This Year, Every Fourth Bank Will Be Recapitalized

Recapitalization is currently underway or is soon planned in at least eight  banks, meaning in every fourth Croatian bank. These are Zagrebačka, Jadranska, Banka Sonic, Primorska, Banka Brod, Banka Kovanica, as well as Istarska kreditna and Hrvatska poštanska banka.

It is estimated that the total increase in equity capital in these banks will amount to at least four billion kuna.
The largest recapitalization this year (which is also convincingly the largest individual recapitalization among Croatian banks to date) has recently been carried out by Zagrebačka banka. Specifically, it has increased its equity capital by as much as 3.55 billion kuna through a private share issuance, bringing it to a high of 10.3 billion kuna.

We learn that in the middle of next month, Banka Sonic will also undergo a total capital increase of 111 million kuna. Jadranska banka, on the other hand, intends to soon increase its equity capital by at least 50 million kuna, while a slightly smaller amount of increase is also announced for Istarsko-kreditna and Banka Kovanica, whereas a much smaller amount (up to 10 million kuna) is mentioned regarding the recapitalization of Primorska and Banka Brod.

From the management of Hrvatska poštanska banka, primarily due to the exceptional growth of this bank over the past two years, a possible new recapitalization has been announced recently, but they also emphasize that it is still early to discuss which model will be chosen and how much the increase in its equity capital will ultimately amount to. This year’s recapitalizations (one has already been completed in one bank) are all the more valuable and significant knowing that last year there was also an increase in capital in as many as ten Croatian banks. Namely, last year our banks were recapitalized for a high 5.5 billion kuna.

However, it should also be noted that the bulk of last year’s recapitalization amount (which, it seems, should not be the case with this year’s announced capital increases) was also a sort of response from banks to the measures by which the Croatian National Bank is trying (or at least tried) to slow down the growth of loans and external borrowing.
In addition to the fact that recapitalization most often helps stabilize a bank’s operations, it also allows, financial analysts point out, for significant expansion of the scope and type of business, ultimately typically opening doors for even more successful, higher quality, and more profitable operations. Equally important (as is recapitalization), if not more important for the stable and secure growth of each bank, is the issue of asset size. According to estimates by independent financial experts, the optimal level for even more successful operations of each bank is the existence of (the bank’s) assets weighing at least one billion kuna. However, about ten of our banks, or every third bank, had assets below that threshold at the beginning of this year.

It is true that the latest recapitalizations of the mentioned eight banks will directly or indirectly increase (their) assets. However, since all of this (thus, both the recapitalization itself and the asset growth) is often not a sufficient guarantee in itself, our bankers will need to undertake other activities in the future to ensure their banks reach the highest level of quality and success in business.   (Nikola Prskalo)