Addiko Bank Ag ((AT:ADKO)) has held its Q4 earnings call. Read on for the main highlights of the call.
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Addiko Bank’s latest earnings call painted a picture of a bank navigating headwinds with notable resilience. Management highlighted solid net profit, firm loan growth, improving asset quality and very strong capital and liquidity. At the same time, they acknowledged that sweeping regulatory measures and ownership uncertainties are weighing on revenues, dividends and investor perception.
Profitability Holds Up Despite Headwinds
Addiko reported full‑year 2025 net profit of €44 million, with fourth‑quarter earnings of €8.7 million, €1 million higher than a year earlier. Earnings per share reached €2.28 and return on average tangible equity came in at 5.2%, underscoring a still‑modest but positive profitability level in a tougher operating environment.
Consumer and SME Lending Drive Growth
Growth in the core retail and business franchises was a clear bright spot, as consumer new business expanded 20% year on year, lifting the consumer loan book by 10%. SME lending also turned the corner, with new business rising 11% versus the prior year, signaling improving momentum after a period of softer activity.
Focused Loan Book Expands with Solid Yield
The bank’s focused loan book grew 7% year on year and now represents 92% of the total portfolio, supporting a more specialized and higher‑margin business model. The blended yield on this focus book stood at about 6.4%, indicating that Addiko is still able to originate loans at attractive spreads despite a lower‑rate backdrop.
Fees Rise on Cards, Accounts and Insurance
Net fee and commission income rose 7.6% year on year to €73 million, adding an important diversification pillar to earnings. Growth was driven mainly by bancassurance, account and package products and the card business, with card and account fees advancing about 13% compared with last year.
Asset Quality Continues to Improve
Credit quality trends were notably positive, with non‑performing exposure shrinking by roughly €19 million to about €125.5–126 million. The NPE ratio improved from 2.9% to 2.5% and coverage increased to 81.7% from 80%, leaving the bank better cushioned against potential defaults in a still‑uncertain macro environment.
Costs Kept Below Inflation
Operating discipline was another theme, as general administrative expenses rose only 1.6% to €195.4 million, meaning costs grew below inflation. The cost‑income ratio stood at 61.7% and the operating result reached €109.8 million, a modest 2.3% decline year on year, reflecting both cost control and some top‑line pressure.
Capital and Liquidity Remain Very Strong
Addiko’s balance sheet strength remains a key comfort for investors, with a CET1 ratio of 22.4% under Basel IV, up versus the previous year. Deposits totaled €5.3 billion, the loan‑to‑deposit ratio was a conservative 70% and the group liquidity coverage ratio exceeded 300%, giving ample buffers against shocks or funding strains.
Digital Push and New Products Gain Traction
Management stressed ongoing execution in digital banking and product innovation, including fully digital end‑to‑end lending with zero human intervention now live in three core markets. Point‑of‑sale financing grew 14% year on year, while mobile apps were upgraded with Google and Apple Pay and two AI tools are already improving operations and customer experience.
Regulation Squeezes Revenues Across Markets
A major concern was the wave of regulatory interventions, particularly in Croatia and several Balkan markets, that directly hit pricing and fees. Measures such as a 40% debt‑to‑income cap for non‑housing loans, mandated free essential services and rate and fee caps in Serbia, Republika Srpska and Montenegro are set to materially pressure core revenues.
NIM and Net Interest Income Under Pressure
Net interest income fell 1.8% year on year to €238.4 million as rates declined sharply, with four cuts totaling roughly 100 basis points in 2025. The net interest margin ended around 3.7%, and management signaled further pressure ahead, guiding for NIM to remain above 3.6% but clearly below the recent peak levels.
Top Line Hit Quantified from New Rules
The bank estimated that regulatory and legal restrictions will shave about €10.5 million off the full‑year 2026 top line. Management also cautioned that fee generation, particularly in Croatia, will be structurally lower going forward as new rules on pricing and essential services kick in.
Dividend Still Suspended Amid Ownership Issues
Despite solid capital ratios, Addiko again suspended dividend payments for the 2025 financial year due to unresolved issues around the shareholder structure and ongoing supervisory concerns. Management admitted that these ownership uncertainties remain a major distraction, absorbing management time and clouding the equity story.
Low Liquidity Prompts Listing Downgrade
The bank’s share price performed well, rising from €22.5 at the end of 2025 to €27.4 before the call, but trading liquidity has stayed very thin. As a result, Addiko’s shares will be moved from the Prime Market to the Standard Market from 1 April 2026, reflecting the limited free float activity and potentially reducing visibility for some institutional investors.
Legal and Operational Costs Weigh on Results
Additional provisions for legal cases and operational risks also burdened the result, including allocations for legal claims in Slovenia and a small top‑up in Croatia. These items, captured in the “other result” line, contributed to the slight decline in operating profit and highlight the still‑elevated legal and regulatory complexity in the region.
Mixed Performance Across Segments and Markets
The bank reported uneven performance across client segments and geographies, with the micro business under pressure in Croatia, Serbia and Slovenia. In Slovenia, SME results were distorted by one large case, while Addiko’s entry into Romania built brand awareness but conversion from interest to actual business lagged expectations, prompting a rethink of marketing and acquisition tactics.
Higher RWA and Capital Requirements
Risk‑weighted assets increased as Basel IV rules took effect and EBA guidance on structural foreign exchange exposures was implemented. The final SREP decision included a 25‑basis‑point increase in the Pillar 2 requirement to 3.5%, with P2G unchanged at 3%, slightly tightening capital planning but still leaving the bank comfortably above minimums.
Conservative but Steady Guidance to 2027
Looking ahead, management guided for loan book growth above a 6% CAGR through 2027, with NIM staying over 3.6% despite rate and regulatory pressure. Net banking income is expected to be broadly flat in 2026 before returning to growth of more than 5% in 2027, while OpEx should remain below €205 million, cost of risk around 1.3%, the NPE ratio under 3%, capital ratios above 18.8% and ROATE improving from about 4.5% in 2026 toward 6% in 2027, though dividends will stay suspended until ownership issues are resolved.
Addiko’s earnings call ultimately reflected a bank that is operationally sound and well capitalized, yet constrained by external regulatory and shareholder factors. Investors will likely focus on whether management can sustain growth, defend margins and execute on digital and efficiency initiatives while navigating regulatory impacts and clearing the ownership overhang that currently blocks capital returns.