Conversion costs led Erste Group into the “red” in 2015.

Erste Group recorded a loss of 769 million kuna last year, while in 2014 it had a net profit of 412 million kuna.

The financial result from last year was primarily affected by the costs of converting loans in Swiss francs, Erste&Steiermärkische Bank reported on Thursday.

Erste Group recorded a loss of 769 million kuna last year, while in 2014 it had a net profit of 412 million kuna, and the financial result from last year was primarily affected by the costs of converting loans in Swiss francs (CHF), Erste&Steiermärkische Bank (ESB) reported on Thursday.

– The most significant impact on the financial result came from the costs of converting CHF loans, which reached 986 million kuna. Although it fully complied with the legal changes, placing special emphasis on communication with clients in this context, Erste Bank submitted a proposal to the Constitutional Court of the Republic of Croatia for the assessment of the constitutionality of the mentioned legal changes in order to protect its interests, stated Erste Bank in a press release.

Additionally, the financial results of the ESB Group last year were affected by one-off costs related to the impairment of goodwill for Erste Card Club, totaling 334 million kuna. “Low rates of macroeconomic growth, increased regulatory requirements, accelerated digitalization processes, and increased competition, especially from abroad, are factors that pose a significant challenge for card business in the long term,” emphasized Erste Bank.

The ESB Group, along with the parent Erste&Steiermärkische Bank, includes subsidiaries Erste Nekretnine, Erste&Steiermärkische S-Leasing, Erste Bank, Podgorica, Erste Card Club group, and Erste Factoring.

– Although the one-off negative effects of legal changes regarding the conversion of CHF loans had the greatest impact on our financial result in 2015, we are pleased that we maintained a stable trend in operational business and further strengthened our position in the Croatian banking market, said Christoph Schoefboeck, CEO of Erste&Steiermärkische Bank.

The total assets of Erste Group at the end of 2015 amounted to 68.2 billion kuna, which is a decrease of 2.2 percent compared to the end of 2014.

The total loans of the group on the last day of last year amounted to 46.2 billion kuna, which is a decrease of 1.2 percent compared to the end of 2014. At the same time, the total deposits of the group at the end of 2015 amounted to 41.4 billion kuna, which is 9 percent higher compared to the end of 2014, when they amounted to 38 billion kuna, the statement said.

The unconsolidated financial report for Erste&Steiermärkische Bank shows that the bank recorded a net loss of one billion kuna last year, compared to a net profit of 232 million kuna achieved in 2014.

– The net loss is also largely a result of the costs of converting CHF loans, and to some extent the impairment of investments in the Erste Card Club subsidiary, the statement said.

The total assets of Erste Bank at the end of December 2015 amounted to 59 billion kuna, which is a year-on-year decrease of 2 percent. The total loans of the bank on December 31, 2015, amounted to 38.8 billion kuna, which is 2 percent less compared to the end of 2014, while total deposits increased by 6.7 percent and amounted to 39.7 billion kuna at the end of last year.

Expressing expectations for this year, Erste Bank emphasizes that this year it will “continue to monitor the financial needs of citizens, and the intense focus will remain on corporate banking, as well as on monitoring all quality projects that generally promote the development of the real sector and employment growth.”