Hrvatska Poštanska Banka d.d.

Annual / Quarterly Financial Statement • Feb 27, 2019

TRANSLATION

Financial Statements for the Period from Jan 01 to Dec 31 2018

Unaudited

Zagreb, February 27 2019

HPB p.l.c.

In accordance with the Capital Markets Act, HPB p.l.c. publishes unaudited financial statements for the period from Jan 01 2018 to Dec 31 2018.

This report includes:

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

Key highlights of results for the reporting period are as follows:

- Bank recorded net profit of HRK 150.2M and gross profit of HRK 183.2M that represents the best result since the establishment,

- achieved market share growth in accordance with capital capability. Bank has turned to the retail segment (loans increased by 13.4% on an annual basis) and the SME segment (loans increased by 20.6% on an annual basis),

- Bank has reached 6th position in the structure of bank assets in Croatia,

- operating profit of HRK 302.4M, decreasing by HRK 70M or 18.8% in comparison with the same period 2017. Result is mainly affected by continuous decreasing interest rates on the market, reducing the exposure to the state institutions due to the continuous debt repayment, high level of liquidity reserves, activities related to the acquisition of Jadranska banka d.d. and higher costs of initiated stategic projects whose aim is to strenghten the HPB's Group market position.

• book value per share increased by 5.0% on y-o-y basis and amounts HRK 988.

Management report of HPB p.l.c.

HPB successfuly meets the market demand challenges and pressure od new regulations in Y2018. However, lower operationg profit neutralized improved results of value adjustments and portfolio management, but the numerous projects that are launched, including the acquisition and merging process of JABA should provide better results in the future.

During 2018, the Bank launched a number of projects in order to respond to the challenges ahead of it in the near future, including responses to a large number of new regulatory changes and requirements and to tighten competition in the banking market through new and attractive products at very low interest margins. In term of strengthening the position in the intensive banking market, the purchase of the Jadranska banka d.d. significantly contributes to the increase in Bank presence in the area of Central Dalmatia and broadens its client base. Acquisition process will be completed during the first half of 2019.

Commentary on P&L movements

Solid profitability in the amount of HRK 150.2M was achieved with lower operating profit through a lower level of provisions as a result of increased collection activity, better credit risk management and good NPL coverage. The Bank's management continues its activities as response to the pressure of interest rate reduction through initiated projects, process optimization with the goal of achieving internal improvements, as well as continued intensive participation in digital transformation, in order to achieve better results in the future.

Operating profit amounted to HRK 302.4M, representing a decrease of HRK 70M when compared to the same period of 2017. Decline in operating profit arises from higher decrease in active interest rates in comparison with pasive ones (interest income declined by 8.5%) leaving very little space for further reduction in financing cost (interest expense decreased by 29.8%). Accordingly, net interest income is lower by 3.1 percent or HRK 16.9M. During the fourth quarter of 2018, there has been a trend of debt repayment by state institutions, which has affected the reduction of interest income. Mentioned reduction is partially offset by loan placements in the Small and Medium Enterprises Sector and the Retail business Sector.

Net income from commissions and fees remained at the same level as in 2017.

Other non-interest income is comprised of trading gains on securities and FX operations, dividends received and other income. These income categories have dropped by 42.5% in comparison with same period of 2017, due to absence of one-off or non-recurring items relating to securities trading gains, dividendes received from subsidiaries following the retention of 2017 earnings.

Operating costs inevitably increased (+3.1%), following an intense activites regarding Jadranska banka acquisition and variety of initiated projects and activities that are driven by regulatory requirements in 2018. Optimization of processes and other expenses in the future will lwas to the lower expenses of initiated projects and initiatives on operating profit.

In the reporting period, the Bank recorded significantly lower impairment losses (66.9 percent or HRK 240.7M) in comparison with the same period of 2017 which was burdened by provisioning for Agrokor in 2017. Lower level of provisions is a result of increased collection activity, better credit risk management and good NPL coverage. Effects in P&L account since the first application of the standard are not material for now.

Owing to the fact that Bank reported a gross profit of HRK 183.2M in 2018, tax expenses were recorded in the amount of HRK 33.0M. This expense does not represent nor it will represent cash outflow, because it relates to deferred tax assets, that can be utilized in the following period, based on past tax losses.

Commentary on balance sheet movements

A stable client base is visible through the continuous increase of received deposits by HRK 1,164M (+7.7%).

Assets have increased by 7.3% and amount to HRK 21.3B as of 31 December 2018. Bank seeks to adequately utilise liquidity surpluses, hence the investments in liquid securities rose by HRK 806.7M and deposits with financial institutions. Gross loans increased by 1.3%. Hence the debt repayment by state institutions is partially offset by loan placements in the Small and Medium Enterprises Sector and the Retail business Sector.

At the end of 2018 Bank's equity reached the level of HRK 2B and on Dec 31 2018 amount to HRK 2,001M, up by 5 percent ytd. Increase in capital refers mainly to the net profit achieved during the reporting period.

According to the digital transformations and our desire to be more accessible to our clients we are continuously improving e-branch office through mobile banking and its functionalities. With digital channels, we eant to strengthen our physical presence and by building good cooperation with Croatian Post, we bring banking services throughout the whole Croatia. We offered online opening of business account and online application of credit request to the corporate sector. We have singned agreement with the Zagreb Stock Exchange to encourage the development of SME and financing through the capital market.

Business event of the year is previously mentioned acquisition of Jadranska banka d.d. and in February 2019 a contract was signed for merging with HPB. Integration process will be finished in a first half of 2019.

Focusing on strategic guidelines auch as modernization of business network, gigitalisation, focus on retail and SME sectors, we are striving will continue to achieve better results and adequate return for our shareholders and keeping a trust of our clients.

Tomislav Vuić CEO

Statement by persons accountable for compiling the report of HPB p.l.c.

In accordance with the Capital Market Act, the Management Board of HPB p.l.c., states that according to their best knowledge the set of unaudited financial statements for the period from Jan 01 to Dec 31 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.

Tea Bažant Head of Finance Division Tomislav Vuić CEO

Appendix 3. Reporting period:		Jan 01 2018	to	Dec 31 2018
Quar te
Registration number (MB):	03777928
Registrati on	080010698
Personal identificati	87939104217
Company:	HPB p.l.c.
Postal code and city	10000	ZAGREB
Address:	JURIŠIĆEVA 4
E-mail address:	hpb@hpb.hr
Internet address:	www.hpb.hr
City code and name:	133 ZAGREB
County code and name:	21 GRAD ZAGREB			# of employees:	1.118
Consolidated report:	NO		Industry code:	(as per reporting date)	6419
Consolidated companies (in accordance with IFRS):		Headquarters:		Registration number:
Book- provided keeping	n/a	n/a
by: Contact:	Bažant Tea
Phone:	014804670			Fax: 014804594
E-mail	tea.bazant@hpb.hr
address: 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
as per Dec 31 2018	AOP		in HRK
Item	label	Dec 31 2017	Dec 31 2018
1	2	3	4
ASSSETS
1. CASH AND DEPOSITS WITH THE CNB (002+003)	001	4.391.466.489	3.370.330.704
1.1.Cash	002	460.023.632	561.549.578
1.2.Deposits with the CNB	003	3.931.442.857	2.808.781.126
2. DEPOSITS WITH FINANCIAL INSTITUTIONS 3. SHORT-TERM TREASURY BILLS OF THE CROATIAN MINISTRY OF FINANCE	004 005	473.302.324 324.931.405	862.929.108 273.389.007
4. FINANCIAL ASSETS HELD FOR TRADING	006	513.989.813	576.411.745
5. FINANCIAL ASSETS AVAILABLE FOR SALE	007	2.459.982.241	3.361.589.545
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	-	0
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	10.851.664.988	11.492.566.904
11. INVESTMENTS IN SUBSIDIARIES, ASSOCIATED COMPANIES AND JOINT VENTURES	013	65.490.000	186.755.000
12. REPOSSESSED ASSETS	014	-	0
13. TANGIBLE ASSETS (LESS DEPRECIATION)	015	141.461.846	138.813.740
14. OTHER ASSETS	016	441.748.035	432.668.405
A) TOTAL ASSETS (001+004 to 016)	017	19.798.832.598	20.869.725.400
LIABILITIES
1. BORROWINGS FROM FINANCIAL INSTITUTIONS (019+020)	018	651.970.981	618.433.800
1.1. Short-term	019	-	-
1.2. Long-term	020	651.970.981	618.433.800
2. DEPOSITS (022 to 024)	021	15.134.400.504	16.068.651.045
	022
2.1. Transactional and current accounts 2.2. Savings deposits (demand)	023	5.172.463.233 1.538.006.561	6.330.248.772 2.168.990.098
2.3. Term deposits	024	8.423.930.710	7.569.412.175
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	2.086.882.490	2.162.868.638
B) TOTAL LIABILITIES (018+021+025+028+029+032+033+034)	035	17.893.540.825	18.887.073.558
EQUITY
1. SHARE CAPITAL	036	1.214.298.000	1.214.298.000
2. PROFIT/(LOSS) FOR THE PERIOD	037	8.333.460	123.371.555
3. RETAINED EARNINGS	038	124.540.223	132.457.010
4. REGULATORY RESERVES	039	15.574.701	15.991.374
5. STATUTARY AND OTHER CAPITAL RESERVES	040	448.288.175	391.054.732
6. FAIR VALUE RESERVE	041	94.257.214	105.479.171
7. RESERVES ARISING FROM HEDGING TRANSACTIONS	042	-	0
C) TOTAL EQUITY (036 to 042)	043	1.905.291.773	1.982.651.842
D) TOTAL LIABILITIES AND EQUITY (035+043)	044	19.798.832.598	20.869.725.400
ADDENDUM TO THE BALANCE SHEET (filled-in by the banks submitting consolidated financial statement)
1. TOTAL EQUITY	045
2. Equity attributable to the shareholders of the parent company	046
3. Minority interest (045-046)	047	0	0

Financial Statements for the Period from Jan 01 to Dec 31 2018 (unaudited)

7

HPB p.l.c.

Ja De 0 1 2 0 1 8 3 1 for th iod fr n to c e p er om	2 0 1 8				in H R K
Ite m	AO P lab el	Ja n 0 1 - De c 3 1 2 017 Ja n 0 1 - De		c 3 1 2 018
		Cu lat ive mu	Qu ly art er	Cu lat ive mu	Qu ly art er
1	2	3	4	5	6
1. Int inc st ere om e	0 4 8	6 6 2.7 5 2. 9 2 1	1 6 1.7 25 9 7 9	6 0 6. 6 2 4.5 17	1 4 6. 6 2 3. 5 1 2
2. Int st ere ex p en se	0 4 9	1 3 1. 4 17 9 0 9	2 9. 7 1 8. 3 0 3	9 2. 2 4 0. 1 6 3	1 6. 1 2 1. 9 6 8
3. Ne int inc ( 0 4 8- 0 4 9 ) t st ere om e	0 5 0	5 3 1. 3 3 5. 0 1 2	1 3 2. 0 0 7. 6 7 6	5 14 3 8 4. 3 5 4	1 3 0. 5 0 1.5 44
4. Fe d c iss ion inc e a n om m om e	0 5 1	5 2 0. 9 6 4. 6 6 1	1 2 0. 7 8 0. 5 7 4	5 1 3. 5 0 0. 6 2 9	1 1 8. 15 5. 3 2 8
5 Fe d c iss ion e a n om m ex p en se	0 5 2	3 2 8. 8 3 7. 1 17	75 6 8 3. 7 1 9	3 2 1. 3 8 6. 0 3 3	75 1 3 2. 2 3 1
6. Ne fee d c iss ion inc ( 0 5 1- 0 5 2 ) t an om m om e	0 5 3	1 9 2.1 27 .5 44	45 0 9 6. 8 5 5	1 9 2.1 14 .5 9 6	4 3. 0 2 3. 0 9 7
Ga 7 ins les los is ing fro inv in bs i d iar ies iat d c ies d tm ts s se s a r m es en su , a ss oc e om p an an j int ntu o ve res	0 5 4	-	-	-	-
8. Ga ins les los fro d ing iv it ies tra t s se s m ac	0 5 5	0. 8 25 8 2 2 5	1 1. 6 3 0 8 75	4 8. 0 6. 0 8 5 7	1 1.5 1 6. 17 8
Ga 9. ins les los fro bu i lt- in de iva ive t s se s m r s	0 6 5	-	-	-	-
Ga ins les los is ing fro f ina ia l a lue d a fa ir v lue hro h P& L, 1 0. ets t t s se s a r m nc ss va a ug ive ly de d t a ct tra no	0 5 7	-	-	-	-
1 1. Ga ins les los is ing fro it ies i la b le for le s se s a r m se cu r av a sa	0 5 8	3 0. 2 1 2. 6 17	2 4.7 5 5. 1 25	-	-
Ga ins les los is ing fro it ies he l d t ity 1 2. atu s se s a r m se cu r o m r	0 5 9	-	-	-	-
1 3. Ga ins les los is ing fro he dg ing iv it ies t s se s a r m ac	0 6 0	-	-	-	-
1 4. Inc fro inv in bs i d iar ies iat d c ies d j int tm ts ntu om e m es en su , a ss oc e om p an an o ve res	0 6 1	3. 2 0 0. 0 0 0	1. 0 0 0. 0 0 0	-	-
Inc fro he ity ins 15 ot tru nts om e m r e q u me	0 6 2	9 7 4. 9 1 9	1 3 9. 9 0 7	9 8 2. 3 1 4	1 8. 7 2 0
Ga 1 6. ins les los fro ha d i f fer ate s se s m exc ng e r en ce s	0 6 3	1.7 47 15 1	( 3 47 27 9 )	( 3. 7 45 3 6 8 )	( 2. 4 3 1. 1 1 8 )
17 Ot he inc r om e	0 6 4	5. 7 27 3 9 1	1. 2 1 9. 2 2 9	7.5 8 1. 2 0 2	2.7 1 3. 45 5
1 8. Ot he ing t sts r o p era co	0 6 5	6 2. 0 27 3 9 .5	2 1. 0 6. 3 9 5 7	6 6. 8 47 6 0 8	1 9. 9 27 5 7. 5
Ge 1 9. l a d a dm in ist ive iza ion d de iat ion rat ort t ne ra n ex p en se s, am an p rec	0 6 6	3 8 1.7 3 6. 3 1 8	9 8. 3 9 0. 3 6 1	3 9 0. 6 17 9 4 8	1 0 2. 4 2 0. 7 9 5
Op ing f it ( ) 2 0. at 0 5 0+ 0 5 3 t 0 6 4- 0 6 5- 0 6 6 er p ro o	0 6 7	3 7 2. 3 8 6. 5 9 9	9 6. 1 0 0. 0 8 1	3 0 2. 3 5 7. 6 2 9	6 3. 3 2 3. 8 0 6
2 1. Im irm los d p is ion t p a en se s a n rov s	0 6 8	3 9. 9 25 8 8 1 5	8 3. 2 9. 8 8 5 5	1 1 9. 1 8 8. 4 8 8	3 1. 1 1 2. 1 4 9
2 2. P R O F I T / ( L O S S ) B E F O R E T A X ( 0 6 0 6 8 ) 7-	0 6 9	2.4 6 0. 8 1 71	2.5 0. 9 6 1 7 1	8 3. 6 9. 1 1 14 1	3 2. 21 6 1. 5 7
C O S 2 3. I N M E T A X E X P E N E / D E F E R R E D T A X	0 7 0	4.1 27 25 8	2. 9 0 2. 27 2	3 3. 0 1 6. 1 6 2	5. 4 3 0. 2 3 3
24 N E T P R O F I T / ( L O S S ) F O R T H E P E R I O D ( 0 6 9- 0 7 0 )	0 71	8. 3 3 3. 4 6 0	9. 6 6 7. 9 24	15 0. 15 2. 9 7 9	2 6. 7 8 1.4 24
25 Ea ing ha rn s p er s re	0 2 7	4	5	7 4	4 1
A D D E N D U M T O T H E P & L ( f i l le d- in by he ba ks bm itt ing l i da d f ina ia l s t te tat t n su co ns o nc em en	)
O O O 1. P R F I T F R T H E P E R I D	0 7 3
2. Att i bu b le he ha ho l de f t he ta to t nt r s re rs o p are co mp an y	0 74
3. M ino ity int ( 0 3- 0 ) st 7 74 Fin ia r l Sta ere for he Pe rio d fro Ja De (u d ite d ) n 0 1 t 3 1 2 0 18 tem ts t an c en m o c na u	0 75	0	0	0	0

CASH FLOW STATEMENT - INDIRECT METHOD

for the period from	Jan 01 2018	to	Dec 31 2018			in HRK
Item				AOP label	Jan 01 - Dec 31 2017	Jan 01 - Dec 31 2018
	1			2	3	4
OPERATING ACTIVITIES
1. Cash flow from operating activities before changes in assets (002 to 007)				001	407.891.101	359.606.784
1.1. Profit/(loss) before tax				002	9.018.025	183.169.141
1.2. Impairment losses and provisions				003	364.171.361	119.188.488
1.3. Amortization and depreciation				004	43.848.609	45.270.615
1.4. Net unrealised gains less losses from financial assets valued at fair value through profit or loss				005	(9.282.072)	5.906.672
1.5. Gains / losses from sale of tangible assets				006	1.882.329	2.326.500
1.6. Other gains / losses				007	(1.747.151)	3.745.368
2. Net increase / decrease of operating assets (009 to 016)				008	(1.179.148.942)	(1.543.348.153)
2.1. Deposits with the CNB				009	(2.089.619.595)	42.361.531
2.2. Tresury bills of the Croatian Ministry of Finance				010	90.605.210	126.641.176
2.3. Deposits with and loans to financial institutions				011	300.786.685	(673.643.780)
2.4. Loans to other customers				012	397.858.387	(120.241.320)
2.5. Financial assets held for trading				013	46.615.145	11.460.601
2.6. Financial assets available for sale				014	150.624.542	(817.154.470)
2.7. Financial assets valued at fair value through profit or loss, not actively traded				015	0	0
2.8. Other operating assets				016	(76.019.316)	(112.771.891)
3. Net increase / decrease of operating liabilities (018 to 021)				017	516.928.465	1.402.074.400
3.1. Transactional accounts				018	1.163.225.808	1.731.295.664
3.2. Savings and term deposits				019	(558.815.876)	(567.497.019)
3.3. Derivative financial liabilities and other liabilities actively traded				020	(3.640.667)	0
3.4. Ostale liabilities				021	(83.840.800)	238.275.755
4. Net cash flow from operating activities before taxation (001+008+017)				022	(254.329.376)	218.333.031
5. Income tax paid				023	(421.217)	(537.596)
6. Net cash inflow / outflow from operating activities (022+023)				024	(254.750.593)	217.795.435
INVESTING ACTIVITIES
7. Net cash flow from investing activities (026 to 030)				025	329.641.906	(159.771.469)
7.1. Purchase of tangible and intangible assets				026	(45.022.615)	(36.501.399)
7.2. Investment in / disposal of subsidiaries, associated companies and joint ventures				027	0	(121.265.000)
7.3. Investment in / disposal of financial assets held to maturity				028	370.489.602	(2.987.384)
7.4. Dividends received				029	4.174.919	982.314
7.5. Other inflows / outflows from investing activities				030	0	0
FINANCIAL ACTIVITIES
8. Net cash flow from financial activities (032 to 037)				031	(37.163.725)	(42.587.048)
8.1. Net increase / decrease of borrowings				032	(37.163.725)	(42.587.048)
8.2. Net increase / decrease of issued debt securities				033	0
8.3. Net increase / decrease of subordinated debt and hybrid instruments				034	0
8.4. Share capital raised				035	0
8.5. Dividends paid				036	0
8.6. Other inflows / outflows from financial activities				037	0
9. Net increase / decrease of cash and cash equivalents
(024+025+031)				038	37.727.588	15.436.918
10. Effect of foreign exchange differences on cash and cash equivalents				039	816.192	163.402
11. Net increase/(decrease) in cash and cash equivalents (038+039)				040	38.543.780	15.600.320
12. Cash and cash equivalents at the beginning of the year				041	421.479.852	460.023.632
13. Cash and cash equivalents as per reporting date (040+041)			042	460.023.632	475.623.952

TRANSLATION

HPB p.l.c.

for th e p	eri od fro m	Jan 01	20 18	to	Dec 31	20 18			in H RK
	AO		Att ribu tab le t o th har eho lde f th nt c e s rs o e p are om pan y
Item	P labe l	Sha ital re c ap	Ow har n s es	Reg ulat , st atu tory ory and oth er r ese rve s	Ret aine d e ing arn s	Pro fit/( los s) for the per iod	Fair val ue res erv e	Min orit inte t y res	Tot al e ity qu
1	2	3	4	5	6	7	8	9	10
Bala Jan 01 201 8 nce as per	001	1.2 14. 775 .00 0	( 477 .00 0)	463 .86 2.8 76	124 .54 0.2 23	8.3 33. 460	94. 257 .21 4	-	1.9 05. 291 .77 3
Effe of c han in a unti olic ies cts ges cco ng p and ions of rect cor erro rs	002			( 57. 233 .44 3)					( 57. 233 .44 3)
Res tate d b alan er J an 0 1 20 18 ( 001 +00 2) ce a s p	003	1.2 14. 775 .00 0	( 477 .00 0)	406 .62 9.4 33	124 .54 0.2 23	8.3 33. 460	94. 257 .21 4	-	1.8 48. 058 .33 0
Disp l of fina ncia l as ilabl e fo le sets osa ava r sa	004						( 7.2 59. 118 )		( 7.2 59. 118 00) ,
Cha in t he f air v alue of f inan cial ilabl e fo le ets nge ass ava r sa	005						10.4 16.2 39		10.4 16.2 39
Tax item nise d di ly rect on s re cog in/tr ferr ed f ity ans rom equ	006			13.0 93			( 512 .55 7)		( 499 .464 )
Oth ains and ( loss es) ised dire ctly in e ity er g reco gn qu	007			( 72. 739 )					( 72. 739 00) ,
Net ins/ ( los ) re nis ed dire ctly in e ity ga ses cog qu ( 004 +00 5+0 06+ 007 )	008	-	-	00) ( 59. 646 ,	-	-	2.6 44. 564	-	2.5 84. 918
Los s fo r the iod per	009					150 .15 2.9 79			150 .15 2.9 79
Tot al r ized inc nd e fo r th erio d eco gn om e a exp ens e p ( 008 +00 9)	010	-	-	00) ( 59. 646 ,	-	150 .15 2.9 79	2.6 44. 564	-	152 .73 7.8 97
Incr e/de se i n sh ital eas crea are cap	011
Purc has e/sa le o f ow hare n s s	012
Oth han er c ges	013			3 416 .67	87 7.9 16.7	( 8.3 33. 460 )			-
nsfe Tra r to rese rves	014								-
Divid end id s pa	015
Pro fit a lloc atio n ( 014 +01 5)	016	-	-	-	-	-	-	-	-
Bala the orti dat nce as per rep ng e ( 003 +01 0+0 11+ 012 +01 3+0 16)	017	1.2 14. 775 .00 0	( 477 .00 0)	406 .98 6.4 60	132 .45 7.0 10	150 .15 2.9 79	96. 901 .77 8	-	2.0 00. 796 .22 7

STATEMENT OF CHANGES IN EQUITY

HPB p.l.c.

NOTES TO FINANCIAL STATEMENTS

A) Income statement

1) INTEREST INCOME in HRK
	Jan 01 - Dec 31 2017		Jan 01 - Dec 31 2018
	Cumulative	Quarterly	Cumulative	Quarterly
Loans	573.042.923	140.714.488	524.670.406	125.269.383
Deposits	(1.125.453)	471.815	1.071.947	(40.073)
Securities	90.835.451	20.539.676	80.882.164	21.394.202
TOTAL	662.752.921	161.725.979	606.624.517	146.623.512

2) INTEREST EXPENSE in HRK

		Jan 01 - Dec 31 2017	Jan 01 - Dec 31 2018
	Cumulative	Quarterly	Cumulative	Quarterly
Borrowings	14.083.983	3.676.154	12.842.912	3.421.373
Deposits	117.333.926	26.042.149	79.397.251	12.700.595
TOTAL	131.417.909	29.718.303	92.240.163	16.121.968

3) FEE AND COMMISSION INCOME in HRK

		Jan 01 - Dec 31 2017	Jan 01 - Dec 31 2018
	Cumulative	Quarterly	Cumulative	Quarterly
Cash payment operations - channels	277.133.722	67.452.911	265.601.621	65.507.516
Retail and card operations	176.067.813	34.522.995	179.095.923	35.340.136
Corporate operations	59.486.631	16.697.514	61.032.169	15.380.894
Other fee and commission income	8.276.495	2.107.154	7.770.916	1.926.782
TOTAL	520.964.661	120.780.574	513.500.629	118.155.328

4) FEE AND COMMISSION EXPENSE in HRK

		Jan 01 - Dec 31 2017	Jan 01 - Dec 31 2018
	Cumulative	Quarterly	Cumulative	Quarterly
Payment operations	278.084.072	66.133.786	265.907.890	65.302.763
Other fee and commission expense	50.753.045	9.549.933	55.478.143	9.829.468
TOTAL	328.837.117	75.683.719	321.386.033	75.132.231

5) GAINS LESS LOSSES FROM TRADING ACTIVITIES in HRK

		Jan 01 - Dec 31 2017	Jan 01 - Dec 31 2018
	Cumulative	Quarterly	Cumulative	Quarterly
Securities and equity instruments	12.093.968	1.849.492	223.711	1.173.091
FX transactions	38.157.579	9.693.413	46.406.110	10.038.952
HRK cash transactions	490.545	3.850	288.040	0
Derivatives	83.730	128.553	1.588.226	304.135
TOTAL	50.825.822	11.675.308	48.506.087	11.516.178

6) OPERATING EXPENSES in HRK

		Jan 01 - Dec 31 2017	Jan 01 - Dec 31 2018
	Cumulative	Quarterly	Cumulative	Quarterly
General and administrative expenses	337.868.034	87.524.818	345.347.333	91.103.986
Amortization and depreciation	43.868.284	10.865.543	45.270.615	11.316.809
Savings deposit insurance costs	35.559.103	9.155.918	34.916.300	8.477.242
Other costs	26.468.436	11.900.461	31.931.308	11.120.033
TOTAL	443.763.857	119.446.740	457.465.556	122.018.070

7) IMPAIRMENT LOSSES AND PROVISION EXPENSES in HRK
		Jan 01 - Dec 31 2017	Jan 01 - Dec 31 2018
	Cumulative	Quarterly	Cumulative	Quarterly
Impairments and provisions for losses	358.042.535	78.569.655	98.570.038	26.763.440
Other impairments and adjstuments	1.883.346	4.960.230	20.618.450	4.348.709
TOTAL	359.925.881	83.529.885	119.188.488	31.112.149

B) Balance sheet

8) CASH AND DEPOSITS WITH THE CNB
-----------------------------------	--	--	--	--

8) CASH AND DEPOSITS WITH THE CNB		in HRK
	Dec 31 2017	Dec 31 2018
CASH	460.023.632	475.623.952
DEPOSITS WITH THE CNB	3.931.442.857	3.889.081.326
Mandatory reserve	1.300.268.691	1.419.939.919
Account for transaction settlement	2.631.174.166	2.469.141.407
MANDATORY TREASURY BILLS
Portfolio based impairment allowance for identified losses
TOTAL	4.391.466.489	4.364.705.278

9) DEPOSITS WITH FINANCIAL INSTITUTIONS		in HRK
	Dec 31 2017	Dec 31 2018
Deposits with foreign banking institutions	449.961.229	957.618.140
Deposits with domestic banking institutions	23.341.095	189.327.964
Portfolio based impairment allowance for identified losses

10) EQUITY INSTRUMENTS AND SECURITIES		in HRK
	Dec 31 2017	Dec 31 2018
Short term Treasury bills of the Croatian Ministry of Finance	324.931.405	198.290.229
Financial assets held for trading	513.989.813	496.622.540
Financial assets available for sale	2.459.982.241	3.266.720.472
Financial assets held to maturity	73.139.356	75.343.907
Portfolio based impairment allowance for identified losses	(775.376)	-
Deferred front-end fee	(18.523)	(11.066)
TOTAL	3.371.248.916	4.036.966.082

TOTAL 473.302.324 1.146.946.104

11) LOANS TO CUSTOMERS in HRK

	Dec 31 2017	Dec 31 2018
Loans to financial institutions	62.450.000	98.081.079
Bruto krediti	62.454.545	98.086.422
Ispravci vrijednosti	(4.545)	(5.343)
Corporate & SME loans	2.948.467.733	2.762.170.141
Bruto krediti	3.908.831.549	3.869.177.354
Ispravci vrijednosti	(960.363.816)	(1.107.007.213)
Retail loans	4.866.944.528	5.511.218.252
Bruto krediti	5.163.867.192	5.863.631.187
Ispravci vrijednosti	(296.922.664)	(352.412.935)
Other loans	3.192.134.584	2.650.791.321
Bruto krediti	3.198.303.415	2.658.434.137
Ispravci vrijednosti	(6.168.831)	(7.642.816)
Portfolio based impairment allowance for identified losses	(116.708.983)	-
Expected credit losses (A1 and A2 risk groups)	-	(140.828.980)
Other adjustments	-	(4.584.608)
Deferred front-end fee	(39.172.874)	(34.314.464)
LOANS TO CUSTOMERS	10.914.114.988	10.842.532.741

B) Balance sheet (continued)

12) DEPOSITS		in HRK
	Dec 31 2017	Dec 31 2018
Financial institutions	1.198.016.694	1.148.143.813
Corporations	3.891.544.698	4.199.811.090
Retail	9.150.703.429	9.574.636.573
Other	894.135.683	1.375.607.673
TOTAL	15.134.400.504	16.298.199.149

13) BORROWINGS in HRK
	Dec 31 2017	Dec 31 2018
Borrowings from HBOR	656.196.151	596.036.649
Borrowings from domestic banking institutions	-	-
Borrowings from domestic non-banking institutions	-	-
Borrowings from foreign banking institutions	20.286.850	37.087.875
Deferred front-end fee	(4.225.170)	(3.453.741)
TOTAL	672.257.831	629.670.783

14) OTHER LIABILITIES		in HRK
	Dec 31 2017	Dec 31 2018
Restricted deposits	1.786.812.843	2.055.861.176
Interest and fees payable	48.664.624	38.376.030
Provisions for off-balance sheet exposure	25.171.072	29.897.396
Other	226.233.951	201.023.643
TOTAL	2.086.882.490	2.325.158.245

C) Changes in accounting policies

During the reporting period, Bank 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 Bank's capital. Migration from IAS 39 to IFRS 9 resulted in an initial effect on the Bank's capital reserves amounting to HRK 57.233 thousand (reduction).

D) Bank's ownership structure

Bank's ownership structure as per Dec 31 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%
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	7,46%
Own shares	0,04%

TRANSLATION

E) 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 450.00 (trading day Dec 28 2018), representing an decrease of 11.1 percent in comparison with the last price achieved in 2017 (=HRK 506,00 as per Dec 29 2017 trading day).

Trading during the reporting period was as follows: