pdf Volksbank Malta Ltd Annual Report 31 December 2013

Transcription

Annual Report
Page
Directors’ Report
3
Directors’ Responsibility for the Financial Statements
7
Separate Financial Statements:
Statement of Financial Position
8
Statement of Changes in Equity
10
Statement of Profit or Loss and Other Comprehensive Income
12
Statement of Cash Flows
13
Notes to the Financial Statements
16
Independent Auditors’ Report
75
Volksbank Malta Limited – Annual Report 2013 - Page 2
Directors’ Report
For the Year Ended 31 December 2013
The directors present their report together with the financial statements of Volksbank Malta
Limited for the year ended 31 December 2013.
Board of directors
Mr. Alfred Mallia-Milanes (Chairman)
Dkfm. Werner Wess (Vice Chairman)
Mr. Herbert Skok (Managing Director)
Mr. Joseph Bugelli (Executive Board Member)
Mr. Hans Janeschitz (Non-Executive Board Member)
Principal activities
Volksbank Malta Limited is a licensed credit institution providing a full range of commercial
banking services to both residents and non-residents.
Review of business development and financial position
In September 2012, the European Commission approved the comprehensive restructuring plan
developed by Österreichische Volksbanken-AG (ÖVAG) in the wake of the financial and economic
crisis to restore the group to long-term profitability. ÖVAG placed Volksbank Malta Limited in the
non-core business division meaning that the operations in Malta are to be discontinued by
December 2017 as stipulated in the restructuring plan. Consequently, in the second half of 2013
Volksbank Malta Limited was offered for sale on a going concern basis. Management expects
that the sale is to be concluded in 2014. Österreichische Volksbanken-AG (ÖVAG) will continue to
support the local operations as long as it remains the ultimate beneficial owner of Volksbank
Malta Limited. The financial statements have therefore been prepared on a going-concern basis.
In order to facilitate the Bank’s sale process, measures were taken in 2013 to reduce the Bank’s
assets. All foreign loans and participations were carved out by end of September 2013.
Net interest income which is the main income contributor to the profit of the Bank stood at EUR
6.085 million (2012: EUR 7.126 million). The Bank registered a loss before tax of EUR 4.158
million for financial year ended 31 December 2013 as opposed to a profit of EUR 2.182 million in
the previous financial year. Furthermore, in December 2013, the Bank de-recognised its deferred
tax assets of EUR 3.37 million. This led to a final tax loss of EUR 2.017 and a loss after tax of
EUR 6.174 million.
The decrease in earnings was attributable to a combination of several factors including higher
provisions on the local loan portfolio due to the downgrading of some of its largest exposures in
the loans and advances to customers, losses incurred from the de-risking activity by disposing of
securities and unwinding of hedging instruments, losses arising from the transfer of the
international business to its parent which also negatively impacted net interest income, low
interest rate environment and a subdued local economy. The loss per share in 2013 was -EUR
2.67 as against earnings of EUR 0.95 registered in 2012. The low market interest rates which
persisted throughout the whole of the financial year 2013 were also a contributing factor. It is to
be noted that the Bank is generally exposed to market risks.
Directors’ Report (continued)
Review of business development and financial position (continued)
The economic environment within which the Bank operated prompted
cautiously managing all areas of expenditure. Nevertheless in 2013,
increased to EUR 1.395 million as opposed to EUR 1.280 million in
growth was partially driven by costs related to the sale process of
Falcon’.
an even closer focus on
administrative expenses
the previous year. The
the bank called ‘Project
Depreciation provision decreased by EUR 0.148 million to EUR 0.184 million and personnel
expenses decreased to EUR 1.153 million (2012: EUR 1.200 million). The management of the
Bank is determined to continue to promote cost efficiency measures in order to contain costs at
desired levels.
The Bank continued to manage its balance sheet in a careful, prudent and conservative manner.
The Bank’s balance sheet registered a contraction of EUR 335.8 million in asset volumes, when
compared to the previous financial year. The drop was recorded in the loans and advances
categories, as all remaining international participations were repaid during the year and also in the
investment portfolio following the de-risking activity. Despite the decrease in the balance sheet,
the Bank continued to maintain a steady level of business with the local community.
The Bank’s recycled EUR 5.062 million in Revaluation Reserves. This was mainly attributable to
the reversal of negative reserve on the available-for-sale investment portfolio. The Bank’s
revaluation reserve as at 31 December 2013 stood at EUR 0.243 million.
The difficult economic conditions of the recent years had an indirect effect on the credit quality of
the Bank’s local portfolio of loans and advances. This prompted management to adopt prudent
and cautious measures, which led to a total specific provision of EUR 6.967 million, an increase
of EUR 5.04 million over the previous financial year (2012: EUR 1.924 million). Collective
impairment decreased to EUR 1.251 million from EUR 2.059 million in 2012 due to the reversal of
the collective provision for facilities which are now being specifically provided for. Furthermore
interest in suspense increased by EUR 0.810 million to EUR 1.675 million in the year ended
December 2013.
Notwithstanding the increase in provisions, the Capital Adequacy Ratio (CAR) of the Bank
increased to 114.5% as a result of the carve out and de-risking measures. This is 14.3 times the
regulatory requirement. In this regards, we confirm that the Bank’s request to reduce capital
from EUR 167.8 million to EUR 55 million was approved by the regulator and the reduction in
capital was made in January 2014 after the lapse of the mandatory three months from the
publishing in the media of the Bank’s intention of the reduction. Consequently the CAR reduced
to 42% which is still well above the minimum requirement of 8%.
Customer Orientation
Volksbank’s local business strategy is focused on building a strong bank-customer relationship for
the long-term. The personalised service and tailor-made solutions offered to our clients have
become a hallmark of the Bank’s dealings with its customers. Some restrictions on lending
imposed due to the sales process impacted negatively the Bank’s ability to attract new lending
business but did not have any negative effect on the existing portfolio.
The Bank operates from its prime location in Sliema, Malta and from an agency in Victoria, Gozo.
Corporate Governance
There were no changes in the directors during the financial year ended 31 December 2013.
Human Resources
During the financial year, the Bank was served with various staff resignations. These were
generally attributable to the forthcoming sale. The Bank took the necessary steps to replace key
staff and ensure business continuity. The Bank managed to go through this difficult period thanks
to the dedication of the staff members that are still willing to support the Bank in these difficult
circumstances. All staff benefit schemes were retained and wherever possible improved. Teambuilding events are generally well patronised by our employees.
Volksbank in the Community
During the year under review Volksbank continued to support the local community through
various initiatives to assist philanthropic and heritage causes.
Future developments
In view of the on-going restructuring and new strategy of Österreichische Volksbanken-AG, being
the Bank’s ultimate shareholder, the Bank has been classified under the “Non-core Business”
division within the Group. It is therefore imperative that the Bank is sold or wound down in the
medium-term and steps have been taken to ensure that this process is completed in an orderly
way that preserves value. In the second part of 2013, Volksbank Malta Limited was officially
placed for sale. A fact and information book was prepared and collected by potential investors,
several of whom continued with the due diligence process having access to the data room and
holding high level meetings. During this process the Bank took all reasonable measures not to
divulge any confidential information.
The process is moving swiftly and the Bank expects to close the sale in 2014. In the event that
the sale is not concluded the shareholder may decide to make a second attempt after the lapse
of some time. Österreichische Volksbanken-AG is committed to support Volksbank Malta Limited
in all its requirements as long as it remains its ultimate beneficial owner.
In the short term the main strategy of the Bank remains to maintain local business levels in a
prudent and conservative approach
Dividends and Reserves
At the Bank’s general meeting, the Board of Directors did not propose the payment of dividend
for financial year ended 31 December 2013.
After transferring €0.369 million to a Reserve for General Banking Risks in accordance with the
requirements of BR09, the directors propose that the balance in retained earnings amounting to
€8.422 million be carried forward to the next financial period.
Approved by the Board of Directors on 3 April 2014 and signed on its behalf by:
Mr. Alfred Mallia-Milanes
Chairman
Mr. Herbert Skok
Managing Director
Mr. Joseph Bugelli
Director
Registered Office
53, Dingli Street
Sliema, SLM 1902
Malta
Top Row: Left to right: Alfred Mallia-Milanes, Herbert Skok, Werner Wess,
Bottom Row: Left to right: Joseph Bugelli, Hans Janeschitz
Directors’ Resposibilities
For the Year Financial Statements
The Companies Act, 1995 (Chapter 386, Laws of Malta) (the “Act”) requires the directors of
Volksbank Malta Limited (the “Bank”) to prepare financial statements for each financial period
which give a true and fair view of the financial position of the Bank as at the end of the financial
period and of the profit or loss of the Bank for that period in accordance with the requirements of
International Financial Reporting Standards as adopted by the EU.
The Directors are responsible for keeping proper accounting records which disclose with
reasonable accuracy, at any time, the financial position of the Bank and to enable them to ensure
that the financial statements have been properly prepared in accordance with the provisions of
the Companies Act, 1995 (Chapter 386, Laws of Malta) and the Banking Act, 1994 (Chapter 371,
Laws of Malta).
The Directors are also responsible for safeguarding the assets of the Bank and hence for taking
reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors, through oversight of management, are responsible to ensure that the Bank
establishes and maintains internal control to provide reasonable assurance with regard to
reliability of financial reporting, effectiveness and efficiency of operations and compliance with
applicable laws and regulations.
Management is responsible, with oversight from the Directors, to establish a control
environment and maintain policies and procedures to assist in achieving the objective of
ensuring, as far as possible, the orderly and efficient conduct of the Bank’s business. This
responsibility includes establishing and maintaining controls pertaining to the Bank’s objective of
preparing financial statements as required by the Act and managing risks that may give rise to
material misstatements in those financial statements. In determining which controls to
implement to prevent and detect fraud, management considers the risks that the financial
statements may be materially misstated as a result of fraud.
Signed on behalf of the Board of Directors by:
Chairman
Mr. Herbert Skok
Managing Director
Mr. Joseph Bugelli
Director
Statements of Financial Position
As at 31 December 2013
ASSETS
Balances with Central Bank of Malta, Treasury bills
and cash
Derivative assets held for risk management
Loans and advances to banks
Loans and advances to customers
Investment securities
Investment in subsidiaries
Current tax assets
Property and equipment
Intangible assets
Deferred tax assets
Prepayments and accrued income
Other assets
2013
2012
Note
EUR 000
EUR 000
16
17
18
19
20
21
5,510
1,452
70,957
104,144
18,327
153
360
21
1,576
5
-------------202,505
======
333
2,359
100,208
378,633
53,037
70
414
41
1,151
2,072
5
-------------538,323
======
3,352
10,551
10,571
870
178
58
-------------25,580
======
7,338
332,766
18,557
356
978
233
58
-------------360,286
======
167,821
70
8,422
369
243
-------------176,925
-------------202,505
======
167,821
70
14,965
(4,819)
-------------178,037
-------------538,323
======
22
23
24
25
Total assets
LIABILITIES AND EQUITY
LIABILITIES
Derivative liabilities held for risk management
Amounts owed to banks
Amounts owed to customers
Current tax payable
Accruals and deferred income
Other liabilities
Provisions
17
26
27
28
29
30
Total liabilities
EQUITY
Called up issued share capital
Capital contributions
Retained earnings
Reserve for general banking risks
Revaluation reserve
Total equity
Total liabilities and equity
31
31
31
31
The notes on pages 16 to 74 are an integral part of these financial statements.
Statements of Financial Position (Continued)
As at 31 December 2013
Note
2013
2012
EUR 000
EUR 000
Memorandum items
Contingent liabilities
36
23
=====
5,635
=====
Financial commitments
37
7,268
=====
11,246
=====
The financial statements on pages 8 to 74 were approved and authorised for issue by the Board
of Directors on 3 April 2014 and signed on its behalf by:
Chairman
Mr. Herbert Skok
Managing Director
Mr. Joseph Bugelli
Director
Statement of Changes in Equity
For the year Ended 31 December 2013
Retained
earnings
Share capital
At 1 January 2012
Total comprehensive
income for the year
Profit for the year
Items that are or may
be reclassified to
profit or loss
Other comprehensive
income, net of tax:
- Change in fair value
- Net amount
transferred to profit or
loss
Items that will not
be reclassified to
profit or loss
Total other
comprehensive
income
Total comprehensive
income for the year
At 31 December 2012
Revaluation
reserve
Capital
contributions
Total
EUR 000
EUR 000
EUR 000
EUR 000
EUR 000
167,821
--------------
12,783
--------------
(7,416)
----------
70
----------
173,258
-----------
--------------
2,182
--------------
----------
----------
2,182
-----------
-
-
3,055
-
3,055
-
-
(458)
-
(458)
-------------
-------------
-----------
-----------
------------
-------------
-------------
2,597
------------
------------
2,597
-------------
------------167,821
2,182
------------14,965
2,597
-----------(4,819)
-----------70
4,779
------------178,037
======
======
=====
=====
======
Statement of Changes in Equity (Continued)
For the year Ended 31 December 2013
Share
capital
At 1 January 2013
Total comprehensive
income for the year
Loss for the year
Items that are or may
be reclassified to profit
or loss
Other comprehensive
income, net of tax:
- Net amount
transferred to profit or
loss
Items that will not be
reclassified to profit
or loss
Total other
comprehensive
income
Total comprehensive
income for the year
Transfer to Reserve
for general banking
risks
At 31 December 2013
Retained
earnings
Reserve
for
General
Banking
Risks
Revaluation
reserve
Capital
contributions
Total
EUR 000
EUR 000
EUR 000
EUR 000
EUR 000
EUR 000
167,821
--------------
14,965
--------------
----------
(4,819)
----------
70
----------
178,037
-----------
--------------
(6,174)
--------------
----------
----------
----------
(6.174)
-----------
-
-
-
4,115
-
4,115
-
-
-
947
-
947
-------------
-------------
-----------
-----------
-----------
------------
-------------
-------------
-----------
5,062
------------
------------
5,062
-------------
-------------
(6,174)
-------------
-----------
5,062
------------
------------
(1,112)
-------------
------------167,821
(369)
------------8,422
369
----------369
-----------243
-----------70
------------176,925
======
======
======
======
======
======
Statement of Profit and Loss and Other Comprehensive
Income For the year ended 31 December 2013
Note
Interest income
Interest expense
2013
2012
EUR 000
EUR 000
14,283
(7,157)
-----------7,126
-----------145
(20)
-----------125
-----------(37)
Net fee and commission income
8
Net trading expense
Net loss from financial instruments
carried at fair value
Net gain on transfer of syndicated loans
9
8,752
(2,667)
-------------6,085
-------------120
(20)
-------------100
-------------(46)
10
(3,119)
(1,103)
331
34
-------------(2,800)
-------------3,385
689
6
-----------(445)
-----------6,806
(4,654)
(1,153)
(156)
(185)
(1,395)
-------------(4,158)
(2,016)
-------------(6,174)
--------------
(1,776)
(152)
(332)
(1,280)
-----------2,066
116
-----------2,182
------------
3,148
1,458
456
--------------
3,652
(705)
(350)
------------
5,062
-------------(1,112)
======
(2.67)
======
2,597
-----------4,779
=====
0.95
=====
Net interest income
7
Fee and commission income
Fee and commission expense
Dividend income
Other operating income
11
Results from operating activities
Net impairment loss
Personnel expenses
Operating lease expenses
Depreciation and amortisation
Other administrative expenses
12
13
22/23
14
(Loss)/Profit before tax
Tax (expense)/income
15
Profit for the year
Other comprehensive income
Items that are or may be reclassified to profit or loss
Change in fair value:
- Net amount transferred to profit or loss
- Taxes on other comprehensive income
Other comprehensive income for the year,
net of tax
Total comprehensive income for the year
Earnings per share
32
Statement of Cash Flows
For the year ended 31 December 2013
Cash flows from operating activities
Interest and commission receipts
Interest and commission payments
Dividend income
Net outflows from foreign exchange
activities
Payments to employees and suppliers
Operating profit before changes in
operating assets/liabilities
(Increase)/decrease in operating assets:
- Reserve deposit with Central Bank of Malta
- Loans and advances to banks
- Loans and advances to customers
- Other receivables
Increase/(decrease) in operating liabilities:
- Amounts owed to banks
- Amounts owed to customers
- Other payables
Cash generated from/(absorbed by) operating
activities
Tax paid
Net cash from/(used in) operating activities
c/fwd
2013
2012
EUR 000
EUR 000
9,919
(3,287)
-
14,918
(6,588)
689
(22)
(2,704)
------------
(37)
(2,679)
------------
3,906
6,303
(112)
12,026
270,595
-
300
(11,103)
34,551
5
(6,647)
(7,986)
(58)
--------------271,725
(100,269)
2,247
(325)
--------------(68,291)
(917)
--------------
(997)
--------------
270,808
---------------
(69,288)
---------------
Statement of Cash Flows (Continued)
Net cash from/(used in) operating activities
2013
2012
Note
EUR 000
EUR 000
c/fwd
270,808
---------------
(69,288)
--------------
70
34,273
(4,983)
(1,617)
1,000
42,066
(1,676)
(223)
--------------27,642
---------------
--------------41,167
---------------
----------------------------298,450
======
----------------------------(28,121)
======
(141)
(40)
298,591
--------------298,450
(28,081)
--------------(28,121)
(239,607)
--------------58,843
======
(211,486)
--------------(239,607)
======
Cash flows from investing activities
Capital contribution provided to subsidiary
Proceeds from winding down of subsidiary
Net inflows from available-for-sale instruments
Net outflows from treasury bills
Net outflows from derivative instruments
Payments to acquire property and equipment,
and intangible assets
Net cash from investing activities
Cash flows from financing activities
Dividends paid
Capital contribution received from parent
Net cash used in financing activities
(Decrease)/increase in cash and cash equivalents
Analysed as follows:
Effect of exchange rate changes on cash
and cash equivalents
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
33
Page
Page
1
Reporting entity
16
20 Investment securities
62
2
Basis of preparation
16
21 Investment in subsidiaries
64
3
Significant accounting policies
18
22 Property and equipment
65
4
Financial risk management
30
23 Intangible assets
66
5
Use of estimates and judgments
52
24 Deferred tax assets and liabilities
67
6
Fair value disclosures
53
25 Prepayments and accrued income
68
7
Net interest income
56
26 Amounts owed to banks
68
8
56
27 Amounts owed to customers
69
9
Net trading income
57
28 Accruals and deferred income
69
29 Other liabilities
69
30 Provisions
70
31 Capital and reserves
70
32 Earnings per share
71
33 Cash and cash equivalents
71
34 Operating leases
72
35 Capital commitments
72
36 Contingent liabilities
72
37 Financial Commitments
73
38 Related parties
73
10 Net (expense)/income from financial
instruments carried at fair value
57
11 Dividend income
57
12 Net impairment loss
57
13 Personnel expenses
58
14 Other administrative expenses
58
15 Tax (expense)/income
59
16 Balances with Central Bank of
Malta, Treasury Bills and cash
59
17 Derivatives held for risk
management
60
18 Loans and advances to banks
61
19 Loans and advances to customers
61
39 Events subsequent to the date
of the statement of financial position 74
1
Reporting entity
Volksbank Malta Limited (the “Bank”) is a limited liability company domiciled and incorporated
in Malta.
These financial statements present only the Bank’s separate financial statements since the only
remaining subsidiary as at 31 December 2012 has been disposed of during 2013. The disposed
subsidiary is also deemed to be immaterial in relation to the operations of the Bank.
2
Basis of preparation
2.1
Statement of compliance
The financial statements have been prepared and presented in accordance with International
Financial Reporting Standards as adopted by the EU (“the applicable framework”). All
references in these financial statements to IAS, IFRS or SIC / IFRIC interpretations refer to
those adopted by the EU. The financial statements have also been drawn up in accordance
with the provisions of the Banking Act, 1994 (Chapter 371, Laws of Malta) and the Companies
Act, 1995 (Chapter 386, Laws of Malta).
2.2
Basis of measurement
The financial statements have been prepared on the historical cost basis except for the
following material items in the statement of financial position:
•
•
2.2.1
derivative financial instruments, measured at fair value; and
available-for-sale financial assets which are measured at fair value.
Going concern
In view of the ongoing restructuring and new strategy of ÖVAG, being the Bank’s ultimate
shareholder, the Bank is now part of the “Non-Core Business” division within the Group. As a
result, the Bank is in the process of being sold as a going concern.
As a result of the carve-out process described above, the Bank has disposed of its nondomestic exposures (with the exception of some balances and instruments with its parent),
partially contributing to the loss generated during the year. New exposures are restricted to
domestic business.
In addition, post year end, the Bank reduced its share capital from EUR 167.821 million to EUR
55.009 million.
The financial statements have been prepared on a going concern basis, which assumes that the
Bank will be able to continue its operations through a new shareholder(s). For the upcoming
twelve month period, the Bank has secured a funding line from its parent company that is
deemed able to cover the funding requirements of Bank over the next twelve month period.
Management is confident that the sale process will be concluded prior to the elapse of the
upcoming twelve month period.
Management acknowledges that uncertainty remains over the Bank’s takeover by anew
shareholder(s). However, as described above, management believes that the provided funding
line is able to support the Bank in its operational existence over the coming two years. In the
event that the Bank is not sold by December 2017, there would be a material uncertainty as to
whether the Bank is able to continue as a going concern. This could have an impact on the
Group’s ability to realise assets at their recognised values, in particular loans and advances to
customers and to extinguish liabilities in the normal course of business at the amounts stated in
the financial statements.
2
Basis of preparation (continued)
2.3
Functional and presentation currency
These financial statements are presented in euro (EUR), which is the Bank’s functional
currency. Except as otherwise indicated, financial information presented in euro has been
rounded to the nearest thousand.
2.4
Use of estimates and judgements
The preparation of the financial statements in conformity with IFRSs requires management to
make judgements, estimates and assumptions that affect the application of accounting policies
and the reported amounts of assets, liabilities, income and expenses. Actual results may differ
from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to
accounting estimates are recognised in the period in which the estimates are revised and in any
future periods affected.
Information about significant areas of estimation uncertainty and critical judgements in applying
accounting policies that have the most significant effect on the amounts recognised in the
financial statements are described in notes 4 and 5.
2.5
Changes in accounting policies
2.5.1
Fair value measurement
In accordance with IFRS 13, the Bank has applied the new definition of fair value, as set out in
Note 3.9.6. The change had no impact on the measurements of the Bank’s assets and liabilities,
but the Bank has included new disclosures in the financial statements, which are required
under IFRS 13 as adopted by the EU. These new disclosure requirements are not included in
the comparative information. However, to the extent that disclosures were required by other
standards before the effective date of IFRS 13 as adopted by the EU, the Bank has provided the
relevant disclosures under those standards.
2.5.2
Offsetting financial assets and financial liabilities
As a result of the amendments to IFRS 7, the Bank has expanded its disclosures about
offsetting financial assets and financial liabilities (see Note 4.2)
2.5.3
Presentation of items in OCI
As a result of the amendment to IAS 1, the Bank has modified the presentation of items of OCI
in its statement of profit or loss and OCI, to present items that would be reclassified to profit or
loss in the future separately from those that would never be. Comparative information has been
re-presented on the same basis.
3
Significant accounting policies
The accounting policies set out below have been applied consistently to all periods presented in
these financial statements.
3.1
Foreign currency transactions
Transactions in foreign currencies are translated into the Bank’s functional currency at the spot
exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in
foreign currencies at the reporting date are retranslated to the functional currency at the spot
exchange rate at that date. The foreign currency gain or loss on monetary items is the
difference between amortised cost in the functional currency at the beginning of the year,
adjusted for effective interest and payments during the period, and the amortised cost in
foreign currency translated at the spot exchange rate at the end of the year. Non-monetary
assets and liabilities that are measured at fair value in a foreign currency are translated to the
functional currency at the spot exchange rate at the date that the fair value was determined.
Non-monetary items that are measured based on historical cost in a foreign currency are
translated using the spot exchange rate at the date of transaction. Foreign currency differences
arising on retranslation are generally recognised in profit or loss. However, foreign currency
differences arising from the retranslation of available-for-sale equity instruments are recognised
in other comprehensive income.
3.2
Interest
Interest income and interest expense are recognised in profit or loss using the effective interest
method. The effective interest rate is the rate that exactly discounts the estimated future cash
payments and receipts through the expected life of the financial asset or liability (or, where
appropriate, a shorter period) to the carrying amount of the financial asset or liability. When
calculating the effective interest rate, the Bank estimates future cash flows considering all
contractual terms of the financial instrument, but not future credit losses.
The calculation of the effective interest rate includes all transaction costs and fees and points
paid or received that are an integral part of the effective interest rate. Transaction costs include
incremental costs that are directly attributable to the acquisition or issue of a financial asset or
liability.
Interest income and expense presented in the statement of comprehensive income include:
•
•
•
•
interest on financial assets and financial liabilities measures at amortised cost calculated
on an effective interest basis;
interest on available-for-sale investment securities calculated on an effective interest
basis;
the effective portion of fair value changes in qualifying hedge derivatives designated as
fair value hedges of interest rate risk; and
Interest on derivative financial instruments.
Fair value changes on non-qualifying derivatives held for risk management purposes, are
presented in net income from other financial instruments carried at fair value in the profit or loss
(see note 3.5).
3
Significant accounting policies (continued)
3.3
Fees and commission
Fees and commission income and expense that are integral to the effective interest rate on a
financial asset or liability are included in the measurement of the effective interest rate.
Other fees and commission income, including account servicing fees, guarantee fees,
placement fees and syndication fees, are recognised as the related services are performed.
When a loan commitment is not expected to result in the draw-down of a loan, the related loan
commitment fees are recognised on a straight-line basis over the commitment period.
Other fees and commission expense relate mainly to transaction and service fees, which are
expensed as the services are received.
3.4
Net trading income
Net trading income comprises all realised and unrealised foreign exchange differences, except
in specific circumstances (see note 3.1).
3.5
Net income from other financial instruments carried at fair value
Net income from other financial instruments carried at fair value relates to realised, gains and
losses on derivative instruments, unrealised gains and losses on non-trading derivatives held for
risk management purposes that do not form part of qualifying hedge relationships and realised
gains and losses on available-for-sale investments.
3.6
Dividends
Dividend income is recognised when the right to receive income is established. Usually this is
the ex-dividend date for equity securities.
3.7
Lease payments
Payments made under operating leases are recognised in profit or loss on a straight-line basis
over the term of the lease.
3.8
Tax expense
Tax expense comprises current and deferred tax. Current and deferred tax are recognised in
profit or loss except to the extent that they relate to items recognised directly in equity or in
other comprehensive income
Current tax is the expected tax payable on the taxable income for the year, using tax rates
enacted or substantively enacted at the reporting date, and any adjustment to tax payable in
respect of previous years.
Deferred tax is recognised in respect of temporary differences between the carrying amounts
of assets and liabilities for financial reporting purposes and the amounts used for taxation
purposes.
Deferred tax is measured at the tax rates that are expected to be applied to temporary
differences when they reverse, using tax rates enacted or substantively enacted at the
reporting date.
3
3.8.1
Tax expense (continued)
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset
current tax liabilities against current tax assets, and they relate to income taxes levied by the
same tax authority on the same taxable entity, or on different tax entities, but they intend to
settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be
realised simultaneously.
Additional income taxes that arise from the distribution of dividends by the Bank are recognised
at the same time as the liability to pay the related dividend is recognised.
A deferred tax asset is recognised for deductible temporary differences to the extent that it is
probable that future taxable profits will be available against which the asset can be utilised.
Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is
no longer probable that the related tax benefit will be realised.
3.9
Financial assets and financial liabilities
3.9.1
Recognition
The Bank initially recognises loans and advances, deposits, and subordinated liabilities on the
date that they are originated. Regular way purchases and sales of financial assets are
recognised on the trade date, which is the date that the Bank commits to purchase or sell the
asset. All other financial assets and liabilities are initially recognised on the trade date, which is
the date that the Bank becomes a party to the contractual provisions of the instrument.
A financial asset or financial liability is measured initially at fair value and, for an item not at fair
value through profit or loss, adjusted by transaction costs that are directly attributable to its
acquisition or issue.
3.9.2
Classification
3.9.2.1 Financial assets
The Bank classifies its financial assets in one of the following categories:
•
•
•
fair value through profit or loss;
loans and receivables; or
available-for-sale.
See accounting policies 3.10, 3.11, 3.12 and 3.13.
3.9.2.2 Financial liabilities
The Bank classifies its financial liabilities, other than financial guarantees and loan
commitments, in one of the following categories:
•
•
fair value through profit or loss; or
other financial liabilities.
See accounting policies 3.11, 3.19 and 3.21.
3
3.9
Financial assets and financial liabilities (continued)
3.9.3
Derecognition
3.9.3.1 Financial assets
The Bank derecognises a financial asset when the contractual rights to the cash flows from the
financial asset expire, or when it transfers the rights to receive the contractual cash flows in a
transaction in which substantially all the risks and rewards of ownership of the financial asset
are transferred or in which the Bank neither transfers nor retains substantially all risks and
rewards of ownership and it does not retain control of the financial asset. Any interest in such
transferred financial assets that qualify for derecognition that is created or retained by the Bank
is recognised as a separate asset or liability in the statement of financial position.
On derecognition of a financial asset, the difference between the carrying amount of the asset
(or the carrying amount allocated to the portion of the asset transferred), and the sum of (i) the
consideration received (including any new asset obtained less any new liability assumed) and (ii)
any cumulative gain or loss that had been recognised in other comprehensive income, is
recognised in profit or loss.
The Bank enters into transactions whereby it transfers assets recognised on its statement of
financial position, but retains either all or substantially all of the risks and rewards of the
transferred assets or a portion of them. If all or substantially all risks and rewards are retained,
then the transferred assets are not derecognised. Transfers of assets with retention of all or
substantially all risks and rewards include, for example, securities lending and repurchase
transactions.
In transactions in which the Bank neither retains nor transfers substantially all the risks and
rewards of ownership of a financial asset and it retains control over the asset, the Bank
continues to recognise the asset to the extent of its continuing involvement, determined by the
extent to which it is exposed to changes in the value of the transferred asset.
In certain transactions the Bank retains the obligation to service the transferred financial asset
for a fee. The transferred asset is derecognised if it meets the recognition criteria. An asset or
liability is recognised for the servicing contract, depending on whether the servicing fee is more
than adequate (asset) or is less than adequate (liability) for performing the servicing.
3.9.3.2 Financial liabilities
The Bank derecognises a financial liability when its contractual obligations are discharged,
cancelled or expire.
3.9.4
Offsetting
Financial assets and liabilities are offset and the net amount presented in the statement of
financial position when, and only when, the Bank has a legal right to set off the amounts and
intends either to settle on a net basis or to realise the asset and settle the liability
simultaneously.
Income and expenses are presented on a net basis only when permitted under IFRS, or for
gains and losses arising from a group of similar transactions such as in the Bank’s trading
activity.
3
3.9
Financial assets and liabilities (continued)
3.9.5
Amortised cost measurement
The amortised cost of a financial asset or liability is the amount at which the financial asset or
liability is measured at initial recognition, minus principal repayments, plus or minus the
cumulative amortisation using the effective interest method of any difference between the
initial amount recognised and the maturity amount, minus any reduction for impairment.
3.9.6
Fair value measurement
3.9.6.1 Policy applicable from 1 January 2013
Fair value is the price that would be received to sell an asset or transfer a liability in an orderly
transaction between market participants at the measurement date in the principal or, in its absence, the
most advantageous market to which the Bank has access at that date. The fair value of a liability
reflects its non-performance risk.
When available, the Bank measures the fair value of an instrument using quoted price in an active
market for that instrument. A market is regarded as active if the transaction for the asset or liability
takes place with sufficient frequency and volume to provide pricing information on an ongoing basis.
If there is no quoted price in an active market, then the Bank uses valuation techniques that maximise
the use of relevant observable inputs and minimise the use of unobservable inputs. The chosen
valuation technique incorporates all of the factors that market participants would take into account in
pricing a transaction.
The best evidence of the fair value of a financial instrument at initial recognition is normally the
transaction price - i.e. the fair value of the consideration given or received. If the Bank determines that
the fair value at initial recognition differs from the transaction price and the fair value is evidenced
neither by the quoted price in an active market for an identical asset or liability nor based on a valuation
technique that uses only data from observable markets, then the financial instrument is measured
initially at fair value, adjusted to defer the difference between the fair value at initial recognition and the
transaction price. Subsequently, that difference is recognised in the profit and loss on an appropriate
basis over the life of the instrument but no later than when the valuation is wholly supported by
observable market data or the transaction is closed out.
If an asset or a liability measured at fair value has a bid and an ask price, then the Bank measures assets
and long positions at a bid price and liabilities and short positions at an ask price.
The fair value of a demand deposit is not less than the amount payable on demand, discounted from the
first date on which the amount payable is required to be paid.
The Bank recognises transfers between levels of the fair value hierarchy as of the end of the reporting
period during which the change has occurred.
3
3.9
3.9.6
Fair value measurement (continued)
3.9.6.2 Policy applicable before 1 January 2013
Fair value is the amount for which an asset could be exchanged, or a liability settled, between
knowledgeable, willing parties in an arm’s length transaction on the measurement date.
When available, the Bank measures the fair value of an instrument using quoted prices in an
active market for that instrument. A market is regarded as active if quoted prices are readily
and regularly available and represent actual and regularly occurring market transactions on an
arm’s length basis.
If a market for a financial instrument is not active, the Bank establishes fair value using a
valuation technique. Valuation techniques include using recent arm’s length transactions
between knowledgeable, willing parties (if available), reference to the current fair value of other
instruments that are substantially the same, discounted cash flow analyses and option pricing
models. The chosen valuation technique makes maximum use of inputs, relies as little as
possible on estimates specific to the Bank, incorporates all factors that market participants
would consider in setting a price, and is consistent with accepted economic methodologies for
pricing financial instruments.
Inputs to valuation techniques reasonably represent market expectations and measures of the
risk-return factors inherent in the financial instrument. The Bank calibrates valuation techniques
and tests them for validity using prices from observable current market transactions in the same
instrument or based on other available observable market data.
Assets and long positions are measured at a bid price; liabilities and short positions are
measured at an asking price. Where the Bank has positions with offsetting risk, mid-market
prices are used to measure the offsetting risk positions and a bid or asking price adjustment is
applied only to the net position as appropriate. Fair values reflect the credit risk of the
instrument and include adjustments to take account of the credit risk of the Bank and the
counterparty where appropriate.
Fair value estimates obtained from models are adjusted for any other factors, such as liquidity
risk or model uncertainties, to the extent that the Bank believes a third-party market participant
would take them into account in pricing a transaction.
The best evidence of the fair value of a financial instrument at initial recognition is the
transaction price, i.e., the fair value of the consideration given or received, unless the fair value
of that instrument is evidenced by comparison with other observable current market
transactions in the same instrument (i.e. without modification or repackaging) or based on a
valuation technique whose variables include only data from observable markets. When
transaction price provides the best evidence of fair value at initial recognition, the financial
instrument is initially measured at the transaction price and any difference between this price
and the value initially obtained from a valuation model is subsequently recognised in profit or
loss on an appropriate basis over the life of the instrument but not later than when the valuation
is supported wholly by observable market data or the transaction is closed out.
3
3.9
3.9.7
Identification and measurement of impairment
At each reporting date the Bank assesses whether there is objective evidence that financial
assets not carried at fair value through profit or loss are impaired. Financial assets are impaired
when objective evidence demonstrates that a loss event has occurred after the initial
recognition of the asset, and that the loss event has an impact on the future cash flows of the
asset that can be estimated reliably.
Objective evidence that financial assets (including equity securities) are impaired can include
significant financial difficulty of the borrower or issuer, default or delinquency by a borrower,
restructuring of a loan or advance by the Bank on terms that the Bank would not otherwise
consider, indications that a borrower or issuer will enter bankruptcy, the disappearance of an
active market for a security, or other observable data relating to a group of assets such as
adverse changes in the payment status of borrowers or issuers in the group, or economic
conditions that correlate with defaults in the group.
In addition, for an investment in an equity security, a significant or prolonged decline in its fair
value below its cost is objective evidence of impairment.
The Bank considers evidence of impairment for loans and advances at both a specific and a
collective level. All individually significant loans and advances are assessed for specific
impairment. Those found not to be specifically impaired are then collectively assessed for any
impairment that has been incurred but not yet identified. Loans and advances that are not
individually significant are collectively assessed for impairment by grouping together loans and
advances with similar risk characteristics.
In assessing collective impairment the Bank uses historical trends of the probability of default,
the timing of recoveries and the amount of loss incurred, adjusted for management’s
judgement as to whether current economic and credit conditions are such that the actual losses
are likely to be greater or less than suggested by historical trends. Default rates, loss rates and
the expected timing of future recoveries are regularly benchmarked against actual outcomes to
ensure that they remain appropriate.
Impairment losses on assets measured at amortised cost are calculated as the difference
between the carrying amount of the financial assets and the present value of estimated future
cash flows discounted at the assets’ original effective interest rate. Impairment losses are
recognised in profit or loss and reflected in an allowance account against loans and advances.
Interest on impaired assets continues to be recognised through the unwinding of the discount.
When an event occurring after the impairment was recognised causes the amount of
impairment loss to decrease, the decrease in impairment loss is reversed through profit or loss.
Impairment losses on available-for-sale investment securities are recognised by reclassifying
the losses accumulated in the fair value reserve (revaluation reserve) in equity to profit or loss.
The cumulative loss that is reclassified from equity to profit or loss is the difference between
the acquisition costs, net of any principal repayment and amortisation, and the current fair value,
less any impairment loss previously recognised in profit or loss. Changes in impairment
provisions attributable to the application of the effective interest method are reflected as a
component of interest income.
3
3.9
3.9.7
Identification and measurement of impairment (continued)
If, in a subsequent period, the fair value of an impaired available-for-sale debt security increases
and the increase can be objectively related to an event occurring after the impairment loss was
recognised in profit or loss, then the impairment loss is reversed, with the amount of the
reversal recognised in profit or loss. However, any subsequent recovery in the fair value of an
impaired available-for-sale equity security is recognised directly in other comprehensive income.
The Bank writes off certain loans and advances and investment securities when they are
determined to be uncollectible.
3.10
Cash and cash equivalents
Cash and cash equivalents include notes and coins on hand, unrestricted balances held with the
Central Bank of Malta and highly liquid financial assets with original maturities of three months
or less from the acquisition date that are subject to insignificant risk of changes in their fair
value, and are used by the Bank in the management of its short-term commitments.
Cash and cash equivalents are carried at amortised cost in the statement of financial position.
3.11
Derivatives held for risk management purposes and hedge accounting
Derivatives held for risk management purposes include all derivative assets and liabilities that
are not classified as trading assets or liabilities. Derivatives held for risk management purposes
are measured at fair value in the statement of financial position.
The Bank designates certain derivatives held for risk management as hedging instruments in
qualifying hedging relationships. On initial designation of the hedge, the Bank formally
documents the relationship between the hedging instrument(s) and hedged item(s), including
the risk management objective and strategy in undertaking the hedge, together with the
method that will be used to assess the effectiveness of the hedging relationship. The Bank
makes an assessment, both at the inception of the hedge relationship as well as on an ongoing
basis, as to whether the hedging instrument(s) is (are) expected to be ‘highly effective’ in
offsetting the changes in the fair value or cash flows of the respective hedged item(s) during
the period for which the hedge is designated, and whether the actual results of each hedge are
within a range of 80-125 percent.
3.11.1 Fair value hedges
When a derivative is designated as a hedging instrument in a hedge of the change in fair value
of a recognised asset or liability or a firm commitment that could affect profit or loss, changes in
the fair value of the derivative are recognised immediately in profit or loss together with
changes in the fair value of the hedged item that are attributable to the hedged risk.
If the hedging derivative expires or is sold, terminated, or exercised, or the hedge no longer
meets the criteria for fair value hedge accounting, or the hedge designation is revoked, then
hedge accounting is discontinued prospectively. Any adjustment up to that point to a hedged
item, for which the effective interest method is used, is amortised to profit or loss as part of the
recalculated effective interest rate of the item over its remaining life.
3
3.11
Derivatives held for risk management purposes and hedge accounting (continued)
3.11.2 Cash flow hedges
When a derivative is designated as the hedging instrument in a hedge of the variability in cash
flows attributable to a particular risk associated with a recognised asset or liability or a highly
probable forecast transaction that could affect profit or loss, the effective portion of changes in
the fair value of the derivative is recognised in other comprehensive income and presented in
the hedging reserve in equity. The amount recognised in other comprehensive income is
reclassified to profit or loss as a reclassification adjustment in the same period as the hedged
cash flows affect profit or loss, and in the same line item in the statement of comprehensive
income. Any ineffective portion of changes in the fair value of the derivative is recognised
immediately in profit or loss.
If the hedging derivative expires or is sold, terminated, exercised, or the hedge no longer meets
the criteria for cash flows hedge accounting, or the hedge designation is revoked, then hedge
accounting is discontinued prospectively. In a discontinued hedge of a forecast transaction the
cumulative amount recognised in other comprehensive income for the period when the hedge
was effective is reclassified from equity to profit or loss as a reclassification adjustment when
the forecast transactions occurs and affects profit or loss. If the forecast transaction is no
longer expected to occur, then the balance in other comprehensive income is reclassified
immediately to profit or loss as a reclassification adjustment.
3.11.3 Other non-trading derivatives
When a derivative is not held for trading, and is not designated in a qualifying hedge
relationship, all changes in its fair value are recognised immediately in profit or loss as a
component of net income from other financial instruments at fair value through profit or loss.
3.12
Loans and advances
Loans and advances are non-derivative financial assets with fixed or determinable payments
that are not quoted in an active market and that the Bank does not intend to sell immediately or
in the near term.
Loans and advances are initially measured at fair value plus incremental direct transaction costs,
and subsequently measured at their amortised cost using the effective interest method.
When the Bank purchases a financial asset and simultaneously enters into an agreement to
resell the asset (or a substantially similar asset) at a fixed price on a future date (“reverse repo”
or “stock borrowing”), the arrangement is accounted for as a loan or advance, and the
underlying asset is not recognised in the Bank’s financial statements.
3
3.13
Investment securities are classified as available-for-sale financial assets and initially measured at
fair value plus incremental direct transaction costs.
Available-for-sale investments are non-derivative investments that are designated as availablefor-sale
or
are
not
classified
as
another
category
of
financial
assets.
Available-for-sale investments comprise equity and debt securities. Unquoted equity securities
whose fair value cannot be reliably measured are carried at cost. All other available-for-sale
investments are carried at fair value.
Interest income is recognised in profit or loss using the effective interest method. Dividend
income is recognised in profit or loss when the Bank becomes entitled to the dividend. Foreign
exchange gains or losses on available-for-sale debt security investments are recognised in profit
or loss. Impairment losses are recognised in profit or loss.
Other fair value changes other than impairment losses are recognised in other comprehensive
income and presented in the fair value reserve (revaluation reserve) in equity until the
investment is sold, whereupon the cumulative gains or losses previously recognised in equity
are reclassified to profit or loss as a reclassification adjustment.
3.14
Investment in subsidiaries is stated at cost less any accumulated impairment losses.
3.15
3.15.1 Recognition and measurement
Items of property and equipment are measured at cost less accumulated depreciation and any
accumulated impairment losses.
Cost includes expenditure that is directly attributable to the acquisition of the asset. Purchased
software that is integral to the functionality of the related equipment is capitalised as part of
that equipment.
When parts of an item of property or equipment have different useful lives, they are accounted
for as separate items (major components) of property and equipment.
The gain or loss on disposal of an item of property and equipment is determined by comparing
the net proceeds from disposal with the carrying amount of the item of property and
equipment, and is recognised net within other income or expense in profit or loss.
3.15.2 Subsequent costs
The cost of replacing part of an item of property or equipment is recognised in the carrying
amount of the item if it is probable that the future economic benefits of the expenditure will
flow to the Bank and its cost can be measured reliably. The carrying amount of the replaced
part is derecognised. The costs of the day-to-day servicing of property and equipment are
expensed as incurred.
3
3.15
Property and equipment (continued)
3.15.3 Depreciation
Items of property and equipment are depreciated from the date they are available for use.
Depreciation is calculated to write off the cost of items of property and equipment less their
estimated residual values using the straight-line basis over their estimated useful lives since this
most closely reflects the expected pattern of consumption of the future economic benefits
embodied in the asset.
The estimated useful lives for the current and comparative periods vary between five and seven
years.
Depreciation methods, useful lives and residual values are reviewed at each reporting date and
adjusted if appropriate.
3.16
Intangible assets
Software acquired by the Bank is stated at cost less accumulated amortisation and any
accumulated impairment losses.
Subsequent expenditure on software assets is capitalised only when it increases the future
economic benefits embodied in the specific asset to which it relates. All other expenditure is
expensed as incurred.
Amortisation is recognised in profit or loss on a straight-line basis over the estimated useful life
of the software, from the date that it is available for use since this most closely reflects the
expected pattern of consumption of the future economic benefits embodied in the asset. The
estimated useful life of software for the current and comparative periods is five years.
Amortisation methods, useful lives and residual values are reviewed at each reporting date and
adjusted if appropriate.
3.17
Leased assets – lessee
Lease agreements entered into by the Bank are operating leases and the leased assets are not
recognised in the Bank’s statement of financial position.
3.18
Impairment of non-financial assets
The carrying amounts of the Bank’s non-financial assets, other than deferred tax assets, are
reviewed at each reporting date to determine whether there is any indication of impairment. If
any such indication exists, then the asset’s recoverable amount is estimated.
The recoverable amount of an asset or cash-generating unit (“CGU”) is the greater of its value
in use and its fair value less costs to sell. In assessing value in use, the estimated future cash
flows are discounted to their present value using a pre-tax discount rate that reflects current
market assessments of the time value of money and the risks specific to the asset or CGU.
For the purpose of impairment testing, assets that cannot be tested individually are grouped
together into the smallest group of assets that generates cash inflows from continuing use that
are largely independent of the cash inflows of other assets or CGUs.
3
3.18
Impairment of non-financial assets (continued)
An impairment loss is recognised if the carrying amount of an asset or a CGU exceeds its
recoverable amount. Impairment losses are recognised in profit or loss.
An impairment loss is reversed only to the extent that the asset’s carrying amount does not
exceed the carrying amount that would have been determined, net of depreciation or
amortisation, if no impairment loss had been recognised.
3.19
Deposits and subordinated liabilities
Deposits and subordinated liabilities are the Bank’s sources of debt funding.
When the Bank sells a financial asset and simultaneously enters into an agreement to
repurchase the asset (or a similar asset) at a fixed price on a future date (“repo” or “stock
lending”), the arrangement is accounted for as a deposit, and the underlying asset continues to
be recognised in the Bank’s financial statements.
The Bank classifies capital instruments as financial liabilities or equity instruments in accordance
with the substance of the contractual terms of the instruments.
Deposits and subordinated liabilities are initially measured at fair value plus incremental direct
transaction costs, and subsequently measured at their amortised cost using the effective
interest method.
3.20
Provisions
A provision is recognised if, as a result of a past event, the Bank has a present legal or
constructive obligation that can be estimated reliably, and it is probable that an outflow of
economic benefits will be required to settle the obligation. Provisions are determined by
discounting the expected future cash flows at a pre-tax rate that reflects current market
assessments of the time value of money and, where appropriate, the risks specific to the
liability. The unwinding of the discount is recognised as finance cost.
A provision for onerous contracts is recognised when the expected benefits to be derived by
the Bank from a contract are lower than the unavoidable cost of meeting its obligations under
the contract. The provision is measured at the present value of the lower of the expected cost
of terminating the contract and the expected net cost of continuing with the contract. Before a
provision is established, the Bank recognises any impairment loss on the assets associated with
that contract.
3.21
Financial guarantees
Financial guarantees are contracts that require the Bank to make specified payments to
reimburse the holder for a loss it incurs because a specified debtor fails to make payment when
due in accordance with the terms of a debt instrument. Liabilities arising from financial
guarantees are initially measured at fair value, and the initial fair value is amortised over the life
of the financial guarantee. The liability is subsequently carried at the higher of this amortised
amount and the present value of any expected payment to settle the liability when a payment
under the guarantee has become probable. Liabilities arising from financial guarantees are
included within other liabilities.
3
3.22
Employee benefits
The Bank contributes towards the State pension defined contribution plan in accordance with
local legislation and to which it has no commitment beyond the payment of fixed contributions.
Obligations for contributions to the defined contribution plan are recognised as an expense in
profit or loss during the year in which these are incurred.
3.23
Earnings per share
The Bank presents basic earnings per share (EPS) data for its ordinary shares. Basic EPS is
calculated by dividing the profit or loss attributable to ordinary shareholders of the Bank by the
weighted average number of ordinary shares outstanding during the period.
3.24
New standards and interpretations not yet adopted
A number of new standards, amendments to standards and interpretations are effective for the
annual periods beginning after 1 January 2013, and have not been applied in preparing these
financial statements. None of these are expected to have a significant effect on the financial
statements of the Bank.
4
Financial risk management
4.1
Introduction and overview
The Bank is a traditional retail bank and its core business is the taking of deposits, holding of
financial instruments and the granting of loans supported by basic retail services such as money
transfer, spot currency exchange, currency forward contracts and interest rate swaps entered
into for risk management purposes. The Bank does not keep a trading book and its treasury is
restricted to liquidity management, occasionally involving interest rate swaps and forward
transactions that are entered into for risk management purposes. Therefore the main risks
assumed are: (a) counterparty credit risk arising from loans and investments in securities (b)
liquidity risk arising from maturity mismatches; (c) market risk; and (d) operational risk.
This note presents information about the Bank’s exposure to each of the above risks, the
Bank’s objectives, policies and processes for measuring and managing risk, and the Bank’s
management of capital.
Risk management framework
The Bank’s risk management policies are established to identify and analyse the risks faced by
the Bank, to set appropriate risk limits and controls, and to monitor risks and adherence to
limits.
The most material risks as perceived by management are identified through the annual Internal
Capital Adequacy Assessment Process, which process uses a methodology that is validated by
the Malta Financial Services Authority (MFSA), ÖVAG Group and the Bank’s internal auditor.
Risk management policies and systems are reviewed regularly to reflect changes in market
conditions, products and services offered. The Bank, through its training and management
standards and procedures, aims to develop a disciplined and constructive control environment,
in which all employees understand their roles and obligations.
4
Financial risk management (continued)
4.1
Introduction and overview (continued)
Risk management framework (continued)
As at the reporting date, the Board of Directors was composed of three Non-Executive
Directors and two Executive Directors. It has overall responsibility for the establishment and
oversight of the Bank’s risk management framework, which includes the identification of risks,
how to mitigate those risks and to ensure that the Bank has adequate capital to cover both
expected and unexpected losses.
The Board has established three management committees, namely the Audit Committee, the
Management Committee and the Asset and Liability Committee (ALCO). These committees
share with the Members of the Board of Directors the ultimate responsibility for directing the
activity of the Bank and to ensure that it is well run and delivering the outcomes for which it has
been set up by implementing the set strategy and by exercising good oversight and
stewardship.
The Audit Committee is composed of two Non-Executive Directors and a representative
appointed by the Shareholders. The Independent Auditors are invited to attend at every Audit
Committee meeting. The Committee reviews audit findings and monitors progress to resolve
the said findings in a timely manner thus mitigating any additional risks identified. The
Committee also reviews findings on data quality, the reporting process and effectiveness of the
Bank's internal controls and the audit of the annual financial statements. The Audit Committee
is assisted in these functions by the Internal Audit. Internal Audit undertakes both regular and
ad-hoc reviews of risk management controls and procedures, the results of which are reported
to the Audit Committee. The Internal Auditor is also the Committee’s Secretary.
The Management Committee is made up of the Senior Managers of the Bank, including the
Managing Director, the Executive Director, the Company Secretary (up to June 2013) and the
Chief Financial Controller. The Committee’s role is to regularly review and evaluate the
corporate strategy, major operational and financial plans, risk policies and performance
objectives. It also monitors corporate performance against budgets and past performance,
ensuring compliance to all relevant laws, regulations and codes of best business practice. The
minutes of the Management Committee Meetings are submitted to the Board.
The ALCO is composed of the Executive Officers of the Bank and the Treasury Officers. The
ALCO reviews levels of liquidity to ensure that future commitments are adequately funded and
ensures compliance with regulatory requirements and approves exposures involving the
assumption of market, interest rate and maturity transformation risks. The minutes of the
ALCO Meetings are also submitted to the Board.
4
4.2
Credit risk
Credit risk is the risk of financial loss to the Bank if a customer or counterparty to a financial
instrument fails to meet its contractual obligations, and arises principally from the Bank’s loans
and advances to customers and other banks, derivative transactions and investment debt
securities.
Management of credit risk
The Bank has in place the standards, policies and procedures of the ÖVAG Group for the control
and monitoring of credit risk. The Bank also complies with limits and standards imposed by the
Banking Rules issued by the Malta Financial Services Authority. Credit decisions for the
acquisition of assets require the approval of both Executive Directors and also of a Senior
Manager.
Higher volume transactions require also the approval of the ÖVAG Risk
Management. International business is also approved by the Board of Directors. Nonetheless,
in view of the intention of the Bank’s parent to dispose of the Bank in the immediate future, no
new international business is being undertaken. Two separate departments, Risk and Credit
Administration, are responsible for the oversight of the Bank’s credit risk, including:
•
Formulating credit policies in consultation with business units, covering collateral
requirements, credit assessment, risk grading and reporting, documentary and legal
procedures, and compliance with regulatory and statutory requirements.
•
Renewals and reviews of facilities are subject to the same review process.
•
Limiting concentrations of exposure to counterparties, geographies (which was relevant
when the Bank undertook non-domestic exposures) and industries (for loans and advances),
and by issuer, credit rating band, market liquidity and country (for investment securities).
•
Maintaining the Bank’s risk gradings in order to categorise exposures according to the
degree of risk of financial loss faced and to focus management on the attendant risks. The
risk grading system is used in determining where impairment provisions may be required
against specific credit exposures. The current risk-grading framework consists of five rating
classes, divided into 25 sub-classes reflecting varying degrees of risk of default. The
responsibility for assigning the appropriate risk rating class lies with the responsible risk
manager. Risk ratings are subject to regular reviews by ÖVAG Group Risk Management.
•
Regular reports are provided to ÖVAG Group Risk Management on the credit quality of local
portfolios and appropriate corrective action is taken.
•
Providing advice, guidance and specialist skills to business units to promote best practice
throughout the Bank in the management of credit risk.
Each business unit is required to implement Bank credit policies and procedures. Each
business unit is responsible for the quality and performance of its credit portfolio and for
monitoring and controlling all credit risks in its portfolios, including those subject to central
approval.
Regular audits of business units and the Bank’s credit processes are undertaken by Internal
Audit.
4
4.2
Credit risk (continued)
Exposure to credit risk
Loans and advances
to customers
In thousands of EUR
Carrying amount
Individually impaired
Grade 5: Default
Gross/revalued amount
Allowance for impairment
Carrying amount
Collectively impaired
Grade 1: Low-fair risk
Grade 2-3: Watch list
Grade 4: Doubtful
Gross amount
Allowance for impairment
Carrying amount
Neither past due nor
specifically impaired
Grade 1-3: Low-fair risk and
Watch list
Carrying amount
Total carrying amount
Loans and
advances to banks
Investment
securities and
Treasury bills
2013
2012
2013
2012
2013
2012
104,144
378,633
=======
70,957
=====
100,208
======
23,310
=====
53,037
=====
20,112
--------------20,112
(6,967)
--------------13,145
---------------
5,076
-------------- -------------5,076
(1,924)
-------------- -------------3,152
-------------- --------------
----------------------------------
--------------------------------
4,878
-----------4,878
(2,282)
-----------2,596
------------
52,236
21,361
18,655
--------------92,252
(1,253)
--------------90,999
---------------
347,011
2,386
11,299
19,230
-------------- -------------377,540
2,386
(2,059)
(10)
-------------- -------------375,481
2,376
-------------- --------------
788
-----------788
(3)
-----------784
------------
----------------------------
----------------------------------
----------------------------104,144
======
68,581
-------------- -------------68,581
-------------- -------------378,633
70,957
====== ======
99,424
--------------99,424
-------------100,208
======
23,310
-----------23,310
-----------23,310
=====
50,441
-----------50,441
-----------53,037
=====
======
4
4.2
Exposure to credit risk (continued)
Loans amounting to EUR6.738 million (2012: EUR 6,521 million) were past due by more than 30
days but not impaired as at 31 December 2013. The past due amounts were as follows:
Past Due 31 to 60 days
Principal
Interest
Past Due 61 to 90 days
Principal
Interest
Past Due over 90 days
Principal
Interest
Total
2013
2012
3
20
5
29
314
49
-
2
54
--------------
1,878
37
--------------
442
======
1,949
======
Description of Grades:
Grade 1: Low-fair risk. The interest or principal repayment is paid up-to-date or is overdue by
less than 30 days.
Grade 2-3: Watch list. The interest or principal repayment is overdue by 30 days and over but
not exceeding 90 days.
Grade 4: Doubtful (Collectively Impaired). The interest or principal repayment is overdue by over
90 days but excess is not recognised as ‘default’ in terms of VBAG Group Standards.
Grade 5: Default (Individually Impaired). All credit exposures that satisfy the ‘default’ conditions
as per VBAG Group standards and consequently entered in the Bank’s Recovery Database
system.
Impaired loans and investment securities
Impaired loans and securities are loans and advances and investment debt securities for which
the Bank determines that there is objective evidence of impairment and it does not expect to
collect all principal and interest due according to the contractual terms of the loan / securities
agreement(s) without reverting to collateral. These loans are graded 4 and 5 in the Bank’s
internal credit risk rating system.
Past due but not impaired loans
Loans and securities where contractual interest or principal payments are past due but the Bank
believes that impairment is not appropriate on the basis of the level of security / collateral
available and / or the stage of collection of amounts owed to the Bank.
4
4.2
Loans with renegotiated terms
Loans with renegotiated terms are loans that have been restructured due to deterioration in the
borrower’s financial position and where the Bank has made concessions that it would not
otherwise consider.
Allowances for impairment
The Bank establishes an allowance for impairment losses that represents its estimate of
incurred losses in its loan portfolio. The main components of this allowance are a specific loss
component that relates to individually significant exposures, and a collective loan loss allowance
established for groups of homogeneous assets in respect of losses that have been incurred but
have not been identified on loans subject to individual assessment for impairment.
Write-off policy
The Bank writes off a loan or an investment debt security balance (and any related allowances
for impairment losses) when the Bank’s Risk Manager determines that the loan or security is
uncollectible. This determination is reached after considering information such as the
occurrence of significant changes in the borrower’s / issuer’s financial position such that the
borrower / issuer can no longer pay the obligation, or that proceeds from collateral will not be
sufficient to pay back the entire exposure.
Collateral
The Bank holds collateral against loans and advances to customers in the form of hypothecary
rights over immovable assets, registered rights over moveable assets and guarantees. The
asset held as collateral is assigned a fair value at the time of credit approval. The value
assigned is regularly monitored to identify assets that need revaluation.
The value of financial instruments is monitored on a monthly basis, the exchange rate of
currencies is monitored every six months, commercial immovable property is generally
reviewed every year and residential real estate is generally reviewed every three years.
Generally collateral is not held over loans and advances to banks, except when securities are
held as part of reverse repurchase and securities borrowing activity. Collateral usually is not
held against investment securities, and no such collateral was held at 31 December 2013 and
31 December 2012.
4
4.2
An estimate of the fair value of collateral and other security enhancements held against loans
and advances to customers is shown below:
Against individually impaired
Property
Against neither past due nor impaired
Property
Debt securities
Equities
Other
Against past due but not impaired
Property
Debt securities
Equities
Other
Total
2013
2012
EUR 000
EUR 000
21,910
4,700
194,882
5,715
999
6,341
138,025
1,766
1,110
96,629
21,562
10
253
--------------
1,766
1,110
--------------
251,672
======
272,230
======
No collateral or other security enhancements are held against other financial assets.
4
4.2
Concentration of credit risk
The Bank monitors concentrations of credit risk by sector and by geographic location. An
analysis of concentrations of credit risk from loans and advances and investment securities at
the reporting date is shown below:
Loans and advances
to customers
In thousands of EUR
Loans and advances
to banks
Investment
securities and
Treasury Bills
2013
2012
2013
2012
Corporate
83,510
339,370
-
-
-
5,405
Sovereign
-
8,143
-
-
23,310
34,414
Banks
-
-
70,957
100,208
-
10,622
Retail
20,634
31,120
-
-
-
-
Equity
------------104,144
======
-------------378,633
======
-------------70,957
======
------------100,208
======
------------23,310
======
2,596
-------------92,761
======
2013
2012
Concentration by
sector
Concentration by
location
North America
Europe
Latin America and
Caribbean
-
-
-
-
-
8,198
104,144
378,633
-
100,208
23,310
42,243
-------------
--------------
--------------
--------------
--------------
2,596
--------------
104,144
378,633
-
100,208
23,310
53,037
======
======
======
======
======
======
Concentration by location for loans and advances is analysed based on the location of the
counterparty. Concentration by location for investment securities is analysed based on the
location of the issuer of the security.
4
4.2
Concentration of credit risk (continued)
An analysis of concentration of loans and advances to customers by industry is shown below:
The following are industry concentrations, gross of allowances:
- agriculture
- quarrying
- manufacturing
- electricity, gas and water supply
- construction
- wholesale and retail trade, repairs of motor vehicles and motor cycles
- transport and storage
- accommodation and food service activities
- financial and insurance activities
- real estate activities
- professional, scientific and technical activities
- administrative and support service activities
- public administration and defence compulsory social security
-human health and social work activities
- Arts, entertainment and recreation
- other services activities
- household and individuals
Gross loans and advances
2013
2012
EUR 000
EUR 000
1,143
219
2,369
1,934
7,290
3,789
5,545
1,976
3,163
56,540
672
9,105
4,756
236
625
13,002
-------------112,364
======
1,228
240
2,464
5,193
14,971
3,732
5,845
12,053
113,354
169,622
23,629
9,450
152
5,072
796
14,815
-------------382,616
======
An analysis of the credit quality of assets which are neither past due nor
impaired, based on credit rating agencies, is shown below:
Loans and advances
to customers
In thousands of EUR
Sovereign
Rated A- to A+
Rated BBB- to BBB+
Not Rated
Corporate/ Retail
Rated A- to A+
Rated BBB- to BBB+
Rated B- to B+
Not Rated
Credit Institutions
Rated AA- to AA+
Rated A- to A+
Rated BBB- to BBB+
Not Rated
Loans and advances
to banks
Investment
securities and
Treasury Bills
2013
2012
2013
2012
2013
2012
-
-
-
-
23,310
-
34,414
-
1,933
110,431
382,616
-
-
-
2,180
3,225
-
-------------112,364
======
-------------382,616
======
6,106
62,476
2,376
-------------70,967
======
25
1
99,297
100
------------99,423
======
------------23,310
======
6,973
3,649
------------50,441
======
-
4
4.2
Offsetting financial assets and financial liabilities
The disclosures set out below include financial assets and financial liabilities that:
•
are offset in the Bank’s statement of financial position; or
•
are subject to an enforceable master netting arrangement or similar agreement that covers
similar financial instruments, irrespective of whether they are offset in the statement of
financial position.
The similar agreements include derivative clearing agreements, whilst similar financial
instruments include derivatives. Financial instruments such as loans and deposits are not
disclosed in this note unless they are offset in the statement of financial position.
The ISDA and similar master netting arrangements do not meet the criteria for offsetting in the
statement of financial position. This is because they create for the parties to the agreement a
right of set-off of recognised amounts that is enforceable only following an event of default,
insolvency or bankruptcy of the Bank or the counterparties or following other predetermined
events. In addition, the Bank and its counterparties do not intend to settle on a net basis or to
realise the assets and settle the liabilities simultaneously.
The Bank does not receive and give collateral in the form of cash and marketable securities in
respect to the derivatives held.
The Bank’s derivative financial assets and liabilities that are subject to enforceable master
netting arrangements and similar agreements relate to positions contacted with the parent. At
the financial reporting date, the Bank had derivatives assets held for risk management
amounting to €590 thousand and derivative liabilities held for risk management amounting to
€3,201 thousand. Derivative assets and liabilities are measured at fair value.
4.3
Liquidity risk
Liquidity risk is the risk that the Bank will encounter difficulty in meeting obligations in respect
of its financial liabilities that are settled by delivering cash or another financial asset.
Management of liquidity risk
The Bank’s approach to managing liquidity is to ensure, as far as possible, that it will always
have sufficient liquidity to meet its liabilities when due, under both normal and stressed
conditions, without incurring unacceptable losses or risking damage to the Bank’s reputation.
4
4.3
Liquidity risk (continued)
Management of liquidity risk (continued)
Treasury receives information from other business units regarding the liquidity profile of
financial assets and liabilities and details of other projected cash flows arising from projected
future business. Treasury then maintains a portfolio of short-term liquid assets, largely made up
of short-term liquid investment securities, loans and advances to banks and other inter-bank
facilities, to ensure that sufficient liquidity is maintained within the Bank.
The daily liquidity position is monitored and regular liquidity stress testing is conducted under a
variety of scenarios covering both normal and more severe market conditions. All liquidity
policies and procedures are subject to review and approval by ALCO. Daily reports cover the
liquidity position of the Bank. A summary report, including any exceptions and remedial action
taken, is submitted regularly to ALCO.
Exposure to liquidity risk
The key measure used by the Bank for managing liquidity risk is the ratio of net liquid assets to
deposits from customers. For this purpose net liquid assets are considered as including cash
and cash equivalents and investment grade debt securities for which there is an active and
liquid market less any deposits from banks, other borrowings and commitments maturing within
the next month. A similar, but not identical, calculation is used to measure the Bank’s
compliance with the liquidity limit established by the Bank’s Regulator, the Malta Financial
Services Authority. Details of the reported Bank’s ratio of net liquid assets to deposits from
customers at the reporting date and during the reporting period were as follows:
At 31 December
Average for the period
Maximum for the period
Minimum for the period
2013
2012
130%
183%
285%
130%
384%
156%
384%
37%
4
4.3
Liquidity risk (continued)
Maturity analysis for financial liabilities
The previous table shows the undiscounted cash flows on the Bank’s non-derivative financial
liabilities and unrecognised loan commitments on the basis of their earliest possible contractual
maturity. The Bank’s expected cash flows on these instruments vary significantly from this
analysis. For example, demand deposits from customers are expected to maintain a stable or
increasing balance; and unrecognised loan commitments are not all expected to be drawn down
immediately.
The gross nominal outflow disclosed in the previous table represents the contractual,
undiscounted cash flows relating to derivative financial liabilities held for risk management
purposes. The disclosure shows a net amount for derivatives that are net settled, but a gross
inflow and outflow amount for derivatives that have simultaneous gross settlement (e.g., forward
exchange contracts and currency swaps).
In thousands of EUR
Carrying
amount
Gross
nominal
outflow
Less than 1
month
1-3 months
3 months to
1 year
1-5 years
31 December 2013
Non-derivative liabilities
Amounts owed to
customers
for
10,551
10,558
10,558
-
-
-
10,571
10,600
8,615
1,440
409
136
3,352
4,270
171
221
1,467
2,411
7,268
7,268
-
-
-
332,766
333,049
80,076
199
252,774
-
18,557
18,619
16,005
1,826
645
143
7,338
8,042
-
1,258
6,037
747
11,246
11,246
-
-
-
Derivative liabilities held
risk management
Unrecognised loan
commitments
31 December 2012
Non-derivative liabilities
Amounts owed to
customers
Derivative liabilities held
for
risk management
Unrecognised loan
commitments
The above table shows the undiscounted cash flows on the Bank’s non-derivative financial
liabilities and unrecognised loan commitments on the basis of their earliest possible contractual
maturity. The Bank’s expected cash flows on these instruments vary significantly from this
analysis. For example, unrecognised loan commitments are not all expected to be drawn down
immediately.
The gross nominal outflows disclosed in the previous table represent the contractual,
undiscounted cash flows relating to derivative financial liabilities held for risk management
purposes. The disclosure shows a net amount for derivatives that are net settled, but a gross
inflow and outflow amount for derivatives that have simultaneous gross settlement (e.g.,
forward exchange contracts and currency swaps).
4
4.4
Market risk
Market risk is the risk that changes in market prices, such as interest rates, equity prices,
foreign exchange rates and credit spreads (not relating to changes in the obligor’s / issuer’s
credit standing) will affect the Bank’s income or the value of its holdings of financial
instruments. The objective of market risk management is to manage and control market risk
exposures within acceptable parameters to ensure solvency, while optimising the return on risk.
Management of market risk
The Bank manages market risk through risk limits and individual risk positions approved by
ÖVAG Group. Treasury’s open currency positions are monitored by Risk Management and by
ALCO.
Overall authority for market risk is vested in ALCO. ÖVAG Group Risk is responsible for the
development of detailed risk management policies (subject to review and approval by ALCO)
and for the day-to-day review of their implementation.
4.4.1
Interest rate risk
Exposure to interest rate risk – non-trading portfolios
The principal risk to which non-trading portfolios are exposed is the risk of loss from fluctuations
in the future cash flows or fair values of financial instrument because of a change in market
interest rates. Interest rate risk is managed principally through monitoring interest rate gaps
and by having pre-approved limits for repricing bands. ALCO is the monitoring body for
compliance with these limits and is assisted by Risk Management in its day-to-day monitoring
activities. A summary of the Bank’s interest rate gap position on non-trading portfolios is shown
in the table below. The pre-tax effect on profit or loss and equity resulting from a change in
interest rates shown in the table relates to variable rate instruments. The analysis is performed
up to the 12 month period.
Investment securities in the table below have been adjusted by the fair value amount to reflect
the nominal value on which interest is calculated.
4
4.4
Market risk (continued)
4.4.1
Interest rate risk (continued)
Exposure to interest rate risk – non-trading portfolios (continued)
In thousands of EUR
31 December 2013
Balances with CBM and cash
Derivatives held for risk
management purposes
Other assets
Total assets
Derivative liabilities held for risk
Management purposes
Other liabilities
Equity
Carrying
amount
Less
than 3
months
5,510
-
-
4,983
-
-
527
1,452
70,957
104,144
18,327
2,115
-----------202,505
======
462
12,218
93,439
-----------106,119
======
5,996
18,327
---------24,323
====
100
1,279
--------6,362
=====
109
1,414
----------1,523
=====
2,016
----------2,016
=====
990
58,530
2,115
-------------62,162
======
3,352
10,551
10,571
1,106
176,925
------------202,505
======
2,429
10,551
10,032
------------23,013
======
83,106
63
----------63
=====
24,260
107,366
339
----------339
=====
6,023
113,389
136
----------136
=====
1,387
114,776
----------=====
2,016
116,792
923
1,106
176,925
------------178,954
======
(116,792)
416
(416)
121
(121)
49
88,469
359,923
-----------448,441
======
314,616
17,361
------------331,977
======
441
7,777
---------8,218
====
12,300
146
----------12,446
=====
11,190
163
5,000
--------16,383
=====
913
----------913
=====
108
10,770
21,180
----------32,058
=====
5,850
137
----------5,987
=====
22,020
----------22,020
=====
----------=====
284
2,596
6,112
-------------8,992
======
8,963
175,796
------------184,759
======
116,464
116,464
(4,228)
112,236
15,440
127,676
26,071
153,747
22,020
175,767
(175,767)
-
1,019
(1,019)
(26)
26
39
(39)
Interest sensitivity gap
Cumulative gap
% change interest rate for the period
50bps increase
50bps decrease
31 December 2012
Other assets
Total assets
Other liabilities
Equity
Interest sensitivity gap
Cumulative gap
% change interest rate for the period
100bps increase
100bps decrease
333
100,208
378,633
50,796
6,112
-----------536,082
======
332,766
18,557
8,963
175,796
------------536,082
======
3-6
months
6-12
months
1-5
years
More
than
5 years
Noninterest
bearing
30
(30)
4
4.4
4.4.1
Interest rate risk (continued)
Exposure to interest rate risk – non-trading portfolios (continued)
The management of interest rate risk against interest rate gap limits is supplemented by
monitoring the sensitivity of the Bank’s financial assets and liabilities to interest rate segments.
Overall non-trading interest rate risk positions are managed by ÖVAG Group Global Treasury,
which uses investment securities, advances to banks, deposits from banks and derivative
instruments to manage the overall position arising from the Bank’s non-trading activities.
In the banking book the interest rate risk is valued primarily using the stress tests (200 Basis
Point movement) stipulated by the Austrian Financial Market Authority (FMA). The interest rate
risk in the banking book is also quantified by means of the periodic gap analysis in the course of
a “fixed interest rate balance” and through analyses of the interest income on the basis of
elasticity analyses. ÖVAG Group ALM Support Unit performs the assessment of the interest
rate risk at least once a quarter and this is submitted to the regulatory authorities. Furthermore
it is agreed with ÖVAG Group Market Risk Management that total interest rate risk is not to
exceed 10% of Own Funds, as calculated by the FMA-approved SAP-ALM IT application.
4.4.2
Foreign exchange risk
Foreign exchange risk is attached to those monetary assets and monetary liabilities of the Bank
that are not denominated in the functional currency of the Bank. Transactional exposures give
rise to foreign currency gains and losses that are recognised in the profit or loss. Currency risk
is mitigated by a closely monitored currency position policy and is managed through matching
within the foreign currency portfolio. Mismatches, which are allowed temporarily and for small
amounts, are continuously monitored and regularised immediately. The Bank ensures that its
net exposure is kept to an acceptable level by buying and selling foreign currencies spot or
forward rates when considered appropriate.
The methodology used to calculate the minimum capital requirements for foreign exchange risk
is based on the statutory requirements, mainly in terms Banking Rule 08. The open foreign
exchange positions are reported on a weekly basis by the Bank to ÖVAG Group Global Treasury
Coordination, which in turn performs the calculation of the foreign exchange risk at Group level.
4
4.4
4.4.2
Foreign exchange risk (continued)
In thousands of EUR
31 December 2013
Balances with the CBM, Treasury
Bills and cash
Derivative assets held for risk
management
Other assets
Total assets
management
Other liabilities
Total liabilities
Equity
Net on balance sheet financial
position
% Change in Exchange rates to EUR
5% increase
5% decrease
Total
EUR
USD
GBP
CHF
Other
5,510
5,490
2
18
-
-
1,452
1,452
18,327
70,957
104,144
2,115
-------------202,505
======
18,327
63,953
103,612
2,115
------------194,956
======
4,002
189
-----------4,193
=====
332
--------350
====
------------======
3,001
--------3,001
====
3,352
3,352
10,551
10,571
1,106
-------------25,580
8,004
5,597
1,091
----------18,044
4,199
11
----------4,210
160
185
---------345
1
------------1
2,386
590
4
---------2,980
176,925
-------------202,505
======
176,925
------------194,969
======
-----------4,210
=====
--------345
====
----------1
=====
---------2,980
====
(17)
5
(1)
21
(1)
1
-
-
-
(1)
1
4
4.4
4.4.2
Foreign exchange risk (continued)
Total
EUR
USD
GBP
CHF
Other
333
2,359
315
2,359
9
9
-
-
53,037
100,208
378,633
3,753
-------------538,323
======
53,037
96,062
375,006
3,707
------------530,486
======
2,448
212
32
-----------2,701
=====
141
355
--------505
====
3,060
------------3,060
======
1,557
14
--------1,571
====
7,338
332,766
18,557
1,625
-------------360,286
7,338
328,833
14,036
1,576
----------351,783
3,314
39
----------3,353
461
2
---------463
3,146
------------3,146
787
746
8
---------1,541
178,037
-------------538,323
======
178,037
------------529,820
======
-----------3,353
=====
--------463
====
----------3,146
=====
---------1,541
====
Net on balance sheet financial
position
(652)
42
(86)
30
% Change in Exchange rates to
EUR
5% increase
5% decrease
(33)
33
2
(2)
(4)
4
2
(2)
In thousands of EUR
31 December 2012
Balances with the CBM and cash
management
Other assets
Total assets
management
Other liabilities
Total liabilities
Equity
4
4.5
Operational risk
Operational risk is the risk of direct or indirect loss arising from a wide variety of causes associated
with the Bank’s processes, personnel, technology and infrastructure, and from external factors other
than credit, market and liquidity risks such as those arising from legal and regulatory requirements
and generally accepted standards of corporate behaviour. Operational risks arise from all of the
Bank’s operations and are faced by all business entities.
The Bank’s objective is to manage operational risk so as to balance the avoidance of financial losses
and damage to the Bank’s reputation with overall cost effectiveness and to avoid control procedures
that restrict initiative and innovation.
The primary responsibility for the development and implementation of controls to address
operational risk is assigned to senior management within each business unit. This responsibility is
supported by the development of overall ÖVAG Group standards for the management of operational
risk in the following areas:
•
•
•
•
•
•
•
•
•
•
requirements for appropriate segregation of duties, including the independent authorisation of
transactions
requirements for the reconciliation and monitoring of transactions
compliance with regulatory and other legal requirements
documentation of controls and procedures
requirements for the periodic assessment of operational risks faced, and the adequacy of
controls and procedures to address the risks identified
requirements for the reporting of operational losses and proposed remedial action
development of contingency plans
training and professional development
ethical and business standards
risk mitigation, including insurance where this is effective.
Compliance with ÖVAG Group standards is supported by a programme of periodic reviews
undertaken by Internal Audit. The results of Internal Audit reviews are discussed with the
management of the business unit to which they relate, with summaries submitted to the Audit
Committee and senior management of the Bank and ÖVAG Group Audit.
The capital requirement for operational risk is measured on the Standardised Approach.
4
4.6
Capital management
Regulatory capital
The Bank’s regulator, the Malta Financial Services Authority, sets and monitors the capital
requirements for the Bank.
In implementing current capital requirements the Malta Financial Services Authority requires the
Bank to maintain a prescribed ratio of total capital to total risk-weighted assets.
Regarding compliance with Banking Rule (BR04) “Capital Requirements of Credit Institutions
Authorised under the Banking Act 1994”, with respect to Pillar 1 capital requirements under the
Basel II framework, as from 30 September 2012 the Bank started to report under the Standardised
Approach with respect to Pillar 1 capital requirements under the Basel II to allocate capital against
credit risk assumed.
The second pillar of Basel II (Supervisory Review and Evaluation Process) involves both banks and
regulators taking a view on whether a Bank should hold additional capital against risks not covered in
Pillar 1. Part of the Pillar 2 process is the Internal Capital Adequacy Assessment Process (“ICAAP”)
which is the bank’s self assessment of risks not captured by Pillar 1.
The Bank’s capital base is divided in two categories, as defined in Banking Rule (BR03) “Own Funds
of Credit Institutions Authorised under the Banking Act, 1994”:
•
“Original own funds” comprise share capital, retained earnings and reserves created by
appropriations of retained earnings. The book value of goodwill and intangible assets are
deducted in arriving at original own funds calculations.
•
“Additional own funds” comprise qualifying subordinated loan capital, collective impairment
allowance, and revaluation reserves arising from the revaluation of tangible fixed assets and
financial fixed assets.
The Bank’s policy is to maintain a strong capital base so as to maintain investor, creditor and market
confidence and to sustain future development of the business. The impact of the level of capital on
shareholders’ return is also recognised and the Bank recognises the need to maintain a balance
between the higher returns that might be possible with greater gearing and the advantages and
security afforded by a sound capital position.
4
4.6
Capital management (continued)
Capital allocation
The allocation of capital between specific operations and activities is, to a large extent, driven by
optimisation of the return achieved on the capital allocated. The amount of capital allocated to each
operation or activity is based primarily upon the regulatory capital, but in some cases the regulatory
requirements do not reflect fully the varying degree of risk associated with different activities. In
such cases the capital requirements may be flexed to reflect differing risk profiles, subject to the
overall level of capital to support a particular operation or activity not falling below the minimum
required for regulatory purposes. The process of allocating capital to specific operations and
activities is undertaken independently of those responsible for the operation, by the Bank’s Risk
Management and Credit Administration and is subject to review by the Board of Directors or ALCO
as appropriate.
Although maximisation of the return on risk-adjusted capital is the principal basis used in
determining how capital is allocated within the Bank to particular operations or activities, it is not the
sole basis used for decision making. Account is also taken of synergies with other operations and
activities, the availability of management and other resources, and the fit of the activity with the
Bank’s longer term strategic objectives. The Bank’s policies in respect of capital management and
allocation are reviewed regularly by the Board of Directors.
The Bank complied with all externally imposed capital requirements throughout the period.
There have been no material changes in the Bank’s management of capital during the period.
The Solvency Ratio of the Bank is calculated below.
4
4.6
In thousands of EUR
31 December 2013
Banking Book Credit Risk Capital Requirements
By exposure classes:
Standardised approach (SA)
Central governments or central banks
Institutions
Corporates
Past due
Retail
Exposures collateralized with real estate
Collective investment undertakings (CIU)
Other assets
Banking Book Notional Risk Weighted Assets
Operational risk capital requirement
Original
exposure
value
Weighted
amount
Capital
requirement
23,938
72,386
84,642
11,350
3,985
27,875
2,517
------------226,693
======
15,067
98,598
12,799
2,822
9,469
2,517
-------------141,270
1,205
7,888
1,024
226
757
201
-----------11,302
14,787
1,183
32
------------156,089
======
3
----------12,487
=====
Foreign Exchange Risk capital requirement
Own funds
Original own funds
Paid up capital
Reserves
Deductions
IFRS prudential filters (deductions)
Additional own funds
Upper tranche
Lower tranche
Deductions
IFRS Prudential Filters: Increases to Additional Own Funds
Total gross own funds
Capital solvency ratio
167,821
9,623
(64)
(1,563)
------------175,817
1,261
43
1,701
-------------3,005
-------------178,821
======
114.56%
======
Note: The above capital adequacy ratio is calculated in accordance with Basel II requirements
(Capital Requirements Directive). The reserves exclude EUR48k which are set aside for the purpose
of the Depositor Compensation Scheme. Following the reduction in share capital on 1 January 2014
(refer to note 39.1), the Bank’s CAR reduced to 42%)
4
4.6
In thousands of EUR
31 December 2012
Banking Book Credit Risk Capital Requirements
By exposure classes:
Standardised approach (SA)
Central governments or central banks
Regional governments or local authorities
Administrative bodies and non-commercial undertakings
Institutions
Corporates
Past due
Retail
Exposures collateralized with real estate
Collective investment undertakings (CIU)
Other assets
Banking Book Notional Risk Weighted Assets
Operational risk capital requirement
Original exposure
value
22,146
359
109,275
366,893
6,009
6,729
35,639
10,862
7,115
------------565,027
======
Foreign Exchange Risk capital requirement
Own funds
Original own funds
Paid up capital
Reserves
Deductions
IFRS prudential filters (deductions)
Additional own funds
Upper tranche
Lower tranche
Deductions
IFRS Prudential Filters: Increases to Additional Own
Funds
Total gross own funds
Capital solvency ratio
Weighted amount
Capital
requirement
76
26,435
263,626
6,364
4,378
13,975
10,862
7,115
-------------332,831
6
2,115
21,090
509
350
1,118
869
569
-----------26,626
15,133
1,211
107
------------348,071
======
9
----------27,846
=====
167,821
12,735
92
(4,952)
------------175,695
2,059
-------------2,059
-------------177,755
======
51.07%
======
Note: The above capital adequacy ratio is calculated in accordance with Basel II requirements (Capital
Requirements Directive). The reserves exclude EUR48k which are set aside for the purpose of the
Depositor Compensation Scheme.
5
Use of estimates and judgements
The Directors consider the development, selection and disclosure of the Bank’s critical accounting
policies and estimates, and the application of these policies and estimates.
These disclosures supplement the commentary on financial risk management (see note 4).
5.1
Key sources of estimation uncertainty
5.1.1
Allowances for credit losses
Assets accounted for at amortised cost are evaluated for impairment on a basis described in
accounting policy 3.9.7.
The specific component of the total allowances for impairment applies to financial assets evaluated
individually for impairment and is based upon management’s best estimate of the present value of the
cash flows that are expected to be received. In estimating these cash flows, management makes
judgements about a counterparty’s financial situation and the net realisable value of any underlying
collateral. Each impaired asset is assessed on its merits, and the workout strategy and estimate of
cash flows considered recoverable are independently approved by the Risk Management function.
Collectively assessed impairment allowances cover credit losses inherent in portfolios of loans and
advances with similar credit risk characteristics when there is objective evidence to suggest that they
contain impaired loans and advances, but the individually impaired items cannot yet be identified. In
assessing the need for collective loss allowances, management considers factors such as credit
quality, portfolio size, concentrations, and economic factors. In order to estimate the required
allowance, assumptions are made to define the way inherent losses are modelled and to determine
the required input parameters, based on historical experience and current economic conditions. The
accuracy of the allowances depends on the estimates of future cash flows for specific counterparty
allowances and the model assumptions and parameters used in determining collective allowances.
5.1.2
Determining fair values
The fair value of financial assets that are traded in an active market are based on quoted market
prices. For all other financial instruments, the Bank determines fair values using other valuation
techniques (refer to note 6).
5.1.3
Qualifying hedge relationships
In designating financial instruments in qualifying hedge relationships, the Bank has determined that it
expects the hedge to be highly effective over the period of the hedge relationship. Investments within
the available for sale category amounting to EUR 3.298 million (2012: EUR34.414 million) are
designated in a qualifying fair value hedge relationship.
6
Fair value disclosures
6.1
Valuation models
The Bank measures fair values using the following fair value hierarchy that reflects the significance of
the inputs used in making the measurements:
•
•
•
Level 1: inputs that are quoted market prices (unadjusted) in active markets for identical
instruments.
Level 2: inputs other than quoted market prices included within Level 1 that are observable
either directly (i.e., as prices) or indirectly (i.e., derived from prices). This category includes
instruments valued using: quoted market prices in active markets for similar instruments;
quoted prices for identical or similar instruments in markets that are considered less than
active; or other valuation techniques where all significant inputs are directly or indirectly
observable from market data.
Level 3: inputs that are unobservable. This category includes all instruments for which the
valuation technique includes inputs not based on observable data and the unobservable inputs
have a significant effect on the instrument’s valuation. This category includes instruments that
are valued based on quoted prices for similar instruments where significant unobservable
adjustments or assumptions are required to reflect differences between the instruments.
Valuation techniques include net present value and discounted cash flow models, comparison to
similar instruments for which market observable prices exist. Assumptions and inputs used in
valuation techniques include risk-free and benchmark interest rates, credit spreads and other premia
used in estimating discount rates, bond and equity prices, foreign currency exchange rates, equity and
equity index prices and expected price volatilities and correlations.
The objective of valuation techniques is to arrive at a fair value determination that reflects the price of
the financial instrument at the reporting date that would have been determined by market participants
acting at arm’s length.
The Bank uses widely recognised valuation models for determining the fair value of common and more
simple financial instruments, like interest rate and currency swaps that use only observable market data
and require little management judgement and estimation.
6
Fair value disclosures (continued)
6.1
Valuation models (continued)
Observable prices and model inputs are usually available in the market for listed debt and equity
securities, exchange traded derivatives and simple over the counter derivatives like interest rate
swaps. Availability of observable market prices and model inputs reduces the need for management
judgement and estimation and also reduces the uncertainty associated with determination of fair
values. Availability of observable market prices and inputs varies depending on the products and
markets and is prone to changes based on specific events and general conditions in the financial
markets.
6.2
Valuation framework
The Bank has established a control framework with respect to the measurement of fair value. The
overall responsibility for independently verifying the results of trading and investment operations and
all significant fair value measurements lies within the Chief Financial Officer. The valuation framework
of the Bank is not complex as it relates to marketable sovereign bonds and over the counter interest
rate swaps.
Significant valuation issues are reported to the Group Audit Committee.
6.3
Financial Instruments measured at fair value
The following table analyses financial instruments measured at fair value at the reporting date, by
level of fair value hierarchy into which the fair value measurement is categorised. The fair value
amounts are based on the values recognised in the statement of financial position.
6
Fair value disclosures (continued)
6.3
Financial Instruments measured at fair value (continued)
In thousands of EUR
Level 1
Level 2
Level 3
Total
31 December 2013
Interest rate
-
462
-
462
Foreign exchange
-
990
-
990
18,327
4,983
-
-
18,327
4,983
---------23,310
=====
---------1,452
=====
----------=====
----------24,762
=====
-----------=====
(2,429)
(923)
----------(3,352)
=====
----------=====
(2,429)
(923)
----------(3,352)
=====
46,260
----------46,260
=====
-----------=====
2,359
6,777
---------9,136
=====
7,338
----------7,338
=====
----------=====
----------=====
2,359
53,037
----------55,396
=====
7,338
----------7,338
=====
Government Bonds
Treasury Bills
management
Interest rate
Foreign exchange
31 December 2012
6.4
Financial instruments not measured at fair value
The Bank’s financial instruments not measured at fair value comprise balances with Central Bank of
Malta, loans and advances to banks and customers, and amounts due to banks and customers.
Loans and advances to banks and customers represent the two largest asset categories. Virtually all
balances with banks and 90% of balances with customers are repriceable or mature in less than
three months. Another 7% of the loans to customers reprice or falls due in less than 12 months.
The Bank determined that fair value differences from these asset categories when compared to the
carrying amounts are immaterial. With respect to amounts owed to banks and customers, virtually
all balances mature or reprice in less than 3 months. In view of this, the fair value of the Bank’s
assets and liabilities not measured at fair value approximates their carrying amount.
7
Net interest income
Interest income
On balances with Central Bank of Malta
On loans and advances to banks
On loans and advances to customers
On debt and other financial instruments
Amortisation of premiums and discounts
Total interest income
Interest expense
On amounts owed to banks
On amounts owed to customers
On derivative financial instruments
Total interest expense
Net interest income
8
2013
2012
EUR 000
EUR 000
1
209
7,457
-----------7,667
-----------1,548
(463)
-----------1,085
-----------8,752
=====
2
1,011
10,631
-------------11,644
-------------3,320
(681)
-------------2,639
-------------14,283
======
(1,685)
(55)
(927)
-----------(2,667)
(5,755)
(116)
(1,286)
-------------(7,157)
=====
6,085
=====
======
7,126
======
Fee and commission income
Credit related fees and commission
Retail banking
Fee and commission expense
Portfolio and other management fees
Other fees paid
2013
2012
EUR 000
EUR 000
83
37
-----120
------
100
45
-----145
------
(6)
(14)
-----(20)
-----100
===
(18)
(2)
-----(20)
-----125
===
9
Net trading income
Net trading expense comprises net foreign exchange losses.
10
Net (expense)/income from financial instruments carried at fair value
Movement in fair value of derivatives
Realised gains/losses on derivatives and securities
11
2013
2012
EUR 000
EUR 000
(43)
(3,076)
----------(3,119)
=====
(229)
(873)
--------(1,103)
====
Dividend income
In 2012, dividend income was received from the liquidation of the subsidiary company VB Finance
Limited and from the investment in Mezzanine Management Central Europe Limited. No dividend
income was received in 2013.
12
Net impairment loss
(Write-downs)/Write-backs
Loans and advances to customers and banks
- specific allowances
- collective allowances
- specific allowances
Net impairment loss
2013
2012
EUR 000
EUR 000
(5,452)
798
(208)
(911)
-----------(4,654)
=====
(657)
-----------(1,776)
=====
13
Personnel expenses
Personnel expenses incurred by the Bank during the year are analysed as follows:
Directors’ emoluments:
Fees (including wages and salaries)
Other emoluments
Compulsory social security contributions
Wages and salaries
Compulsory social security contributions
Other employee – related expenses
2013
2012
EUR 000
EUR 000
132
19
2
---------153
---------904
57
39
---------1,000
---------1,153
====
126
13
2
---------141
---------970
60
29
---------1,059
---------1,200
====
The weekly average number of persons employed by the Bank during the year was as follows:
2013
2012
No.
No.
6
23
1
---30
==
8
24
1
---33
==
Executive and senior managerial
Other managerial, supervisory and clerical
Others
14
Other administrative expenses
Included in administrative expenses are fees charged by the Bank’s independent auditors for
the year as follows:
Audit
Other
Tax
Other
Services Assurance
Advisory
Non-Audit
Services
Services
Services
Auditors’ remuneration
(exclusive of VAT)
EUR 000
EUR 000
EUR 000
EUR 000
40
=====
30
=====
14
=====
6
=====
15
15.1
Tax income (expense)/income, which is based on the taxable profit for the year comprises:
Current tax
- Current year
Deferred tax
- Origination and reversal of temporary differences
15.2
2012
EUR 000
EUR 000
(408)
(308)
(1,608)
424
--------(2,016)
====
--------116
====
Tax (expense)/income for the year and the result of the accounting result multiplied by the tax rate
applicable in Malta, the Bank’s country of incorporation, are reconciled as follows:
(Loss)/Profit before tax
Tax at the applicable rate of 35%
Tax effect of:
- Effective tax rates applied to compute temporary
differences
- Depreciation charges not deductible by way of capital
allowances
- Flat rate foreign tax credit
- Exempt dividend income received
- Non-Deductible expenses
- Temporary differences not recognised in the current year
- Other
16
2013
2013
2012
EUR 000
EUR 000
(4,158)
====
2,066
====
1,455
(723)
472
(405)
(13)
(316)
(3,614)
--------(2,016)
====
(15)
1,060
205
(6)
--------116
====
Balances with Central Bank of Malta, Treasury Bills and Cash
16.1
Balances with Central Bank of Malta
- Reserve Deposit
- Other deposit
Treasury Bills
Other
Cash
2013
2012
EUR 000
EUR 000
112
48
4,983
77
290
--------5,510
====
48
13
272
--------333
====
16.2
Balances held with the Central Bank of Malta for Minimum Reserve Requirement bear an interest
rate equal to the minimum bid rate set by the European Central Bank (ECB) on its main refinancing
operations as per Regulation (EC) No 1745/2003 of the ECB of 12 September 2003.
16.3
Other deposits with Central Bank of Malta as at 31 December 2011 comprise a deposit of EUR
48,300 which is pledged in favour of the Deposition Compensation Scheme.
17
Derivatives held for risk management
Instrument type:
- Interest rate
- Foreign exchange
Instrument type:
- Interest rate
- Foreign exchange
Net derivatives held for risk management
Net derivatives held for risk management analysed as follows:
Fair value hedges of interest rate risk
Other derivatives held for risk management
2013
2012
EUR 000
EUR 000
462
990
----------1,452
=====
735
1,624
----------2,359
=====
(2,429)
(923)
-----------(3,352)
=====
(1,900)
=====
(5,726)
(1,612)
----------(7,338)
=====
(4, 979)
=====
(327)
(1,573)
----------(1,900)
=====
(4,686)
(293)
----------(4,979)
=====
Interest rate swaps are entered into with the parent company to hedge fair value risk. Forward
exchange contracts are entered into back to back with the parent company to hedge the foreign
exchange risk arising from forward contracts with customers.
17.1
Fair value hedges of interest rate risk
The Bank uses interest rate swaps to hedge its exposure to changes in the fair value of its fixed rate
available-for-sale investment securities. Interest rate swaps are matched to specific securities.
17.2
During 2012, the Bank used interest rate swaps to hedge its exposure to changes in cash flows of
its fixed rate financial assets (loans and advances to customers). No cashflow hedge accounting
was applied during 2013.
17.3
The Bank uses other derivatives, not designated in a qualifying hedge relationship, to manage its
exposure to foreign currency and interest rate risk. The instruments used include interest rate
swaps, cross-currency interest rate swaps, forward contracts and foreign currency exchange
swaps.
18
Repayable on call and at short notice
Term loans and advances: Current
Term loans and advances: Non-current
Gross loans and advances to banks
Less collective allowances for impairment
Amounts include:
Due from parent company
- unsubordinated
Collective allowance for impairment
Balance as at 1 January
Impairment loss for the year:
- Charge for the year
Balance at 31 December
2013
2012
EUR 000
EUR 000
58,558
12,301
108
--------------70,967
(10)
--------------70,957
======
4,179
96,032
--------------100,211
(3)
--------------100,208
======
61,904
======
99,297
======
(3)
(1)
(7)
--------------(10)
======
(2)
--------------(3)
======
Interest amounting to EUR205 thousand (2012: EUR891 thousand) was received from the parent
company during the year.
19
Repayable on call and at short notice
Term loans and advances: Current
Term loans and advances: Non-current
Gross loans and advances to customers
Less: Allowances for impairment
Net loans and advances to customers
Amounts include:
Due from related companies within the ÖVAG
structure – unsubordinated
2013
2012
EUR 000
EUR 000
20,733
21,486
70,144
-------------112,363
(8,219)
-------------104,144
======
20,135
71,575
290,906
-------------382,616
(3,983)
-------------378,633
======
85,367
======
======
19
Loans and advances to customers (continued)
Specific allowances for impairment
Balance at 1 January
Collective allowances for impairment
Balance at 1 January
Total allowances for impairment
2013
2012
EUR 000
EUR 000
(1,924)
(1,716)
(5,043)
-----------(6,967)
------------
(208)
-----------(1,924)
------------
(2,059)
(1,150)
808
-----------(1,251)
-----------(8,218)
=====
(909)
-----------(2,059)
-----------(3,983)
=====
Loans and advances to customers with a carrying amount of EUR4 million (2012: EUR 5 million)
where pledged against the provision of credit lines by the Central Bank of Malta.
The aggregate amount of impaired loans and advances amounted to EUR 20,112 thousand (2012:
EUR 5,076 thousand). Total interest that would have accrued on the impaired loans in the current
and preceding financial years would have amounted to EUR 1,675 thousand (2012: EUR 960
thousand). Interest income on impaired loans and advances to customers amounting to EUR 140
thousand was recognised during 2013 (2012: EUR 94 thousand).
20
Available-for-sale
Debt and other fixed income instruments
Equity and other non-fixed income instruments
- Gross
- Less specific impairment allowance
2013
2012
EUR 000
EUR 000
18,327
-----------
36,594
------------
----------18,327
----------18,327
=====
18,725
(2,282)
-----------16,443
-----------53,037
=====
20
Investment securities (continued)
Debt instruments with a carrying amount of EUR18.327 million (2012: EUR39.387 million) have
been pledged against the provision of credit lines by the Central Bank of Malta. At 31 December
2013, no amounts were outstanding against these credit lines.
In 2012, the Bank had a callable commitment of EUR1.459 million on one of its equity instruments.
The fair value amount invested stood at EUR2.596 million. No callable commitments existed as at
31 December 2013.
In 2012, debt instruments with a carrying amount of EUR4.180 million were issued by indirect
shareholders. All these instruments were disposed, and no such instruments were held as at 31
December 2013.
During 2012, a specific impairment allowance amounting to €656,921 was recognised in profit or
loss on equity and other non-fixed income instruments. This amount was transferred from
revaluation reserve. No specific impairment allowances or charges were recorded with respect to
the debt securities portfolio for the year ended 31 December 2013.
20.1
Debt and other fixed income instruments
Issued by other issuers
- foreign banks
- others
Listing status
- listed
- unlisted
- subordinated
- unsubordinated
At 1 January
Amortisation
Acquisitions
Redemptions
Fair value adjustments
At 31 December
2013
2012
EUR 000
EUR 000
18,327
---------18,327
=====
2,180
34,414
---------36,594
=====
18,327
-----------18,327
=====
34,414
2,180
-----------36,594
=====
18,327
-----------18,327
=====
2,180
34,414
-----------36,594
=====
36,594
(528)
(18,149)
410
-----------18,327
=====
75,644
(771)
(39,320)
1,041
-----------36,594
=====
20
Investment securities (continued)
20.2
Equity and other non-fixed income instruments
Issued by
- foreign banks
- others
Listing status
- listed on foreign stock markets
- foreign unlisted
-subordinated
-unsubordinated
At 1 January
Amortisation
Acquisitions
Redemptions
Fair value adjustments
Impairment
At 31 December
21
2013
2012
EUR 000
EUR000
----------=====
10,622
5,821
----------16,443
=====
----------=====
11,847
4,596
----------16,443
=====
----------=====
8,245
8,198
----------16,443
=====
16,443
65
(16,121)
(387)
-----------=====
17,117
90
(1,986)
1,879
(657)
-----------16,443
=====
Name of the
Company
VB Finance Limited
ÖVAF Finance
(Jersey) Limited
Incorporated
in
Malta
Jersey
Nature of
Business
IT Services
Investment
Company
Equity Interest
2013
%
100
2012
%
100
100
2013
EUR 000
_____
0
=====
2012
EUR 000
70
_____
70
=====
21
Investment in subsidiaries (continued)
21.1
VB Finance Limited has been struck off the Registry of Companies on 27 November 2012. Upon
liquidation a dividend of EUR588 thousand was received by the Bank.
21.2
ÖVAG Finance (Jersey) Limited was disposed of on 13 March 2013. Upon transfer of shares, a
payment of EUR70 thousand was received by the Bank.
22
Improvement
to premises
Motor
Vehicles
Furniture
and fittings
Equipment
Total
In thousands of euro
Cost
Balance at 1 January 2012
Additions
Disposals
Balance at 31 December 2012
Additions
Disposals
Accumulated depreciation
and impairment losses
Depreciation for the year
Disposals
Depreciation for the year
Disposals
Carrying amounts
679
154
(2)
-----------831
-----------831
3
(1)
-----------833
------------
232
6
(40)
---------198
---------198
29
(40)
---------187
----------
339
50
(2)
----------387
----------387
4
(1)
----------390
-----------
724
14
(6)
---------732
---------732
71
(8)
---------795
----------
1,974
224
(50)
-----------2,148
-----------2,148
107
(50)
-----------2,205
------------
526
107
(2)
-----------631
-----------631
66
(1)
-----------696
------------
149
34
(23)
---------160
---------160
26
(8)
---------178
----------
218
35
(2)
----------251
----------251
37
(1)
----------287
-----------
608
89
(5)
---------692
---------692
32
(40)
---------684
----------
1,501
265
(32)
-----------1,734
-----------1,734
161
(50)
-----------1,845
------------
153
====
200
====
137
====
83
===
38
===
9
===
121
===
136
===
103
===
116
===
40
===
111
===
473
====
414
====
360
====
There were no capitalised borrowing costs related to the acquisition of property and equipment as at
the reporting date.
23
Intangible assets
Cost
Additions
1,355
24
----------1,379
=====
1,379
3
----------1,382
=====
Additions
Accumulated amortisation and impairment losses
Amortisation for the year
Amortisation for the year
Carrying amounts
1,270
68
----------1,338
=====
1,338
23
----------1,361
=====
85
=====
41
=====
21
=====
There were no capitalised borrowing costs related to the acquisition of intangible assets as at the
reporting date.
24
Deferred tax assets and liabilities
24.1
Deferred tax assets and liabilities are attributable to the following:
Assets
Impairment allowance
and other provisions
Fair value movements on
financial instruments:
- at fair value through
profit or loss
- available-for-sale
Net tax assets
24.2
Liabilities
Net
2013
2012
2013
2012
2013
2012
EUR 000
-
EUR 000
EUR 000
-
EUR 000
EUR 000
-
EUR 000
-
--------====
1,618
12
246
--------1,876
====
(23)
-
-
-
-
(702)
---------(725)
====
---------====
---------====
(23)
1,618
12
(456)
---------1,151
====
Movement in temporary differences during the year
2013
Fair value movements on financial
instruments
- at fair value through profit or loss
2012
Fair value movements on financial
instruments
- at fair value through profit or loss
Balance at
1 January
Recognised
in profit or
loss
Recognised in
other
comprehensive
income
Balance at 31
December
EUR 000
EUR 000
EUR 000
EUR 000
(23)
23
-
-
1,618
(1,618)
-
12
(456)
---------1,151
====
(12)
456
---------(1,151)
====
---------====
---------====
(36)
13
-
(23)
1,219
399
-
1,618
(106)
---------1,077
====
12
---------424
====
(350)
---------(350)
====
12
(456)
---------1,151
====
-
24
Deferred tax assets and liabilities (continued)
24.3
Unrecognised deferred tax liabilities
As at 31 December 2013, there was a deferred tax liability of EUR 85 thousand (2012: EUR NIL)
related to fair value movements on available for sales financial instruments. In view of the
amount of unrecognised deferred tax assets and expected tax losses in the near future,
management is satisfied that the liability will not be incurred in the foreseeable future.
24.4
Unrecognised deferred tax assets
Deferred tax assets on deductable temporary differences of EUR 3,614 thousand (2012: EUR
NIL) have not been recognised because it is not probable that future taxable profit will be
available against which the Bank can use the benefits therefrom.
25
Accrued income
Prepayments
26
2013
2012
EUR 000
EUR 000
1,211
365
---------1,576
====
1,659
413
---------2,072
====
2013
2012
EUR 000
EUR 000
10,386
165
-------------10,551
======
252,769
79,997
-----------332,766
======
2,546
======
332,293
======
Term deposits
Repayable on demand
Amounts include:
- due to related companies
Interest amounting to EUR5.664 million (2011: EUR6.997 million) was charged by the parent
company during the year.
27 Amounts owed to customers
Term deposits
Repayable on demand
Amounts include:
- due to related parties
2013
2012
EUR 000
EUR 000
7,680
2,891
----------10,571
=====
3,956
14,601
------------18,557
=====
15
=====
74
=====
Amounts owed to related parties comprise deposits by the Bank’s subsidiary (in 2012) and key
management personnel.
28
Accrued interest
Other
2013
2012
EUR 000
EUR 000
348
522
842
136
------870
===
---------978
====
Accrued interest include EUR329 thousand (2012: EUR328 thousand) payable to the parent
company.
29
Other liabilities
Bills payable
Other
2013
2012
EUR 000
EUR 000
101
77
---------178
====
121
112
---------233
====
30
Provisions
Severance
Payment
Provisions made during the year
Provisions used during the year
Provisions reversed during the year
58
------58
===
Severance payments provision is provided and calculated in accordance with ÖVAG Group
guidelines.
31
Capital and Reserves
31.1
Share capital
Authorised
Ordinary ‘A’ shares of EUR72.7
Ordinary ‘B’ shares of EUR1,816.8
Issued and fully paid up
Ordinary ‘A’ shares of EUR72.7
2013
2012
No. of shares
EUR 000
EUR 000
2,500,000
20,000
--------------2,520,000
=======
181,750
36,336
------------218,086
======
181,750
36,336
------------218,086
======
2,308,400
=======
167,821
======
167,821
======
Both classes of ordinary shares rank equally in the distribution of ordinary dividend. In addition,
Ordinary ‘B’ Shares will be entitled to a dividend of eight per cent (8%) on a non-cumulative
basis.
The bank decreased its issued ordinary share capital on 1 January 2014 (refer to note 39.1)
31.2
Capital contributions are advances by the parent company to enable the Bank finance its
investment in subsidiary. These contributions are unsecured, interest free and payable at the
option of the Bank.
31.3
Revaluation reserve
The revaluation reserve comprises the cumulative net change in fair value of available-for-sale
assets held by the Bank, net of tax.
31
Capital and Reserves (continued)
31.4
Dividends
During the year, the Company did not pay interim dividends (2012: NIL).
31.5
Reserve for General Banking Risks
In accordance with the Revised Banking Rule BR/09/2013, credit institutions are required to
maintain a Reserve for General Banking Risks against non-performing loans to create an
additional Pillar II capital buffer. In view of the Bank’s loss for the year, the reserve has been
created out of prior year retained earnings. As at the reporting date, the reserve amounted to
EUR369 thousand. This reserve, which is distributable subject to the formal consent of the
Banking Regulator, represents 40% of the regulatory allocation applicable by virtue of paragraph
38 of the Banking Rule. The remaining 60% will be set split and set aside equally over a period
of two years in terms of the Banking Rule.
32
Earnings per share
The calculation of basic earnings per share at 31 December 2013 was based on the loss
attributable to ordinary shareholder of EUR 6,174 million (2012: profit of EUR 2,182 million) and
a weighted average number of ordinary shares outstanding of 2,308,400 (2012: 2,308,400).
33
Cash and Cash Equivalents
33.1
Balances of cash and cash equivalents as shown in the statement of financial position are
analysed below:
Analysis of balances of cash and cash equivalents:
Cash
Other deposits
Cash and Cash Equivalents
Adjustment to reflect balances with contractual
maturity of more than three months
2013
2012
EUR 000
EUR 000
68,998
290
124
(10,551)
-----------------58,861
86,227
272
13
(326,119)
-----------------(239,607)
2,071
----------------
7,382
----------------
60,932
=======
(232,225)
=======
33
Cash and Cash Equivalents (Continued)
Analysed in the statement of financial position or
notes as follows:
Cash
Balances with Central Bank of Malta
Other deposits
2013
2012
EUR 000
EUR 000
290
161
75
70,957
(10,551)
----------------60,932
=======
272
48
13
100,208
(332,766)
----------------(232,225)
=======
33.2
Movement in assets not recognised as cash and cash equivalents above are shown gross of
movements in provisions for collective allowances (see note 18).
34
Operating leases
Non-cancellable operating lease rentals relating to the Bank’s premises are payable as follows:
Less than one year
Between one and five years
More than five years
35
2013
2012
EUR 000
EUR 000
145
97
90
------332
===
150
227
105
------482
===
Capital commitments
At the reporting date the Bank had the following capital commitments in respect of acquisition
of property and equipment and intangible assets:
Authorised but not contracted for
36
2013
2012
EUR 000
EUR 000
234
===
158
===
Contingent liabilities represent unsecured guarantee obligations incurred on behalf of third
parties. The Bank holds other cash secured guarantee obligations amounting to €242 thousand.
37
Financial Commitments
2013
2012
EUR 000
EUR 000
7,268
=====
11,246
=====
Undrawn formal standby facilities, credit facilities
and other commitments to lend
38
Related Parties
38.1
Parent and ultimate controlling party
The immediate parent company of Volksbank Malta Limited is Österreichische Volksbanken AG,
which is incorporated and registered in Austria, the registered address of which is, Kolingasse
14-16, 1090 Vienna, Austria.
38.2
Transactions with key management personnel
Key management personnel and their immediate relatives have transacted with the Bank during
the year as follows:
2013
2012
Mortgage lending and other secured loans
Credit card
Other loans
Maximum
balance
Closing
balance
Maximum
balance
Closing
balance
EUR 000
EUR 000
EUR 000
EUR 000
520
6
56
520
9
542
3
44
528
11
Interest rates on balances outstanding from related parties are charged on an arm’s length
transaction basis. The mortgages and secured loans granted are secured over property of the
respective borrowers. Other balances are not secured and no guarantees have been obtained.
Loans and advances to directors and key management personnel as at 31 December 2013
amounted to EUR529 thousand (2012: EUR539 thousand). These are included in “loans and
advances to customers”. Effective interest is charged at 1.74% per annum and amounted to
EUR9 thousand for the year ended 31 December 2013.
Deposits by directors and companies under their control and key management personnel as at
31 December 2013 amounted to EUR15 thousand (2012: EUR22 thousand) and are included in
“amounts owed to customers”.
During the financial year ended 31 December 2013, the Bank acquired supplies from a company
owned and controlled by a director of the Bank amounting to EUR1 thousand (2012: EUR25
thousand). Conversely, no services have been used from companies owned and controlled by
immediate relatives of directors (2012: EUR1 thousand).
38
Related Parties
38.2
Transactions with key management personnel
In addition to their salaries, the Bank also provides non-cash benefits to directors and executive
officers in the form of use of car.
Directors’ compensations are disclosed in note 13 to these financial statements.
Total remuneration payable to key management personnel amounting to EUR240 thousand
(2012: EUR188 thousand) is included in “personnel expenses” (see note 13).
38.3
Other related party transactions
Administrative expenses
Administrative expenses include management fees amounting to EUR249 thousand (2012:
EUR245 thousand) charged by the parent, exclusive of VAT.
Net fees and commission income
Net fees and commission income include EUR4 thousand (2012: EUR6 thousand) charged by
the parent company.
Net interest income
Net interest income includes EUR652 thousand (2012: EUR2,265 thousand) interest income
from the parent and affiliated companies and EUR3,103thousand (2012: EUR6,949 thousand)
interest expense paid to the parent and affiliated companies.
38.4
Related party balances
Information on amounts due to/by related parties within the ÖVAG structure are set out in notes
17, 18, 19, 21, 25, 26, 27 and 28 to these financial statements. Amounts due to/by directors,
key management personnel, close members of the family of directors and key management
personnel and company controlled by a director of the Bank are disclosed in note 38.2.
39
Events subsequent to the date of the statement of financial position
39.1
Reduction in share capital
As part of the process involving its sale, the Bank has transferred all of its foreign business to its
parent company, which in turn resulted in a decrease in risk weighted assets.
As a result, the Bank resolved to decrease its issued share capital from EUR 167.8 million to
€55 million. Following approval by the MFSA, the reduction came into effect on 1 January 2014.
39.2
Bidding process
The Bank has continued with the process of selling the Bank. The process has not been
concluded as at the date of these financial statements.
Independent Auditors’ Report
Appendix
Additional Disclosures in accordance with
the requirements of Banking Rule 07
78
Income statement - 5 year summary
80
Statement of Financial Position - 5 year summary
81
Statement of Cash Flows - 5 year summary
82
Accounting Ratios - 5 year summary
83
Additional Disclosures in Accordance with the
Requirements of Banking Rule 07
31 December 2013
Introduction
In accordance with Banking Rule 07 (BR/07), “Publication of Annual report and Audited Financial
Statements”, the Bank has prepared this report which contains Pillar 3 disclosures, which are
listed in paragraphs 3 and 4 of Appendix 2 Part 2 of BR/07. It is to be noted that the Bank
qualifies under the significant subsidiary of a European Economic Area credit institution and thus
the full additional disclosures of Appendix 2 of BR/07 are compiled by the parent credit institution
(ÖVAG) on the basis of the consolidated financial statements.
Consistent with the banking regulations, these disclosures are not subject to external audit
except where they are equivalent to those prepared under International Financial Reporting
Standards requirements in the Bank’s Annual Report (particularly Note 4 – Financial Risk
Management). These disclosures have been appropriately verified internally by the Bank’s Risk
Manager.
Internal Capital Adequacy Assessment Process
The Internal Capital Adequacy Assessment Process (ICAAP) requires banks to take all necessary
measures to guarantee at all times that there are sufficient capital resources for current business
activities and those planned for future as well as the associated risks. Internal methods and
procedures developed by the banks may be used for this purpose. The size and complexity of
the business activities plays a key role in the design of the strategies, methods and systems
required for implementing the ICAAP.
The ICAAP is a revolving management circuit which starts with defining risk strategy, identifying,
quantifying and aggregating risks, determining risk-bearing ability, allocating capital, establishing
limits and leads to ongoing risk monitoring. The individual elements of the circuit are performed
with varying regularity. All the activities described in the circuit are examined at least once a year
to ensure that they are up to date, adequate and also adjusted to current underlying conditions
when necessary.
The process involves both a quantitative assessment of individual types of risk and an
assessment of the existing methods and systems for monitoring and managing risks (qualitative
assessment). The risk assessment concept is used on a scoring procedure, thus providing a
comprehensive overview of the risk situation of the Bank.
The basis for the quantitative implementation of the ICAAP is the risk bearing capacity calculation
which demonstrates that adequate capital is in place at all times to provide sufficient cover for
risks that have been entered into and which also ensures such cover is available for the future.
For this purpose, firstly all individual risks are aggregated into a total bank risk. The existing
previously-defined risk-covering capital is then compared with this total bank risk. In the course
of the risk monitoring process, compliance with the defined limits is monitored, the risk-bearing
ability is calculated and the annual ICAAP Report is produced.
Standardised Approach
Following the formation in Austria of a “Kreditinstitute-Verbund” (Association with a joint liability
and joint funding scheme) in accordance with section 30a, Austrian Banking Act, ÖVAG and its
subsidiaries switched from the F-IRB approach to the Standardised Approach, whilst leaving
leave all risk management systems "IRB fit".
Additional Disclosures in Accordance with the
Requirements of Banking Rule 07 (Continued)
31 December 2013
Remuneration Report
Remuneration Policy
The Managing Director, as the Head of Human Resources of the Bank, is responsible for making
recommendations to the Board on the Bank’s remuneration policy and, within the terms of the
agreed policy and the Staff Rules and Procedures, making recommendations for the individual
remuneration packages of all staff members.
Remuneration of the Board of Directors
The Directors of the Bank are remunerated as follows:
(a) Board Members who are employees of ÖVAG or any one of its subsidiaries have their
compensation determined by their employer and may receive any additional compensation
from Volksbank Malta Limited for serving as Board Members. Executive Directors who are
employed with Volksbank Malta Limited are not eligible to receive a performance-related
bonus. Board Members who are employed with ÖVAG or other subsidiaries of ÖVAG,
except Volksbank Malta Limited, may receive additional remuneration and such remuneration
is outside the scope of the Remuneration Policy of Volksbank Malta Limited.
(b) Board Members who are not full-time employees of ÖVAG or any of its subsidiaries are
engaged as directors (i) on a contractual basis, (ii) for a definite time period, (iii) receive a fixed
fee and (iv) are not remunerated further by any type of incentive- or performance-based
remuneration. The said fixed fee is a nominal fixed remuneration not dependant on the
Bank’s performance. No additional fees are payable for chairing the Board, chairing of
committees, for attending meetings or for bank-related work engaged after the election to
director. This remuneration is determined by the shareholders by means of an extraordinary
resolution that is normally approved during the Annual General Meeting of the Bank.
Remuneration of the Executive Officers
The Executive Officers must not receive any performance related pay from Volksbank Malta
Limited. The Managing Director is employed by ÖVAG and may receive additional remuneration
(non-performance-related) which is outside the scope of the Remuneration Policy of Volksbank
Malta Limited.
Income Statement - 5 Year Summary
31 December 2013
Interest income
Interest expense
Net interest income
Fees and commissions income
Fees and commissions expense
Net (loss)/gain from financial
instruments carried at fair value, net
trading (expense)/income and net
gain on transfer of syndicated loans
Dividend income
Other operating income
Operating income
Net impairment loss
Other expenses inclusive of
personnel expenses and operating
lease expenses
Depreciation and amortisation
Profit before tax
Tax income/(expense)
Profit for the year
2013
2012
2011
2010
2009
2008
EUR 000
EUR 000
EUR 000
EUR 000
EUR 000
EUR 000
8,752
(2,667)
----------6,085
-----------
12,997
(5,871)
----------7,126
-----------
16,518
(7,594)
----------8,564
-----------
14,950
(7,951)
----------6,999
-----------
20,670
(12,655)
----------8,015
-----------
45,773
(33,397)
----------12,376
-----------
120
(20)
--------100
---------
145
(20)
----------125
-----------
149
(25)
----------124
-----------
185
(43)
----------142
-----------
128
(14)
----------114
-----------
168
(45)
----------123
-----------
(2,834)
0
34
---------(2,800)
--------3,385
(1,140)
689
6
----------(445)
----------6,806
109
109
10
----------228
----------8,916
283
0
38
----------321
----------7,462
(338)
312
23
----------(3)
----------8,126
(26)
288
14
----------276
----------12,775
(4,654)
(1,776)
(1,466)
(946)
(1,091)
(358)
(2,704)
(185)
-----------(4,158)
(2,632)
(332)
----------2,066
(2,613)
(325)
----------4,512
(2,312)
(322)
----------3,882
(2,382)
(329)
----------4,324
(2,573)
(316)
----------9,528
(2,016)
----------(6,174)
=====
116
----------2,182
=====
(251)
----------4,261
=====
(617)
----------3,265
=====
(616)
----------3,708
=====
(841)
----------8,687
=====
Statements of Financial Position - 5 Year Summary
31 December 2013
Assets
management
Investments securities
Investments in subsidiaries
Intangible assets
Deferred tax assets
Tax recoverable
Other assets
Total assets
Liabilities and equity
Liabilities
management
Current tax payable
Other liabilities
Provisions
Equity
Called up issued share capital
Retained earnings
Reserve for general banking risks
Revaluation reserve
Total equity and liabilities
Memorandum items
Commitments
2013
2012
2011
2010
2009
2008
EUR 000
EUR 000
EUR 000
EUR 000
EUR 000
EUR 000
5,510
333
652
704
20,720
1,072
1,452
70,957
104,144
18,327
360
21
153
1,576
5
------------202,505
=====
2,359
100,208
378,633
53,037
70
414
41
1,151
2,072
5
------------538,323
======
4,377
126,449
414,301
92,761
1,070
473
85
1,077
3,148
10
------------644,403
======
4,135
159,264
400,964
95,724
1,000
662
141
400
2,563
8
------------665,565
======
514
140,271
470,655
90,510
1,000
841
196
358
114
2,605
8
------------727,792
======
6,509
342,218
457,194
67,951
1,000
953
186
771
118
6,990
8
------------884,970
======
3,352
10,551
10,571
870
178
58
-----------25,580
------------
7,338
332,766
18,557
356
978
233
58
-------------360,286
--------------
9,196
442,275
16,310
1,045
1,710
559
50
-------------471,145
--------------
6,121
444,438
35,075
748
1,649
673
42
-------------488,746
--------------
2,447
515,208
30,280
1,219
2,916
567
36
------------552,673
-------------
8,599
658,924
39,673
1,454
5,211
839
30
------------714,730
-------------
167,821
70
8,422
167,821
70
14,965
167,821
70
12,783
167,821
12,022
167,821
11,557
167,821
11,649
369
243
------------176,925
------------202,505
======
(4,819)
------------178,037
------------538,323
======
(7,416)
------------173,258
------------644,403
======
(3,024)
------------176,819
------------665,565
======
(4,259)
------------175,119
------------727,792
======
(9,230)
------------170,240
------------884,970
======
23
=====
5,635
=====
6,193
=====
4,939
=====
12,749
=====
14,054
=====
7,268
=====
11,246
=====
17,487
=====
18,109
=====
22,430
=====
24,983
=====
Statements of Cashflows - 5 Year Summary
31 December 2011
Cash flows from operating activities
Interest and commissions receipts
Interest and commission payments
Dividend Income
Proceeds from foreign exchange activities
Payments to employees and suppliers
Operating profit before changes in operating
assets/liabilities
(Increase)/decrease in operating assets:
Reserve deposit with Central Bank of Malta
Trading financial instruments
Other receivables
Increase/(decrease) in operating liabilities:
Other payables
Cash (absorbed by)/generated from operating
activities
Tax paid
Net cash flows (used in)/from operating
activities
Cash flows from investing activities
Capital contribution provided to subsidiary
Proceeds from winding down of subsidiary
Proceeds on maturity of investment security
Net outflows from derivative instruments
Proceeds on disposal of available-for-sale
instruments
Purchase of available-for-sale instruments
Net outflows from treasury bills
Purchase of intangible and tangible assets
Net cash flows (used in)/from investing
activities
Cash flows from financing activities
Dividends paid
Capital contributions received from parent
Net cash used in financial activities
Increase/(decrease) in cash and cash
equivalents
Effect of exchange rate changes on cash and
cash equivalents
Net increase/(decrease) in cash and cash
equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
2013
2012
2011
2010
2009
2008
EUR 000
EUR 000
EUR 000
EUR 000
EUR 000
EUR 000
9,919
(3,287)
(22)
(2,704)
------------
14,918
(6,588)
689
(37)
(2,679)
--------------
17,694
(7,933)
109
304
(3,269)
--------------
17,216
(9,224)
145
(3,486)
-----------
28,294
(19,279)
312
89
(1,003)
-----------
44,307
(32,340)
288
696
(3,671)
-----------
3,906
6,303
6,905
4,651
8,413
9,280
(112)
12,026
270,595
-
300
(11,103)
(34,551)
5
31
111,219
(14,802)
(2)
66
(12,236)
68,747
-
253
3,385
(13,106)
-
24,339
58,097
18,079
1,184
16
(6,647)
(7,986)
(57)
------------
(100,269)
2,247
(325)
--------------
88,844
(18,765)
(114)
--------------
(6,521)
4,795
116
-------------
(4,317)
(9,393)
(272)
-----------
(99,608)
7,369
392
-------------
271,725
(917)
------------
(68,291)
(997)
--------------
173,316
(680)
--------------
59,618
(1,197)
-------------
(15,037)
(708)
-----------
19,148
(1,190)
--------------
270,808
-----------
(69,288)
--------------
172,636
--------------
58,421
-------------
(15,745)
-----------
17,958
--------------
70
5,000
(1.617)
1,000
40,390
-
(70)
22,740
-
28,185
-
18,378
-
3,235
-
29,273
(4,983)
(101)
-------------
-
(22,407)
(32,662)
2,490
(40,356)
7,767
(14,784)
(223)
--------------
(79)
--------------
(88)
-------------
(227)
-----------
(818)
------------
27,642
-------------
41,167
--------------
184
--------------
(4,565)
-------------
(19,715)
-----------
(4,600)
-------------
-------------------------
---------------------------
(3,500)
70
-------------(3,430)
--------------
(2,800)
------------(2,800)
-------------
(3,800)
----------(3,800)
-----------
(7,100)
----------(7,100)
-----------
298,450
=====
28,121
======
169,390
======
51,056
======
(39,260)
======
6,258
======
(141)
40
159
22,412
284
20,440
298,591
-------------298,450
(239,607)
------------58,853
======
(28,081)
-------------(28,121)
(211,486)
-------------(239,607)
======
169,231
-------------169,390
(380,876)
-------------(211,486)
======
28,644
-------------51,056
(431,932)
-------------(380,876)
======
(39,544)
-----------(39,260)
(392,672)
------------(431,932)
======
(14,182)
------------6,258
(398,930)
------------(392,672)
======
Accounting Ratios - 5 Year Summary
31 December 2013
2013
2012
2011
2010
2009
2008
%
%
%
%
%
%
1.7
1.4
(2.1)
(2.4)
(3.5)
1.3
0.6
0.4
1.2
1.2
1.3
0.5
0.7
2.6
2.5
1.1
0.4
0.6
2.2
1.8
1.1
0.4
0.6
2.5
2.1
1.4
0.3
1.1
5.6
5.1
2013
2012
2011
2010
2009
2008
Shares in issue (thousands)
2,308.4
2,308.4
2,308.4
2,308.4
2,308.4
2,308.4
Net assets per share (EUR)
76.6
77.1
75.1
76.6
75.9
73.7
(2.67)
0.9
1.8
1.4
1.6
3.8
Dividends per share (EUR)
-
-
1.5
1.2
1.7
3.1
Dividend cover
-
-
1.2
1.2
1.0
1.2
Net interest income and other operating
income to total assets
Operating expenses to total assets
Profit before tax to total assets
Profit before tax to equity
Profit after tax to equity
Earnings per share (EUR)
Imprint
Published by:
Volksbank Malta Limited
53 Dingli Street
Sliema SLM 1902
Malta
Company Registration Number: C 30432
Tel.: +356 2777 7777
Fax: +356 2133 6090
Web: www.volksbank.com.mt
Email: info@volksbank.com.mt
Photography/Design:
Netty Skok-Farrugia

pdf Volksbank Malta Ltd Annual Report 31 December 2013

Transcription

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