HPB SWOT Analysis

HPB benefits from the Croatian banking sector's overall strength, marked by high capitalization ratios. As of the first quarter of 2024, the consolidated capital adequacy ratio for Croatian banks stood at a healthy 23.8%, well above regulatory minimums, indicating a solid buffer against potential losses.

This robust capitalization, mirrored by HPB's own strong capital base, ensures the bank can withstand economic downturns and meet its financial obligations. Furthermore, ample liquidity buffers, evidenced by a liquidity coverage ratio of 175% for the sector in Q1 2024, allow HPB to comfortably manage its short-term funding needs and maintain lending operations.

HPB's extensive branch network, a legacy of its postal bank origins, provides significant reach, especially in rural Croatia. This physical presence, with over 50 branches as of early 2024, ensures broad customer accessibility for those preferring in-person banking.

The bank offers a comprehensive suite of financial products for both individuals and businesses, covering retail banking, corporate services, and investment solutions. This diversified offering strengthens its market position and revenue generation capabilities.

HPB benefits from the robust Croatian banking sector, characterized by high capitalization. The sector's consolidated capital adequacy ratio was 23.8% in Q1 2024, well above regulatory requirements, indicating financial stability and resilience.

The bank's long operational history since 1991 has built deep market insight, brand loyalty, and regulatory acumen within Croatia. This established trust is a key competitive advantage.

HPB has demonstrated strong financial performance, with total assets reaching $15.2 billion by Q1 2024, supported by a 6% year-over-year deposit growth. Furthermore, its commitment to prudent lending is reflected in a record low non-performing loan ratio of 0.45% in Q1 2024, highlighting effective risk management.

HPB has faced a challenging period with a noticeable decline in its net profit during 2024 and the first half of 2025. Specifically, the after-tax profit saw a significant drop in H1 2025, indicating a potential strain on the company's earnings power.

This downturn in profitability is largely attributed to a reduction in net interest income, a key revenue driver for financial institutions, coupled with an uptick in operating expenses. Such a combination suggests that HPB may be struggling to adapt to evolving market dynamics and manage its cost structure effectively, raising concerns about its sustained profitability going forward.

HPB faces intense competition in Croatia's banking sector, where a few large players dominate, making it hard to gain significant market share. This rivalry pressures interest margins and increases marketing costs, impacting HPB's profitability. Furthermore, Croatia's slower digital adoption rate, around 60% for internet banking in early 2024 compared to the EU average of 75%, limits HPB's ability to scale digital offerings effectively.

HPB experienced a notable profit decline in 2024 and H1 2025, primarily due to reduced net interest income and rising operating expenses. The integration of Nova Hrvatska Banka in mid-2023 also brought increased employee and operational costs, along with the complexity of harmonizing disparate IT systems and processes. This integration demands significant investment and strategic focus, potentially diverting resources from other initiatives.

The bank's reliance on legacy IT infrastructure presents a significant weakness. These older systems often lead to higher maintenance costs, slower innovation cycles, and integration challenges with newer technologies. By 2025, this inflexibility could hinder HPB's ability to offer the seamless digital experiences expected by customers, putting it at a disadvantage against more agile competitors.

The growing global focus on Environmental, Social, and Governance (ESG) criteria presents a significant opportunity for HPB. With regulations like the European Green Bond Regulation gaining traction, HPB can proactively develop and market green financial products, aligning with investor demand for sustainable options. This strategic move can attract a segment of socially conscious investors and customers, thereby bolstering HPB's brand image and market position.

The Croatian banking sector's digital acceleration, fueled by regulations like the Instant Payments Regulation (IPR), offers HPB a prime opportunity to enhance its digital offerings. By investing in advanced digital platforms and exploring partnerships with fintech innovators, HPB can streamline operations and broaden its customer base.

This digital push allows HPB to directly address the growing demand for immediate and secure financial services, a trend that saw a significant uptick in digital transaction volumes across European banks in 2024. Successful integration of new technologies will be key to meeting these evolving customer expectations.

The Croatian banking sector's robust growth in household and corporate lending, coupled with a steady rise in deposits, presents a significant opportunity for HPB. This favorable environment allows HPB to strategically expand its loan offerings, particularly in high-demand areas like housing and general-purpose cash loans, thereby growing its balance sheet.

As of the first quarter of 2024, Croatian banks reported a 7.5% year-on-year increase in total loans, reaching approximately €30.8 billion, with household loans up by 8.2%. Deposit growth also remained strong, indicating ample liquidity for further lending activities, which HPB can leverage to capture market share.

The growing global focus on Environmental, Social, and Governance (ESG) criteria presents a significant opportunity for HPB. With regulations like the European Green Bond Regulation gaining traction, HPB can proactively develop and market green financial products, aligning with investor demand for sustainable options. This strategic move can attract a segment of socially conscious investors and customers, thereby bolstering HPB's brand image and market position.

Croatia's economy is expected to maintain strong growth, fueled by substantial EU fund utilization and sustained investment. For HPB, this translates into a favorable landscape for supporting new business initiatives, infrastructure development, and meeting the demands of a growing consumer market, all of which can expand its customer base.

Key opportunities arising from this economic environment include:

• Increased demand for corporate lending: Businesses are likely to seek financing for expansion and modernization projects, leveraging the positive economic outlook.
• Growth in retail banking: Rising consumer confidence and spending power present opportunities for HPB to offer a wider range of retail financial products.
• Infrastructure project financing: The significant absorption of EU funds, projected to reach billions of euros in the coming years, will drive demand for financing large-scale infrastructure projects.
• Potential for increased fee and commission income: As economic activity picks up, HPB can benefit from higher transaction volumes and the provision of advisory services.

HPB's significant branch network and broad range of financial offerings present a prime opportunity for deepening customer relationships through cross-selling. By strategically promoting additional products to its existing clientele, the bank can capitalize on established trust and familiarity.

Leveraging advanced data analytics to gain insights into individual customer needs and behaviors is key. This allows HPB to move beyond generic product pushes and instead offer highly personalized solutions, thereby increasing customer loyalty and maximizing the lifetime value of each relationship. For instance, if a customer frequently uses mortgage services, HPB could proactively offer them home insurance or investment products tailored to homeowners.

In 2024, banks are increasingly focusing on personalized customer journeys. Data from the first half of 2024 indicates that financial institutions employing targeted cross-selling strategies saw an average increase of 15% in customer wallet share compared to those with less personalized approaches. This trend is expected to continue into 2025, with a greater emphasis on AI-driven recommendations.

• Expand product offerings to existing mortgage holders
• Target savings account customers with investment opportunities
• Utilize customer transaction data for personalized loan pre-approvals
• Offer bundled digital banking and insurance packages

The Croatian economy is projected to grow by 3.1% in 2024 and 3.0% in 2025, creating a fertile ground for increased lending and investment activities. This economic expansion directly translates into higher demand for corporate and retail banking services, offering HPB substantial opportunities for balance sheet growth and enhanced fee income generation.

Additionally, the ongoing digital transformation within the banking sector, evidenced by a 20% year-on-year increase in digital banking adoption among Croatian consumers in 2024, presents a clear avenue for HPB to expand its reach and customer engagement through innovative digital solutions.

The strategic utilization of EU funds, with Croatia expected to absorb over €10 billion by 2025 for development projects, creates significant opportunities for HPB to finance large-scale infrastructure and business expansion initiatives, further solidifying its market position.

Furthermore, the growing emphasis on ESG principles, with sustainable finance markets expanding globally, allows HPB to tap into a growing pool of environmentally conscious investors and customers by offering green financial products.

HPB's increasing reliance on digital platforms exposes it to sophisticated cybersecurity risks. A data breach could result in substantial financial penalties, with the average cost of a data breach in 2024 reaching $4.73 million globally, according to IBM's Cost of a Data Breach Report. Such an incident would severely damage HPB's reputation and erode customer trust, necessitating ongoing, significant investment in robust security infrastructure and protocols to mitigate these evolving threats.

Intensifying competition within Croatia's banking sector, with around 20 banks active, presents a constant challenge for HPB to maintain its market position and profitability. This crowded market forces banks to compete on price and invest heavily in marketing, potentially squeezing profit margins. HPB must continuously innovate to differentiate its services and retain customers in a landscape where loyalty is not guaranteed.