Wednesday, 27 October 2021

Zagrebačka Banka Makes HRK 1.07bn in Profit After Taxes

ZAGREB, 27 Oct 2021 - In the first nine months of 2021, Zagrebačka Banka generated HRK 1.07 billion in profit after taxes, up 22% on the year, according to an unconsolidated financial report released on Wednesday.

Operating revenue was HRK 2.8 billion, down 1.8% on the year, while operating costs were HRK 1.2 billion, up by HRK 9 million on the year. The cost-revenue ratio was 42.3%.

The bank's assets totaled HRK 131.3 billion, up 5.5% on the year, while net lending totalled HRK 68.6 billion, up by HRK 1.1 billion as a result of higher exposure to the government.

Client deposits were the primary source of financing and totalled HRK 106.9 billion, including a HRK 8.7 billion increase resulting mainly from household and corporate deposits.

Deposits by credit institutions were HRK 2.6 billion, down by HRK 3.1 billion.

According to a consolidated financial report for the first nine months of 2021, the Zagrebačka Banka Group generated HRK 1.28 billion in profit after taxes, up 16.2% on the year, the main contributors being Zagrebačka Banka, UniCredit Bank Mostar and UniCredit Leasing Croatia.

The group's operating revenue was HRK 3.6 billion, down 3.9% on the year, while operating costs were HRK 1.7 billion, down by HRK 4 million.

(€1 = HRK 7.5)


Thursday, 2 September 2021

Governor Says Legal Changes to Cut Banks' Revenue by More Than HRK 100mn Annually

ZAGREB, 2 Sept 2021 - Croatian National Bank (HNB) governor Boris Vujčić has said that the HNB's legal proposal is aimed at regulating tacit overdrafts the same way authorized overdrafts are regulated, which would result in greater consumer protection but also cause a drop in bank revenue of more than HRK 100 million annually.

Addressing a news conference on Thursday, Vujčić recalled the HNB's proposal for amendment of the Consumer Credit Act in the segment concerning authorized and tacit overdrafts. The HNB will agree to those changes with the government and it will also meet with bank representatives, Vujčić said, noting that the final form of the bill had still not been defined.

Vujčić said that the HNB completed a market analysis in Q1 2021 and that its findings, together with legal proposals, were presented to the Finance Ministry in April.

The analysis of the overdraft market was launched in 2020, showing that a large portion of overdrafts had changed from authorized to tacit overdrafts.

Vujčić stressed that the Consumer Credit Act, adopted much earlier, was designed to make tacit overdrafts an exception, but that when it was established that most overdrafts had turned into tacit overdrafts, a decision was made to impose the same regulation mechanism for those overdrafts as for authorized overdrafts.

In the case of authorized overdrafts, the effective interest rate is capped and banks have the obligation, when opting to cancel that service, to offer their client the possibility of repaying their debt in 12 installments.

"This legal proposal is an attempt to set a maximum effective interest rate (on tacit overdrafts) and make banks offer repayment in installments if their clients get into problems. Banks can do that now but they are not obliged to. In the future, they will have to do just that," said Vujčić.

He noted that the legal proposal was not about abolishing tacit overdrafts.

New agreements on tacit overdrafts will thus have to be limited to 90 days and HRK 1,500, and Vujčić said that the adoption of the new law could result in a drop in bank revenue of HRK 100 million annually, noting that that would depend on the final version of the bill, however, the estimate was not expected to change significantly.

Depending on the type of loan, wage, and overdraft amount, consumers would be able to save between HRK 150 and 450 a year.

Interest rates should reflect product-related risks 

Vujčić also said that of some 1,000 consumer complaints the HNB received in 2020, seven referred to tacit overdrafts, and when asked if the HNB could have reacted sooner, he said that this was not a problem previously as the effective interest rate on tacit overdrafts was not high.

The average effective interest rate for overdrafts grew in 2020 because banks raised their fees, not interest rates. "Before that, we did not have any reason to intervene, and now we do," he said.

Vujčić said that the matter was a very complex and sensitive one and that putting a cap on the interest rate was not, as believed by some, necessarily the best solution because it could exclude a large number of citizens from the market.

He noted that interest rates should reflect product-related risks and that in principle tacit overdrafts indeed entailed the most risk as there was no collateral and the client's creditworthiness was not checked, hence the high-interest rate.

He added that interest rates on tacit overdrafts in Croatia were lower on average than in EU countries that had not introduced the euro and higher than in those that were part of the euro area, but that that was not the case with other financial products.

Speaking of inflation, Vujčić said that there was no risk of very high inflation rates.

"However, in the euro area the inflation rate is slightly higher than forecast but we are still between 2% and 3%, which should not be worrying," he said.

For more on politics, follow TCN's dedicated page.

Friday, 2 July 2021

Issue of Croatian Bank Bonds on International Capital Market Successful

July the 2nd, 2021 - The first issuing of some Croatian bank bonds on the international capital market has proven successful, seeing the popular Erste Bank take another brave step forward at both the national and the EU level.

As Poslovni Dnevnik writes, these Croatian bank bonds were issued with an annual interest rate of 0.75 percent and a yield to maturity of 0.835 percent. With the realisation of this transaction, Erste Bank made an additional step forward and added its first international euro bond to its existing securities in circulation on the Croatian capital market. This made it the first bank in all of Croatia to successfully issue its own bonds on the international capital market.

The primary purpose of this Croatan bank bonds issue is to meet the regulatory requirement with which the bank must comply by the 1st of January 2024, and the first binding requirement in the transitional period must be met by the 1st of January 2022. This regards the so-called MREL requirement (Minimum regulatory capital requirement and eligible liabilities).

MREL is part of the European Union (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. The funds raised by this Croatian bank bonds issue will be used for general financing purposes and to encourage green and sustainable investments, and will also contribute to the further diversification of funding sources.

The issue was intended for institutional investors in the international market, and in the final allocation the largest share was played by international financial institutions with a share of 39 percent, followed by investment funds with 32 percent, banks with 15 percent and pension funds and insurers with a 14 percent share. Over 70 institutional investors participated in the issue, with a very pronounced European geographical diversification (the UK and Ireland with 41 percent, Germany and Austria with 27 percent, CEE countries with 11 percent, France with 6 percent, and Switzerland, the Benelux countries and others with smaller percentages of shares).

The joint agents of the issue were BofA Securities Europe SA, Erste Group Bank AG, Landesbank Baden-Württemberg and Societe Generale.

"Erste Bank is the most active issuer of bonds among financial institutions in the Republic of Croatia, with this Croatian bank bonds issue being the sixth in a row, and also the first on the international capital market.

After we successfully realised the edition of the so-called senior preffered bonds in the amount of 45 million euros, which was the first such issue on the domestic capital market within the so-called MREL regulatory requirement, and with the successful issuance of an international euro bond, we're continuing on our planned path. In accordance with our financing strategy, we've further diversified the sources of funds by issuing bonds, and we'll use these collected funds for our core business, continuing to build a sustainable and successful business path for Erste Bank on the Croatian market,'' said Kresimir Baric, the CFO of Erste Bank.

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Sunday, 7 March 2021

Zdenko Adrovic: Banks Hope Companies Won´t Require Moratorium Extensions

March the 7th, 2021 - The ongoing coronavirus crisis is difficult to manage even for banks as Croatian companies require moratoriums on loans and credit taken out. As the tourist season approaches, Zdenko Adrovic, the director of the Croatian Banking Association, says that banks are quietly hoping that such extensions will become a thing of the past.

As Novac/Marina Klepo writes, with the beginning of the tourist season, when Croatian companies working in the field of tourism and transport start generating income, the Croatian Banking Association believes that their creditworthiness will increase and that there will be no additional need for moratoriums.

Referring to the latest guidelines of the EBA, the EU banking regulatory body, on extending the moratorium to nine months, Zdenko Adrovic, the director of the Croatian Banking Association, stated that an expiration to that will take place on March the 31st this year, which means that the moratorium may last until the end of 2021.

¨I believe that this should be long enough, provided that everything starts to return to normal in the next few months,¨ said Zdenko Adrovic during a presentation. However, he added that he will have a much better picture of the state of Croatian companies and what happened in regard to the economy at the end of June. Whether the moratorium will be extended, obviously, will depend on further instructions from the EBA, but what is quite likely is that the share of so-called bad loans/credit will continue to grow, as well as banks' provisions for value adjustments.

The importance of support

The year of the coronavirus crisis in regard to the banking system, according to Zdenko Adrovic of the Croatian Banking Association, will be remembered for three characteristic trends: the growth of deposits, stable interest rates and the growth of loans. Back in January this year, household deposits were seven percent higher than they were in the same month last year, and compared to the end of 2019, they increased by as much as 15.6 billion kuna.

Profit and capitalisation

As expected, the public health crisis led to a deterioration in overall bank performance, with their profits more than halved last year (down 53.3 percent). Their net interest income decreased by 5.7 percent, and income from fees and commissions down by 10.5 percent. Banks responded to the decline in income with better cost management, but "costs are more rigid than income and cannot be reduced at the same pace." Despite this, Croatian banks remain "among the best capitalised banks in the world". The total capital ratio of 24.9 percent and the entry into the banking union in parallel with the entry into ERM II "guarantees stability, transition through the crisis and the readiness of banks to respond to the increased demand expected by offering new loans in the period ahead as we exit this crisis.¨

Tuesday, 23 February 2021

Opening a Croatian Business Bank Account as a Foreigner... in 46 Minutes.

February 23, 2021 - After being told it would take weeks by another bank, opening a Croatian business bank account in 46 minutes as a foreigner IS possible.

I ALMOST had the perfect day with Croatian bureaucracy last week. 

The mission was daunting. First stop, Raiffeisen Bank in Varazdin to sign a leasing contract for my new (not so new) car. Then to the notary to notarise the contract, which I then had to return. Then off to the heroes at FINA to collect the documentation for my new jdoo company. then on to my bank PBZ - where I have had a private and a Croatian business bank account for 18 years. My simple mission was to open a bank account for the new company, return a document to my FINA heroes, then pick up some chicken from the market, and there would be curry for lunch. You can see how I did in 'Beer to Go' to Celebrate a Morning with Croatian Bureaucracy.

As a spoiler alert, I didn't manage to open the bank account. I was shocked to be told that as a foreigner (they did not ask my nationality), opening a Croatian business bank account in Varazdin was not possible. I would have to travel to Zagreb for this.  Crazy, I thought to myself, as I headed to the market, the chicken curry now guaranteed. But not too inconvenient, as I would be in Zagreb two days later. 

My wife called ahead to make sure it was possible and to make an appointment. It was indeed possible to make an appointment, but the earliest available slot was on March 3, some two weeks ago. 

Let me get this right. Opening a Croatian business bank account as a foreigner (the PBZ rules are apparently different for locals) meant I would have to drive 160 km round trip and wait two weeks for the privilege?

In 2021?

My long-suffering accountant, Gordana, confirmed that this was indeed the case after she called the bank to check. A recent change of policy, apparently. 

This is nuts, I thought. So I posted on Facebook and LinkedIn, with a challenge to anyone working in the industry. Was opening a Croatian business bank account as a foreigner possible in one day? I even offered to write an article on TCN about the process, which I thought would be a good PR incentive. 

I was disheartened by the early feedback. Representatives of various Croatian banks were tagged by my social media followers, but none got in touch. And then someone said that I should try Raiffeisen Bank - you could even do most of the application online. 


We checked, my wife called, and it seemed to be true. Or I could do it in person, the very helpful Varazdin branch confirmed. I chose the latter. And I decided to time it. 

Arriving exactly at 15:00 my soon-to-be new best friend, Nenad, took my papers, passport and ID and inspected them. All was in order. This should not take long, he exclaimed in perfect English. 


A few questions, a few signatures, and all was done. Could I add my accountant to the account, give her online access and have all the bills sent to her?

Of course, replied Nenad. What is her name, perhaps she is already in our system? And there she was, young Gordana smiling out of Nenad's desktop. We got her on the phone and confirmed some details and all was set up. 

Absotulely painless. 


Timeline 46 minutes from start to finish with the opening process, including downloading the application and training on how it works. 

Today, I will get the number of the account and the online access codes, and we are ready to roll. 

Just 46 minutes in the bank rather than the anticipated hours of torture, leaving plenty of time for the finer things in llfe.


Nenad, I salute you, Sir. A lovely man, for a Liverpool fan. Masked up for the entire process, he did consent to a photo without a mask for this article. 

I don't know if Raiffeisen has an initiative for rewarding star employees, but my vote for a gold star and chocolate biscuit goes to this young man.

For more on the joys of Croatian bureaucracy, click here


Tuesday, 12 January 2021

Croatian OTP Banka Lowering Interest Rates From February 1st

January the 12th, 2021 - Excellent news for those with accounts with the Croatian OTP banka as interest rates are set to be frozen as of the beginning of next month.

As Poslovni Dnevnik writes, on Monday, the Croatian OTP banka announced that it would lower its interest rates on loans to Croatia’s residents who have accounts in euros and kuna linked to the National Reference Interest Rate (NRS1) from the beginning of February.

From February the 1st, OTP banka will lower interest rates on all loans to those with a variable interest rate, which is related to the movement of the national reference rate (NRS1), so the interest rate on loans with a currency clause in euros will be lower by 0.05 percent points while on loans in kuna will be lower by 0.06 percentage points, the statement said.

As was added, this interest rate reduction refers to all existing and newly approved loans that are related to the National Reference Rate (NRS1).

OTP banka notes that it will inform all its clients in a timely and written manner about the change in the interest rates and the new amount of annuities and the new repayment plan.

The national reference interest rate is the average cost of financing the banking sector and is calculated by the Croatian National Bank (CNB). NRS1 represents the costs of financing from the funds collected from deposits of natural persons, and NRS2 the costs of financing from the funds collected from deposits of natural and legal persons of the non-financial sector.

Back at the end of November, the CNB published the values ​​of the national reference rate (NRS) for the third quarter of 2020, which show the continuation of the downward trend that has been going on since way back at the beginning of 2013. Of the 24 NRS indices calculated by the CNB, in the third quarter of 2020 all these indices showed lower values ​​than they did in the previous quarter, although their decline was slightly smaller than in the previous quarter, with the exception of the Swiss currency index, which remained unchanged.

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Sunday, 10 January 2021

Croatian Banks' Resilience to Pandemic Depends on Government Measures

January the 10th, 2021 - Croatian banks and banks throughout the wider region have taken some serious blows as a result of the ongoing pandemic, but just what determines the strength of those blows?

As Ana Blaskovic/Poslovni Dnevnik writes, Croatian banks and banks across the country’s region entered the coronavirus crisis in relatively good health as they were fairly adequately protected by capital and were engulfed in a trend of declining bad loans. However, the effects of the pandemic will continue to be profound, especially when it comes to the quality of bank portfolios, which will depend deeply on national measures put in place to try to mitigate the effects of the pandemic.

“The outlook for the quality of Croatian banks' assets in the coming period largely depends on a combination of economic recovery and state aid. Since the beginning of the pandemic, state measures to help businesses have played a key role in stabilising the quality of bank assets.

However, even an early cessation of state aid could lead to a sharp increase in contract default rates in the coming period,’’ they warned from Deloitte in the third edition of the Study on Mergers and Acquisitions in the Banking Sector in Central and Eastern Europe.

The body noted that lawmakers are encouraging the early detection of bad loans and securing provisions, and measures to mitigate the effects of the pandemic, such as a moratorium and selective relief for Croatian banks and others, could, at least to some extent, work to mask the real economic damage. Nevertheless, "huge future negative effects on the quality of bank portfolios and the profits of banks" are expected.

"The coming period will reveal the real extent of the damage caused by the material deterioration of certain clients, which is likely to further encourage consolidation in the banking market of Central and Eastern Europe," said Vedrana Jelusic Kasic, a partner in Deloitte's financial advisory department.

The real damage to Croatian banks in those throughout the region can be seen from the financial results for 2020 and “there is no doubt that coronavirus will leave a strong mark on the results of CEE banks over the next year as well”.

Among the key findings is that regional creditors entered the crisis with a strong capital position, averaging about 20 percent in 2019, up 0.2 points from a year earlier. The average profitability with a return on equity of 12.7 percent with a simultaneous return on assets of 1.5 percent was also stable.

"High levels of profitability due to further pressure on interest rates and provisions for credit placements will not be able to be maintained," the study said.

Nearly 60 percent of total assets are owned by the 15 largest regional groups. In terms of assets, the largest is still the Erste Group with 8.7 percent market share and a presence in 8 countries.

Erste is followed by the KBC Group (with a market share of 7.8%, presence in 4 countries) and the Italian UniCredit (with a market share of 6.5% and presence in 9 countries). The Hungarian OTP achieved the highest asset growth thanks to boasting an active M&A strategy.

The banking sector of Central and Eastern Europe entered a pandemic with only 7.2 percent of bad loans. Compared to 2018, this marks three-quarters of a percentage point less, which reflects many years of positive economic trends, portfolio cleansing and regulatory incentives.

"Overall, the shares of non-performing loans in the CEE at the end of 2019 were at their lowest levels ever, which put the regional banking sector in a relatively favourable position to face the economic challenges and consequences caused by the pandemic," said Deloitte.

As the good years have reflected on them, Croatian banks and those in the region cannot avoid the spillover effects of the ongoing pandemic, and the extent to which the sector will feel this will greatly depend on the range and scope of government measures.

Deloitte concludes that banks in the CEE region have recorded remarkable results in recent years thanks to a stable macro-environment that was interrupted by a pandemic in the first half of last year to the detriment of return on capital.

Resilience is crucial in times of economic shocks, and the banking sector in Central and Eastern Europe is still fragmented, with a significant number of smaller banks whose market share is virtually negligible.

"Small, less efficient and less resilient players may not be able to overcome the shock of capital and minimum acceptable profitability on their own, and we expect the consolidation trend to continue in the coming years and even accelerate due to the crisis caused by the pandemic," Deloitte said.

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Tuesday, 29 December 2020

Hrvatska Postanska Banka Has New Service for Croatian Account Holders

December the 29th, 2020 - Croatian account holders at Hrvatska postanska banka (HPB) will be the ones to be able to enjoy a unique service in Croatian terms, and one which many people, particularly foreigners, find themselves discussing.

As Poslovni Dnevnik writes, given the fact that it is constantly expanding and improving the offers of its products and services for its numerous different groups of clients, and based on the needs and requirements of residents who do not have the ability to collect foreign checks in the Republic of Croatia, Hrvatska postanska banka has now decided to offer the service of processing foreign checks within its business network.

Hrvatska postanska banka is usually striving to simplify financial operations for Croatian residents who receive their pensions or other benefits through means issued from outside of the Republic of Croatia, and to provide them with an accessible and fast way to pay their funds. As such, Hrvatska postanska banka's brand new service is extremely important in cases when the payers or issuers of foreign checks insist on payment by cheque.

Hrvatska postanska banka accepts bank checks issued in Switzerland, Liechtenstein, Norway, all European Union countries except France, Denmark and Great Britain, and it even accepts US Treasury checks from the United States of America, ie those in euros, US, Australian and Canadian dollars, Swiss francs, British pounds, Swedish and Norwegian krone and Japanese yen.

In the processing of foreign checks, Hrvatska postanska banka acts as an intermediary in the business being done between the issuer and the user of the cheque in accordance with all appropriate international standards. All that is needed to cash a foreign check is to have a foreign currency transaction account opened with this bank.

This is a unique service on the Croatian market and is, as previously touched on, often the topic of conversation among foreign residents who tend to come unstuck when faced with having to deal with foreign currencies. The new service can only be realised in Hrvatska postanska banka centres and branches.

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Thursday, 10 December 2020

Croatian Banks to be More Resilient to Financial Shocks in 2021

December the 10th, 2020 - The new law on the deposit insurance system will significantly strengthen Croatian banks and the Croatian banking system, the State Agency for Deposit Insurance and Bank Rehabilitation (DAB) said.

As Poslovni Dnevnik wrires, as of January the 1st next year, a new law on the deposit insurance system and on the compulsory liquidation of credit institutions will enter into force. It was recently properly harmonised with European directives, which, among other things, will shorten the duration of bankruptcy proceedings of credit institutions and additionally protect citizens and depositors.

Further reform

This new law continues to further reform the banking system of Croatia and the entire European Union, strengthens the ability of banks to withstand financial shocks, which will also include Croatian banks, minimises the cost that taxpayers will bear in the event of problems with banks, and represents a single financial fund that is filled by the payment of credit institutions, not citizens, as was pointed out from the DAB. They also believe that the law will further facilitate the lives of Croatia's residents and offer security when it comes to savings deposits as well as a general increase the stability of the financial system, which is becoming much more resilient to possible financial crises.

The new law, which combines the provisions of the current law on deposit insurance and the law on DAB, seeks to anticipate and regulate situations when a credit institution fails as much as possible, as such a scenario may lead to legal uncertainty regarding the protection of depositors.

In order to protect the financial stability of the system, the new law prescribes the activation of the deposit insurance system when opening a compulsory liquidation procedure against a credit institution.

Additional replenishment

In order to ensure the more efficient use of funds from the deposit insurance system, the new law stipulates that the deposit insurance fund consists of two parts - the basic deposit insurance fund and the additional deposit insurance fund. The purpose of the basic deposit insurance fund, which at any time has 1 percent of insured deposits, is the payment of insured deposits, while the purpose of the additional fund is to replenish the basic fund if its available funds fall below 1 percent of insured deposits.

Furthermore, its task is to support the collection of ex-post premiums, use its funds to take measures to reduce the risk of an insured event, and support the financing of the rehabilitation of credit institutions and the financing of forced liquidation of credit institutions.

Additionally, the new law will harmonise the source of financing according to the acquis communautaire by explicitly stating that the deposit insurance system cannot be financed at the expense of taxpayers, but exclusively at the expense of credit institutions. The entire system is harmonised with European directives and will help to make Croatian banks more resilient to potential future challenges on the country's path to th Eurozone.

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Friday, 4 December 2020

The Banker Magazine: PBZ Wins Croatian Bank of the Year

December the 4th, 2020 - When it comes to Croatian banks, or perhaps it is more realistic to say banks which operate within Croatia, the options are numerous. Despite the amount of choice on the table, PBZ has won the title of Bank of the Year in Croatia thanks to the prestigious The Banker magazine, for which it had to satisfy many very stringent requirements.

As Poslovni Dnevnik writes, a very wide range of quantitative and qualitative criteria were considered for The Banker magazine's award, which is considered the "standard for banking excellence" in the challenging and demanding financial industry.

Dinko Lucic, the president of the management board of the Croatian bank PBZ, on the occasion of the proclamation of it having won The Banker magazine's Bank of the Year Awards 2020, said:

''We're extremely proud of having received this prestigious international award, which our bank has acheived for the second year in a row now, and that pride is especially emphasised during these difficult and very challenging times dominated by the coronavirus pandemic. I would especially like to emphasise that this success wouldn't have been possible without our employees, their continuous commitment and hard work of the entire PBZ Group team, the support of the parent bank team as well as all our clients for whom we're constantly striving to be even better.''

''We're continuing down the path of innovation, focusing on the continuous improvement of our services and customer relations and the further transformation and digitalisation of our business, which proved to be crucial during the pandemic,'' concluded PBZ's Lucic.

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