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Hrvatska Poštanska Banka d.d.

Quarterly Report Oct 30, 2018

2090_10-q_2018-10-30_bf54c96b-1730-45f9-a45b-35306d23f5ff.pdf

Quarterly Report

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TRANSLATION

Consolidated Financial Statements for the Period from Jan 01 to Sep 30 2018

Unaudited

Zagreb, October 25 2018

In accordance with Capital Markets Act, HPB p.l.c. (Bank) as the parent company of HPB Group (Group), publishes unaudited consolidated financial statements for the period from Jan 01 to Sep 30 2018.

This report includes:

  • Management report of HPB Group,
  • statement by persons accountable for compiling the consolidated report of HPB Group,
  • unaudited set of consolidated financial statements (balance sheet, profit or loss statement, statement of changes in equity, cash flow statement), and
  • notes to consolidated financial statements.

Financial statements and notes have been compiled in accordance with instructions defined in Rulebook on format and content of interim financial reports of issuers (NN 47/2011). Accordingly, there can be certain differences between reporting items outlined in the statement on financial position – with regard to new IFRS 9 classificiation. However, all the effects of transactions recognized since Jan 01 2018 are presented in the income statement, as well as through other comprehensive income, in compliance with IFRS 9.

Management report of HPB Group

HPB Group is, apart from the parent company – HPB p.l.c., comprised of HPB-Stambena štedionica (savings bank), HPB Invest (investment fund management) and HPB-nekretnine (real estate agency). From current reporting period, Financial Statements of HPB Group include the results from newly acquired member – Jadranska banka d.d. Šibenik. Bank has successfully closed the acquisition of Jadranska banka at the begining of third quarter of 2018. Ownership transfer has been completed on July 12 2018, while on July 13 2018 HPB has injected HRK 110 million of new capital to Jadranska banka in order to achieve full compliance with applicable capital demands. Merger activities have been initiated.

Through the acquisition of Jadranska banka d.d., HPB's market share increased by more than 5% with the client base expansion of over 50,000 new clients. Acquisition of Jadranska banka will enable HPB to achieve stronger presence in Šibenik – Knin County, which according to the CBS estimates (2016) has 102,000 residents and the the opportunity for further growth in market share in the region as well as the Republic of Croatia as a whole.

Following the demanding 2017, parent company returned to the long-term profitability trend, contributing to the net profit of the Group in the amount of HRK 111.8 million, as opposed to the HRK 1.0 million in profit in the comparable period of 2017. Profitability improvements have been achieved owing to better collection and NPL coverage, resulting in significantly lower cost-of-risk.

Apart from HRK 123.4M of net profit achieved by the parent-company, HPB Invest recorded a net profit of HRK 699T, HPB-nekretnine added a net profit of HRK 722T. According to the relatively adverse effects from capital markets continued in third quarter, HPB-Stambena štedionica recorded a net loss amounting to HRK 906T, in spite of increasing volume and contribution of core operations to overall result. Following the acquisiton of Jadranska banka d.d. during July 2018, the Bank includes its results to the HPB Group results. In a period from July 13 to September 30, 2018 Jadranska banka d.d. realized a loss of HRK 12.0M which is continously decreased from the inclusion date.

On behalf of HPB p.l.c., the parent company of HPB Group :

Tomislav Vuić CEO

Statement by persons accountable for compiling the consolidated report of HPB Group

In accordance with the Capital Market Act, the Management Board of HPB p.l.c., the parent company of HPB Group, states that according to their best knowledge the set of consolidated unaudited financial statements for the period from Jan 01 to Sep 30 2018, compiled in accordance with the accounting regulation applicable to credit institutions in Croatia, presents complete and accurate view of assets and liabilities, losses and gains, financial position and results of HPB p.l.c., as well as companies included in consolidation as a whole.

On behalf of HPB p.l.c., the parent company of HPB Group :

Tea Bažant Head of Finance Division Tomislav Vuić CEO

HPB GROUP
Appendix 3.
Reporting period:
Jan 01 to Sep 30 2018
Quarterly financial statements for credit institutions TFI-KI
Registration number (MB): 03777928
Registration number (MBS): 080010698
Personal identification
number (OIB):
87939104217
Company: HPB p.l.c.
Postal code and city 10000 ZAGREB
Address: JURIŠIĆEVA 4
E-mail address: [email protected]
Internet address: www.hpb.hr
City code and name: 133
ZAGREB
County code and name: 21
GRAD ZAGREB
# of employees: 1.354
Consolidated report: YES (as per reporting date)
Industry code:
6419
Consolidated companies (in accordance with IFRS): Headquarters: Registration number:
HPB-Stambena Štedionica d.d. Savska 58, 10000 Zagreb 02068001
HPB Invest d.o.o. Strojarska 20, 10000 Zagreb 01972278
HPB-nekretnine d.o.o. Amruševa 8, 10000 Zagreb 01972260
JADRANSKA BANKA dioničko društvo Ante Starčevića 4, Šibenik 03019349
Book-keeping service
provided by: n/a n/a
Contact: Bažant Tea
Phone: 014804670 Fax: 014804594
E-mail address: [email protected]
Surname and name: Vuić Tomislav
(persons authorized for representation)
Documentation to be made public:
  1. Financial reports (balance sheet, profit or loss statement, cash flow statement, statement on changes

in equity and notes to financial statements)

  1. Management report

  2. Statement by persons accountable for compiling the report

BALANCE SHEET

Sep 30 2018
as per
in HRK
Item AOP
label
Dec 31 2017 Sep 30 2018
1 2 3 4
ASSSETS
1. CASH AND DEPOSITS WITH THE CNB (002+003) 001 4.391.466.871 3.938.374.353
1.1.Cash 002 460.024.014 608.733.627
1.2.Deposits with the CNB 003 3.931.442.857 3.329.640.726
2. DEPOSITS WITH FINANCIAL INSTITUTIONS 004 473.330.331 1.076.526.361
3. SHORT-TERM TREASURY BILLS OF THE CROATIAN MINISTRY OF FINANCE 005 324.931.405 273.389.007
4. FINANCIAL ASSETS HELD FOR TRADING 006 654.815.717 741.465.394
5. FINANCIAL ASSETS AVAILABLE FOR SALE 007 2.459.982.241 4.069.261.488
6. FINANCIAL ASSETS HELD TO MATURITY 008 72.345.457 68.219.282
7. FINANCIAL ASSETS VALUED AT FAIR VALUE THROUGH PROFIT OR LOSS,
NOT ACTIVELY TRADED 009 - 81.912
8. DERIVATIVE FINANCIAL ASSETS 010 - 30.179
9. LOANS TO FINANCIAL INSTITUTIONS 011 62.450.000 106.021.781
10. LOANS TO OTHER CUSTOMERS 012 11.013.731.914 11.966.519.412
11. INVESTMENTS IN SUBSIDIARIES, ASSOCIATED COMPANIES AND JOINT VENTURES 013 20.000.000 20.000.000
12. REPOSSESSED ASSETS 014 - 4.702.677
13. TANGIBLE ASSETS (LESS DEPRECIATION) 015 141.615.708 149.848.770
14. OTHER ASSETS 016 455.167.665 486.488.731
A) TOTAL ASSETS (001+004 to 016) 017 20.069.837.309 22.900.929.347
LIABILITIES
1. BORROWINGS FROM FINANCIAL INSTITUTIONS (019+020) 018 651.970.981 733.433.800
1.1. Short-term 019 - 0
1.2. Long-term 020 651.970.981 733.433.800
2. DEPOSITS (022 to 024) 021 15.389.912.890 17.897.454.751
2.1. Transactional and current accounts 022 5.125.557.660 6.726.748.421
2.2. Savings deposits (demand) 023 1.538.006.561 2.521.734.496
2.3. Term deposits 024 8.726.348.669 8.648.971.834
3. OTHER BORROWINGS (026+027) 025 20.286.850 37.120.075
3.1. Short-term 026 - -
3.2. Long-term 027 20.286.850 37.120.075
4. DERIVATIVE AND OTHER FINANCIAL LIABILITIES HELD FOR TRADING 028 - -
5. ISSUED SECURITIES (030+031) 029 - -
5.1. Short-term 030 - -
5.2. Long-term 031 - -
6. SUBORDINATED DEBT ISSUED 032 - -
7. HYBRID INSTRUMENTS 033 - -
8. OTHER LIABILITIES 034 2.096.847.345 2.221.231.695
B) TOTAL LIABILITIES (018+021+025+028+029+032+033+034) 035 18.159.018.066 20.889.240.321
EQUITY
1. SHARE CAPITAL 036 1.214.298.000 1.214.298.000
2. PROFIT/(LOSS) FOR THE PERIOD 037 7.898.428 111.830.601
3. RETAINED EARNINGS 038 130.368.702 137.850.457
4. REGULATORY RESERVES 039 15.708.724 16.125.397
5. STATUTARY AND OTHER CAPITAL RESERVES 040 448.288.175 418.531.835
6. FAIR VALUE RESERVE 041 94.257.214 113.052.736
7. RESERVES ARISING FROM HEDGING TRANSACTIONS 042 - 0
C) TOTAL EQUITY (036 to 042) 043 1.910.819.243 2.011.689.026
D) TOTAL LIABILITIES AND EQUITY (035+043) 044 20.069.837.309 22.900.929.347
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CASH FLOW STATEMENT - INDIRECT METHOD

for the period from Jan 01 2018 to Sep 30 2018 in HRK
Item AOP Jan 01 - Sep 30 Jan 01 - Sep 30
label 2017 2018
1 2 3 4
OPERATING ACTIVITIES
1. Cash flow from operating activities before changes in assets (002 to 007) 001 304.316.209 298.209.396
1.1. Profit/(loss) before tax 002 2.846.100 140.115.260
1.2. Impairment losses and provisions 003 276.288.015 108.039.458
1.3. Amortization and depreciation 004 33.227.519 35.645.637
1.4. Net unrealised gains less losses from financial assets valued at fair value through profit or
loss
005 (7.376.887) 4.834.194
1.5. Gains / losses from sale of tangible assets 006 1.452.852 8.780.649
1.6. Other gains / losses 007 (2.121.390) 794.198
2. Net increase / decrease of operating assets (009 to 016) 008 (532.984.954) (2.736.942.916)
2.1. Deposits with the CNB 009 (713.804.766) 601.802.131
2.2. Tresury bills of the Croatian Ministry of Finance 010 896.501 51.542.398
2.3. Deposits with and loans to financial institutions 011 337.436.309 (603.196.030)
2.4. Loans to other customers 012 (358.882.367) (981.768.272)
2.5. Financial assets held for trading 013 105.144.798 (91.483.871)
2.6. Financial assets available for sale 014 220.213.729 (1.628.074.769)
2.7. Financial assets valued at fair value through profit or loss, not actively traded 015 -
2.8. Other operating assets 016 (123.989.158) (85.764.503)
3. Net increase / decrease of operating liabilities (018 to 021) 017 128.183.271 2.631.926.211
3.1. Transactional accounts 018 302.894.657 1.601.190.761
3.2. Savings and term deposits 019 (271.070.978) 906.351.100
3.3. Derivative financial liabilities and other liabilities actively traded 020 (3.640.667) 0
3.4. Ostale liabilities 021 100.000.259 124.384.350
4. Net cash flow from operating activities before taxation
(001+008+017)
022 (100.485.474) 193.192.691
5. Income tax paid 023 (1.065.525) (537.596,00)
6. Net cash inflow / outflow from operating activities (022+023) 024 (101.550.999) 192.655.095
INVESTING ACTIVITIES
7. Net cash flow from investing activities (026 to 030) 025 275.428.314 (142.311.215)
7.1. Purchase of tangible and intangible assets 026 (24.225.656) (26.135.984)
7.2. Investment in / disposal of subsidiaries, associated companies and joint ventures 027 - (121.265.000)
7.3. Investment in / disposal of financial assets held to maturity 028 298.818.958 4.126.175
7.4. Dividends received 029 835.012 963.594
7.5. Other inflows / outflows from investing activities 030 -
FINANCIAL ACTIVITIES
8. Net cash flow from financial activities (032 to 037) 031 (52.110.989) 98.296.044
8.1. Net increase / decrease of borrowings 032 (52.110.989) 98.296.044
8.2. Net increase / decrease of issued debt securities 033 -
8.3. Net increase / decrease of subordinated debt and hybrid instruments 034 -
8.4. Share capital raised 035 -
8.5. Dividends paid 036 -
8.6. Other inflows / outflows from financial activities 037 -
9. Net increase / decrease of cash and cash equivalents
(024+025+031) 038 121.766.326 148.639.924
10. Effect of foreign exchange differences on cash and cash equivalents 039 1.318.707 69.689
11. Net increase/(decrease) in cash and cash equivalents (038+039) 040 123.085.033 148.709.613
12. Cash and cash equivalents at the beginning of the year 041 421.479.852 460.024.014
13. Cash and cash equivalents as per reporting date (040+041) 042 544.564.885 608.733.627
for
th
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fro
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Jan
01
20
18
to Se
30
p
201
8
in H
RK
AO Att
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tab
le t
o th
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lde
f th
nt c
rs o
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are
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Item P lab
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Sha
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Ow
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es
Reg
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, st
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ory
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and
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Ret
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Pro
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Fair
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Min
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Tot
al e
qui
ty
1 2 3 4 5 6 7 8 9 10
Bal
er J
01 2
018
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s p
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001 1.2
14.
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.00
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94.
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Effe
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6

STATEMENT OF CHANGES IN EQUITY

NOTES TO FINANCIAL STATEMENTS

A) Income statement

Notes to financial statements

1) INTEREST INCOME
in HRK
Jan 01 - Sep 30 2017 Jan 01 - Sep 30 2017
Cumulative Quarterly Cumulative Quarterly
Loans 437.281.866 146.532.943 409.345.637 138.736.354
Deposits (1.597.265) (327.405) 1.048.269 410.541
Securities 75.849.331 23.502.934 70.109.329 29.085.511
TOTAL 511.533.932 169.708.472 480.503.235 168.232.406
2) INTEREST EXPENSE
in HRK
Jan 01 - Sep 30 2017 Jan 01 - Sep 30 2017
Cumulative Quarterly Cumulative Quarterly
Borrowings 10.407.829 3.503.033 17.455.110 11.069.941
Deposits 97.261.717 30.140.384 67.147.048 15.772.431
TOTAL 107.669.546 33.643.417 84.602.158 26.842.372
3) FEE AND COMMISSION INCOME
in HRK
Jan 01 - Sep 30 2017 Jan 01 - Sep 30 2017
Cumulative Quarterly Cumulative Quarterly
Cash payment operations - channels 209.680.812 70.711.662 200.094.105 67.984.445
Retail and card operations 144.588.009 71.725.253 149.105.743 72.057.835
Corporate operations 42.789.117 15.066.923 46.804.747 17.364.787
Other fee and commission income 15.748.360 5.836.164 15.929.775 5.852.571
TOTAL 412.806.298 163.340.002 411.934.370 163.259.638
4) FEE AND COMMISSION EXPENSE
in HRK
Jan 01 - Sep 30 2017 Jan 01 - Sep 30 2017
Cumulative Quarterly Cumulative Quarterly
Payment operations 211.950.286 72.721.364 200.914.917 69.069.160
Other fee and commission expense 41.354.223 31.587.376 46.541.981 28.391.355
TOTAL 253.304.509 104.308.740 247.456.898 97.460.515

5) GAINS LESS LOSSES FROM TRADING ACTIVITIES in HRK

Jan 01 - Sep 30 2017 Jan 01 - Sep 30 2017
Cumulative Quarterly Cumulative Quarterly
Securities and equity instruments 10.092.945 9.287.858 (3.574.337) 2.222.124
FX transactions 28.464.166 10.811.781 37.851.499 15.337.431
HRK cash transactions 486.695 277.150 288.040 136.960
Derivatives (38.685) (17.674) 1.284.091 524.029
TOTAL 39.005.121 20.359.115 35.849.293 18.220.544

6) OPERATING EXPENSES in HRK

Jan 01 - Sep 30 2017 Jan 01 - Sep 30 2017
Cumulative Quarterly Cumulative Quarterly
General and administrative expenses 259.871.176 85.457.264 275.176.821 97.215.648
Amortization and depreciation 33.227.519 10.781.555 35.645.637 12.616.305
Savings deposit insurance costs 26.403.185 8.599.644 28.253.439 10.212.736
Other costs 16.685.723 5.941.638 21.645.813 5.230.273
TOTAL 336.187.603 110.780.101 360.721.710 125.274.962

7) IMPAIRMENT LOSSES AND PROVISION EXPENSES in HRK

Jan 01 - Sep 30 2017 Jan 01 - Sep 30 2017
Cumulative Quarterly Cumulative Quarterly
Impairments and provisions for losses 279.277.615 30.268.531 76.736.564 61.411.855
Other impairments and adjstuments (2.989.600) 8.985.491 31.302.894 23.842.533
TOTAL 276.288.015 39.254.022 108.039.458 85.254.388

B) Balance sheet

8) CASH AND DEPOSITS WITH THE CNB in HRK
Dec 31 2017 Sep 30 2018
CASH 460.024.014 608.733.627
DEPOSITS WITH THE CNB 3.931.442.857 3.332.739.263
Mandatory reserve 1.300.268.691 1.514.172.204
Account for transaction settlement 2.631.174.166 1.818.567.059
MANDATORY TREASURY BILLS - -
Portfolio based impairment allowance for identified losses - (3.098.537)
TOTAL 4.391.466.871 3.938.374.353

9) DEPOSITS WITH FINANCIAL INSTITUTIONS in HRK

Dec 31 2017 Sep 30 2018
Deposits with foreign banking institutions 449.961.251 958.984.091
Deposits with domestic banking institutions 23.369.080 120.341.812
Portfolio based impairment allowance for identified losses - (2.799.542)
TOTAL 473.330.331 1.076.526.361
10) EQUITY INSTRUMENTS AND SECURITIES in HRK
Dec 31 2017 Sep 30 2018
Short term Treasury bills of the Croatian Ministry of Finance 324.931.405 273.389.007
Financial assets held for trading 654.815.717 741.465.394
Financial assets available for sale 2.459.982.241 4.069.261.488
Financial assets held to maturity 73.139.356 68.221.429
Financial assets valued at fair value through profit or loss, not
actively traded - 81.912
Portfolio based impairment allowance for identified losses (775.376) -
Deferred front-end fee (18.523) (2.147)
TOTAL 3.512.074.820 5.152.335.171
11) LOANS TO CUSTOMERS in HRK
Dec 31 2017 Sep 30 2018
Loans to financial institutions 62.450.000 106.021.781
Bruto krediti 62.454.545 106.026.989
Ispravci vrijednosti (4.545) (5.208)
Corporate & SME loans 2.942.304.493 3.777.042.661
Bruto krediti 3.902.668.309 4.772.544.074
Ispravci vrijednosti (960.363.816) (995.501.413)
Retail loans 5.036.923.707 5.553.606.806
Bruto krediti 5.333.998.299 5.905.355.946
Ispravci vrijednosti (297.074.592) (351.749.140)
Other loans 3.192.134.584 2.855.143.093
Bruto krediti 3.198.303.415 2.862.822.387
Ispravci vrijednosti (6.168.831) (7.679.294)
Portfolio based impairment allowance for identified losses (118.064.812) 0
Expected credit losses (A1 and A2 risk groups) - (175.622.773)
Other adjustments - (10.988.871)
Deferred front-end fee (39.566.058) (32.661.504)
LOANS TO CUSTOMERS 11.076.181.914 12.072.541.193

B) Balance sheet (continued)

12) DEPOSITS in HRK
Dec 31 2017 Sep 30 2018
Financial institutions 1.116.153.667 1.356.049.725
Corporations 3.574.264.999 3.793.291.344
Retail 9.282.809.836 11.187.557.321
Other 1.416.684.388 1.560.556.361
TOTAL 15.389.912.890 17.897.454.751
13) BORROWINGS in HRK
Dec 31 2017 Sep 30 2018
Borrowings from HBOR 656.196.151 622.124.856
Borrowings from domestic banking institutions - 115.000.000
Borrowings from domestic non-banking institutions - -
Borrowings from foreign banking institutions 20.286.850 37.120.075
Deferred front-end fee (4.225.170) (3.691.056)
TOTAL 672.257.831 770.553.875
14) OTHER LIABILITIES in HRK
Dec 31 2017 Sep 30 2018
Restricted deposits 1.786.812.843 1.884.823.340
Interest and fees payable 48.664.624 64.643.740
Provisions for off-balance sheet exposure 25.193.152 30.557.965
Other 236.176.726 241.206.650
TOTAL 2.096.847.345 2.221.231.695

C) Changes in accounting policies

During the reporting period, Group has transitioned to new reporting standard IFRS 9 "Financial instruments". Standard supplants the old IAS 39: "Financial instruments: classification and measurement" and consists of conditions relating to classification and measurement, impairment, derecognition and hedge accounting in general.

Classification and measurement IFRS 9 introduces a new approach to classification of financial assets, based on cash flow features and business model in which certain financial assets is maintained. New model introduces the unique model of impairment.

Impairment IFRS 9 introduces the new model of impairment based on expected losses. This model instructs that expected credit losses should be recorded in a more timely manner.

Hedge accounting - IFRS 9 brings significant changes to hedge accounting. Based on this changes, more information must be disclosed about risk management activities.

Bank and its subsidiaries have initiated the project of IFRS 9 implementation in 2016, and have succeeded in implementing it with first adoption as of Jan 01 2018.

From the impairment aspect, adoption of this standard has significant effects on the Group's capital. Migration from IAS 39 to IFRS 9 resulted in an initial effect on the Group's capital reserves amounting to HRK 57.233 thousand (reduction).

D) Parent company's ownership structure

Ownership structure of HPB p.l.c., parent company of HPB Group as per Sep 30 2018 was as follows:

Shareholder Ownership stake
Republic of Croatia (Ministry of State Assets) 42,43%
HP Hrvatska pošta Plc 11,93%
State Agency for Deposit Insurance and Bank Resolution 8,98%
Croatian Pension Insurance Insitute (Ministry of State Assets) 8,76%
Prosperus Invest d.o.o., for Prosperus FGS 4,94%
PBZ CROATIA OSIGURANJE OMF (B category) 4,12%
ERSTE d.o.o. for ERSTE PLAVI OMF (B category) 3,90%
Allianz ZB d.o.o., for AZ OMF (B category) 2,88%
CROATIA osiguranje Plc 2,47%
Fund for Financing the Decommissioning of the Krško Nuclear Power Plant and the
Disposal of NEK Radioactive Waste and Spent Nuclear Fuel
2,36%
RAIFFEISEN D.D., for Raiffeisen OMF (B category) 2,20%
Minorities 4,99%
Own shares 0,04%

E) Consolidation of Jadranska banka d.d., Šibenik results

From July 13, 2018 Jadranska banka d.d. becomes an integral part of the HPB Group. After the acquisition, the HPB has injected HRK 110 million of new capital to Jadranska banka in order to meet regulatory requirements of Croatian National Bank. The Bank started process of merging Jadranska banka d.d. From the acquisition until reporting period, Jadranska banka d.d., Šibenik reported a net loss of HRK 12.0 million. The business result of Jadranska banka is continuously improving since it becomes part of HPB Group and the same trend is expected in the future. On the side of the sources of funds, Jadranska banka d.d. contributes to HRK 1,543 million in customer deposits, representing 8.6% of total deposits of the Group.

TRANSLATION

last price in HRK

F) HPB stock

HPB Stock is listed on ZSE's Official market. Last share price at the end of the 2018 reporting period amounted to HRK 515,00 (trading day Sep 25 2018), representing an increase of 1,8 percent in comparison with the last price achieved in 2017 (=HRK 506,00 as per Dec 29 2017 trading day).

400,00 450,00 500,00 550,00 600,00 02.01.18 16.01.18 30.01.18 13.02.18 27.02.18 13.03.18 27.03.18 10.04.18 24.04.18 08.05.18 22.05.18 05.06.18 19.06.18 03.07.18 17.07.18 31.07.18 14.08.18 28.08.18 11.09.18 25.09.18 min. ytd 2018: HRK 484.00 (Mar 28) max. ytd 2018: HRK 550.00 (Jan 22, Apr 30, May 3)

Trading during the reporting period was as follows:

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