HPB dd : in 2015: record net profit of HRK 123 million, the capital has doubled, the number of clients is growing

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Jurišićeva 4, HR-10000 Zagreb

Press Release

HPB IN 2015: RECORD NET PROFIT OF HRK 123 MILLION, THE CAPITAL HAS DOUBLED, THE NUMBER OF CLIENTS IS GROWING

Zagreb, 20 January 2016 - According to the unaudited financial statements, HPB achieved in 2015 a record operating profit of HRK 324 million which is a record high in the Bank's corporate history and increased its total capital to HRK 1.7 billion. The number of customers jumped: individuals, companies, cities and municipalities - the total number has grown now to more than 640,000

• Record operating profit of HRK 324 million, an increase of 8.1%; net profit of HRK 123 million, a record high since HPB has been established
• Total capital following recapitalisation, hybrid instruments conversion and generated profit has doubled to HRK 1.7 billion; capital adequacy rate of 16.25%
• Business efficiency is improving: C/I ratio is 58.6%, near the market mean (estimated 56% for

  
  

  2015)

  
  

• Assets amount to HRK 17.7 billion, an increase of 1.8%

  
  

• 5.7% increase in household loans, with increase in market share (estimated 3.7% for 2015); 12.3% increase in home loans
• Total deposits up 2.9% and reached HRK 14.6 billion

  
  

• The number of customers has grown to more than 640,000 and the number of individuals' current accounts to more than 420,000; the Bank increased the number of businesses' accounts to more than 1,200; increasing number of cities and municipalities are among the HPB's customers
• The Bank completed its reorganisation and is strengthened by new staff

In an extremely demanding year - 2015, Hrvatska poštanska banka carried out a recapitalisation with the participation of private investors too, implemented reorganisation, improved business efficiency, attracted new customers and generated the best business results in its corporate history.

PROFIT: The Bank achieved a record operating profit of HRK 324 million which is 8.1% more than last year. The

net profit of HRK 123 million is also a record high in HPB's corporate history.

PROVISIONS: 60% of the Bank's operating profit was allocated for provisions and the coverage of non-performing loans (NPL) had increased in 2015 by 2.9% to 64.1% which is significantly higher than the mean in the banking system (on 30 September 2015 it amounted to 54.4%).

Hrvatska poštanska banka, dioničko društvo  Jurišićeva 4, 10000 Zagreb, Hrvatska  tel.: [phone]  [e-mail]  www.hpb.hr Uprava Banke: Tomislav Vuić, predsjednik  Dubravka Kolarić, član  Mladen Mrvelj, član  Domagoj Karadjole, član  predsjednik Nadzornog odbora: Dražen Kobas  IBAN: HR46 2390 0011 0700 0002 9  SWIFT: HPBZHR2X  OIB: 87939104217  Upis kod Trgovačkog suda u Zagrebu pod br. MBS: 080010698  Temeljni kapital 1.214.775.000,00 kn, podijeljen na 2.024.625 redovnih dionica u nominalnom iznosu 600,00 kn (uplaćen u cijelosti)

INCOME: HPB operated with insufficient capital for the better part of the last year and was thus required to reduce credit risk exposure which caused the inevitable minimum 0.5% drop in net interest income. Lower average volume of loans in 2015 and continuing drop in active interest rates resulted in the decrease in total interest income by 9%; however, at the same time the structure of funding sources was improved through the growth of more favourable sources and repayment of relatively expensive term deposits. In that manner, interest expense has declined by 22% to neutralise the major part of the decline in interest income.

Net commission and fee income increased 5% primarily as a result of enlarged business operations with individuals in the card operation segment, offsetting largely the fall in cash payments in the externalised network. Profit arising from transactions in securities and foreign currencies has jumped 23.6%, and other income has more than doubled, mostly thanks to the recovery and sale of foreclosed properties. Foreign exchange gain has also doubled as a result of the efficient management of FX position in the ordinary course of business.

COSTS AND BUSINESS EFFICIENCY: General and administrative costs and depreciation increased due to one- time costs associated with the reorganisation and recapitalisation of the Bank, as well as due to new regulatory contribution. Total operating costs have gone up 1% but C/I business efficiency indicator has been improved from 60.1% in 2014 to present 58.6%, primarily due to the jump in net operating income. Efficiency indicator dropped thereby below 60% for the first time in the last ten years, and HPB is edging up the market mean (estimated 56% for 2015). CUSTOMERS AND PRODUCTS: At the end of 2015, HPB had 640,000 customers which represented the net annual growth of 4,000. The retail sector has recorded the biggest growth - as much as 32,000 new current accounts, the corporate segment has more than 1,200 newly acquired corporate accounts, and among the customers are also 10 new cities and municipalities.

HPB is increasingly using new technologies in service development, and in 2015 it launched new, the most advanced mobile banking in Croatia which would be soon upgraded to an even higher level. Also, the Bank, as a leader in kuna lending, has recently introduced attractive conditions for its kuna loans - fixed interest rates and low fees.

ASSETS: On 31 December 2015, the assets amounted to HRK 17.7 billion and were 1.8% higher than at the end

of the previous year.

LOANS: The total gross loans remained at the end of 2015 at the level of HRK 12.4 billion. Household loans recorded again an upward trend (+5.7%) where home loans grew 12.3% which would, taking into account the market stagnation, increase HPB's market shares. Due to restrictions on capital and loan risk exposure optimisation, as well as due to the introduction of new lending standards, loans to legal persons dropped 3.2%. Corporate segment decreased by 19.3% while other loans, less demanding in terms of capital requirements, increased by 26%. DEPOSITS: The total deposits have increased by 2.9% and amount to HRK 14.6 billion. The retail segment has also recorded continuing growth in both term and sight deposits and HPB's market share, while the portion of relatively expensive term deposits have been returned to legal persons the growth in sight and limited deposits has continued. These developments are a result of increased number of corporate accounts and individual current accounts, as well as the reflection of savers' trust in HPB. RECAPITALISATION: By recapitalisation, hybrid instruments conversion into its share capital and generated gains, HPB's total capital has doubled in 2015 to HRK 1.7 billion. By increased capital and optimised risk exposure, the Bank is heading into 2016 with significantly stronger balance sheet and bigger potential for the

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development in the future with the capital adequacy rate which was on 31 December 2015 16.25% according to the preliminary calculations which was higher than the rate required by the regulator.

In 2015, we have achieved all the goals: we recapitalised the Bank and finally reached required capital adequacy, generated excellent business result, the profit of HRK 123 million and operating profit of HRK 324 million, market growth in targeted segments, increased the number of customers and completed the process of reorganisation and staffing.

In 2016 we expect further growth in profitability and market share. Increased income and better cost management will enable us to offer even better services to our customers and competing prices. We will focus on small and medium enterprises, specialise in agriculture and tourism, IT industry, and production for export in general. In our retail business we will not only take special care of our present customers but also through technology and new product we will target on younger generations. Our responsibility towards both, customers and owners is not only to remain good, the largest Croatian-owned bank but also to become the best bank in Croatia, HPB Management Board President Tomislav Vuić said.

Media Relations

HPB Office of Corporate Communications 01 4804 920/473, 4804 473, 4805 057

[e-mail] www.hpb.hr

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