Non-Banking Financial Industry in Profit of 2.3 Billion Kuna

The non-banking financial industry is slowly but surely moving on an upward trajectory. After finishing the year 2008 with a loss of 12 billion kuna, it recorded a profit of 2.3 billion kuna last year, primarily due to the good results of investment and pension funds.

Leasing companies are in the most difficult position, having been in losses for the last three years, since 2007. Last year, this industry ended with a loss exceeding 600 million kuna. Ante Samodol, head of Hanfa, states that leasing is not in losses solely due to exchange rate differences but also due to significant value adjustments and the application of new accounting methods, and it is uncertain, he says, how this industry will conclude this year. When it comes to brokerage firms that are not backed by bank founders, Samodol warns that they operated at a loss in both 2008 and 2009. Data from the first quarter of this year shows that their average daily turnover is only around 20 million kuna, which means that in this part of ‘brokerage’, consolidation has not been completed.

Although Crobex is slowly recovering this year after a steep decline of about 60% in 2008, Samodol, through some comparisons with the largest stock exchange in the region, the Budapest Stock Exchange, demonstrated how much the Zagreb Stock Exchange truly lags behind. Namely, less than 50 stocks are traded on the Budapest Stock Exchange, while more than 250 are traded on the Zagreb Stock Exchange, yet the neighboring exchange is almost seven times larger in terms of turnover. – This means that the problem is not in quantity but in quality – concludes Samodol, warning of several other issues. The structure of shareholders in our investment funds shows that individuals hold 51% of the portfolio (it was 55% two years ago).

The exposure of funds to market segmentation is also concerning. Of the five most represented markets in which our equity funds invest, three are among the countries of the former state. Mixed funds behave similarly – of the ten most represented markets, half invest in the countries of the former Yugoslavia. The Zagreb Stock Exchange is also affected by illiquidity – for more than 40% of stocks, the time to liquidation exceeds 60 days. The problem of the Croatian capital market is that we do not have real ‘large’ stocks like those of Zagrebačka banka or Pliva, with thousands of investors and large market capitalization, warned Tonči Korunić, CEO of Intercapital.

However, this is clearly not a Croatian specificity. We share similar problems with the capital markets of all countries of the former state, concluded representatives of regulators and the fund industry in the region at a round table of the Money Market conference. When asked whether he would recommend an individual investor from Croatia to invest their private portfolio in the region, Pierre Matek, the head of ZB Invest, says that although the region also suffers from a lack of liquidity, ‘freshly’ adopted regulations, which means there is no case law, would make it difficult for small shareholders to protect their rights in case of problems. – There is still no awareness there that shareholders are the owners of the company – concludes Matek. (Gordana Gelenčer)