO THE GROWTH AND DEVELOPMENT OF THE DOMESTIC CAPITAL MARKET
The bank has once again confirmed its position as the most active bond issuer among financial institutions in Croatia, by issuing the so-called "preferred senior" bond as part of meeting the minimum requirements for own funds and eligible liabilities (MREL) in June this year. The total value of this issue, the seventh in a row including domestic and international issues, was EUR 90.1 million, and the Bank will use the funds for general financing purposes and for improving its core business. In addition to issuing its own bond, the Bank, as one of the leading agents, also participated in the issuing of the Republic of Croatia bond (so-called national bond) on the domestic capital market, in February and March this year. In addition, in late June and early July 2023, as one of the agents, the Bank also participated in the successful issue of the ZG Holding bond, amounting to a total of EUR 305 million, thus continuing to provide additional support to the development of the domestic capital market overall.
DOWNWARD TREND OF NPLs
The first half of 2023 was also characterized by the continued downward trend of so-called NPLs (non-performing loans). As a result, the Bank's share of NPLs was 3.0% at the end of June 2023, compared to 3.4% at the end of December 2022. In the retail segment, the share of NPLs was 4.3% in the first half of 2023, compared to 4.8% at the end of 2022. In the corporate segment (including the government segment), the share of NPLs at the end of June 2023 was 2.2%, down from 2.7% at the end of 2022.
OUTLOOK
"Judging by current indicators, the Eurozone should avoid recession in 2023, with an expected modest 0.5% growth rate. When it comes to Croatia, lower recession risks within EU should have a positive impact on foreign demand, while more moderate inflation trends present in 2023 so far, as well as the return of real wages into the positive territory, that is, the growth of disposable income, could further stimulate personal consumption. Taking into account the fact that Croatia is in a very favourable position when it comes to the distribution of funds from the new EU budget, which can give a strong and sustainable boost to the recovery of investments in the medium term, and the expected contribution from tourism, we see the GDP growth rate in 2023 at the level of 2.5% in the more optimistic scenario," Schoefboeck pointed out.
"The upward trend of reference interest rates, which is recording a more pronounced transmission effect on the active side due to the extremely high liquidity of the domestic banking system, has been significantly milder in Croatia compared to other EU countries, especially those outside the Eurozone, due to the positive effects of the introduction of the euro. Because of that, Croatia is currently in the group of EU countries with comparably lower financing costs, which previously was not the case. In the next period, interest rate trends will continue to predominantly depend on the actions of monetary policy-makers, particularly the European Central Bank, and a certain stabilisation in that regard can be expected towards the end of the year," Schoefboeck continued.
"Erste Bank Croatia has a solid and stable position on the Croatian market, with a leading position in many business segments, and still holds the highest rating (A-, Fitch Ratings, 2022) among the banks and other companies on the domestic market. Our goal is to be a kind of consolidator of financial services in both segments – physical and digital, and digital recognition and the development of digital solutions is a very important pillar of our strategy. A strong and stable capital position, a high level of liquidity, a very high degree of client trust, as well as belonging to a strong parent group that sees the region of Central and Eastern Europe as its core market, places efficiency, innovation and the pursuit of excellence in the focus of our business, as we strive to contribute to the growth and development of the Croatian economy, encouraging and promoting the prosperity of each of our employees, clients and Croatian society as a whole," concluded Schoefboeck on this occasion.