Annual Report 2012 Banka Celje, d.d., and the Banka Celje Group

Transcription

Annual Report 2012
Banka Celje, d.d., and the Banka Celje Group
Celje, April 2013
Banka Celje, d.d., and the Banke Celje Group
Annual Report 2012, prepared in accordance with
International Financial Reporting Standards, as adopted by the European Union.
2
CONTENT
A WORD BY THE PRESIDENT OF THE MANAGEMENT BOARD
REPORT OF THE SUPERVISORY BOARD OF BANKA CELJE, d.d.
I
BUSINESS REPORT
1
2
3
4
5
6
7
8
9
10
11
II
HIGHLIGHTS
PRESENTATION
STRATEGY
SIGNIFICANT EVENTS
ECONOMIC AND BANKING ENVIRONMENT
5.1
Economic environment
5.2
Banking environment
REPORT ON THE OPERATIONS IN 2012
6.1
Financial results
6.2
Financial position
6.3
Operations according to key sectors
6.4
Shareholder information
6.5
Assuming and managing banking risks
6.6
Development
6.7
Social and environmental responsibility
6.8
Internal Audit Department operations
MANAGING BODIES OF THE BANK
ORGANIZATIONAL STRUCTURE OF THE BANK
STATEMENT OF CORPORATE GOVERNANCE
STATEMENT OF MANAGEMENT’S RESPONSIBILITIES
REPORT OF THE AUDITORS
FINANCIAL STATEMENTS
1
2
3
4
5
INCOME STATEMENT
STATEMENT OF COMPREHENSIVE INCOME
STATEMENT OF FINANCIAL POSITION
STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY
STATEMENT OF CASH FLOWS
NOTES TO THE FINANCIAL STATEMENTS
1
2
GENERAL INFORMATION
SIGNIFICANT ACCOUNTING POLICIES
2.1
Declaration of Conformity
2.2
Basis of preparation of financial statements
2.3
Comparative figures
2.4
Investments in subsidiaries
2.5
Consolidation
2.6
Foreign currency translation
2.7
Interest income and expenses
2.8
Fee and commission income
2.9
Dividend income
2.10
Financial instruments
2.11
Impairment of financial assets
2.12
Offsetting
2.13
Sale and repurchase agreements
2.14
Cash and cash equivalents
2.15
Accounting for leases
2.16
Investment property
2.17
Property and equipment
2.18
Intangible assets
2.19
Inventories
2.20
Taxes
2.21
Employee benefits
2.22
Loans taken, deposits and debt securities issued
2.23
Provisions
2.24
Financial guarantees
2.25
Performance guarantees
2.26
Share capital
2.27
Segment reporting
2.28
Adoption of new or revised standards and interpretations
2.29
Critical accounting estimates and judgements
5
6
11
11
12
13
14
15
15
15
16
16
18
20
25
26
30
31
32
33
34
35
40
41
45
45
46
47
48
49
51
51
51
51
51
51
51
52
52
52
52
52
52
54
55
56
56
56
56
56
57
57
57
57
57
57
58
58
58
58
58
61
3
3
4
5
6
4
NOTES TO INCOME STATEMENT
3.1
Net interest and similar income
3.2
Dividend income
3.3
Net fee and commission income
3.4
Gains less losses from financial assets and liabilities
not classified at fair value through profit or loss
3.5
Gains less losses from financial assets and liabilities held for trading
3.6
Gain less losses from financial assets and liabilities
designated at fair value through profit or loss
3.7
Changes in fair value from hedge accounting
3.8
Net other operating (loss) / income
3.9
Administrative expenses
3.10
Amortisation and depreciation
3.11
Provisions
3.12
Impairment charges
3.13
Income tax expense
3.14
Basic and diluted earnings per share
NOTES TO STATEMENT OF FINANCIAL POSITION
4.1
Cash and balances with the Central Bank
4.2
Held for trading financial assets
4.3
Financial assets designated at fair value through profit or loss
4.4
Available for sale financial assets
4.5
Loans and advances to banks
4.6
Loans and advances to customer
4.7
Other financial assets
4.8
Held to maturity investment
4.9
Hedging derivatives
4.10
4.11
Investment property
4.12
Intangible assets
4.13
Investments in subsidiaries
4.14
Income tax assets
4.15
Other assets
4.16
Deposits from Central Bank
4.17
Held for trading financial liabilities
4.18
Financial liabilities designated at fair value through profit or loss
4.19
Financial liabilities at amortised cost – deposits from banks
4.20
Financial liabilities at amortised cost – due to customers
4.21
Financial liabilities, measured at amortised cost – borrowings from banks
4.22
Financial liabilities at amortised cost – borrowing from customers
4.23
Debt securities
4.24
Subordinated liabilities
4.25
Other financial liabilities
4.26
Derivatives - hedge accounting
4.27
Provisions
4.28
Other liabilities
4.29
Share capital
4.30
Dividend per share
4.31
Contingent liabilities and commitments
4.32
4.33
Related party transactions
4.34
Information on the results of organisational units abroad
4.35
Events after reporting date
RISK MANAGEMENT
5.1
Credit risk
5.2
Market risk
5.3
Liquidity risk
5.4
Capital and capital adequacy
5.5
Fair value of financial assets and liabilities
SEGMENT REPORTING
62
62
62
63
63
63
64
64
64
65
65
66
66
66
67
67
67
67
68
68
69
70
71
72
72
73
75
76
78
78
79
80
80
80
81
82
83
83
84
84
85
85
86
88
88
90
90
91
92
97
97
97
98
115
121
124
127
130
A WORD BY THE MANAGEMENT BOARD OF BANKA CELJE, d.d.
2012 passed with macroeconomic conditions deteriorating in Slovenia as well as the rest of the world. In spite of the deepening
economic crisis and the increasing lack of confidence in the financial markets, the Bank's operations were stable and it retained its
significant role in the Slovenian banking environment.
Using new commercial approaches we endeavoured to establish and continuously enjoy the trust we are shown by our business
partners, however the economic recession hit a large number of our clients and worsened the quality of our credit portfolio. An
increase in the number of insolvency proceedings in the real economy resulted in an increased volume of impairment charges and
provisions formed, coming in at an amount of EUR 63.6 million. With this we improved the coverage of the portfolio with impairments,
thus contributing to a greater stability of the Bank, however the year-end result consequently came in negative. Despite the above, we
were able to preserve good operational and structural liquidity and further increase cost efficiency.
With improved cost efficiency and on the basis of a few one-time events, we were able to achieve a better operational result before
provisions than in 2011.
At the Bank, we are aware of the need for safety of operations, which is why we carefully monitor the amount of capital. In 2012,
using internal measures, we achieved a ratio of capital adequacy of 13.01% and the core capital ratio of 9.33%. We redeemed part of
the innovative and subordinated financial instruments early and eliminated two share classes with the support of our shareholders.
During the past year, we successfully concluded activities related to the SEPA payment operations and modernized electronic banking
for corporate entities, which we offered to our clients as an improved product in March of the current year.
To more effectively recover bad debt we established a work group at the Bank to more intensively monitor non-performing loans and
recovery activities. In 2012 the work group was very active already, with the results of its efforts anticipated in the coming years due to
the lengthy rescheduling procedures, financial reconstructions, bankruptcies or execution proceedings.
We are actively entering the real estate market, as we intend to offer partners and real estate project investors, who are in trouble,
additional expert services. We have designed a special unit, i.e. the “real estate point”, where clients can obtain answers to all their
queries in one place.
Which objectives are we going to be following in 2013?
We will strengthen the business cooperation with the non-banking sector and direct much attention to decreasing bad debt and the
volume of non-performing loans. The approach to the decreasing of bad debt that we will select, shall depend on the form in which
new legislative measures, pertaining to the elimination of the credit crunch and the solution of the problem of bad debt in the banking
system, will be introduced. In addition to the recovery of bad debt, we will of course also work on finding new business opportunities,
which will bring in new income. However, the strengthening of the Bank's capital remains an extremely important task.
Respected business partners, shareholders and co-workers, speaking in the name of the Management Board, I would like to express my
appreciation for the trust you have shown us and for your good cooperation.
Dušan Drofenik, M.Sc.
President of the Management Board
5
REPORT OF THE SUPERVISORY BOARD OF BANKA CELJE, d.d.
The framework of the Supervisory Board's operations and its responsibilities as well as its obligations is determined by the applicable
legislation (the Banking Act, the Companies Act, the Regulation on the diligence of members of the management and supervisory
boards of banks and savings banks) and the Bank's internal acts (the Articles of Association and the Rules of procedure related to the
operations of the Supervisory Board and its committees) as well as other legal norms, which pertain to the Bank's operations.
In its decision-making process during 2012, the Supervisory Board was supported by the Audit Committee.
Operations of the Supervisory Board
At the 26 General Meeting of Shareholders in May 2011 a new Supervisory Board of the Bank was elected, comprising: Jure Peljhan,
Ph.D., as President, Zvonko Ivanušič, M.Sc., as Vice-President and with the following members: Uroš Čufer, Ph.D., Melita Malgaj, Tomaž
Subotič, Ph.D., Bojan Šrot, and Zdenko Zanoški, M.Sc. The Supervisory Board members’ term of office expires on fourth anniversary of
their election, being the General Meeting of Shareholders in 2015. On March 20, 2013 Uroš Čufer, Ph.D., resigned from his position as
member of the Supervisory Board due to being elected to the position of the Minister of Finance.
The Supervisory Board met at seven regular meetings in 2012, where it dealt with 85 items on the agenda and also held two
correspondent sessions. At its meetings the Supervisory Board acquainted itself with the Bank's interim results on the basis of reports
prepared by the Management Board. It addressed letters the Bank received from the Bank of Slovenia, acquainted itself with the
measures the Bank implemented in relation to risk management and reviewed the Bank's policies and strategies on risk management
and its risk profile for 2013. The Supervisory Board adopted the Bank's operational policies and the financial plan for 2013 as well as its
strategies and financial plans for the period from 2013 to 2017.
The Supervisory Board reviewed the documents pertainig to the calling of the 28 Regular Meeting of the Bank's Shareholders at its
4 regular meeting in 2012, which it confirmed and successfully carried out the procedure of eliminating the rights of the holders of
prefered shares together with the Management Board at the 28 Meeting of Shareholders on October 10, 2012, as the proposal was
confirmed by shareholders of both classes with more than the required three-quarter majority of the votes.
At its 14 regular meeting in 2013 the Supervisory Board also reviewed and approved the annual report of the Bank and the Group
for 2012, the Disclosures document for 2012, the Report on the operations of the Internal Audit Service for the period from July to
December 2012 and the Internal Audit Report for 2012. It reviewed the managerial presentation of the Bank's Management Board
for 2012, gave consent to the Auditor's Report and confirmed the Bank's Statement on Compliance with the Corporate Governance
Code. It also reviewed the proposal by the Audit Committee on the naming of the auditor for 2013. Additionally, it reviewed the
entire documentation relating to the 29 Annual Regular Meeting of the Bank's Shareholders and adopted the report to the Meeting of
Shareholders on it own operations during 2012.
The President of the Supervisory Board was in constant contact with the Management Board, which allowed for the Supervisory Board
to constantly supervise the operations of the Management Board. The Supervisory Board invited the authorised auditor to its regular
meetings, thus making it possible for the auditor to present it with findings related to audit of the Bank.
The Remuneration Committee met in 2012 at its constitutive meeting and considered the proposal of the Remuneration Policy at Banka
Celje, d.d., which it sent to adoption to the Bank's Supervisory Board, which confirmed it.
The Supervisory Board also ascertains that in 2012 its' members were not subject to conflict of interest and have performed their duties
as Supervisory Board members autonomously and independently. The members attended the Supervisory Board meetings regularly,
based on which it was able to meet in full composition, with all members actively participating in the creation of decisions by taking
part in discussions related to individual items on the agenda.
Based on the scope of activities conducted during 2012 and the performed self-assessment of operations, the Supervisory Board assess
its own operations 2012 to have been performed with all due diligence and care, without any deviations from good practice.
6
Operations of the Audit Committee
The Audit Committee, comprising: Uroš Čufer, Ph.D., as President, Tomaž Subotič as Vice-President and Zdenka Habe, authorised
auditor, as the external independent member; met at 5 meetings in 2012. It dealt with 48 items on the agenda. The materials it reviewed
pertained to the adoption of the plan of operation of the Audit Committee in 2012, to the report on the operations of the Internal Audit
for 2012 and to the plan of the operations of the Internal Audit for 2013. The Audit Committee also acquainted itself with the information
on the review by the Bank of Slovenia (ICAAP process). It reviewed the strategies and policies on risk management, the trading strategy
and the Bank's risk profile – all pertaining to 2013. In April it proposed the selection of the auditor for 2012 to the Supervisory Board. It
also monitored the Bank's interim results, the Bank's exposure to credit risk (on a quarterly basis), its five-year development plan and its
business policies and financial plan for 2013. It was presented with the Agreement on the Audit of the Bank's Operations in 2012, with
the findings of the external auditor after the completion of the initial phase of the audit for 2012 and with the report on the operations
of the Posest subsidiary.
The President of the Audit Committee kept the Supervisory Board appraised of the Committee's activities on a regular basis through
reports at the Supervisory Board meetings. The Committee was successful in the execution of all planned assignments all the while
offering the Supervisory Board advisory support in the areas for which it was established. With Uroš Čufer having resigned his function
as member of the Supervisory Board and member of the Audit Committee on March 20, 2013, the Supervisory Board elected a new
President of the Audit Committee, namely Tomaž Subotič, Ph.D. and a new member of the Audit Committee, namely Melita Malgaj as
Vice-President, at its meeting on March 22, 2013.
Annual Report 2012
In accordance with the legislation the Bank prepared an annual report for the Bank and the Group for the 2012 business year. Both
annual reports have been merged into a single document. The Group comprises the Bank and its subsidiary Posest, d.o.o., Celje, wherein
the Bank holds a 100% interest. The subsidiary deals mainly with the marketing of own and the Bank’s real estate, with real estate and
equipment appraisals, the monitoring of the purposeful use of loans granted to investors, the realisation of bad debt, property leasing,
own and other property engineering and it also offers advisory services to the bank in the field of real estate project financing.
The Bank’s and the Group's financial statements have been prepared in line with the International Financial Reporting Standards, as
adopted by the EU.
The 2012 annual audit of the Bank’s and the Group's financial statements was conducted by the authorized auditors of
PricewaterhouseCoopers, d.o.o., Ljubljana, which approved the Bank’s financial statements without reservation and confirmed the
content as being in line with the Bank’s business report.
Resolutions and positions of the Supervisory Board
The Supervisory Board reviewed the audited annual report for 2012 pertaining to both the Bank and the Group at its 14 Regular Meeting
in 2013 on April 22, 2013, giving its consent and approval without remark. The auditor's report, forming an integral part of the annual
report, was approved.
The Supervisory Board also confirmed the proposal of the Management Board on covering for loss from other profit reserves in line
with the legislation.
In addition to the aforementioned the Supervisory Board members ascertain that the macroeconomic conditions in 2012 were
extremely unfavourable and that the Bank, in spite of a net loss from operations, ensured safe and stable as well as cost efficient
operations during the past business year.
Jure Peljhan, Ph.D.
President of the Supervisory Board
7
Business report
I
BUSINESS REPORT
1
HIGHLIGHTS
- amounts in thousands of EUR
Bank
1.
2.
3.
Statement of financial position (on 31 December)
Total assets
Total deposits from the non-banking sector
- corporates
- retail
Total amount of loans to the non-banking sector
- corporates
- retail
Total equity
Impairment of financial assets at cost and provisions
Commitments and contingent liabilities
Income statement (from 1 January to 31 December)
Net non-interest income
Labour costs, general and administrative costs
Depreciation and amortisation
Impairment and provisions
Loss before income tax
Income tax expense
Statement of comprehensive income
Other comprehensive income
Income tax relating to other comprehensive income
4.
Number of employees (on 31 December)
5.
Shares
Number of shareholders
Number of shares
Nominal share value (in EUR)
Book value per share (in EUR)
6.
Ratios in %
Capital
Capital adequacy ratio
Asset quality
Impairment charges on financial assets, measured
at amortised cost, and provisions for guarantees and
commitments / classified balance and off-balance sheet
asset items
Profitability
Interest margin
Financial mediation margin
Return on assets - before tax
Return on equity - before tax
Return on equity - after tax
Operational costs
Operational expenses / average assets
Liquidity
Average liquid assets / average short-term deposits
from non-banking sector
Average liquid assets / average assets
Business report 2012
GROUP
2012
2011
2010
2012
2011
2010
Balance
Balance
Balance
Balance
Balance
Balance
2,270,076
2,490,913
2,598,080
2,271,355
2,492,765
2,599,217
1,416,899
1,484,868
1,507,808
1,416,898
1,485,025
1,507,805
716,570
756,122
781,172
716,569
756,299
781,169
700,329
728,746
726,636
700,329
728,726
726,636
1,590,853
1,693,206
1,710,049
1,585,677
1,690,007
1,707,367
1,265,826
1,355,319
1,378,530
1,260,650
1,352,120
1,375,778
325,027
337,887
331,519
325,027
337,887
331,589
157,943
181,333
199,926
158,808
182,169
200,702
166,432
152,460
111,297
166,488
152,515
111,318
551,939
692,167
472,090
551,939
692,556
471,867
46,589
48,927
55,067
46,556
48,895
55,008
24,714
23,171
20,837
26,361
23,939
21,595
31,848
33,731
35,992
33,398
34,372
36,384
3,392
3,764
3,757
3,426
3,791
3,771
(63,600)
(53,193)
(30,730)
(63,601)
(53,201)
(30,763)
(27,537)
(18,590)
5,425
(27,508)
(18,530)
5,685
2,553
3,715
925
2,552
3,715
926
1,844
(3,359)
(861)
1,844
(3,359)
(861)
(265)
672
172
(265)
672
172
508
530
538
513
534
542
709
704
708
709
704
708
508,629
508,629
508,629
508,629
508,629
508,629
33
33
33
33
33
33
311
357
393
311
357
393
13.01
14.42
15.19
13.04
14.46
15.21
7.96
6.68
4.79
7.96
6.68
4.79
1.93
1.95
2.14
1.93
1.95
2.13
2.95
2.88
2.95
3.02
2.91
2.97
(1.14)
(0.74)
0.21
(1.14)
(0.74)
0.22
(15.37)
(9.49)
2.70
(15.28)
(9.42)
2.82
(13.95)
(7.60)
2.24
(13.86)
(7.53)
2.36
1.46
1.50
1.54
1.52
1.52
1.56
53.47
49.14
49.95
53.47
49.14
49.95
21.14
19.06
20.38
21.14
19.06
20.38
11
2
PRESENTATION
On 31 December 2012 the Banka Celje Group comprised: Banka
Celje, d.d. (the ''Bank''), as the parent bank and Posest, d.o.o., Celje
(the ''Subsidiary''). The Bank owns 100% of the Subsidiary.
Subsidiary's scope of operation
The Posest, d.o.o., subsidiary's headquarters is situated in Celje, at
Prešernova 18.
The company is registered to perform a number of different types
of activities, with its core business comprising:
- marketing of real estate owned by the company and the Bank;
- property and equipment appraisals;
- supervision of the purposeful use of loans granted to investors;
- repayment of the Bank's bad debt;
- property leasing;
- owned and other property engineering;
- advising the Bank regarding real estate property financing.
Scope of operations
History
The Bank is an independent financial institution, established as
a joint-stock company to execute all banking and other financial
services based on the Banking Act (Zban-1) and the Companies
Act (ZGD-1). Based on the authorisations it holds, it is licensed to
perform the following mutually recognised financial services in
accordance with Article 10 of the Banking Act:
- accepting deposits;
-lending that also includes: consumer loans, mortgage loans,
factoring with or without recourse, financing of commercial
transactions, including forfeiting;
- payment services;
- issuing and administering other payment instruments (for
example, traveller's cheques and bankers' drafts) insofar as this
activity is not covered by services referred to in point 3;
- issuing guarantees and other commitments;
- trading for own account or for the account of customers in:
foreign exchange, including currency exchange transactions,
financial futures and options, exchange and interest rate
instruments;
- trading for own account in: money market instruments,
transferable securities;
- safe custody services;
- investment services and transactions and ancillary investment
services from Paragraph 1 of Article 10 of the Market in Financial
Instruments Act.
The beginnings of the Bank reach as far back as 1864, when
Hranilnica mestne občine Celje was established. As the Kreditna
banka Celje, it joined Ljubljanska banka in 1971. The Bank was
transformed into a joint-stock company at the end of 1989 and
remained part of the Ljubljanska banka system as a subsidiary
bank until 1994.
The Bank may also perform the following other financial services
in accordance with Article 11 of the Banking Act:
insurance brokerage in accordance with the act governing
- insurance business;
marketing of mutual funds, sale of investment coupons or
- mutual fund shares.
The Posest subsidiary company was established in 1991 as a
limited liability company.
Head office
The Bank's head office is located in Celje, at Vodnikova 2.
Subsidiary's head office
Since 15 June 1994, the Bank has been operating independently
under the name it holds today, namely Banka Celje, d.d. In line
with the strategy of extending its operations outside the Celje
region, the Bank acquired Banka Noricum, d.d., Ljubljana in 1996
and transformed it into its main branch in Ljubljana, named Glavna
Podružnica Ljubljana. The Bank also acquired Hmezad banka,
d.d., Žalec in 1998 and first transformed it into a branch, namely
Podružnica Hmezad (Hmezad branch), later making it a business
unit at the start of 2011. In 1999 the Bank signed a Strategic
partnership and business cooperation agreement with Nova
Ljubljanska banka, d.d., thus becoming an associated member of
its banking group.
In February 2011, the consortium of the Bank's owners decided to
offer the Bank's shares publicly, based on which due diligence of
the Bank's operations was performed in May 2011 by a potential
buyer. The owners then stopped the sale temporarily, with the
largest owner still not having changed their decision.
The Bank complements its range of services on offer through its
specialist subsidiary company Posest, d.o.o., Celje, which deals
in real estate and offers leasing products, while also providing
advisory services in the recovery of bad debt.
12
3
STRATEGY
The Bank has prepared a strategy of operation for the period from
2013 to 2017 as well as business policies and a financial plan for
2013.
The strategy has been prepared under the assumption that the
Bank is independent and that it builds its own business model
regardless of the ownership structure. It strives to remain a
universal bank with an emphasis on operations with low-risk
customer segments, a subsequently more diversified portfolio
of investments and funding sources and an offer of banking and
financial services, which will, while using minimal capital, ensure
good profitability and full work-time utilisation at the Bank. A
stable strategic owner will play an important role in the further
long-term sustainable development of the Bank, supporting its
tradition and preserving its status as a universal bank by offering
comprehensive banking services in domestic and international
operations.
The Bank's key strategic indicators include providing a sufficient
amount of top-quality capital and an adequate ratio between
net loans and deposits from the non-banking sector. During
the coming five-year period the Bank plans to decrease its risk
profile, decrease the share of large exposures and focus on
acquiring stable funding from the non-banking sector. Increased
profitability will be based on increased cost efficiency and a more
optimal structure of operations as well as a more optimal and cost
effective technological support of processes within the Bank.
To attain its strategic goals, the Bank set key objectives for
2013, including the strengthening of its market share in the SME
sector operations, the development and marketing of services
with the highest possible added value and the lowest possible
capital requirements, decreasing the concentration of deposits,
ensuring adequate amounts of capital and capital adequacy,
active credit portfolio management with accelerated recovery
activities, increasing the coverage of non-performing assets
with impairment charges, and optimising fixed assets, IT and
personnel.
In the coming years, organisational changes are set to follow
operational processes, whereby the rationalisation of these will
be one of the key short- and long-term goals pertaining to the
Bank's internal organisation.
With regard to risk, the Bank will focus on adequately covering
the risk portfolio with impairments and provisions, all the while
decreasing the share of bad debt in gross loans. It will ensure
an adequate liquidity position, with special attention given to
upgrading the system of liquidity risk management in accordance
with European guidelines. It will maintain a stable capital position,
work on improving the structure of capital, and optimise capital
requirements by decreasing investments with high capital
requirements. It will carefully monitor the new capital accord set
to come into effect in 2014 and continue to develop the procedures
of measuring and estimating capital requirements and internal
capital, while using the findings in its decision-making process.
Due to the global financial and economic crisis, the Bank saw a
dramatic slide in business results and it is not likely that the coming
years will allow the levels of return on capital achieved prior to the
crisis to be repeated. In spite of this, the Bank has planned for
a positive financial result in 2013, with special emphasis placed
on ensuring stable income. After a longer period of high volumes
of impairments and provisions required, the Bank expects these
gradually to begin to decrease to the levels seen before the crisis.
In the coming years, the Bank will continue to ensure an optimal
number of employees as well as their suitable qualifications
pertaining to individual areas of operation, with a view toward
the realisation of current assignments and the assignments
strategically significant to the Bank's development in the future.
To ensure the adequate quality of IT support for operational
processes, the Bank will, within the framework of its key strategic
activities, provide for the standardisation of IT support while
providing for adequate quality with emphasis on fast processing
speeds, user-friendliness and cost-effectiveness.
The Subsidiary prepared its plan of operations for 2013, wherein
it defined its main objective as being a positive operational result,
which will mainly depend on the successful sales of property in
stock. It plans to attain stable income from services and leases.
The company will focus to a larger extent on participating in
public auctions by auctioning and purchasing real estate property.
Due to the unfavourable macroeconomic forecasts on economic
growth, employment and funding, the Bank is planning to reduce
the volume of on-balance-sheet operations in 2013, with zero
growth from 2015 onwards. On the liabilities side, the expected
decrease in deposits from the state will see activities directed
at increasing the volume of deposit operations within the SME
sector. In doing so the Bank will maintain an adequate term
structure of deposits, decrease deposit concentration and provide
for an adequate ratio between net loans and deposits from the
non-banking sector. Investment operations will see strengthened
recovery activities, with a great deal of attention directed at the
quality of investments, appropriate collateral and decreased
investment concentration. The Bank is planning to increase
investments in the SME sector and investments with a higher
credit rating.
13
4
SIGNIFICANT EVENTS
Year 2012:
- at
the 28 Regular Meeting of the Bank's Shareholders on 10 October 2012 a decision was taken to eliminate pre-emptive rights
based on preference shares, which were subsequently transformed into ordinary shares. Thus, after the changes were entered in
the court register on 11 October 2012, the share capital comprised 508,629 ordinary registered no par value shares;
- early redemption of innovative bonds from the BCE11 series in an amount of EUR 34.9 million and the simultaneous issue of the
new BCE16 series subordinated bonds in an amount of EUR 24.5 million as well as an issue of a smaller amount of subordinated
certificates of deposit based on the approval of the Bank of Slovenia from autumn 2012 with the purpose of improving capital
structure;
- rating received from the international rating agency Fitch Ratings, which, in accordance with a decrease in the country rating and
the ratings of the major banks in Slovenia in August, also decreased the Bank's rating to a long-term credit risk B+ (formerly BB). Due
to the decrease in the Bank's rating and the execution of clauses in loan agreements with foreign banks, the Bank prepaid loans in
a total amount of EUR 41.7 million in September and December;
- long-term funding raised with the European Central Bank in an amount of EUR 70 million;
- review of credit, liquidity and capital risk management by the Bank of Slovenia mid 2012 and in November the receipt of a
requirement by the Bank of Slovenia on the basis of which the Bank prepared an action plan for the implementation of requirements
and warnings as well as the introduction of all necessary measures to comply with the regulator's requirements in 2012;
- r uling by the Constitutional Court received that the Bank's constitutional complaint pertaining to the denationalisation process
would not be tried, subsequent adjustment of the amount of provisions formed and the removal from the books of part of the
headquarter building at Vodinkova.
14
5
ECONOMIC AND BANKING ENVIRONMENT
5.1
Economic environment
5.2
The economic trends in 2012 remained negative in the Eurozone
as well as in Slovenia. Weak foreign demand and a decrease
in domestic spending were key to the decrease in Slovenian
economic activity.
Decreasing economic activity, cuts in investment spending,
reduced household and state spending on the one hand, and
cooling economic growth in the Eurozone as well as the lack of
confidence exhibited by international financial markets toward
Slovenian long-term state debt on the other, all impacted the
performance of Slovenian banks and contributed to an increase
in financial risk.
Economic growth in Slovenia decreased by 2.3% in 2012
compared to the same period in 2011. Domestic spending
decreased by 5.7% on an annual basis with final consumption
going down by 2.6% and investment spending dropping by 17.8%.
Foreign demand was the only thing that prevented even greater
reduction in economic activity. In 2012 the foreign demand
increased by 0.3%; however the decrease in imports by 6.6% was
due to low domestic demand, which is why the trade balance
actually produced a surplus by 3.3%.
The decrease in economic activity was more and more evident in
the job market. Employment continued to decrease, which is why
the registered unemployment rate increased by 0.8% percentage
points in 2012 to a record 13.0%. The number of people without
employment climbed to 118,061, being the highest since the
start of the crisis. The construction sector contributed most to
the decrease in employment figures, with increasing numbers of
unemployed people coming from the manufacturing and utilities
services. The increase in unemployment was highest in the age
group of 55 to 59 years old, while at the same time the number
of unemployed young persons (age group 15 to 24) decreased
slightly. The unemployment rate increased throughout the
Slovenian statistical regions, with the highest rates still coming
from Pomurje, and the lowest recorded in Gorenjska.
The state budget deficit in 2012 amounted to 3.1% of the gross
domestic product, which is less than in 2011, when it stood at
6.4%, but slightly more than forecast in the Stability program.
The decrease in the deficit has been achieved by continuing
operations in fiscal spending, especially with the enforcement
of changes and measures by the Fiscal Balance Act. Significantly
lower were also expenditures relating particularly to capital
increase in banks and companies.
Banking environment
The length of the economic and financial crisis continued
to worsen conditions in corporate operations in 2012 and
it decreased demand for investment lending. The level of
indebtedness in the corporate sector remained high for the
fourth year running in spite of the sector deleveraging at
domestic banks. The sluggish implementation of operational
and financial restructuring within the sector is, to a large extent,
the consequence of financial weakness exhibited by the owners
and a whole host of institutional and legal obstacles. At the same
time, banks saw the process of funding restructuring continue,
decreasing lending potential, especially because the state was
decreasing deposits to and borrowings from the domestic
banking system and because exposure was also being reduced
in the international financial markets (due to a rating downgrade).
Credit risk in banks increased additionally in 2012, but at a slower
pace compared to 2011. The share of non-performing assets
classified as being in excess of 90 days overdue remains high,
with the share of claims to bankrupt companies also increasing
due to the increase in the number of bankruptcies. Income risk
also remained high due to the deterioration in the quality of the
credit portfolio and the decreased lending volume. For the third
year in a row the banking system incurred a pre-tax loss, which
further decreases the investment appeal for new investors in the
Slovenian banking system, thus preventing the generation of
bank capital. Capital risk also increased, in spite of the improved
capital structure and the relatively high capital adequacy, as
banks improved their capital ratios mainly by reducing the
volume of operations.
The annual inflation rate, measured by the harmonised index
of consumer prices, reached 3.1% in Slovenia in 2012, with the
average 12-month price growth coming in at 2.8%, representing
a 0.7% increase to the 2011 figure. In the European Monetary
Union member states, the annual inflation rate was 2.2% on
average, while reaching 2.4% in the European Union member
states. Energy and food prices contributed most to the Slovenian
inflation rate, as well as measures related to fiscal consolidation
activities.
15
6
REPORT ON THE OPERATIONS IN 2012
The report on operations, including the chapter on assuming and managing banking risk, is based on the Bank's operations, being the
dominant entity within the Group. Based on permission issued by the Bank of Slovenia, the subsidiary company is not included in the
consolidated supervision in accordance with the decision by the Bank of Slovenia on the Supervision of Banks and Savings Banks on
a Consolidated Basis, as from the aspect of the aim of supervision the Subsidiary does not represent any significant effect.
6.1
Financial results
6.1.1The Bank’s financial result
Due to the global financial and economic crisis resulting in the subsequently greater requirement for additional impairment charges
and provisioning, the Slovene banking system made a pre-tax loss for the third year in a row in 2012.
The Bank was faced with similar problems afflicting the entire Slovene banking system. In 2012 it recorded a profit before impairments
and provisions in the amount of EUR 36,063 thousand. After decreases for the impairment charges and provisions made, however, the
result was a pre-tax loss in the amount of EUR 27,537 thousand and a net loss of EUR 24,984 thousand. Data shows that the decrease
in gross profit mainly resulted from the requirement for additional impairment charges and provisions.
The diagram below shows the trends in the profit before impairment and provisioning during the past three years:
40,000
in thousands of EUR
35,000
30,000
25,000
31 December 2010
20,000
31 December 2011
31 December 2012
15,000
10,000
5,000
0
Profit before impairment and provisions
16
Analysis of the Bank’s net income and expenses in 2012:
Net income and expenses
Realization
Realization
2012
2011
Change
Index
1
2
3=1-2
4=1:2
46,589
48,927
(2,338)
95
15,733
16,386
(653)
96
8,981
6,785
2,196
132
Net gains from financial operations *
Administrative expenses and amortization
(35,240)
(37,495)
2,255
94
Impairment charges and provisions
(63,600)
(53,193)
(10,407)
120
(Loss) from operations
(27,537)
(18,590)
(8,947)
148
* includes dividends and other operating gains / (losses)
Net interest came in at EUR 46,589 thousand, remaining the strongest income category for the Bank. It was 5.0% off the realisation in
2011, namely EUR 2,338 thousand. The lower interest income was impacted mostly by the reduction in the volume of operations, additional provisioning and the decrease in the interest rates attained on average, mainly due to the falling EURIBOR. The biggest impact
on the interest expenses came from the reduced size of interest bearing liabilities, with the average interest rates attained remaining
at the levels from the previous year. The cumulative interest margin amounted to 1.93% in the period from January to December,
having come in at 1.95% in 2011.
Net fee and commission income from banking services amounted to EUR 15,733 thousand lagging behind the comparable 2011 figure
by 4.0% or by EUR 653 thousand. In comparison with 2011, card operations and payment service fees were off most, mainly due to
the equalisation of domestic and cross-border payments fees. The effect of lower fee and commission income from card operations
in an amount of EUR 674 thousand compared with 2011 was partially offset by lower costs in the same items in an amount of EUR
580 thousand.
Financial transactions resulted in a profit totalling EUR 8,981 thousand, being for the most part the result of the early redemption and
simultaneous issue of new subordinated bonds and certificates of deposit in a lower amount with a positive effect of EUR 10,595
thousand. In addition to this positive effect, another also came from the valuation of interest derivatives and equity securities issued
as well as from the sale of shares in a total amount of EUR 4,545 thousand, while the valuation of forward agreements recorded negative effects in an amount of EUR 6,822 thousand. Dividend income came in at EUR 751 thousand, while other net operating losses
amounted to EUR 182 thousand.
Administrative expenses accounted for EUR 35.240 thousand in 2012, thus decreasing by EUR 2,255 thousand or by 6.0% as compared
with 2011. Labour costs came in lower than in 2011 due to the reduction in the number of employees by 22, and also due to changes
in working hours, salary caps and lower accrued costs. Costs of material and services and amortisation costs were lower also. The
Bank’s cost efficiency, measured with the share of operating costs in the Bank’s assets, improved from 1.50% to 1.46% in 2012. The
cost/income ratio (the CIR) came in at 49.42%, also improving on the 2011 figure of 52.01%. Without taking into account the one-off
effect of the early redemption and a new issue of bonds and certificates of deposit, the CIR would come up to 57.96%.
Impairments and provisions were made in a total amount of EUR 63,600 thousand and include all impairment charges anticipated in
accordance with the requirement from the Bank of Slovenia, with prior operational audits having also been taken into consideration.
In the period from January to December 2012, the Bank’s credit risk provisions and impairment charges amounted to a total of EUR
53,758 thousand, impairment charges for available for sale financial assets were EUR 10,842 thousand and other provisions were
reversed in a net of EUR 1.000 thousand.
6.1.2The Group’s financial result
The gross loss that the Group recorded was EUR 29 thousand lower than the gross loss recorded by the Bank, with the Group’s net loss
lower by EUR 28 thousand.
The Group’s income statement differs from the Bank’s income statement under other net operating profit, mainly due to income from
real estate sales. The Subsidiary sold part of the flats and parking spaces in Celje, two semi-detached houses in Velenje and a factory hall.
17
6.2 Financial position
6.2.1Financial position of the Bank
At the end of 2012 the Bank’s total assets amounted to EUR 2,270,076 thousand. As compared to 2011 the figure decreased by EUR
220,837 thousand or by 8.9%.
The Bank’s assets according to individual items:
Bank's assets
2012
%
2011
%
Change
Index
1
2
3
4
5=1-3
6=1:3
1,615,610
71
1,750,289
70
(134,679)
92
22,043
1
55,054
2
(33,011)
40
1,590,853
70
1,693,206
68
(102,353)
94
2,714
-
2,029
-
685
134
Financial assets
488,097
22
533,152
21
(45,055)
92
Other assets
166,369
7
207,472
9
(41,103)
80
2,270,076
100
2,490,913
100
(220,837)
91
Loans and advances
- loans and advances to banks
- loans and advances to customers
- other financial assets
Total
Loans and advances to banks decreased by 60% amounting to EUR 55,054 thousand at the end of 2011. The decrease came mainly
from over-night deposits abroad, from short-term deposits with domestic banks maturing up to 30 days, and from other short-term
investments in foreign banks.
Loans and advances to customers dropped by 6% in 2012, their share in the structure of the assets still having increased from 68% to
70%. A decrease in the loans and advances to customers is for the most part the result of additional impairment charges required.
Loans and advances to customers as the most significant category of the Bank's assets are shown in the following diagram:
1,800,000
1,600,000
1,400,000
in thousands of EUR
1,200,000
1,000,000
31 December 2010
800,000
31 December 2011
31 December 2012
600,000
400,000
200,000
0
Loans and advances
to customers
18
Loans to corporates
and private
undertakings
Retail loans
Investments in financial assets have been decreased by 8% in 2012 in accordance with the business policies, most coming from available
for sale financial assets. Investments in hold to maturity financial assets represent the largest category in the Bank's securities portfolio.
The Bank’s liabilities per item have been realized as follows:
Bank's liabilities
Deposits and borrowings from banks
- foreign banks
Due to customers
2012
%
2011
%
Change
Index
1
2
3
4
5=1-3
6=1:3
265,853
12
416,158
17
(150,305)
64
19,120
1
180,768
7
(161,648)
11
1,416,899
62
1,484,868
60
(67,969)
95
Borrowings from the ECB
151,431
7
90,082
4
61,349
168
Securities in issue, subordinated liabilities
259,747
11
294,092
12
(34,345)
88
18,203
1
24,380
-
(6,177)
75
2,112,133
93
2,309,580
93
-197,447
91
157,943
7
181,333
7
(23,390)
87
2,270,076
100
2,490,913
100
(220,837)
91
Other liabilities
Total liabilities
Total equity
Total liabilities and equity
Risk bearing commitments and contingent liabilities
Guarantees
95,104
47
96,612
35
(1,508)
98
Assumed liabilities
108,207
53
176,113
65
(67,906)
61
Total risk bearing com. and cont. liabilities
203,311
100
272,725
100
(69,414)
75
Deposits and borrowings from banks fell by 36%, within this figure deposits and borrowings from foreign banks dropped by 89%. In 2012,
the Bank worked on reducing exposure to foreign interbank markets by regular repayments and prepayments of syndicated loans due to a
decrease in its rating. In the domestic interbank market it directed its activities at acquiring predominantly long-term dedicated financing
from SID Bank.
Due to customers decreased by 5%. Retail deposits went down as well as deposits from corporates and private entrepreneurs, while
the ratio of net loans and deposits from the non-banking sector improved from 1.14 to 1.12.
Due to customers as the most significant category in the Bank's liabilities:
1,600,000
1,400,000
in thousands of EUR
1,200,000
1,000,000
31 December 2010
800,000
31 December 2011
31 December 2012
600,000
400,000
200,000
0
Due to customers
Due to corporates and
private undertakings
Retail deposits
19
Deposits from the Central Bank include loans taken from the European Central Bank and represent long-term liabilities. The Bank
acquired the assets in December 2011 and in March 2012 within the framework of the Central Bank's 36-month funding facility.
The volume of own securities in issue and subordinated liabilities dropped by 12% in 2012. The fall is mainly the result of the early
redemption of part of the BCE11 series of innovative bonds and subordinated certificates of deposit and the simultaneous issue of the
new BCE16 series subordinated bonds and the new certificates of deposit in a lower amount in November and December 2012, as well
as due to regular certificates of deposit maturing, interest being paid and the negative valuation of the BCE10 series subordinated bond
maturing in 2017.
The Bank’s capital decreased by EUR 23,390 thousand or 13% in 2012, and stood at EUR 157,943 thousand at the end of the year. The
main cause for the decrease was the net loss achieved during the financial year 2012.
Risk bearing commitments and contingent liabilities fell by 25% in 2012. The volume of guarantees issued decreased by 2%, while the
assumed liabilities dropped by 39%. The largest decrease came from unused commitments to extend loans and from letters of intent.
6.2.2Financial position of the Group
The Group’s total assets came in EUR 1,279 thousand higher than the total assets of the Bank; in comparison with 2011, the figure was
EUR 221,410 thousand less.
Looking at Group assets, the higher total assets mainly pertain to the inventory and investment property of the Subsidiary. Investment
property includes the net carrying value of land and buildings purchased for the purpose of an operating lease.
The liabilities of the Group are higher than the liabilities of the Bank mainly in the items pertaining to capital and other liabilities,
wherein the majority pertains to the liability of the Subsidiary to contractors.
6.3Operations according to key sectors
6.3.1
Corporate banking
Corporate banking, pertaining to businesses and individual entrepreneurs, represents a key sector for the Bank, as it is the strongest
segment of its operations.
The Group’s credit operations with corporates came in EUR 5,176 thousand lower than the Bank’s credit operations due to the elimination
of mutual claims, while deposit operations with corporates were only lower by EUR 1 thousand.
Turning to the Bank’s credit operations, the gross value of loans to corporates amounted to EUR 1,409,015 thousand, while impairments
totalled EUR 143,189 thousand, having increased by EUR 19,183 thousand in a year. The net value of loans to corporates decreased
by 7%, representing a decrease in value of EUR 89,493 thousand. With a net amount of EUR 1,265,826 thousand, the share of loans to
corporates increased within the structure of the assets from 54% to 56%.
In lending to corporates, the Bank devoted special attention to recovery activities with the intention of timely identification of bad
investments and the setting up of mechanisms to deal efficiently with these. It also established a work group dedicated to active
monitoring and recovery activities. As the procedures pertaining to compulsory settlement, bankruptcy and insolvency continued in
the corporate sector, which holds a large share of outstanding liabilities toward the Bank, this meant that the Bank actively collected
information on developments in the business environment, monitored enforcement procedures and prepared proposals for the
rehabilitation of companies. In 2012, the Bank approved debt rescheduling to 22 companies, while starting or continuing execution
proceedings in 18 cases. 11 companies went bankrupt, with the Bank participating in syndicates for financial rehabilitation in 7 cases.
The Subsidiary entered into a new financial lease agreement with a company from Prebold, thus continuing the business cooperation
it started in 2005 with the same company.
Deposit operations have seen deposits from the non-banking sector decrease by 5% or by EUR 39,552 thousand, government deposits
accounting for EUR 20,621 of the total drop.
20
The diagram below shows the trend in credit and deposit operations with the corporate sector during the past three years:
1,600,000
1,400,000
in thousands of EUR
1,200,000
1,000,000
31 December 2010
800,000
31 December 2011
31 December 2012
600,000
400,000
200,000
0
Corporate loans
6.3.2
Corporate deposits
Retail operations
The Bank also puts a lot of emphasis on retail operations, having put in place a broadly diversified retail network which it uses to
bring its services to as many clients as possible. It also developed the CPS (comprehensive customer overview) and CRM (customer
relationship management) tools, through the use of which it can detect customer purchasing habits, preferences and needs based
on past activity.
The Group's credit and deposit operations did not differ from the Bank's credit and deposit operations in 2012.
Retail loans went down by 4% in 2012. The gross value of loans amounted to EUR 336,596 thousand, with impairment charges
amounting to EUR 11,569 thousand, having increased by EUR 2,221 thousand during the year.
To promote retail loans, the Bank introduced the ''Right Decision'' package, which in addition to free transaction account management
during the first year of operation also includes a package offering cheaper and free services.
Retail deposits also declined by 4% or EUR 28,417 thousand in 2012, as was the case with loans. This is an extremely important item for
the Bank’s stability, which is why it actively adapts its deposit services to cater to the needs and preferences of its customers.
21
The trends in retail credit and deposit operations during the past three years:
800,000
700,000
in thousands of EUR
600,000
500,000
31 December 2010
400,000
31 December 2011
31 December 2012
300,000
200,000
100,000
0
Retail loans
Retail deposits
In March, the Bank offered its customers a rising interest rate deposit, while also actively marketing attractive deposits with differing
maturities. It prepared a number of benefits and new offers for student accounts, varying from savings, to loans and overdraft limits as
well as different packages. For those having already finished their studies, the Bank prepared a special package to help them at the start
of their professional careers. A special offer for pensioners was also introduced.
Alternative savings instruments are also something the Bank provides its savers with. It has been selling investment products and
insurance services for a number of years now, thus complementing the traditional banking and financial transactions on offer. In
relation to investment products on offer, it accepts and forwards orders to buy or sell asset units of the NLB Skladi umbrella fund with
the related sub-funds and the NFD umbrella fund with the related sub-funds. Within the framework of insurance services, it offers
its clients a number of different insurance types. The Bank holds a licence for insurance brokerage and cooperates with insurance
companies NLB Vita, Zavarovalnica Maribor, Zavarovalnica Triglav and Adriatic Slovenica. In 2012, it also started cooperating with the
Tilia insurance company.
In addition to classical counter services, the Bank has also been offering its clients more modern services, comprising non-cash and
self-service operations, e-banking, phone banking, bank letters and transaction monitoring with the use of SMS messages.
In non-cash operations, the Bank offers a wide spectrum of card services. It issues payment cards of the Activa Maestro, Activa/
Mastercard and Activa/Visa brands, distinguished by recognition value and applicability in Slovenia and abroad. These may be used at
numerous points of sale equipped with POS terminals, banks, post office counters, ATMs and over the internet.
With regard to self-service operations, clients had at their disposal 85 ATMs at the end of 2012, connected into the BA network across
Slovenia. The Bank constantly monitors the safety of ATM operations and is working towards expanding the applicability of these
also. In addition to cash withdrawals, UPM order payments, cash deposits, mobile phone account charging, and a mini print-out of
transactions for the past 90 days is also available.
Modern e-banking has been available to clients since July 2000 and it enables the quick, safe and simple performance of most of the
services offered by the Bank. E-banking is constantly adapting to new modern technologies. Safety has been provided for with the use
of the most modern internet technologies. In 2011, the Bank enabled its customers to perform electronic banking, using mobile phones
and tablet PCs to use e-invoices. In 2012, it provided an account activity overview and a detailed card transaction overview.
22
6.3.3
Banking operations
Operations with other banks are performed by the Bank, with the
Subsidiary only dealing with the parent bank.
In 2012, the Bank managed its liquidity efficiently and adopted
measures which led to the strengthening of operational and
structural liquidity. The Bank’s liquidity position in 2012 was
good, with a constant surplus of operational short-term liquidity,
reflected in the amount of the liquidity reserve. Liquidity
surpluses were mostly invested in the interbank market and
with the European Central Bank in the form of weekly liquidity
placements at variable interest rates.
The Bank obtained liquid assets from the European Central Bank
on the basis of long-term funding operations, from SID bank and
from the interbank market. It holds sufficient eligible financial
assets to acquire funds from the European Central Bank or to
enter into interbank repo transactions.
Liabilities to commercial banks declined by 36%. In spite of the
instability in the international interbank long-term lending
markets, the Bank was able to renew one and partially renew
two other bilateral loans, with the dedicated funding from the
European Investment Bank having been taken over by SID bank
as intermediary. The Bank reduced its exposure to foreign banks
markedly in 2012, partially as a result of regular repayments
and in part due to prepayments on the basis of its credit rating
having been lowered. In the domestic interbank market, funding
is mainly acquired from SID bank. In 2012, the Bank acquired 15year funding in an amount of EUR 15 million, dedicated to the
promotion of green technologies and other projects by SMEs.
It also took a 2-year loan, also in an amount of EUR 15 million,
dedicated to the financing of growth and development projects
as well as to the internationalisation of corporate customer
operations regardless of their size.
Due to the reluctance for interbank lending, especially in the
longer-term, the European Central Bank came out with a second
round of 36-month financing in March 2012, after having done
so in December 2011 for the first time with the option of early
repayment after one year. In both rounds, the Bank acquired a
total of EUR 150 million, with Slovenian banks taking EUR 3,767
million in total. Thus, the Bank's share in the total comes to 4%.
Trends in bank operations during the past three years:
600,000
in thousands of EUR
500,000
400,000
31 December 2010
300,000
31 December 2011
31 December 2012
200,000
100,000
0
Loans and advances to
banks and ECB
6.3.4
Deposits and borrowings
from banks and ECB
Financial instrument operations
The Bank conducts transactions with securities and derivative financial instruments, while the Subsidiary does not.
The total volume of investments in securities decreased by 8% in comparison with 2011. Investments in available for sale financial
assets contracted most, while investments in held to maturity financial assets remained at the levels of 2011.
Held for trading financial assets fell by 50%. In 2012, the Bank sold the shares of two companies from the shares held for trading and
reallocated shares, acquired in the collection of collateral, and non-tradable shares to available for sale financial assets in accordance
with the Bank of Slovenia guidelines. The debt securities portfolio decreased due to the sale of a bond and the early liquidation of two
futures contracts with underlying certificates of deposit.
23
Financial assets designated at fair value through profit or loss declined by 35% in 2012, with the decline coming from the substitution
of bonds and a company's subordinated debt with new bonds, recorded in the trading book.
Available for sale financial assets represent part of the secondary liquidity reserve and are used for the management of currency,
exchange and interest rate risk. In 2012, investments in this category of financial assets went down by 8%. Investments in equity
securities decreased mainly due to the sale of shares, while investments in debt securities dropped due to the lower reinvestment of
matured bonds.
The Bank classifies fixed income securities as held to maturity investments, which it provisionally expects to be able to hold until final
maturity. In 2012, the Bank increased investments in treasury bills, while not having reinvested other matured securities in full.
In 2012, in line with its business objectives, the Bank carried out futures transactions with underlying securities, entered into interest rate
and currency swaps as well as traded options. The total volume of derivative transactions at the end of 2012 was 17% lower than in 2011.
700,000
600,000
in thousands of EUR
500,000
400,000
31 December 2010
300,000
31 December 2011
31 December 2012
200,000
100,000
0
Securities investments
Own securities issued
Liabilities from securities in issue came down by a total of 12% in 2012.
Financial liabilities at fair value through profit or loss include subordinated bonds at a nominal value of EUR 37 million, issued in 2007
and maturing in 2017 as well as certificates of deposit issued in 2007 at a nominal value of EUR 1.5 million, which matured in 2012.
Debt securities in issue include liabilities from regular bonds and certificates of deposit. The 8% decline is the result of matured
certificates of deposit.
Subordinated liabilities dropped by 24% in 2012. To improve capital structure, the Bank decided to redeem part of the BCE11 innovative
bond issue and subordinated certificates of deposit early and issued new subordinated instruments at a lower amount at the same time.
6.3.5Payments
The Bank performs international and domestic payment operations, while the Subsidiary does not.
In 2012, the Bank continued its activities in relation to SEPA payments (Single Euro Payments Area), concluding these successfully. The
migration of credit and debit payments was also completed. The centre for collection of payments within Bankart was discontinued.
Currently SEPA direct debits are used by 37 of the Bank's customers, with the service being actively marketed.
Mid-2011, the Bank entered the e-invoice system, completing the project of own e-invoice issuing in 2012. It acted as issuer and recipient
of e-invoices in 2012.
24
The Bank also started the project of renovating electronic banking
for corporate customers in 2012. It is now in its final stage of
completion. Electronic banking has now been standardised from
the transaction account standpoint, with new functionalities
added and a new name - ''BC Net''.
In 2012, the Bank executed 12.2 million credit payment transactions
totalling EUR 56,618 million. The majority is represented by
domestic payment transactions, while in international payments
Germany stands out according to the number of payment orders
and their total value with a 30% share in the total international
payments, which indicates the export orientation of the Bank's
customers.
At the end of 2012, the Bank maintained 6,872 corporate transaction
accounts and 5,901 transaction accounts belonging to private
entrepreneurs and to private undertakings, which represents a
3.9% increase as compared with the end of 2011. The Bank's market
share in the Slovene banking system thus came in at 5.8%.
In the area of transaction account management, the Bank is legally
obligated to perform execution activities on the basis of final court
decisions received. In 2012, the Bank received 26,032 and executed
12,855 final court decisions on compulsory debt collection and
execution. At the end of 2012, a total of 482 corporate accounts
amounting to EUR 202.8 million, as well as 615 accounts belonging
to private entrepreneurs and private undertakings in an amount
of EUR 23.2 million, were frozen. The Bank was also authorised
to execute 18,059 final decisions related to private individuals
totalling EUR 48.2 million. 2012 also saw legislation passed for the
enforcement draft to be introduced, with the Bank having received
one for collection since its introduction.
6.4
Shareholder information
The Bank’s equity comprises share capital, share premium,
revaluation reserve, profit reserves and net profit, while own
shares decrease it.
With the intention of improving capital structure and capital ratios,
especially the top-quality Tier 1 capital, a decision was taken at
the 28 General Meeting of the Bank's Shareholders to eliminate
pre-emptive rights based on preference shares, which were
subsequently transformed into ordinary shares. Thus, after the
changes were entered in the court register on 11 October 2012, the
share capital comprised 508,629 ordinary registered no par value
shares.
In 2012, the Bank did not acquire or dispose of own shares. As
at 31 December 2012, it held 251 regular own shares, 165 shares
reserved for substitution with shares of the former Hmezad banka
and 938 shares pledged as collateral, which in total represents
0.27% of the Bank's share capital.
Equity in 2012 is shown in the table below:
Equity
2012
%
2011
%
Change
Index
1
2
3
4
5=1-3
6=1:3
Share capital
16,980
11
16,980
9
-
100
Share premium
51,380
32
51,380
28
-
100
2,863
2
1,284
1
1,579
223
111,735
71
126,595
70
(14,860)
88
(31)
-
(31)
-
-
100
(24,984)
(16)
(14,875)
(8)
(10,109)
168
157,943
100
181,333
100
(23,390)
87
Revaluation reserve
Profit reserves
Treasury shares
(Loss) for the year
Total
At the end of December 2012, the Bank's equity amounted to EUR 157,943 thousand, having declined by EUR 23,390 thousand in the year.
The decrease resulted from net loss amounting to EUR 24,984 thousand. The surplus from the revaluation of available for sale financial
assets had a positive effect of EUR 1,579 thousand on equity, with an additional positive impact from the transfer of unpaid dividends
from previous years to profit reserves in the amount of EUR 15 thousand.
The Group equity at end 2012 amounted to EUR 158,808 thousand exceeding the Bank equity by EUR 865 thousand, with EUR 162
thousand of the figure pertaining to the share premium, EUR 675 thousand pertaining to the revaluation reserve and net profit
representing EUR 28 thousand.
The book value of the Bank’s share amounted to EUR 311 as at 31 December 2012. More detailed information on the structure of share
capital and the rights and obligations based on the shares are shown in Chapter I. 9.2.9 of this annual report.
At end 2012, the share register of the Bank showed 709 shareholders, 218 of which were legal entities, while 491 were private individuals.
Nova Ljubljanska banka remains the Bank’s largest shareholder, holding a 40.99% ownership share and a 41.11% share of the voting rights
at end of 2012.
25
The following companies represent the Bank’s 10 largest shareholders:
- in %
10 largest shareholders as at 31 December 2011
Nova Ljubljanska banka, d.d., Ljubljana
Ownership share
40.99
Slovenska odškodninska družba, d.d., Ljubljana
9.36
Vzajemni sklad NFD 1 Delniški
9.21
Abanka Vipa, d.d., Ljubljana
4.00
Unior, d.d., Zreče
3.88
Zavarovalnica Triglav, d.d., and Kritni sklad Ljubljana
3.75
Nova Kreditna banka Maribor, d.d., Maribor
2.67
Juteks, d.d., Žalec
2.43
Opus Invest, d.o.o., Velenje
1.79
Polzela, d.d., Polzela
1.53
Total
79.61
6.5Assuming and managing
banking risks
In its operations, the Bank is exposed to a number of different
risks which is why it developed a number of different procedures
and methods for their management. The quality of assessing
all risk types and responding to them in a timely manner as
well as decreasing exposure to risk are important factors for
the attainment of the Bank’s strategic goals. It has prepared a
strategy of assuming and managing risk together with nine
policies, which feature detailed descriptions of procedures in
connection with identifying, measuring or assessing, managing
and monitoring risk. The strategy and policies of assuming and
managing risk are updated annually, whereby environmental
conditions and their effect on the Bank’s operations are taken
into consideration as well as the newly acquired experience and
know-how in the area of risk management. The Bank’s largest
exposure pertains to credit risk, followed by liquidity and capital
risk, profitability risk, market, operational, strategic and interest
rate risk, as well as reputation risk.
The following includes definitions of individual banking risk
types.
Credit risk
Credit risk, representing the risk of loss resulting from a debtor's
inability to meet its obligation to the Bank, is considered one of the
most important banking risks.
The aim of assuming and managing credit risk is for the Bank to
ensure up-to-date management and assessment of debtor risk or
the risk related with investments and the credit portfolio. The Bank
measures the risk associated with a debtor prior to granting a loan
as accurately as possible and measures the exposure to credit risk
for the entire duration of the credit relationship thereafter. The Bank
directs investments toward debtors with a high rating and toward
less risky sectors and regions. It builds the risk associated with
the investment into the interest rate and ensures the best possible
collateral. The Bank limits portfolio concentration by setting up
limits toward debtors or toward groups of related entities, by setting
26
limits in connection with portfolio structure (according to sector,
region, type of transaction, and activity). Most of the transactions
are entered into within the Republic of Slovenia, with treasury
transactions and low risk investments being performed in other
European Union members, while selectively entering the SEE region
with corporate lending activities. The Bank has set up a system
of early increased credit risk detection and is actively working on
recovery of receivables past due. In the event of objective evidence
on increased credit risk, the Bank assesses loss from credit risk
and recognises impairment charges and provisions in line with
international financial reporting standards, while ensuring their
adequacy on an ongoing basis later on.
The Bank calculates credit risk capital requirements using the
standardised approach. It also calculates an internal assessment of
capital requirements to cover for unexpected loss from credit risk
on a quarterly basis. It also estimates the assessed internal capital
requirements based on external factors and performs stress tests,
while also measuring the effect that extraordinary, but probable,
events have on profit and the Bank’s financial position.
The problems faced by the domestic economy and the uncertain
conditions in the European financial markets and economies further
impact the deterioration of the credit portfolio. With the number of
insolvency proceedings increasing and with rising unemployment
in 2012, the share of defaulters and non-performing assets also
increased. An economic recovery is not yet expected in 2013, which
is why the Bank will continue to implement measures to mitigate the
negative effect of the crisis (regular monitoring of debtor operations
and their rating, active recovery of receivables due, stricter lending
conditions, acquiring additional collateral, granting new loans to
financially stable companies and financing investments in core
business, granting housing loans, etc.). It will also continue to follow
the strategy of maximising diversification of its credit portfolio
and reducing exposure to individual debtors and groups of related
parties, all the while limiting investments in sectors and regions it
estimates as high risk.
Market risk
In its operations, the Bank assumes market risk being the risk of a
change in the fair value of financial instruments due to the change
in risk factors, namely interest rates, currency rates and financial
instrument prices. The most significant risk type within market
risk is positional risk in equity and debt financial instruments and
derivatives. Exposure to currency risk is low.
In trading with financial instruments, the Bank is predominantly
active in the financial market of the European Union (securities
transactions with prime banks and sovereigns). The Bank defines
investments and trading in financial instruments by applying limits
to a number of different factors (according to issuer, transaction
type, region, etc.), which the Bank constantly adjusts to take into
account the conditions in the financial markets and the Bank’s
business strategy. Additionally, it has also adopted stop-loss limits.
The Bank enters into transactions with foreign currency and interest
rate derivatives. Its basic policy in connection with derivatives
trading is entering into transactions for the purpose of hedging
own positions and client positions, whereby the latter transactions
are hedged with counter positions. Transactions are entered into
with prime foreign banks.
In relation to foreign currency risk, the Bank’s policy is that of a
closed position across individual foreign currencies. Managing the
open currency positions is performed through prompt transactions
and with the use of foreign currency derivatives in line with the
limits set. Limits are low and are meant for the management of
currency open positions within the scope of regular operations,
not intended for speculative trading.
The Bank calculates market risk capital requirements using the
standardised approach. On a quarterly basis, the Bank calculates
the internal estimated capital requirement to cover for unexpected
loss from market risk by using the value-at-risk method (VaR) and
performs stress tests. It also measures the effect of extraordinary, but
probable, events on income and the financial position of the Bank.
By continuously adapting the system of limits to cope with the
uncertain conditions in the financial markets and by implementing
investment policies aimed at decreasing equity holdings and
exposure to derivatives and at channelling investments into prime
debt instruments, the Bank is decreasing its exposure to credit risk.
Interest rate risk
The risk of change in interest rates pertains to the exposure of the
Bank’s financial balances to fluctuations in interest rates, mainly
due to the mismatch between the maturities of investments and
the Bank's funding sources or to the mismatch between the type of
interest rate or period, in which the interest rate is fixed. Exposure
to interest rate risk may influence the amount of the Bank's net
interest income as well as the economic value of its capital.
The Bank analyses exposure to interest rate risk using the method
of interest rate gaps, calculating the effects that changes in interest
rates have on net interest income (income aspect). It also analyses
interest rate risk with the use of the duration model, where it
assesses the effect of change in interest rates on the economic
value of equity (economic aspect).
In relation to interest rate risk, the Bank follows the policy of a
closed net banking book position, meaning that the objective is
to minimise the amount of interest rate gaps. The interest rate risk
associated with the trading book is analysed within the framework
of market risk.
In the event that the implementation of measures to decrease
interest risk is required, the Bank uses traditional balance sheet
transactions, such as lending, securities purchases, deposit taking,
issue of securities, etc. In addition to traditional balance sheet
transactions, the Bank also enters into agreements based on
interest derivatives to hedge individual transactions, and not for the
purpose of speculation. In accordance with International Financial
Reporting Standards, the Bank values such interest derivatives at
fair value, which may have a significant impact on the income
statement. Therefore the Bank introduced hedge accounting,
which minimises the instability of the operational results caused by
changes in the fair value of derivatives intended for hedging.
On a quarterly basis, the Bank calculates internal capital requirement
estimates to cover for unexpected loss from banking book interest
rate risk in line with internal methodologies.
With the use of the above measures, the Bank was successful in
decreasing exposure to interest rate risk. It will continue to close
interest rate gaps using balance sheet instruments and interest
derivative agreements in 2013, mitigating the effect on the income
statement with the use of hedge accounting.
Liquidity risk
Liquidity risk is the risk type that includes the risk of providing
liquidity funding when the Bank is unable to settle all of its due
obligations or is forced to obtain sources of liquidity at significantly
higher costs. It also includes market liquidity risk, pertaining to
positions in financial instruments which cannot be sold or replaced
in a short period of time without significantly affecting the market
price. From the aspect of time, liquidity risk management is
separated into operational liquidity management and structural
liquidity management.
The Bank provides for efficient management of operational and
structural liquidity, representing the management of cash flows in
a chosen time frame while taking into consideration the liquidity of
available assets and the stability of asset sources. Operational and
structural liquidity cash flow management is based on simulations
done in relation to the maturity of asset sources and the maturity of
assets according to their capacity for prompt realisation. In the area
of operational liquidity in connection with structural liquidity, the
Bank has at its disposal an adequate amount of liquidity reserves,
which enable it to settle matured liabilities in the shortest possible
period in cases when usual liquidity sources are not available, or
when these do not provide for the adequate liquidity required.
Turning to structural liquidity, the Bank provides for an adequate
liquidity ratio in accordance with the Decision on minimal
requirements for ensuring adequate liquidity for banks and savings
banks, thus ensuring required reserves in the form of the structural
liquidity surplus.
27
In accordance with the Decision on risk management and
implementation of internal capital adequacy for banks and savings
banks, the Bank performs quarterly stress test scenarios pertaining
to liquidity. Based on the results of these stress tests, it defines
target ratios and liquidity risk management limits. The tests allow
it to determine the structure and minimal amount of the liquidity
reserve. It also defines a contingency plan for the Bank to follow at
the onset of the first signs of a liquidity crisis.
By employing a system of limits, the Bank also follows the objective
of maximising funding source diversification. By maximising the
diversification of liquidity sources with an emphasis on longterm liquidity, the Bank works towards the objective of an optimal
liquidity gap, being the difference between assets and liquidity
sources in a certain time interval.
The Bank calculates the internal estimate of capital requirements to
cover for unexpected loss from liquidity risk in line with its internal
methodologies on a quarterly basis.
In 2012, the Bank managed liquidity risk in line with adopted
policies, however the conditions in relation to accessing liquidity
changed. The Bank did not have any problem in relation to
operational liquidity, as it provided for sufficient liquidity reserves
(highly liquid assets, which are also eligible to be pledged as
collateral pertaining to obligations toward the European Central
Bank and in the interbank repo market) to manage the required
level of operational liquidity.
More of its activities were aimed at providing adequate
diversification of liquidity sources, which allowed it to follow the
goal of an optimal structure of these while emphasising stable
liquidity sources. It also followed its objective of an adequate ratio
of loans to the non-banking sector with deposits from the nonbanking sector.
In 2012, the Bank continued to perform activities pertaining to the
calculation of the value of the Liquidity Coverage Ratio (the LCR) as
defined by the new CRD IV capital accord. The LCR ratio calculations
show that the amount of the Bank's top-quality liquid assets
exceeds the net liquidity outflows in extreme liquidity conditions
(30 days), which is why it will continue to work towards ensuring
an adequate amount of top-quality liquid assets in relation to the
expected liquidity inflows and outflows. Liquidity management will
be directed at providing alternative long-term liquidity sources.
Operational risk
Operational risk pertains to the risk of loss as a consequence of
the inadequate or unsuccessful execution of internal processes, the
actions of individual persons or the functioning of systems, or due
to external factors.
Due to its fast development and the characteristics of the financial
system, the importance of operational risk is growing. It requires
the setting up of a solid and reliable system for assuming and
managing this risk type. In defining the way it assumes and
manages operational risk, the Bank takes into consideration its
size and development as well as the nature and complexity of its
business activities. It has prepared a comprehensive review of
its potential exposure to operational risk according to business
28
processes, which is based on exposure according to category
of operational risk, the frequency of an event occurring, the risk
impacts and control environment.
The Bank has prepared a list of operational processes, which served
as the basis for the preparation of a profile of potential exposure to
operational risk according to individual processes, for the Bank as
a whole, for the preparation of a catalogue of all operational risk
it identifies and for the preparation of a matrix of links between
organisational units in the business processes.
It calculates operational risk capital requirements according to the
basic indicator approach. The calculation of the internal capital
assessment and the capital requirements to cover unexpected loss
from operational risk is done in line with adopted methodologies
on a quarterly basis.
Continuous operation of the Bank is regulated by the rulebook
defining procedures, activities and processes of operation and
organisation in the event of a crisis, which are part of operational
risk. The purpose of the plan for continuous operation is to ensure
the safety of employees and clients and to set up the smooth
operation of key business processes in the shortest possible time
at the existing and an alternate location. All business processes
performed by the Bank have plans in place for their performance in
the event of non-functional IT. The goal of organised operations is
to reduce operating and financial damage, which would materialise
should activities and procedures defined in the continuous
operation plans for the Bank and in the recovery plan be suspended.
In its operations, the Bank must always have at its disposal an
adequate amount of capital, which depends on the volume and
types of services the Bank provides and on its strategy. An adequate
capital base represents a contingency reserve pertaining to different
risk types, which the Bank is exposed to in its operations. To cover
unexpected loss, the capital of any bank must always amount to
at least the sum of the capital requirements for the credit, market
and operational risk, while capital adequacy, representing the ratio
between capital and the sum of risk-adjusted items, must always
amount to at least 8%. The management of the capital and capital
adequacy within the Bank is based on adopted policies of assuming
and managing capital risk and is in line with annual business
principles, also expressed in the need for adequate regulatory
capital.
With an aim to provide for safe and profitable operations, the Bank
maintains an adequate level of capital at all times along with its
appropriate structure. With the intention of assessing the capacity
for assuming risk, the Bank prepares a plan of movement in capital
and capital requirements once a year, as well as the plan of the
internal capital assessment and capital requirements for a period
of five years in line with its annual business plan and the five-year
development plan, which shows the fluctuations of capital adequacy
ratios in accordance with the planned volume of operations. In the
event that planned fluctuations of capital adequacy ratios deviate
from target values, the Bank will commence activities to decrease
exposure to risk or increase regulatory capital or decrease exposure
to risk.
The Bank can increase capital with retained profit by issuing
subordinated debt financial instruments or by issuing shares. It will
work on reducing investments with higher capital requirements
(related to capital requirements for credit and liquidity risk), while
also decreasing capital requirements for credit risk by including
real estate (housing and offices) into the calculation of the risk
adjusted exposure.
In 2011, a proposal of the new capital directive CRD IV was
published in response to Basel III, which provides the framework
for amending and supplementing the legislation to improve the
resilience of banks to risk. 2013 was anticipated as the year in which
the new legislation would come into effect, however this has been
delayed. Key requirements of the new capital regulations pertain
to increased amounts and quality of capital, the harmonisation
of regulatory adjustments and detailed disclosures. The major
features of the new regulation that will affect the calculation of
Bank capital relate to more stringent criteria on the inclusion of
hybrid instruments in the calculation of capital, the consideration
of unrealised profits and losses from securities at fair value and the
introduction of capital buffers. A transitional period is provided in
relation to the introduction of these changes.
With the emphasis the new capital accord puts on the increase
of top-quality capital, the Bank was actively preparing for the
changes in 2012. It eliminated two separate share classes (with the
elimination of the pre-emptive right the preference shares have
been turned into ordinary ones), partially redeemed the innovative
BCE11 series bond early, issued the subordinated BCE16 series
bond, redeemed the subordinated certificate of deposit early, and
issued a subordinated certificate of deposit with a longer maturity.
The above-mentioned activities have allowed the Bank to improve
capital structure and capital ratios, especially the ratio of the topquality Tier 1 capital. To identify the need for a possible increase in
capital in the coming years, it prepared simulations of capital and
capital ratios in line with the provisions of the new capital accord.
On a quarterly basis, the Bank calculates an internal estimate of
capital requirements to cover unexpected losses from capital risk
in accordance with the adopted methodologies.
Profitability risk
Profitability risk pertains to an inadequate structure or
diversification of income or to the Bank’s inability to provide ample
and constant levels of profitability.
The methodology of assessing profitability risk is based on
determining the adequacy of the structure of the statement of
financial position, the income statement items, the interest margin,
the return on assets and the capital and cost efficiency. This is why
the Bank prepares monthly quantitative and qualitative analyses
of the statement of financial position, the income statement, the
statement of comprehensive income and the statement of cash
flows, with the findings taken into account in the operational
decision-making process.
To assess the adequacy of internal capital, the Bank calculates the
internal estimate of capital requirements to cover for unexpected
loss from profitability risk on a quarterly basis in line with the
adopted methodology.
Unfavourable economic conditions continued in 2012. Country
rating downgrades and bank rating downgrades, with subsequent
partial repayments of foreign borrowing, have increased the
pressure on acquiring funding from other sources for the Bank. It
has been adjusting the volume of lending and the amount of the
secondary liquidity reserve to the account for these facts.
Strategic risk
Strategic risk pertains to the risk of loss from erroneous operational
decisions, the inappropriate implementation of decisions made or
due to insufficient responsiveness to the changes in the operating
environment.
To this end, the Bank prepares a five-year strategy and regularly
verifies its implementation, which allows it to adapt to the changes
in the internal and external business environments on time.
The strategy is clear enough to allow for it to be implemented
throughout the Bank and is adequately supported by all the
required calculations, as well as by personnel and technological
capabilities.
The uncertain macroeconomic environment increases strategic
risk, which is why the probability exists that the Bank will need
to adjust its strategic goals to the changes in the environment
brought about by the crisis; it will, however, attempt to reduce
risk to the lowest possible level by responding quickly to these
changes.
In line with its risk profile, the Bank did not calculate any capital
requirements in 2012.
Reputation risk
Reputation risk represents the risk of loss due to a negative image,
which the Bank has in the eyes of its clients, business partners,
owners, investors and supervisors. This image impacts the
establishment of new business relationships and services as well
as the managing of existing ones. Negative effects may include
loss of revenue, a deterioration of operational results, a decrease
in at sight deposits and other funding sources, a decline in the
number of clients, drop of share value, etc.
The Bank manages reputation risk by ensuring safe and stable
high quality operations, by having the Management Board and
Supervisory Board conduct themselves with in accordance
with professional prudence and the highest ethical standards of
management, by providing transparent operations, monitoring
its media image, systematically communicating with the varied
public groups, managing its human resources with utmost care,
and by being socially responsible. It pays special attention to
communicating the Bank’s operations and its capital position,
which it maintains in spite of the challenging economic conditions.
The profitability risk management methodology includes
measures and rules of assuming, reducing, dispersing, transferring
and avoiding risk, which the Bank has identified and measured.
29
ICAAP process
In line with the new Basel II capital accord, the Bank has set
up a process of assessing adequate internal capital (the ICAAP
process), which:
-is based on the identification, measurement and assessment
of risk, the preparation of an aggregate risk estimate and the
monitoring of significant risk types;
-allows for ensuring adequate internal capital levels in relation
to the risk profile of the Bank;
-
i s appropriately included in the management process
(decision-making, risk management, etc.).
For the purpose of assessing internal capital, the Bank calculates
internal capital requirement estimates for risks it deems
significant on the basis of the risk profile it determines through
the procedure of risk identification, measurement or assessment,
management and monitoring, so that these might significantly
impact its operations, thus requiring it to ensure appropriate
capital levels. The Bank calculates the internal capital assessment
and capital requirements on a quarterly basis, with the calculation
being confirmed at the Risk Committee and considered at ALCO.
The Bank re-assessed the level of exposure to individual risk
types in major business lines and the quality of the control
environment. It calculated the Bank’s risk profile and prepared a
risk matrix. Based on the risk profile, prepared in November 2012,
the Bank’s exposure to risk is acceptable, with it being mostly
exposed to capital, followed by profitability, credit and liquidity,
market, strategic, operational and interest rate risk, as well as
profitability risk. The calculated risk profile deviates from the
desired risk profile, as defined in the Strategy of assuming and
managing risk, it does however still allow for the Bank’s stable
and safe operation in the ordinary and extraordinary course of
business. The deterioration in the risk profile is mainly the result
of continued harsh economic conditions in the domestic and
international environments, which subsequently result in the
increased exposure of the Bank to respective risk types.
6.6Development
The Bank provides its clients with universal banking services. It
has taken care of its further development during the entire course
of its operation by investing in efficient IT support systems, its
business network and in its human resource potential.
Retail and internal organisation
The Bank only has business units in Slovenia. Through a welldeveloped business network, it operates in all the major towns
of the Celje region as well as in Ljubljana, being the financial
centre of Slovenia, in Maribor and in Koper. Within 9 business
units operate 8 branch offices with 22 agencies for individuals
and 6 branch offices for corporates and private individuals. On
1 February 2012, a restructuring of the business network was
performed, with it being divided into two organisational units, the
Retail Division and the Services Development Division. Agency
Vitanje was discontinued and the organisational structure of
the Celje Business Unit was changed. Due to the rationalisation
of operations in payment operations, a restructuring of the
Payments Division was also performed. The Subsidiary does not
have any subsidiaries or affiliates.
Investments
The Bank earmarked EUR 1,520 thousand for investments in
2012, being 4.6% less than the year before. Most of the funds were
used for IT upgrades in the Retail Division, licenses, software and
hardware, external advisory services pertaining to the setting up
of the data warehouse, ATM upgrades, POS terminal and signalling
and safety device purchases, and for equipment purchases.
IT support
In addition to the activities needed for the performance of
continuous IT support, a large part of the IT support activity
was also directed at the completion of larger projects, the more
complex of those being the replacement of hardware and systems
software to allow for support of the three-level architecture in
Hibis and pertaining to own development.
The project of optimising the processes of card operations
saw the implementation of new development tools and the
completion of development standards. A significant part of the
joint infrastructure was set up, building a foundation for the
further development of the application.
The process of introducing MPLS communication links to all
business units and ATMs, allowing for higher pass-through
capabilities, was completed. Thus the communication links
comply with modern requirements at significantly lower costs of
use. The migration of all workstations to the Windows 7 platform
and the Exchange 2010 mail were also completed.
In connection with the data warehouse, 2012 saw routine
operations carried out, not including adjustments and changes in
the source environments, monthly data feeding and optimisation.
At the same time, the Bank saw to its further upgrading, by way
of providing additional data, improving the quality of reports, and
an improved management of operations.
30
Human resources
In 2012, the number of employees in the Bank decreased from
530 to a total of 508, with the average complement over the
past year amounting to 524 employees. During the year there
were 31 employment terminations and 9 new employees were
taken on. At the end of the year, 10 employees were employed on
temporary employment contracts.
Looking at the age structure, 2012 saw the share of employees
in the 41 to 45, 51 to 55 and 56 to 60 year categories increase,
while other age group categories saw the number of employees
decrease. The average age at the Bank thus increased to 45.1
years in 2012.
The educational structure of employees improved at the higher
education and Master’s levels in line with the personnel policy if
compared with 2011, namely by 3.3%. The share of employees
with at least a university level education was 61.2%, while the
secondary education group held a 36.4% share. The educational
structure improved mainly due to the fact that employment of
secondary education employees terminated and new employees
were taken on with university and higher education. Additionally,
12 employees got a diploma in 2012, 2 finished specialist studies,
9 finished higher education programmes, and one finished a
university level programme.
The average work time efficiency was 78.7%, with absenteeism
predominantly coming from use of annual leave, holidays and
sick leave.
Achievement of strategic goals requires investments focused
on the development of employee skills and abilities. The Bank
subsequently manages the quality of employee education. In
2012, employees attended 228 training events in all areas of
banking operations.
The subsidiary company employed 5 people at the end of 2012. In
addition to its regular employees, the company also cooperates
with external appraisers, is in a contractual relationship with a
real-estate broker, and has outsourced its accounting. Two of the
employees in the subsidiary company hold a Master's Degree,
two have university degrees in finance and architecture, while
another holds a high school diploma. The head of projects and
the head of property sales both have acquired individual licenses
in the fields of construction, real estate operations and real estate
appraisal (certified appraiser, appraiser certified by the Slovene
Institute of Auditors).
6.7Social and environmental
responsibility
The Bank’s Management Board continues to operate with due
professional diligence, manages the Bank with prudence, takes
care of investor interests and fulfils liabilities toward shareholders,
the Supervisory Board and the general public, all the while
actively and transparently communicating with the interested
public as well as operating within the framework of established
risk management mechanisms.
Being part of the environment is an important component of
successful operations, quality development and progress for the
Bank, which is why it is actively and responsibly involved in the
social environment. In accordance with its vision and strategy, it
invests in the environment in which it operates. It supports sports
and culture with sponsorships, takes part in a number of charity
projects and is actively involved in social projects, as it deems its
further efficiency and success to be dependent on the support of
its environment and the trust of different interest groups.
In addition to cooperating with various cultural, humanitarian
and sports societies, the Bank also supports the Muzej novejše
zgodovine (Museum of Modern History) in Celje in its Hermanov
Brlog (Herman’s Den) project, the only Slovenian museum for
children, the Pelikan Studio, the Olympic gold medallist Urška
Žolnir, while also being a long-term sponsor of the selection of
the fastest growing company in the region.
In its operations, it shows special concern for underprivileged
customer classes as it offers special benefits to humanitarian
and other organisations, and still maintains savings at primary
schools. In doing so it hopes to contribute to the development of
banking related values.
The Bank also helps its partners invest in ecologically sound
projects, construct waste water treatment plants, and carry out
other social responsibility projects. It purchases ecologically
safe materials, separates waste, collects waste paper and ink
cartridges, and utilises a centrally controlled heating system to
be rational in its energy usage.
31
6.8Internal Audit Department operations
The Internal Audit Service is an independent department, which
reports directly to the Management Board, at the second level of
management. It is in constant contact with the Audit Committee
and the Supervisory Board. The aforementioned gives its
employees the possibility to contribute opinions, assessments and
recommendations while relying on internationally established
professional internal audit standards and operating independently
of other parts of the Bank.
The Service with its five employees performs its duties in
accordance with the internal audit standards of professional
practice, the code of internal auditing principles and the internal
auditor’s professional ethics code in all significant aspects. The
latest assessment of the Internal Audit Service's compliance with
standards was performed in the period from November 2012 to
January 2013 (the assessment period interval is 5 years).
The two basic planning documents of the Internal Audit
comprise the three-year strategic plan and the annual operational
programme which the Management Board adopts annually with
approval given by the Supervisory Board after due discussion at
the Audit Committee. Both documents are based on the Bank’s
risk profile, its annual and development plan, and the fundamental
characteristics of the environment in which it operates, while
taking into consideration the requirements by the Supervisory
Board on compulsory internal auditing of certain operational areas.
The planned activities of the service are detailed in semi-annual
operational plans, which the Management Board adopts. To
monitor the Internal Audit’s activities on an ongoing basis the
Management Board and the Supervisory Board endorse semiannual reports on its activities, showing the significant activities
performed by it, as well as an overview of issued and implemented
recommendations. The reports are also considered at the
Supervisory Board’s advisory body, the Audit Committee. In line
with legislation, the Supervisory Board is regularly kept appraised
of the audits conducted by the external supervisory. The annual
report on the internal audit is also brought before the General
Meeting of Shareholders.
The assignments of Internal Audit are defined by legislation
and pertain foremost to quality assessment in connection with
the management of all types of risk (including the setting up of
an adequate system of internal controls) and the monitoring of
compliance of the Bank’s operations with regulations and internal
rules as well as the principles of rational operations. A framework
system for comprehensive monitoring of implementation of the
annual operational programme has been set up comparing the
plan and execution of internal audits. The Bank’s Management
Board is made aware of the realisation of all recommendations
after internal auditing has been performed on at least two levels:
first after every internal audit has been completed and after that
a comprehensive annual report on the implementation of all the
recommendations is given. The Internal Audit also coordinates
activities in connection with the selection of the external auditors
(through the Management Board, the Audit Committee and the
Supervisory Board) to be decided upon at the General Meeting of
Shareholders.
32
The annual operational programme provided for audits of the
Bank’s 23 business areas and the completion of 5 internal audits
from 2011, with the assumption there would be no large scale
extraordinary assignments (a total of 28 internal audits). Actually,
19 planned internal audits were completed by end February 2013,
5 internal audits carried over from 2011 have been completed, with
5 extraordinary audits having been performed (a total of 29 audits),
three internal audits are still running, and two have been included
in the plan of operations for 2013. The Internal Audit prepared 44
expert opinions pertaining to different areas of operation. There
were a total of 73 instances where internal audits were performed
and expert advice was given in 2012.
The most significant areas of operation, which were audited in 2012
include: credit risk management in its broadest sense, IT systems
management quality from different points of view, POS terminals
management quality, the system of internal controls set up within
business units, interest rate risk management quality, anti-money
laundering, operations with persons in a special relationship with
the Bank, compliance of the Bank's operations with changes in
legislation, and adequate usage of dedicated funding.
In all internal audits and reviews, special emphasis was given to:
the identification of procedures built-in for the management of
risk, assessing the current situation, the quality of internal control
systems, compliance with the legislation and internal rules, and
the possibilities for improvement of existing procedures; all
aimed at further raising the quality of the Bank’s operations thus
contributing to added value. Special attention is directed at the
areas subject to new regulations (external or internal) or changes
in the established operational practice, frequently in cooperation
with the Compliance Department.
All of the Internal Audit’s assignments described were performed
in 2012 by five employees (the figure includes the department’s
General Manager). One of the employees is a certified internal
auditor; another is a certified information systems auditor
(CISA) and is a Master of Science. All the employees have been
educated at least university. Additionally, one employee holds an
insurance broker licence and three employees hold the European
Banking Certificate. One of the employees continued with postgraduate Master’s studies in 2012. As in previous years, 2012 saw
education and training of employees remains a constant mission,
with additional knowledge attained in internal auditing, banking
operations, IT skills, anti-money laundering, risk management and
corporate governance.
7 MANAGING BODIES OF THE BANK
GENERAL MEETING OF SHAREHOLDERS
Audit Committee
SUPERVISORY BOARD
Remuneration Committee
MANAGEMENT BOARD
Credit Committee
Liquidity Committee
Organisational units
Management Committee
Assets and Liabilities
Committee - ALCO
IT Committee
Other committees and councils
33
8 ORGANIZATIONAL STRUCTURE OF THE BANK
MANAGEMENT BOARD
Member of the Management Board
President & CEO
Board & Deputy CEO
Aleksander Vozel, M.Sc.
Davorin Leskovar
ACCOUNTING
DIVISION
EXECUTIVE DIRECTOR
EXECUTIVE DIRECTOR
LEGAL AFFAIRS, DEBT
ENFORCEMENT AND
COMPLIANCE
OPERATIONS
DIVISION
CORPORATE
DIVISION
FINANCIAL MARKETS
DIVISON
MAIN
BRANCH
LJUBLJANA
DEVELOPMENT
SERVICE
Branch Ljubljana
RETAIL DIVISION
IT DIVISION
GENERAL AFFAIRS
RISK
MANAGEMENT
DIVISION
PAYMENTS AND
OPERATIONAL
SUPPORT DIVISION
PERSONNEL AND
ORGANISATIONAL
SERVICES
INTERNAL AUDIT
CELJE
BUSINESS UNIT FOR
PRIVATE INDIVIDUALS
CELJE
BUSINESS UNIT
FOR COMPANIES
SLOVENSKE KONJICE
BUSINESS UNIT
HMEZAD ŽALEC
BUSINESS UNIT
ŠENTJUR
BUSINESS UNIT
LAŠKO
BUSINESS UNIT
ROGAŠKA SLATINA
BUSINESS UNIT
MARIBOR
BUSINESS UNIT
KOPER
BUSINESS UNIT
34
9
STATEMENT OF CORPORATE GOVERNANCE
The Bank’s Corporate Governance statement is prepared in line
with the provisions of the Companies Act (the ZGD-1) and pertains
to the year 2012. It includes the Statement on compliance with
the Corporate Governance Code made by the Management Board
and the Supervisory Board under item 9.1 and additional Notes in
accordance with Paragraphs 5 and 6 of Article 70 of the Companies
Act under item 9.2.
Clause 5.4
The Bank’s shares are currently not listed on the stock exchange.
Clause 5.5
The proposal to the General Meeting of Shareholders for the
nomination of Supervisory Board members includes all of the
legally required data; the rest is public domain data.
Clause 5.6
9.1
Statement of the Banka Celje, d.d.,
Management Board and Supervisory
Board on compliance with the Corporate Governance Code
As a public company Banka Celje, d.d. (the Bank), which has bonds
listed on the Ljubljana Stock Exchange, d.d., is compliant with the
Banking Act (the ZBan-1) and the Companies Act as well as the
Market in Financial Instruments Act (the ZTFI) and the Rules of
the Ljubljana Stock Exchange and with all the additional general
rules, dealing with topics that are dealt with in the Corporate
Governance Code.
Corporate Governance Code is in the public domain, attainable at
the Ljubljana Stock Exchange website at http://www.ljse.si/ under
"for issuers/downloads'".
The Bank complies with the Corporate Governance Code dated 8
December 2009 (the Code) with the exception of some deviations
or particularities, explained under individual items of the Code
below.
The Posest, d.o.o., as a non-public company, is not subject to any
code in its operations.
Clause 1
The Bank's goals are defined in its annual and development plan,
both of which are approved by the Supervisory Board and are not
separately defined in its Articles of Association.
Clauses 2, 2.1 and 2.2
As of yet, the Bank has not prepared or adopted a Bank Management
Policy as an independent document, rather this area is regulated
with different internal documents, such as prescribed by the
Bank of Slovenia, the ZGD-1, the ZTFI and other sector-specific
legislation.
Clause 4.2
The Bank would like to see large and institutional shareholders
inform the public with their management policies; this decision,
however, is up to them.
Clause 5.2 (second paragraph)
The Bank does not publish data on the costs it incurred from the
collection of powers of attorney; these are included in the cost of
the organisation and execution of the annual General Meeting of
Shareholders.
The Bank, in line with general practice, as a rule nominates the
members of the Supervisory Board collectively.
Clause 5.7
The remuneration policies concerning the Bank's Management
Board are defined by the Supervisory Board on the basis of a
proposal by the Remuneration Commission.
Clause 5.8
The General Meeting of Shareholders of Banka Celje decides on
the use of distributable profit separately, however it decides on the
discharge of the Management Board and the Supervisory Board by
single unified vote.
Clause 5.9
Financial statements form part of the annual report, which together
with the auditor’s opinion is presented to the General Meeting of
Shareholders. A representative of the Bank’s authorised auditor is
not invited to the Meeting. Were, however, the Meeting authorised
to adopt the annual financial statements, a representative of the
authorised auditor would be invited.
Clause 8
Statements with which the Supervisory Board members would
take a position on the fulfilment of each of the criteria pertaining
to independence under item C.3 of Supplement C have not yet been
signed, nor has there been any such announcement made on the
website. In the future, the Bank will endeavour to comply with the
recommendation on this matter.
Clause 8.9
The Supervisory Board of the company has not formed a Personnel
Committee or any other body, which would set the criteria and
recommendations pertaining to the nomination of the Management
Board in advance. The Bank will deal with this option in the future
also.
Clause 8.12
In its report, the Supervisory Board also includes all of the
requirements from the decision of the Bank of Slovenia pertaining to
the due care and professional diligence of Management Board and
Supervisory Board members and endeavours to include as much
information as possible to represent adequately its activities during
the year. In the future, the recommendations from Clause 8.12 of the
Code will be observed as much as possible.
Clause 11
In its operations until now the Supervisory Board has not yet
nominated a secretary. In accordance with the consensus between
the Management Board and the Supervisory Board this job is
performed by the expert department of the company.
35
Clause 13
The Personnel Committee or the Commission for Term
Appointment have not been appointed; the Bank will strive to
comply with the recommendation in the future.
Clauses 16.5 and 16.6
The Bank has no option plan or comparable financial instruments
in place which would provide for variable reimbursement of the
Management Board members.
Clause 17.2
Statements on compliance with individual items from supplement
C.3 of Supplement C (Conflict of Interest) of the Code have not
been signed by Supervisory Board members at replacement or at
each change, nor were these presented to the Supervisory Board.
The Bank will endeavour to comply with this recommendation in
the future.
Clause 20.2
Individual areas of communication have been regulated by
individual internal acts until now, however the Bank will endeavour
to comply with this recommendation in the future.
Clause 20.3
The Bank has not got a special internal act in place in connection
with the limitations and disclosures pertaining to treasury share
transactions, as it considers this to be sufficiently regulated by
existing legislation.
Clause 20.4
In making significant shareholder and public announcements,
the Bank considers statutory time limits, which is why it does not
prepare a calendar of significant announcements. It will endeavour
to comply with this recommendation in the future.
Clause 22.2
The company does not prepare a separate sustainability report as
this area forms part of the annual report.
Clause 22.3
In line with the ZGD-1, the ZBan-1 and the ZTFI, the Bank informs
the competent authorities on the acquisition of a qualifying share.
Clause 23
The Statement of Corporate Governance forms part of the annual
report, which is published on the Bank’s website.
9.2
Additional Notes in line with Paragraphs
5 and 6 of Article 70 of the ZGD-1
9.2.1The main characteristics of internal controls and risk
management in connection with financial reporting
The Bank has always had a system of internal controls set up
during its operations, as it is the duty of the Bank's Management
Board to conduct its operations in a manner ensuring an adequate
risk management system in relation to all the business partners,
owners and supervisory institutions. The system of internal
controls is connected to a comprehensive whole in the sense of an
umbrella act, determining all the dimensions of control activities.
The internal control system at the Bank must be set up in a way as
to provide adequate assurances on the following activities:
- the Bank's operations must be managed with great care and
conducted on the basis of the approved development plan as
well as the Bank's approved annual policies and financial plan
resulting in profitable operations;
- all operational activities, which have the potential to increase
the Bank's liabilities, must be approved by the authorised
person, with a segregation of responsibilities clearly defined;
- a ssets must be secured appropriately, receivables insured,
liabilities monitored;
- a strategy and policies for risk management must be prepared,
special care must be given to the monitoring of the Bank's
capital adequacy, liquidity and credit risk, interest rate and
operational risk, profitability and market risks;
- a system for the prevention of loss due to irregularities,
especially in connection with timely detection of fraud, abuse,
anomalies or errors, must be set up;
- the system of financial records needs to provide timely, reliable,
up-to-date and complete information;
- a system for the transmission of reliable, timely, up-to-date and
complete information for reporting to owners and external
institutions must be set up;
- a supervised system for the introduction of new financial
services and new banking products as well as entering new
markets needs to be provided for.
9.2.2
Significant direct and indirect ownership of the
Bank’s securities
Qualifying holdings, as defined by the law dealing with the market
in financial instruments, in the Bank's equity are held by three
companies, namely:
- Nova Ljubljanska banka, holding 208,499 regular shares, thus
having a 40.99% share in the voting rights,
- NFD1 Investicijski sklad, holding 46,820 regular shares, thus
having a 9.21% share in the voting rights and
- Slovenska odškodninska družba, holding 47,592 regular shares,
thus having a 9.36% share in the voting rights.
The voting rights of the Bank's other owners do not exceed the
qualifying shares as defined by the act dealing with the market in
financial instruments.
36
9.2.3Holders of securities ensuring special rights
of control
The Bank's shares do not give their holders any special rights of
control.
9.2.4Restrictions related to voting rights
The shareholder's voting right depends on the number of shares held
and is not limited to a certain share or a certain number of votes. Each
share provides one vote at the Meeting of Shareholders.
Voting at the Meeting of Shareholders is the right given to shareholders
- persons holding registered shares with voting rights entered in the
central register for book entry securities at the end of the fourth day
prior to the Meeting.
The convenor of the General Meeting may restrict the voting rights
of an individual shareholder, who acquired shares contrary to the
regulations.
Agreements, which - with the Bank's cooperation - would mean
financial rights based on shares being separated from ownership of
the shares, do not exist.
9.2.5The Bank's rules on:
- a ppointment and replacement of the management
or supervisory body members
- changes in the Articles of Association
The Bank's rules on appointment and replacement of the members
of its management or supervisory body and on the changes in the
Articles of Association are defined in the Banka Celje, d.d., Articles of
Association and in the Working Rules on the Operations of the Banka
Celje, d.d., Supervisory Board.
In accordance with the Articles of Association, the Supervisory Board
comprises seven members appointed and discharged at the Meeting
of Shareholders. To be appointed a Supervisory Board member, one
must fulfil membership conditions for bank supervisory boards as
defined by the Companies Act and the Banking Act.
Supervisory Board members are appointed for a period of 4 years
and may be re-appointed. The term for Supervisory Board members
expires on the day of the General Meeting held in the fourth year after
appointment.
In the event of an early termination of appointment of Supervisory
Board members having been appointed at the General Meeting of
Shareholders, replacements are appointed at the following General
Meeting. The replacement is appointed until the end of the originally
appointed member's term. Each member of the Supervisory Board
may resign prior to the expiry of their term on giving three months’
notice. A written letter of resignation must be sent to the President
of the Supervisory Board, and in the event of the resignation of the
President of the Supervisory Board, it must be sent to his deputy and
the Bank's Management Board.
At the General Meeting of Shareholders, individual members of the
Supervisory Board - or the Supervisory Board collectively - may be
recalled early. Such a resolution shall be adopted with at least a threequarter majority of votes present at the Meeting.
Supervisory Board members appoint an Audit Committee and the
Reimbursement Committee, serving as the bodies of the Supervisory
Board.
The president and members of the Bank's Management Board
are appointed and discharged by the Supervisory Board. Only a
candidate who fulfils all the conditions for appointment as defined by
the Companies Act and the Banking Act may be appointed to the post
of president or member of the Management Board.
The President and Members of the Bank's Management Board are
appointed for a term of five years and may be re-appointed.
The President and Members of the Bank's Management Board may be
recalled early in line with the applicable legislation. Each member of
the Bank's Management Board may resign prior to the expiry of their
term on giving six months’ notice. A written letter of resignation must
be sent to the President of the Supervisory Board.
The Articles of Association may be amended based on the decision
made at the General Meeting of Shareholders, such a decision having
been adopted by a majority of at least three quarters of votes present.
The General Meeting of the Bank's Shareholders may authorise the
Supervisory Board to amend the Articles of Association to harmonise
the text with the adopted resolutions in effect.
9.2.6Authorisations of the Management Board
Based on the amendment to the Articles of Association having been
entered into the Court's Companies Register on 28 May 2008 during
a five year period following the entry, the Management Board, under
approval by the Bank's Supervisory Board, is authorised to increase
share capital by no more than EUR 7,045,952.26 (authorised capital)
by issuing no more than 211,061 new shares.
The Bank may acquire and dispose of own shares in line with the
Companies Act. The Management Board decides on the conditions
of the acquisition and disposal of own shares and must report own
share transactions at the General Meeting.
9.2.7
Data on the activity of the General Meeting of
the Bank’s shareholders, its key responsibilities,
description of shareholder rights and how these
are exercised
The Bank's Management Board calls the Meeting of Shareholders.
It convenes at least once a year. The Supervisory Board calls the
Meeting in the following cases:
- if the Management Board does not call it at least once a year;
- if the Management Board does not call it upon request of the
minority as stipulated in the Articles of Association.
37
The General Meeting of Shareholders passes decisions on:
- he use of distributable profit and the discharge to the Management
Board and Supervisory Board;
- the adoption of the annual report in cases as defined by the
Companies Act;
- the appointment and recall of Supervisory Board members;
- amendments to the Articles of Association;
- measures taken to increase or decrease capital;
- changes in status;
- the dissolution of the Bank;
- the appointment of the auditor;
- authorisation of the Management Board to acquire own shares in
accordance with the Companies Act;
- other matters within the scope of its competencies in accordance
with the Companies Act and the Banking Act.
Shareholders holding 20% of the share capital in total may request,
in writing, the General Meeting to be convened. Such a request
must include a reason for the Meeting to be convened and the
matter on which the Meeting is to pass a decision. In such event, the
Management Board is required to call the Meeting no later than 2
months after receiving a written request.
Shareholders holding 20% of the share capital collectively may
request, in writing, for a certain item to be included in the agenda of
the General Meeting of Shareholders. The Bank's Management Board
must accede to such a request, if it includes a prepared proposition
of a decision falling under the responsibilities of the General Meeting
and if the request was made in writing seven days after the call of the
General Meeting at the latest, so that the item may be made public at
least 14 days before the General Meeting.
9.2.8
Data on the composition and activities of
management and supervisory bodies and their
committees
The Supervisory Board monitors and supervises the management of
the Bank and its operations. It conducts its assignment in accordance
with the provisions of the statutory acts dealing with the operations
of banks and companies and in accordance with the Bank’s Articles
of Association. At the Meeting of Shareholders on 24 May 2011, new
Supervisory Board members were elected: Jure Peljhan, Ph.D. as
President, Zvonko Ivanušič, M.Sc. as Vice President, Uroš Čufer, Ph.D.,
Melita Malgaj, Tomaž Subotič, Ph.D., Bojan Šrot, Zdenko Zanoški, M.Sc.;
it also operated this function in 2012. On 25 March 2013 the Bank
received a resignation of a member of the Supervisory Board Uroš
Čufer, Ph.D., who was appointed Minister of Finance of the Republic
of Slovenia. He also resigned as a member of the Audit Committee
of the Bank.
In 2008, the Supervisory Board of Banka Celje, d.d., established a
consulting body, namely the Audit Committee of Banka Celje, d.d. At
the constituent meeting of the Supervisory Board on 8 June 2011,
new members of the Audit Committee were appointed, namely: Uroš
Čufer, Ph.D., President, Tomaž Subotič, Ph.D., Deputy and Zdenka
Habe, Member, as an independent expert. The Audit Committee
continued to perform its activities in the same composition during
2012. The Supervisory Board named the Reimbursement Committee
38
at its 3rd meeting on 19 October 2011. It comprises Jure Peljhan,
Ph.D., as President, Zvonko Ivanušič, M.Sc., as Vice President, Tomaž
Subotič, Ph.D., as member and Bojan Salobir, Executive Director, as
the Bank's representative with a standing invitation.
The Management Board represents and manages the Bank’s
operations according to the principles of joint and several liability.
In accordance with the Articles of Association it comprises three
members: President of the Management Board, Dušan Drofenik,
M.Sc., Vice President of the Management Board, Davorin Leskovar
and Member of the Management Board, Aleksander Vozel, M.Sc. The
Bank’s Management Board usually meets once a week and considers
materials from areas as defined by the Banking Act and the Banka
Celje, d.d., Management Board Working Rules at its meetings.
The President of the Management Board, Dušan Drofenik, M.Sc.
is a member of the Supervisory Board at The Bank Association of
Slovenia, a member of the Supervisory Board at the Slovene-German
Chamber of Commerce, and was a member of the supervisory board
of Skupna pokojninska družba until 16 August 2012. Davorin Leskovar
and Aleksander Vozel, M.Sc. are not members of any supervisory
boards.
The Credit Committee comprises nine members and defines the
conditions and criteria for acquiring and placement of assets, makes
decisions on lending and guarantee transactions and decides on
distribution in line with its operational rulebook. In 2012, it comprised:
the President of the Management Board at the post of President of the
Credit Committee, the Vice President of the Management Board at
the post of Vice President of the Credit Committee and the following
members: Member of the Management Board, Executive Director for
Corporate Division and Main Branch Ljubljana, General Manager of
the Risk Management Division, General Manager of the Retail Division
and the General Manager of the Financial Markets Division, the General
Manager of the Corporate Division and the General Manager of the
Legal affairs, debt enforcement and compliance operations Division.
The President of the Credit Committee may invite other General
Managers to the Credit Committee meetings. When proposals from
the Retail Division are being considered, business unit Heads are also
invited.
The Liquidity Committee comprised seven members in 2012: General
Manager of the Financial Markets Division as Committee President
and the following members: President of the Management Board, Vice
President of the Management Board, Member of the Management
Board, Executive Director for Corporate Division and Main Branch
Ljubljana, General Manager of the Retail Division and General
Manager of the Risk Management Division. The Liquidity Committee
meets at least three times a week and supervises the Bank’s liquidity
position. It performs its duties in line with the Liquidity Committee
Working Rules.
The Bank’s Management Committee operates as the Management
Board’s advisory and informative body. In 2012 it comprised the
Bank's Management Board, the Executive Directors, General Managers
and the Heads of independent functional organisational units, who,
in accordance with their operative functions, answer directly to the
Management Board and the Director of the subsidiary company.
The Management Board may also appoint other attendees to the Management Body’s meetings. Operational rules are set with the Management
Body Working Rules and meetings are usually held once a month and are intended for the presentation of the financial and income position
of the Bank as well as the consideration of the execution of project assignments, all the while allowing for discussion on other significant
decisions to be made in relation to the Bank’s operations.
The Assets and Liabilities Committee – the ALCO monitors the conditions in the financial markets, analyses the balances and changes in the
Bank’s statements, and prepares the decisions aimed at the attainment of an adequate balance sheet structure. In line with the Working Rules
on its operations, the Committee meets once a month. The members: Vice President of the Management Board as President of the Committee,
the President of the Management Board at the post of Vice President of the Committee, Member of the Management Board, General Manager
of the Accounting Division, General Manager of the Risk Management Division and the General Manager of the Financial Markets Division.
The IT Committee is the Management Board’s counselling body in connection with the execution of its rights and obligations related to IT. It
meets once a month. In addition to the President of the Management Board, the Vice President of the Management Board and Member of the
Management Board as the president of the IT Committee, it also comprises the General Manager of the IT Division and the Business Consultant
for IT. Standing invitations were extended to the Assistant General Manager of the IT Division, the Business Consultant for the development of
IT, the internal auditor in charge of IT and to the security systems engineer.
9.2.9 Structure of share capital, with special reference to:
- rights and obligations, provided by shares or shares from individual classes, and
- should multiple share classes exist, the proportion of share capital represented by an individual class
The Bank's share capital is represented by 508,629 ordinary registered no par value shares. Shareholders exercise their rights in the matters of
the Bank's operations at the General Meeting of Shareholders. Regular shares are voting right shares, whereby each share ensures one vote at
the Meeting.
9.2.10 Share transfer restrictions, especially:
- restriction of security ownership and
-explanatory note on the requirement to acquire permission
from the company or other holders of securities for the transfer
The Bank's shares are transferred in line with the regulations pertaining to dematerialised securities. Current shareholders have priority, in
proportion with their portion of the share capital, to subscribe new shares from the authorised capital (the right expires on 28 May 2013). There
are no other shareholding restrictions imposed by the Bank, whereas acquiring a qualifying share requires the approval of the Bank of Slovenia.
There is no requirement to get the approval of the Bank or other shareholders to transfer shares.
9.2.11 Employee stock options
The Bank does not have an employee stock option scheme in place.
9.2.12 Shareholder agreements that could result in the restriction of the transfer of shares or voting rights
Agreements between shareholders that could result in the restriction of the transfer of shares or voting rights are not in force.
Davorin Leskovar
Member of the
Management Board
Member of the
Management Board
President of the
Management Board
Celje, 22 April 2013
39
10STATEMENT OF MANAGEMENT’S RESPONSIBILITIES
The Management Board herewith confirms the financial statements of the Bank and the Group for the year ended 31 December 2012
on pages 45 to 50 and the accounting policies and notes to the accounting policies on pages 51 to 134 of the annual report.
The Management Board is responsible for the preparation of the annual report in a way as to be a true and fair representation of the
Bank’s assets and the Group's assets and the results of their operations for the year ended 31 December 2012.
The Management Board additionally confirms that appropriate accounting policies were consistently used and that the accounting
estimates were prepared according to the principles of prudence and good management. The Management Board furthermore
confirms that the financial statements together with the notes have been prepared on the basis of the assumption of continued
operations of the Group and in line with the existing legislation and the IFRS, as adopted by the European Union.
The Management Board is also responsible for appropriate accounting practice, for the adoption of appropriate measures for the
insurance of property and for the prevention and identification of fraud and other irregularities or unlawfulness.
The tax authorities may at any time within 5 years from the day of the tax charge examine the operations of the company, which
in turn may cause the obligation of an additional tax payment, default interest payment and penalty from Corporate Income Tax or
other taxes or duties. The Management Board is not aware of any circumstances, which could result in any such potentially significant
obligation.
Managment Board:
Davorin Leskovar
Member of the
Management Board
Member of the
Management Board
President of the
Management Board
Celje, 17 April 2013
40
11
REPORT OF THE AUDITORS
41
FINANCIAL STATEMENTS
II FINANCIAL STATEMENTS
1 INCOME STATEMENT
Bank
Note
1 January to
31 December
2012
Group
1 January to 1 January to 1 January to
31 December 31 December 31 December
2011
2012
2011
Interest and similar income
3.1
110,535
115,799
110,502
115,778
Interest and similar expense
3.1
(63,946)
(66,872)
(63,946)
(66,883)
3.1
46,589
48,927
46,556
48,895
Dividend income
3.2
751
876
751
876
3.3
17,528
18,772
17,527
18,771
Fee and commission expense
3.3
(1,795)
(2,386)
(1,795)
(2,386)
3.3
15,733
16,386
15,732
16,385
Net gains from financial assets and liabilities not
classified at fair value through profit or loss
3.4
13,478
551
13,478
551
Net (losses) / gains from financial assets and liabilities
held for trading
3.5
(5,613)
2,989
(5,613)
2,989
Net gains from financial assets and liabilities designated
at fair value through profit or loss
3.6
459
3,598
459
3,598
Changes in fair value from hedging
3.7
Foreign exchange translation net gains / (losses)
Net (losses) from derecognition of assets
53
(200)
53
(200)
146
(680)
146
(680)
(111)
(5)
(105)
(5)
3.8
(182)
(344)
1,460
425
Administrative expenses
3.9
(31,848)
(33,731)
(33,398)
(34,372)
3.10
(3,392)
(3,764)
(3,426)
(3,791)
Provisions
3.11
1,800
(523)
1,799
(523)
Impairment charges
3.12
(65,400)
(52,670)
(65,400)
(52,678)
(27,537)
(18,590)
(27,508)
(18,530)
2,553
3,715
2,552
3,715
(24,984)
(14,875)
(24,956)
(14,815)
(49)
(29)
(49)
(29)
(LOSS) BEFORE INCOME TAX
Income tax credit
3.13
(LOSS) FOR THE YEAR
Basic and diluted earnings per share in EUR
3.14
The Notes form an integral part of these Financial Statements.
Financial statements 2012
45
2
STATEMENT OF COMPREHENSIVE INCOME
Bank
1 January to
31 December
2012
(LOSS) FOR THE YEAR
Group
1 January to 1 January to 1 January to
31 December 31 December 31 December
2011
2012
2011
(24,984)
(14,875)
(24,956)
(14,815)
OTHER COMPREHENSIVE INCOME
1,579
Net gains / (losses) from available for sale financial assets
1,844
(2,687)
1,579
(2,687)
(3,359)
1,844
(3,359)
Valuation (losses) taken to other comprehensive income
(6,339)
(12,231)
(6,339)
(12,231)
Recycled to income statement
8,183
8,872
8,183
8,872
Income tax relating to other comprehensive income
(265)
672
(265)
672
(23,405)
(17,562)
(23,377)
(17,502)
TOTAL COMPREHENSIVE INCOME FOR THE YEAR AFTER
TAX ATRIBUTABLE TO EQUITY HOLDERS OF THE PARENT
46
3
STATEMENT OF FINANCIAL POSITION
BANK
Note
GROUP
31 December 31 December 31 December 31 December
2012
2011
2012
2012
Cash and balances with Central Bank
4.1
127,486
168,163
127,486
168,163
Financial assets held for trading
4.2
26,123
52,817
26,123
52,817
Financial assets designated at fair value through profit or loss
4.3
5,064
7,823
5,064
7,823
4.4
186,758
203,201
186,758
203,201
1,747,090
Loans and advances
1,615,610
1,750,289
1,610,814
4.5
22,043
55,054
22,043
55,054
4.6
1,590,853
1,693,206
1,585,677
1,690,007
Held to maturity investments
4.7
2,714
2,029
3,094
2,029
4.8
270,152
269,311
270,152
269,311
Derivatives - hedging
4.9
6,892
4,838
6,892
4,838
4.10
14,918
17,802
14,928
18,752
Investment property
4.11
-
-
2,679
3,270
Intangible assets
4.12
4,415
4,921
4,421
4,925
Investments in subsidiaries, associates and joint ventures
4.13
2,257
2,257
-
-
Income tax assets
4.14
10,087
9,208
10,089
9,211
-
1,409
-
1,409
4.14.1
10,087
7,799
10,089
7,802
314
283
5,949
3,364
2,270,076
2,490,913
2,271,355
2,492,765
- current tax assets
- deferred tax assets
Other assets
TOTAL ASSETS
4.15
4.16
151,431
90,082
151,431
90,082
Financial liabilities held for trading
4.17
1,888
2,167
1,888
2,167
Financial liabilities designated at fair value through profit
or loss
4.18
33,592
36,146
33,592
36,146
2,168,506
Financial liabilities at amortised cost
1,915,156
2,167,921
1,915,310
- deposits from banks
4.19
10,567
20,135
10,567
20,135
- due to customers
4.20
1,413,621
1,478,644
1,413,620
1,478,640
- borrowings from banks
4.21
255,286
396,023
255,286
396,023
- borrowings from other customers
4.22
3,278
6,224
3,278
6,224
- debt securities in issue
4.23
170,880
185,520
170,880
185,520
- subordinated liabilities
4.24
55,275
72,417
55,275
72,417
- other financial liabilities
4.25
6,249
8,958
6,404
9,547
4.26
-
8
-
8
Provisions
4.27
9,576
12,598
9,611
12,629
Other liabilities
4.28
490
658
715
1,058
TOTAL LIABILITIES
2,112,133
2,309,580
2,112,547
2,310,596
Share capital
4.29
16,980
16,980
16,980
16,980
Share premium
4.29
51,380
51,380
51,542
51,542
Revaluation reserve
4.29
2,863
1,284
2,863
1,284
Profit reserves (including retained earnings)
4.29
111,735
126,595
112,410
127,209
Treasury shares
4.29
(31)
(31)
(31)
(31)
(Loss) for the year
4.29
(24,984)
(14,875)
(24,956)
(14,815)
TOTAL EQUITY
TOTAL LIABILITIES AND EQUITY
157,943
181,333
158,808
182,169
2,270,076
2,490,913
2,271,355
2,492,765
These Financial Statements have been approved for Issue by the Management Board on 17 April 2013 and signed on its behalf by:
Davorin Leskovar
Member of the
Management Board
Member of the
Management Board
President of the
Management Board
47
4
STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY
Bank
BALANCE AS AT 1 JANUARY 2011
Comprehensive income for the
year after tax
Retained earnings
(including net Treasury
profit for the year)
shares
Share
capital
Share
premium
Revaluation
reserve
Profit
reserves
Total
equity
16,980
51,380
3,971
125,376
2,250
(31)
199,926
-
-
(2,687)
-
(14,875)
-
(17,562)
Dividends paid
Allocation of net profit to profit
reserves
-
-
-
-
(1,068)
-
(1,068)
-
-
-
1,182
(1,182)
-
-
Other
-
-
-
37
-
-
37
BALANCE AS AT 31 DECEMBER 2011
16,980
51,380
1,284
126,595
(14,875)
(31)
181,333
16,980
51,380
1,284
126,595
(14,875)
(31)
181,333
year after tax
-
-
1,579
-
(24,984)
-
(23,405)
Loss appropriation to profit
reserves
-
-
-
(14,875)
14,875
-
-
Other
-
-
-
15
-
-
15
16,980
51,380
2,863
111,735
(24,984)
(31)
157,943
GROUP
Retained earnings
(including net Treasury
profit for the year)
shares
Share
capital
Share
premium
Revaluation
reserve
Profit
reserves
16,980
51,542
3,971
125,573
2,667
(31)
200,702
year after tax
-
-
(2,687)
-
(14,815)
-
(17,502)
Dividends paid
-
-
-
-
(1,068)
-
(1,068)
Allocation of net profit to profit
reserves
-
-
-
1,182
(1,182)
-
-
Other
-
-
-
37
-
-
37
16,980
51,542
1,284
126,792
(14,398)
(31)
182,169
16,980
51,542
1,284
126,792
(14,398)
(31)
182,169
year after tax
Loss appropriation to profit
reserves
-
-
1,579
-
(24,956)
-
(23,377)
-
-
-
(14,875)
14,875
-
-
Other
-
-
-
16
-
-
16
16,980
51,542
2,863
111,933
(24,479)
(31)
158,808
Total
equity
48
5
STATEMENT OF CASH FLOWS
BANK
1 January to
31 December
2012
A.
GROUP
1 January to
31 December
2011
1 January to
31 December
2012
1 January to
31 December
2011
CASH FLOWS FROM OPERATING ACTIVITIES
Interest received
101,208
96,569
101,241
96,548
Interest paid
(60,850)
(60,991)
(60,850)
(60,980)
Dividends received
751
876
751
876
Fee and commission received
17,397
18,640
17,397
18,640
Fee and commission paid
Realized gains from financial assets and financial liabilities
not classified as fair value through profit or loss
Realized (losses) from financial assets and financial liabilities
designated at fair value through profit or loss
(Losses) / gains from financial assets and financial liabilities
held for trading
(1,807)
(2,383)
(1,807)
(2,383)
14,255
1,358
14,255
1,358
(76)
(199)
(76)
(199)
Payments to employees and suppliers
Operating income
(5,966)
6,387
(5,966)
6,387
(31,581)
(34,928)
(31,581)
(34,928)
298
296
359
388
(1,886)
(1,875)
(1,886)
(1,875)
a)
Operating expenses
Cash flows from operating activities before changes in
operating assets and liabilities
31,743
23,750
31,837
23,832
b)
Decreases in operating assets
81,780
29,938
82,584
30,509
Net decrease in trading assets
Net decrease in financial assets, designated at fair value
through profit or loss
27,156
12,367
27,156
12,367
2,723
21,025
2,723
21,025
Net decrease in available for sale financial assets
4,361
13,730
4,361
13,730
Net decrease / (increase) in loans and advances
49,494
(10,739)
52,958
(9,914)
Net (increase) of hedging derivative financial liabilities
(2,053)
(4,838)
(2,053)
(4,838)
99
(1,607)
(2,561)
(1,861)
(173,221)
(73,731)
(174,112)
(73,513)
59,929
(10,992)
59,929
(10,992)
(282)
(3,361)
(282)
(3,361)
(1,492)
(2,054)
(1,492)
(2,054)
(215,508)
(81,770)
(215,833)
(82,085)
(13,206)
25,185
(13,206)
25,185
(8)
(340)
(8)
(340)
(2,654)
(399)
(3,220)
134
(59,698)
(20,043)
(59,691)
(19,172)
1,409
42
1,409
42
(58,289)
(20,001)
(58,282)
(19,130)
Net decrease / (increase) in other assets
c)
(Decreases) in operating liabilities
Net increase / (decrease) in deposits from Central Bank
Net (decrease) in financial liabilities held for trading
Net (decrease) in financial liabilities designated at fair value
Net (decrease) in deposits and loans measured at amortised
cost
Net (decrease) / increase of debt securities issued measured
at amortised cost
Net (decrease) of hedging derivative financial liabilities
Net (decrease) / increase in other liabilities
d)
Cash flow generated from operating activities (a+b+c)
e)
Income tax refund
f)
Net cash flow from operating activities (d+e)
49
BANK
Note
GROUP
1 January to 1 January to
31 December 31 December
2012
2011
1 January to
31 December
2012
1 January to
31 December
2011
B. CASH FLOWS FROM INVESTING ACTIVITIES
a) Receipts from investing activities
34,743
Proceeds from sale of property and equipment and
investment property
Redemption of held to maturity investments
b) Payments from investing activities
163,309
34,743
163,309
29
15
29
15
34,714
163,294
34,714
163,294
(28,140)
(113,526)
(28,147)
(114,397)
(1,980)
(Purchase of property and equipment and investment
property)
(795)
(1,109)
(799)
(Purchase of intangible assets)
(503)
(1,022)
(506)
(1,022)
(26,842)
(111,395)
(26,842)
(111,395)
6,603
49,783
6,596
48,912
-
-
-
-
(Purchase of held to maturity investments)
4.8
c) Net cash provided by investing activities (a-b)
C. CASH FLOWS FROM FINANCING ACTIVITIES
a) Proceeds from financing activities
Issue of subordinated liabilities
-
-
-
-
(21,844)
(18,850)
(21,844)
(18,850)
-
(1,068)
-
(1,068)
(21,844)
(17,782)
(21,844)
(17,782)
(21,844)
(18,850)
(21,844)
(18,850)
(89)
178
(89)
178
E. Net increase in cash and cash
equivalents (Ae+Bc+Cc)
(73,530)
10,932
(73,530)
10,932
at beginning of year
223,148
212,038
223,148
212,038
149,529
223,148
149,529
223,148
b) Expenditure from financing
(Dividends paid)
(Subordinated liabilities repaied)
c)
D.
F.
Net cash used in financing activities (a-b)
Effects of exchange rate changes
on cash and cash equivalents
G. Cash and cash equivalents
at end of year (D+E+F)
4.32
50
NOTES TO THE FINANCIAL STATEMENTS
1
GENERAL INFORMATION
Banka Celje d.d. (the Bank) is a Slovene joint stock company,
providing universal banking services. The Banka Celje, d.d., Group
(the Group) comprises the Bank and its subsidiary, Posest, d.o.o.
(the Subsidiary).
The Bank is registered and located in Slovenia. The address of the
Bank’s headquarters is Banka Celje, d.d., Vodnikova 2, Celje. The
Bank’s shares are not listed on any stock exchange.
The largest single shareholder of the Bank is Nova Ljubljanska
banka d.d., with an ownership share of 40.99%; other major
shareholders are shown in Note 4.29.1.
The Posest subsidiary company was established in 1991 as a limited
liability company. The Bank is a 100% owner of the Subsidiary.
Based on permission issued by the Bank of Slovenia, the subsidiary
company is not included in the consolidated supervision
in accordance with the decision by the Bank of Slovenia on
Supervision of Banks and Savings Banks on a Consolidated Basis, as
from the aspect of the aim of supervision the Subsidiary does not
represent any significant effect. Notes to the Financial Statements
refer to the Bank and the Group.
After the annual report has been approved by the Supervisory
Board, standalone and consolidated Financial Statements can no
longer be amended.
Amounts in these standalone and consolidated Financial
Statements and the Notes thereto are expressed in thousands of
Euros, except where stated otherwise.
2.2
Basis for preparation of financial
statements
The financial statements have been prepared under the historical
cost convention, as modified by the revaluation of available-forsale financial assets, financial assets and financial liabilities at fair
value through profit or loss and all derivative contracts, which
have been measured at fair value.
The standalone and consolidated statements of cash flows show
the changes in cash and cash equivalents arising from financial
flows during the period classified according to operating activities,
investment activities and financing activities. Cash and cash
equivalents include highly liquid investments and are shown in
Note 4.32. The standalone and consolidated statements of cash
flows have been prepared using the direct method, by amending
the appropriate items from the consolidated income statement
with income and expenses or changes in operating assets and
liabilities from investments and financing during the period.
Interest paid and received has been classified as operating cash
flows except where they are based on financing.
The preparation of financial statements in accordance with IFRS
requires the use of certain estimates and assumptions, which
influence the value of reported assets and liabilities as well as
the disclosure of potential assets and liabilities on the reporting
date and the amount of income and expenses during the reported
period. Estimates and judgements are evaluated on a continuing
basis and are based on past experience and other factors, including
expectations with regard to future events. Critical accounting
estimates and judgements are disclosed in Note 2.29.
2.3Comparative figures
2SIGNIFICANT ACCOUNTING
POLICIES
The principal accounting policies applied in the preparation of
these standalone and consolidated financial statements are set out
below and have been consistently applied to both years presented.
The disclosures in accordance with the Regulation on disclosures
by banks and saving banks are presented in a separate document.
2.1
Declaration of Conformity
Standalone and consolidated financial statements have been
prepared in accordance with International Financial Reporting
Standards (IFRS) as adopted by the European Union. Where
required, additional disclosures are included to comply with the
requirements of local regulations.
The standalone and consolidated financial statements comprise
the income statement and the statement of comprehensive
income, the statement of financial position, the statement of
changes in shareholder’s equity, the statement of cash flows and
the principal accounting policies and the notes.
The standalone and consolidated financial statements feature
data disclosed using comparative figures. Comparative figures for
other financial assets are transferred to loans and advances and
other financial liabilities are transferred to financial liabilities at
amortised cost.
2.4Investments in subsidiaries
In the separate financial statements, investments in the capital
of the Subsidiary are accounted for at cost. Dividends from the
Subsidiary are recognised in the income statement, when the right
to receive cash flow is established.
The Bank shall assess at the end of each reporting period whether
there is any indication that the Investment in subsidiaries may be
impaired. The Bank shall consider the following indications:
-significant changes with an adverse effect on the entity have
taken place during the period, or will take place in the near
future, in the market, economic or legal environment in which
the entity operates;
-the carrying amount of the net assets of the entity is more than
its market capitalisation;
-a significant decline in budgeted net cash flows or operating
profit, or a significant increase in budgeted loss, flowing from
the entity.
51
If the recoverable amount of the investment in subsidiaries is
less than its carrying amount, the carrying amount of the asset
shall be reduced to its recoverable amount. That reduction
shall be immediately recognised in the income statement as an
impairment loss.
2.5Consolidation
The financial statements of the Subsidiary, used for the preparation
of consolidated financial statements, were prepared as of the
Bank’s reporting date. The consolidation principles remained
unchanged in comparison with the previous year.
The Subsidiary has been fully consolidated since the day of the setup and will be excluded from consolidation on the date control is
lost. Where necessary, accounting policies of the Subsidiary have
been adjusted to ensure consistency with the policies adopted by
the Bank.
In the process of consolidation, all intercompany claims and
liabilities as well as revenues and expenditures within the Group
have been eliminated.
2.6 Foreign currency translation
a) Functional and presentation currency
Items reported in these standalone and consolidated financial
statements are measured using the currency of the primary
economic environment in which the Bank and the Group operates
(the functional currency). The financial statements are reported in
Euros, which is the Bank’s and the Subsidiary's functional and the
Group’s presentation currency.
b) Transactions and balances
Foreign currency transactions are translated into the functional
currency according to the exchange rates prevailing on the date of
the transactions. Foreign exchange gains and losses resulting from
the settlement of such transactions and from the translation of
monetary assets and liabilities denominated in foreign currencies
are recognised in the income statement.
Translation differences resulting from changes in amortised costs
of monetary items denominated in foreign currency classified as
available for sale financial assets are recognised in the income
statement.
Translation differences on non-monetary items, such as equities
at fair value through profit or loss, are reported as part of fair value
gain or loss in the income statement. Translation differences on
non-monetary items, such as equities classified as available for
sale, are included together with valuation reserves at fair value
within other comprehensive income.
2.7Interest income and expenses
Interest income and expenses are recognised for all debt
instruments using the effective interest rate method. The
aforementioned method serves the calculation of amortised cost
of a financial asset or financial liability and distributes interest
income and expenses across the expected life of a financial
instrument. Interest income includes interest from fixed income
investments and investments in securities held for trading and
from discounts and premiums on bonds. The effective interest
rate calculation includes all fees paid between parties as well as
transaction costs, however excludes future losses due to credit
risk. Once a financial asset or a group of related assets is impaired,
the interest revenue is recognised on the basis of the interest rate
used to discount future cash flows to calculate impairment.
2.8
Fees and commissions are generally recognised as the service
is provided. Fee and commission income includes fees and
commissions from guarantees to companies issued by the Bank,
from payment operations and foreign exchange as well as from
credit card operations. Fees and commissions included in the
calculation of the effective interest rate are shown in interest
income and expenses.
2.9
Dividend income
Dividend income is recognised in the income statement when
the Group’s right to receive payment has been established. All
dividend income is realised in Slovenia.
2.10 Financial instruments
2.10.1Classification
The classification of financial instruments on initial recognition
depends on the purpose of acquisition and the instruments’
characteristics. The Group classifies financial instruments in the
following categories: financial instruments at fair value through
profit or loss, loans and advances, held to maturity investments
and available for sale financial assets.
a) F inancial instruments at fair value through profit or loss
This category includes financial instruments held for trading
and financial instruments designated at fair value through profit
or loss at inception. A financial asset is classified in the held for
trading category if acquired principally for the purpose of selling
in the short-term or for the creation of short-term profits, or if so
designated by management.
Gains and losses from foreign exchange trading are shown in the
income statement under “Net gains / (losses) from financial assets
and liabilities held for trading”.
52
Financial assets and liabilities are designated at fair value through
profit or loss when the following conditions are met:
- with such a classification the Group eliminates or significantly
reduces measurement or recognition inconsistencies that
would arise from the valuation of financial assets and liabilities
on different bases or
- a financial instrument contains one or more embedded
derivatives, which may significantly modify its cash flows.
Derivatives are always categorised as held for trading unless
they are designated as hedging instruments in the application of
accounting rules for hedge accounting.
b) Loans and advances
Loans and advances are non-derivative financial assets with fixed
or determinable payments, which are not quoted in an active
market, other than:
- those that the Group intends to sell immediately or in the shortterm, which are classified as held for trading, and those that
the Group upon initial recognition designates as at fair value
through profit or loss;
- those that the Group upon initial recognition designates as
available for sale; or
- those for which the holder may not recover substantially all of
its initial investment, for reasons other than the deterioration of
creditworthiness.
c) H
eld to maturity investments
Held to maturity investments are non-derivative financial
instruments with fixed or determinable payments and a fixed
maturity which do not meet the definition of loans and receivables
and which the Group intends to hold until maturity and is able to
do so.
d) Available for sale financial assets
Available for sale financial assets are those non-derivative financial
assets which the Group intends to hold for an indefinite period of
time and which it may sell in response to liquidity needs or due to
changes in interest rates, exchange rates or prices.
2.10.2 Measurement and recognition
Financial assets, except financial assets at fair value through
profit or loss, are initially recognised at fair value increased by
transaction costs.
Financial instruments at fair value through profit or loss are initially
recognised at fair value with transaction costs recorded in the
income statement.
Purchases and sales of financial instruments at fair value through
profit or loss, held to maturity investments and available for sale
financial assets are recognised on trade date. Loans are recognised
when cash is advanced to the borrowers.
Financial assets at fair value through profit or loss and available
for sale financial assets are measured at fair value. Gains and
losses from financial assets at fair value through profit or loss are
included in the income statement in the period in which they
arise. Gains and losses from changes in the fair value of available
for sale financial assets are recognised in other comprehensive
income until the financial asset is derecognised or impaired, at
which time the cumulative amount previously included in other
comprehensive income is transferred to the income statement.
Interest calculated using the effective interest rate method and
foreign currency gains and losses on monetary assets classified as
available for sale are recognised directly in the income statement.
Dividends on available for sale equity instruments are recognised
in the income statement when the Group’s right to receive
payment is established.
Loans and held to maturity investments are carried at amortised
cost.
2.10.3
Profit or loss at initial recognition
The best evidence of fair value at initial recognition is the
transaction price, representing the fair value of consideration
given or received, unless where it is possible to prove fair value
through other comparable market transactions or on the basis of
a valuation technique, whose variables are exclusively based on
market assumptions.
When the transaction price of a financial instrument on a nonactive market differs from the price in other observable current
market transactions in the same instrument, or from the price
ascertained using a valuation technique whose variables include
data from observable markets exclusively, the Group immediately
recognises the difference between the transaction price and the
fair value in the income statement.
2.10.4Reclassification
Financial assets that are eligible for classification as loans and
advances can be reclassified out of the held for trading category if
they are no longer held for the purpose of selling or repurchasing
them in the near-term. Financial assets that are not eligible for
classification as loans and receivables may be transferred from the
held for trading category only in rare circumstances. Additionally,
instruments designated at fair value through profit and loss cannot
be reclassified.
2.10.5Derecognition
Financial assets are derecognised when the contractual rights to
receive cash flows from these assets have ceased to exist, or the
assets have been transferred in the transfer that fulfils the criteria
for derecognition. Financial liabilities are derecognised when they
have been discharged, cancelled or have expired.
53
2.10.6
Fair value measurement principles
The fair value of financial instruments traded on active markets is
based on the current best bid price at the statement of financial
position date, excluding transaction costs. If a market price is not
available, fair value is determined using discounted future cash
flow or a pricing model.
When using discounted future cash flow models, these are
determined based on the most probable estimate and the
discount rate is a market based rate of an instrument with similar
characteristics on the last day of the reporting period. If the pricing
model is used, market data at the reporting date is used.
If the hedge no longer meets the criteria for hedge accounting, the
adjustment to the carrying amount of a hedged item for which the
effective interest method is used is transferred to profit or loss over
the period to maturity. The adjustment in the carrying amount of
the hedged equity investment is included in operating profit at the
moment of sale.
Individual derivative financial instruments that provide effective
economic hedges which, however, do not qualify for hedge
accounting under the specific accounting rules, are treated as
derivatives held for trading. Changes in the fair value of those
derivative instruments are recognised immediately in the income
statement under “Net gains / (losses) from financial assets and
liabilities held for trading”.
The fair value hierarchy is disclosed under 5.5.b.
2.10.7Derivative financial instruments and hedge
accounting
Derivatives, including forwards, futures and swaps, are initially
recognised in the statement of financial position at fair value.
Fair value is determined on the basis of a listed market price,
the model of discounted future cash flows and with the use of
pricing models. The fair values are recognised in assets (positive
valuation) or liabilities (negative valuation) in the statement of
financial position. Interest accruals on interest rate derivatives are
recorded separately from fair value measurement in the income
statement.
The method of recognising the resulting fair value gain or loss
depends on whether the derivative is designated as a hedging
instrument, and if so, the nature of the item being hedged. The
Group uses derivatives to hedge the fair value of recognised assets
and liabilities.
Hedge accounting is used provided certain criteria are met.
When a hedge is introduced a formal document is prepared,
describing the relationship between hedged items and hedging
instruments, as well as its risk management purpose and strategy
and the valuation methodology. The Group also documents the
effectiveness assessment of hedging instruments at exposure
to changes in the fair value of a hedged instrument, which are
attributable to hedging. The Group assesses the effectiveness of
a hedge at its inception and then on an ongoing basis during the
duration of the hedge, where the hedge effectiveness must always
fall within a range of 80 to 125 percent.
Changes in the fair value of derivatives that are designated
and qualify as fair value hedges are recognised in the income
statement, together with any changes in the fair value of the
hedged asset or liability that are attributable to the hedged risk.
Effective changes in fair value of hedging instruments and the
related hedged items are reflected in the income statement under
“fair value adjustments in hedge accounting”.
54
2.11Impairment of financial assets
2.11.1Assets measured at amortised cost
The Group assesses impairments of financial assets individually
for all individually significant assets where there is objective
evidence of impairment, while all other financial assets are
impaired collectively. According to the Regulation on credit risk
loss assessment by the Bank of Slovenia, a financial asset or offbalance sheet liability is individually significant if total exposure to
the client exceeds EUR 650 thousand or 0.5% of the Bank’s equity.
The Bank defines as individually significant all exposures to banks
and other exposure to legal entities, rated A through C, and all legal
entities rated C2, D and E. If the Group determines that no objective
evidence of impairment exists in an individually significant
financial asset, it includes this asset in a group of financial assets
with similar credit risk characteristics and collectively assesses
them for impairment.
At each reporting date of the statement of financial position,
the Group assesses whether there is objective evidence that an
individually significant financial asset is impaired as a consequence
of one or more events that occurred after initial recognition of the
asset and that event has an impact on the asset’s future cash flows,
which can be reliably estimated.
The criteria the Group uses to determine the existence of objective
evidence on an impairment loss pertaining to a financial asset or
asset class include:
- late payment of contractual interest or principal;
- debtor’s significant liquidity problems;
- breach of contract;
- start of bankruptcy proceedings, compulsory settlement
proceedings or a different form of financial restructuring;
- deterioration of the borrower’s competitive position;
- deterioration in the value of collateral; and
- credit rating downgraded below investment grade.
The Group estimates that the period between the occurrence of
problems, which prevent the client from fulfilling his obligations
to the Group, and identification of these problems by the Group
typically varies from between one to three months. Junior
management determines the assessment period on a case by case
basis.
If there is objective evidence that an impairment loss on loans
and advances or held to maturity investment has been incurred,
the amount of the loss is measured as the difference between the
asset’s carrying amount and the present value of estimated future
cash flows. The carrying amount of the asset is reduced through
an allowance account and the amount of the loss is recognised
in the income statement. The calculation of the present value of
the estimated future cash flows of collateralised financial assets
reflects the present value of future cash flows from foreclosure,
less cost of obtaining and selling the collateral. Assumed offbalance sheet liabilities are also assessed individually, and where
necessary related provisions are recognised as liabilities.
For the purpose of collective impairment evaluation, the Group
uses migration matrices, which illustrate the expected migration
of customers between internal rating classes. The probability of
migration is assessed on the basis of past experience, namely the
annual migration matrices for different types of customers. This
data is then adjusted to the predicted future trends, since historic
experience does not necessarily reflect the actual economic
conditions. The Bank includes the estimates in the impairment
percentages with an estimate of the general risk factor. Exposure to
retail clients is analysed additionally from the aspect of transaction
type. For corporates, impairments are assessed on the basis of
expected client transitions and with it the transition of good debt
to C, D and E rating classes with individually estimated average
recovery rates from C2, D and E clients (bad debt class). In retail,
the expected migrations from good rating classes to C, D and E are
assessed for individual transaction types, the average recovery is
subsequently calculated on the basis of actual loss from bad debt
for individual transaction type.
If the amount of the impairment subsequently decreases due to
an event occurring after the write down, the reversal of loss is
recognised as a reduction of an allowance for loan impairment.
2.11.2
A
ssets available for sale
At the reporting date, the Group assesses whether there is
objective evidence that available for sale financial assets are
impaired. A significant or prolonged decrease in the fair value of an
equity instrument below its cost may provide objective evidence
of impairment. If any such evidence exists for available for sale
assets, the cumulative loss is removed from equity and recognised
in the income statement as an impairment loss. A subsequent
derecognition of loss due to impairment of an equity instrument
as a result of an increase in its fair value is recognised through
other comprehensive income.
If, in a subsequent period, the fair value of a debt instrument
classified as available for sale increases and the increase can be
objectively related to an event occurring after the impairment
loss was recognized, the impairment loss is reversed through the
income statement.
The criteria the Group uses to determine whether a debt
instrument is impaired:
- late payment of contractual interest or principal;
- issuer’s significant liquidity problems;
- breach of contract;
- start of bankruptcy proceedings at issuer;
- deterioration of the issuer’s competitive position;
- credit rating downgraded below investment grade.
Impairment losses recognised in the income statement are
measured as the difference between the carrying amount of the
financial asset and its present fair value. The present fair value of
the instrument is its market price or discounted future cash flows,
when the market price is not obtainable.
2.11.3
Repossessed assets
In certain cases assets are repossessed in payment of outstanding
obligations. Repossessed assets are initially recognised in the
Group statements at fair value. They are sold as soon as possible.
After initial recognition, repossessed assets are measured and
accounted for in accordance with policies relating to the adequate
asset category.
2.11.4
Renegotiated loans
If the terms of an impaired financial asset held at amortised cost
are renegotiated or otherwise modified because of financial
difficulties of the borrower or issuer, impairment is measured
using the original effective interest rate before the modification
of terms. The renegotiated asset is then derecognised and a new
asset is recognised at its fair value only if the risks and rewards of
the asset are substantially changed.
2.12 Offsetting
Financial assets and liabilities are offset when a legally enforceable
right to offset the recognised amounts exists and there is an
intention to settle on a net basis, or realise the asset and settle the
liability simultaneously.
55
2.13Sale and repurchase agreements
Securities sold under sale and repurchase agreements (repos)
are retained in the financial statements and the related liabilities
are included in financial liabilities associated with the transferred
assets. Securities sold subject to sale and repurchase agreements
are reclassified in the financial statements as pledged assets when
the counterparty has the right by contract to sell or re-pledge the
collateral. The difference between the sale and repurchase price is
treated as interest and accrued over the life of the repo agreements
using the effective interest rate method.
2.14Cash and cash equivalents
For the purpose of the statement of cash flows, cash and cash
equivalents comprise cash and balances with the Central Bank,
debt securities held for trading and loans to banks with an original
maturity of less than 90 days.
apportioned systematically over the lease period. Receivables
from a finance lease are shown as net investments in the finance
lease including the unguaranteed residual value.
2.16 Investment property
Investment property includes buildings held for leasing and not
occupied by the Group.
Investment property is initially recognised at cost. Direct
transaction costs are included in the initial measurement.
Subsequently, it is measured at cost less accumulated depreciation
and any accumulated impairment loss. When there is a change in
use, the Group makes transfers to or from investment property.
Depreciation is provided for on a straight line basis using a
depreciation rate of 1.0%.
2.17Property and equipment
2.15 Accounting for leases
A lease is an agreement whereby the lessor conveys to the lessee,
in return for a payment or series of payments, the right to use
an asset for an agreed period of time. Lease agreements are
accounted for in accordance with their classification as finance
leases or operating leases at the inception of the lease. The key
classification factor is the extent to which the risks and rewards
incidental to ownership of a leased asset lie with the lessor or
lessee.
a) the Group is the lessee
Leases entered into by the Group are operating leases. The total
payments made under operating leases are included in the income
statement on a straight line basis over the period of the lease and
are recorded in administrative expenses.
All property and equipment is initially recognised at cost.
Subsequently, it is measured at cost less accumulated depreciation
and any accumulated impairment loss.
Each year the Group assesses whether there are any indications
that assets may be impaired. If such an indication exists, the Group
estimates the recoverable amount. The recoverable amount is the
higher of the fair value less cost to sell and value in use. If the
recoverable amount exceeds the carrying value, the assets are not
impaired. As at 31 December 2012 no property or equipment item
was impaired.
Depreciation is provided for on a straight line basis over their
estimated useful lives.
The following are approximations of the annual rates used:
Bank and Group
When an operating lease is terminated before the lease period
has expired, any payment required to be made to the lessor is
recognised as an expense for the period in which termination
takes place.
b) the Group is the lessor
In operational leasing, the Group transfers the right to use an
asset for a contractually agreed amount of time to the lessee in
exchange for a payment or a string of payments.
Payments received under operating leasing are recognised as
other operating income in the income statement on a straight
line basis over the period of the lease. Assets leased out under
operating leases are presented in the consolidated statement
of financial position as investment property or as property and
equipment.
Assets are leased under a finance lease when the risks and
rewards related to ownership of a leased asset are transferred
to the lessee. When assets are leased out under a finance lease,
the present value of the minimum lease payments is recognised
as a receivable. Income from finance leasing transactions is
56
Buildings
Furniture and equipment
%
1.9 - 6.0
7.0 - 20.0
Computer equipment
10.0 - 33.3
Leasehold improvements
10.0 - 20.0
Assets in the course of transfer or construction are not depreciated
until they are available for use.
The assets' residual value and useful life are reviewed, and adjusted
if appropriate, on each statement of financial position date.
Gains and losses on disposal of property and equipment are
determined as a difference between the sale proceeds and their
carrying amount and are recognised in the income statement.
Maintenance and repairs are charged to the income statement
during the financial period in which they are incurred. Day-today servicing costs are recognised in profit or loss as incurred.
Subsequent costs that increase future economic benefits are
recognised in the carrying amount of a property and equipment
item.
2.18Intangible assets
2.21Employee benefits
Intangible assets comprise computer software and software
licences. They are initially recognised at cost, decreased by the
accumulated amortisation and impairment losses.
Employee benefits include: jubilee benefits and retirement
indemnity bonuses. In accordance with legislation, employees
retire after 40 years of service and are entitled to a lump sum
severance payout at such time. Employees are also entitled to long
service bonuses for every ten years of service to the Group.
Amortisation of intangible assets with a finite useful life is
calculated on a straight-line basis at rates designed to write down
the cost of the intangible asset over its estimated useful life.
Software and licences are amortised over a period of three to ten
years.
Intangible assets begin to be amortised when they are available
for use.
The valuation of the provisions for these obligations is carried out
by independent qualified actuaries. The significant assumptions
used in the actuarial calculation for the Group are:
Bank and Group
2012
2011
Discount rate
3.55%
5.20%
503
524
3.00%
4.00%
No. of employees entitled to benefits
2.19Inventories
Inventories are measured at the lower of cost or net realisable
value. The Group uses the weighted average cost method to
determine inventories.
2.20 Taxes
2.20.1 Corporate income tax
Corporate income tax is calculated using the provisions of the
Corporate Income Tax Act (the Act) at a tax rate of 18% (2011: 20%),
and is recorded together with the changes in deferred taxes as tax
expense in the income statement.
Deferred income tax is provided using the balance sheet liability
method, for all temporary differences arising between the tax
bases of assets and liabilities and their carrying amounts for
financial reporting purposes. Deferred tax assets and liabilities
are measured at tax rates that are expected to apply to the period
when the asset is realised or the liability is settled (typically 15%).
Deferred tax assets are recognised on all temporary differences,
if there is a probability that a taxable profit will be available,
against which the temporary differences can be utilised. Most of
the deferred tax assets relate to tax losses, which can be carried
forward indefinitely in accordance with the Act.
Deferred tax related to fair value remeasurement of available for sale
investments is charged or credited directly to other comprehensive
income and subsequently recognised in the income statement
together with the deferred gain or loss from the sale.
2.20.2
Tax on total assets
The Bank's total asset tax liability is shown under net operating
income (Note 3.8) and is calculated in accordance with Slovenian
legislation. The tax liability is represented by the difference between
the tax base and the tax relief. The tax base is balance sheet volume,
which represents the value of assets in the Statement of financial
position. The tax rate for the balance sheet is 0.1%. Calculated tax
is reduced by 0.167% of loans granted to non-financial companies
and private entrepreneurs during the period.
Wage growth based on inflation,
promotions and seniority
All gains and losses arising from changes in assumptions are
immediately recognised in the income statement.
The Group contributes to the State Pension Scheme (8.85% of
gross salaries) in accordance with legislation. Once contributions
have been paid, the Bank has no further payment obligation. The
regular contributions constitute net periodic costs for the year in
which they are due and are disclosed under labour costs in the
income statement.
2.22Loans taken, deposits and debt
securities issued
Loans taken, deposits and debt securities issued are initially
recognised at fair value decreased by the transaction costs. Loans
and deposits are usually measured at cost, with the difference
between initial recognition and carrying value recognised in
the income statement under interest income with the use of the
effective interest rate. A debt security issued is measured at cost
or at fair value.
Purchases of own debt reduce the liabilities in the statement of
financial position. The difference between the carrying amount
and the price of the own debt is shown in the income statement.
2.23Provisions
Provisions are recognised when the Group has a present legal or
constructive obligation as a result of past events and it is probable
that an outflow of resources embodying economic benefits will
be required to settle the obligation and a reliable estimate of the
amount of the obligation can be made.
57
2.24Financial guarantees
2.27 Segment reporting
Financial guarantees are agreements that require the issuer to
make specific payments to reimburse the holder for a loss it incurs
because a specific debtor fails to make payments when due, in
accordance with the terms of debt instruments at the initial or
adjusted due date. Such financial guarantees are given to banks,
other financial institutions and other parties as a form of collateral
on loans, overdrafts and other banking facilities.
Operating segments are reported in a manner consistent with the
internal reporting to the body that makes decisions on funding,
investments and the operating performance of the Bank and its
segments. The criterion for the definition of the Bank’s and the
Group’s segments is represented by services, which are allocated
based on similar characteristics to retail operations, corporate
operations and the financial markets. The Assets and Liabilities
Committee (ALCO) was organised as the decision-making body.
Income and expenses directly attributable to a respective segment
are included in the said segment's performance. Income tax is not
allocated to segments.
Financial guarantees are initially recognised at fair value, which is
normally evidenced by the fees received. The fees are transferred
to the income statement over the contract term using the
straight line method. The Group’s liabilities under guarantees are
subsequently measured at the greater of:
-the initial measurement, less amortisation calculated to
recognise fee income over the period of guarantee; or
- the best estimate of the expenditure required to settle the
obligation.
2.25Performance guarantees
Performance guarantees are agreements, based on which the
issuer is obligated to pay a consideration, which compensates
the holder for the loss resulting from failure to fulfil an agreed
delivery or failure to provide a service in the contractual period.
These instruments are issued to customers as a form of insurance
against risk of failure to meet contractual obligations. Performance
guarantees are initially recognised at fair value, which is normally
evidenced by the fees received.
At each reporting period, the Group, based on estimated future
cash flows, assesses whether the recognised insurance obligations
are adequate. Each increase in obligation on the basis of estimated
expenditures, required for the settlement of obligations, is included
in provisions in the income statement.
2.26Share capital
2.28Adoption of new or revised standards
and interpretations
a) Implemented accounting standards, amendments and
interpretations
The following new standards and interpretations became effective
for the Group from 1 January 2012:
Disclosures – Transfers of Financial Assets – Amendments to
IFRS 7 (issued in October 2010 and effective for annual periods
beginning on or after 1 July 2011). The amendment requires
additional disclosures in respect of risk exposures arising
from transferred financial assets. The amendment includes a
requirement to disclose by class of asset the nature, carrying
amount and a description of the risks and rewards of financial
assets that have been transferred to another party, yet remain on
the entity's balance sheet. Disclosures are also required to enable a
user to understand the amount of any associated liabilities, and the
relationship between the financial assets and associated liabilities.
Where financial assets have been derecognised, but the entity
is still exposed to certain risks and rewards associated with the
transferred asset, additional disclosure is required to enable the
effects of those risks to be understood. The Group is not exposed
to any risks as a result of transferred financial assets.
Ordinary shares and preference shares are both classified as equity.
b) Dividends on shares
Dividends on shares are recognised in equity in the period in
which they are approved by the Bank’s owners.
Other revised standards and interpretations: The amendments to
IFRS 1 “First-time adoption of IFRS”, relating to severe hyperinflation
and eliminating references to fixed dates for certain exceptions
and exemptions, did not have any impact on these financial
statements. The amendment to IAS 12 “Income taxes”, which
introduced a rebuttable presumption that an investment property
carried at fair value is recovered entirely through sale, did not have
a material impact on the financial statements of the Group.
c) Treasury shares
Should the Bank purchase treasury shares, the consideration paid
is deducted from total shareholder’s equity as treasury shares. In
the event of a subsequent sale of the acquired treasury shares, the
amount is shown as an increase in share capital.
b) New accounting pronouncements
Certain new standards and interpretations have been issued and
endorsed by the EU that are mandatory for the annual periods
beginning on or after 1 January 2013, and which the Group has
not early adopted.
a) Share issue costs
Costs, directly attributed to the issue of new shares are recognised
in equity as a reduction in share premium.
58
IAS 19 (amendment) - Employee Benefits (effective for annual
periods beginning on or after 1 January 2013, with earlier application
permitted). Amendment to standard relates to the recognition and
measurement of defined benefit obligations and to the disclosure
of all employee benefits. The Group expects the amended standard
to change the presentation of its financial statements, but to have
no impact on the measurement of transactions and balances.
IAS 1 (amendment) - Presentation of Financial Statements (effective
for annual periods beginning on or after 1 July 2012, with earlier
application permitted). The amendments retain the option to
present profit or loss and other comprehensive income in either
a single statement or in two separate but consecutive statements.
However, the amendments require additional disclosures to be
made in the other comprehensive income section, such that items
of other comprehensive income are grouped into two categories:
items that will not be reclassified subsequently to profit or loss;
and items that will be reclassified subsequently to profit or loss
when specific conditions are met. Income tax on items of other
comprehensive income must be allocated on the same basis. The
Group expects the amended standard to change the presentation of
its financial statements, but to have no impact on the measurement
of transactions and balances.
IFRS 7 (amendments) - Offsetting Financial Assets and Financial
Liabilities (effective for annual periods beginning on or after 1
January 2013). The amendment requires disclosures that will
enable users of an entity’s financial statements to evaluate the
effect or potential effect of netting arrangements, including rights
of set-off. The Group expects the amended standard to change the
presentation of its financial statements, but to have no impact on
the measurement of transactions and balances.
IAS 32 (amendments) - Offsetting Financial Assets and Financial
Liabilities (effective for annual periods beginning on or after 1
January 2014). The amendment added application guidance
to IAS 32 to address inconsistencies identified in applying some
of the offsetting criteria. This includes clarifying the meaning
of ”currently has a legally enforceable right of set-off” and that
some gross settlement systems may be considered equivalent to
net settlement. The Group is considering the implications of the
amendment, the timing of its adoption and the impact on the
Group’s financial statements.
IAS 27 - Separate Financial Statements, (revised in May 2011 and
effective for annual periods beginning on or after 1 January 2013),
was changed and its objective is now to prescribe the accounting
and disclosure requirements for investments in subsidiaries, joint
ventures and associates when an entity prepares separate financial
statements. The guidance on control and consolidated financial
statements was replaced by IFRS 10, Consolidated Financial
Statements. The Group is currently assessing the impact of the
amended standard on its financial statements.
IAS 28 - Investments in Associates and Joint Ventures, (revised in
May 2011 and effective for annual periods beginning on or after
1 January 2013). The amendment of IAS 28 resulted from
the Board’s project on joint ventures. When discussing that
project, the Board decided to incorporate the accounting for
joint ventures using the equity method into IAS 28 because this
method is applicable to both joint ventures and associates. With
this exception, other guidance remained unchanged. The Group
is currently assessing the impact of the amended standard on its
financial statements.
IFRS 10 (new standard). The new standard replaces the parts of IAS
27 - Consolidated and Separate Financial Statements that deal with
consolidated financial statements. SIC 12 Consolidation - Special
Purpose Entities has been withdrawn upon the issuance of IFRS 10.
Under IFRS 10, there is only one basis for consolidation, that being
control. In addition, IFRS 10 includes a new definition of control
that contains three elements: control over an investee, exposure,
or rights to variable returns from its involvement with the investee,
and the ability to use its control over the investee to affect the
amount of the investor's returns. Extensive guidance has been
added in IFRS 10 to deal with complex scenarios. The standard will
have no impact on the Group's financial statements.
IFRS 11 (new standard). The new standard replaces IAS 31 - Interests
in Joint Ventures. IFRS 11 deals with how a joint arrangement, over
which two or more parties have joint control, should be classified.
SIC 13 Jointly Controlled Entities - Non-monetary Contributions by
Venturers has been withdrawn upon the issuance of IFRS 11. Under
IFRS 11, joint arrangements are classified as joint operations or joint
ventures, depending on the rights and obligations of the parties to
the arrangements. In contrast, under IAS 31, there are three types
of joint arrangements: jointly controlled entities, jointly controlled
assets and jointly controlled operations. In addition, joint ventures
under IFRS 11 must be accounted for using the equity method
of accounting, whereas jointly controlled entities under IAS 31
may be accounted for using the equity method of accounting or
proportionate accounting. The standard will have no impact on the
Group's financial statements.
IFRS 12 (new standard). The new standard is a disclosure standard
and is applicable to entities that have interests in subsidiaries,
joint arrangements, associates and/or unconsolidated structured
entities. In general, the disclosure requirements in IFRS 12 are more
extensive than those in the current standards. The standard will
have no impact on the Group's financial statements.
IFRS 13 (new standard) - Fair Value Measurement (effective for
annual periods beginning on or after 1 January 2013, with earlier
application permitted). The standard establishes a single source of
guidance for fair value measurements and disclosures about fair
value measurements. The standard defines fair value, establishes a
framework for measuring fair value, and requires disclosures about
fair value measurements. The scope of the standard is broad; it
applies to both financial instruments and non-financial instruments
for which other standards require or permit fair value measurements
and disclosures about fair value measurements, except in specified
circumstances. In general, the disclosure requirements in IFRS 13
are more extensive than those required in the current standards.
For example, quantitative and qualitative disclosures based on
the three-level fair value hierarchy, currently required for financial
instruments only under IFRS 7 Financial Instruments: Disclosures,
will be extended by IFRS 13 to cover all assets and liabilities within
its scope. The Group is currently assessing the impact of the
amended standard on its financial statements.
59
Annual improvements to IFRS 2009-2011 cycle. The improvements
consist of a mixture of substantive changes and clarifications and
are effective for annual periods beginning on or after 1 January
2013. Amendments to IFRS 1 Fist time Adoption of IFRS include
explanations of additional comparative information disclosures.
If additional comparative information is provided, the information
should include disclosure of comparative information for any
additional statements included beyond the minimum comparative
financial statement requirements. Presenting additional
comparative information voluntarily would not trigger a requirement
to provide a complete set of financial statements. Amendments to
IAS 16 Property, plant and equipment classifies spare parts, standby equipment and servicing equipment as property, plant and
equipment when they meet the definition of property, plant and
equipment in IAS 16, and as inventory otherwise. Amendments to
IAS 32 Financial instruments: Presentation requires that income
tax relating to distributions to holders of an equity instrument and
to transaction costs of an equity transaction should be accounted
for in accordance with IAS 12 Income Taxes. Amendments to IAS
34 Interim Financial Reporting require separate disclosure of total
assets and total liabilities for a particular reportable segment in
interim financial reporting, only when the amounts are regularly
provided to the chief operating decision maker and there has been
a material change from the amounts disclosed in the last annual
financial statements for that reportable segment. Amendments
to IAS 1 First-time Adoption of International Financial Reporting
Standards require that borrowing costs incurred on or after the
date of transition to IFRS that relate to qualifying assets under
construction at the date of transition should be accounted for in
accordance with IAS 23 Borrowing Costs.
Amendment to IFRIC 20 - Stripping Costs in the Production Phase
of a Surface Mine. The interpretation will not have an impact on
the Group’s financial statements.
c) Accounting standards and amendments to existing standards issued but not endorsed by the EU:
IFRS 9 - Financial Instruments IFRS 9 issued in November 2009
replaces those parts of IAS 39 relating to the classification and
measurement of financial assets. IFRS 9 was further amended in
October 2010 to address the classification and measurement of
financial liabilities. Key features of the standard are as follows:
-
Financial assets are required to be classified into two
measurement categories: those to be measured subsequently
at fair value, and those to be measured subsequently at
amortised cost. The decision is to be made at initial recognition.
The classification depends on the entity’s business model for
managing its financial instruments and the contractual cash
flow characteristics of the instrument.
-An instrument is subsequently measured at amortised cost only
if it is a debt instrument and both (i) the objective of the entity’s
business model is to hold the asset to collect the contractual
cash flows, and (ii) the asset’s contractual cash flows represent
only payments of principal and interest (i.e. it bears only “basic
loan features”). All other debt instruments are to be measured at
fair value through profit or loss.
-
All equity instruments are to be measured subsequently at
fair value. Equity instruments that are held for trading will
60
be measured at fair value through profit or loss. For all other
equity investments, an irrevocable election can be made at
initial recognition, to recognise unrealised and realised fair
value gains and losses through other comprehensive income
rather than profit or loss. There is to be no recycling of fair value
gains and losses to profit or loss. This election may be made
on an instrument-by-instrument basis. Dividends are to be
presented in profit or loss, as long as they represent a return on
investment.
-
Most of the requirements in IAS 39 for classification and
measurement of financial liabilities were carried forward
unchanged to IFRS 9. The key change is that an entity will be
required to present the effects of changes in own credit risk of
financial liabilities designated as at fair value through profit or
loss in other comprehensive income.
Adoption of IFRS 9 is mandatory from 1 January 2015, earlier
adoption is permitted. The Group is considering the implications
of the amendment, the impact on the Group and the timing of its
adoption by the Group.
Transition Guidance Amendments to IFRS 10, IFRS 11 and IFRS 12
(issued on 28 June 2012 and effective for annual periods beginning
1 January 2013). The amendments clarify the transition guidance
in IFRS 10 Consolidated Financial Statements. Entities adopting
IFRS 10 should assess control at the first day of the annual period in
which IFRS 10 is adopted, and if the consolidation conclusion under
IFRS 10 differs from IAS 27 and SIC 12, the immediately preceding
comparative period (that is, year 2012 for a calendar year-end
entity that adopts IFRS 10 in 2013) is restated, unless impracticable.
The amendments also provide additional transition relief in IFRS
10, IFRS 11, Joint Arrangements, and IFRS 12, Disclosure of Interests
in Other Entities, by limiting the requirement to provide adjusted
comparative information only for the immediately preceding
comparative period. Further, the amendments will remove the
requirement to present comparative information for disclosures
related to unconsolidated structured entities for periods before
IFRS 12 is first applied. The Group is currently assessing the impact
of the amendments on its financial statements.
Amendments to IFRS 10, IFRS 12 and IAS 27 - Investment entities
(issued on 31 October 2012 and effective for annual periods
beginning 1 January 2014). The amendment introduced a
definition of an investment entity as an entity that (i) obtains funds
from investors for the purpose of providing them with investment
management services, (ii) commits to its investors that its
business purpose is to invest funds solely for capital appreciation
or investment income and (iii) measures and evaluates its
investments on a fair value basis. An investment entity will be
required to account for its subsidiaries at fair value through profit
or loss, and to consolidate only those subsidiaries that provide
services that are related to the entity's investment activities. IFRS
12 was amended to introduce new disclosures, including any
significant judgements made in determining whether an entity
is an investment entity and information about financial or other
support to an unconsolidated subsidiary, whether intended for or
already provided to the subsidiary. The Group is currently assessing
the impact of the amendments on its financial statements.
2.29Critical accounting estimates and
judgements
All the estimates and judgements used represent the best
judgements in accordance with IFRS, made in line with the
applicable standards and are based on the principles of an
active company, on past experience and other factors, including
expectations with regard to future events.
a) Impairment losses on loans and advances
With the objective of determining impairment charges, the Bank
and the Group are reviewing their loan portfolio at least on a
quarterly basis. Prior to making the decision on recognising loss
through the income statement, they make judgements if any
information exists which could signify a drop in the estimated
cash flows from loans. Such evidence includes the information
on deterioration of debtor creditworthiness or on deterioration of
economic conditions and circumstances. Future cash flows from
financial assets are estimated on the basis of past experience and
loss from credit risk bearing assets. The estimated future cash
flows reflect also the effects related to the current circumstances.
Individual estimations are prepared on the basis of projected future
cash flows including all relevant information in relation to the
financial position and debtor creditworthiness as well as collateral.
The methodology and assumptions, used in estimating future
cash flow are based on regular reviews aimed at decreasing the
differences between the estimated and actual losses. Should the
present value of future cash flows decrease by 1 percentage point,
it would result in additional impairment charges in the amount
of EUR 3,503 thousand for the Bank and EUR 3,504 thousand for
the Group (2011: EUR 3,994 thousand for the Bank and EUR 3,995
thousand for the Group).
c) Held to maturity investments
This group of investments features non-derivative financial
instruments with fixed payments and a fixed maturity. Prior
to classification, the intention and capacity to hold such an
investment until maturity is verified. Should the Group be unable
to hold the investment until maturity, the entire group would
have to be reclassified as available for sale financial assets. In this
case the investments are required to be revalued at fair value,
which would result in an increase of the value of investments,
subsequently increasing equity by EUR 7,154 thousand (2011: EUR
1,057 thousand).
d) Deferred income tax asset recognition
The recognised deferred tax asset represents income taxes
recoverable through future deductions from taxable profits,
and is recorded in the statement of financial position. Deferred
income tax assets are recorded to the extent that realisation of the
related tax benefit is probable. The future taxable profits and the
amount of tax benefits that are probable in the future are based
on a medium-term business plan prepared by management and
extrapolated results thereafter. The business plan is based on
management’s expectations that are believed to be reasonable
under the circumstances.
b) Fair value of financial instruments
The fair value of financial instruments traded on an organised
market is determined using observable market prices on the
reporting date, being the price, representing the best bid for the
financial instrument.
Fair values of financial instruments not traded on organized
markets are determined using valuation models. These include
comparisons with the prices from the most recent transactions,
the use of discounted future cash flows and other frequently used
valuation methods. All models in use have been verified to ensure
that the results offer an adequate representation of actual market
conditions, including the relative liquidity of the market and the
use of adequate market surpluses. Changes in the estimates of
these factors would impact the reported fair value of held for
trading investments and available for sale financial assets.
The fair values of derivatives are determined on the basis of market
data, in line with the adopted methodology of the valuation of
financial instruments. Market foreign currency rates, market
interest rates, the yield curve and the volatility curves are used in
the valuation.
61
3
NOTES TO INCOME STATEMENT 3.1
Net interest and similar income - amounts in thousands of EUR
Bank
GROUP
2012
2011
2012
2011
Interest and similar income
110,535
115,799
110,502
115,778
Loans and advances to customers
88,090
90,858
88,057
90,837
192
671
192
671
Securities
15,440
18,108
15,440
18,108
- held for trading
754
1,266
754
1,266
- financial assets designated at fair value through profit or loss
261
386
261
386
- available for sale financial assets
4,808
5,915
4,808
5,915
- held to maturity investments
9,617
10,541
9,617
10,541
234
559
234
559
6,579
5,603
6,579
5,603
Interest and similar expense
(63,946)
(66,872)
(63,946)
(66,883)
Loans and advances from customers
(34,784)
(34,201)
(34,784)
(34,212)
Loans and advances from banks
(13,059)
(15,820)
(13,059)
(15,820)
Deposits with Central Bank
Derivatives - interest rate swap
Loans and deposits from Central Bank
(1,420)
(334)
(1,420)
(334)
(12,217)
(13,347)
(12,217)
(13,347)
Derivatives - interest rate swap
(2,466)
(3,170)
(2,466)
(3,170)
46,589
48,927
46,556
48,895
Issued securities and CDs
In 2012, the Bank and the Group realised EUR 19,608 thousand of revenue from individually impaired loans (2011: EUR 23,853 thousand).
The Bank and the Group accounted for EUR 4,442 thousand interest expense on subordinated bonds (of which EUR 38 thousand are
discounts from bond sales) and EUR 221 thousand is interest expense on subordinated certificates of deposit included in interest expense.
3.2
Dividend income - amounts in thousands of EUR
Bank and Group
2012
2011
Dividends from financial assets held for trading
462
453
Dividends from available for sale financial assets
289
423
Total
751
876
62
3.3
Bank
Group
2012
2011
2012
2011
18,771
17,528
18,772
17,527
Payment services
6,582
6,794
6,581
6,793
Card operations
5,698
6,954
5,698
6,954
Current account
3,043
3,012
3,043
3,012
Guarantees
1,962
1,741
1,962
1,741
243
271
243
271
Other services
Fee and commission expenses
(1,795)
(2,386)
(1,795)
(2,386)
Card operations
(905)
(1,496)
(905)
(1,496)
Payment services
(672)
(619)
(672)
(619)
Brokerage commissions and other securities transactions
(170)
(178)
(170)
(178)
(48)
(93)
(48)
(93)
15,733
16,386
15,732
16,385
Other services
3.4Gains less losses from financial assets and liabilities not classified at fair value
Bank and Group
Financial liabilities recognised at amortised cost
2012
2011
10,595
41
2,852
1,085
Equity securities
2,997
1,099
Debt securities
(145)
(14)
31
(575)
13,478
551
Financial assets recognised at amortised cost
Total
The attained higher profit for 2012 resulted from the sales of portfolio investments in the amount of EUR 2,962 thousand and from the early
redemption of the BCE11 series subordinated bond and the subordinated certificates of deposit in a total amount of EUR 10,595 thousand.
3.5Gains less losses from financial assets and liabilities held for trading
Bank and Group
2012
2011
IRS and options (Interest rate cap)
402
1,815
Foreign currency trading
389
387
Debt securities
219
(163)
Currency derivative financial instruments
Equity securities
(58)
924
(363)
(573)
Forwards and futures with underlying securities
(6,202)
599
Total
(5,613)
2,989
The loss recognised from forwards and futures and the underlying securities in 2012 pertains mainly to the lower fair value valuation of
futures and forwards.
63
3.6
ain less losses from financial assets and liabilities designated at fair value
G
Bank and Group
2012
2011
Gains from valuation of securities in issue
1,097
3,930
(Losses) from bond valuation
(638)
(332)
459
3,598
Total
The profit from revaluation of issued securities (subordinated bonds BCE 10 and certificates of deposit reaching maturity in 2012) are a
result of an increase in the issuer’s credit risk, which is decreased by lower market (risk-free) interest rate. In 2012, the decrease in the
market (risk-free) interest rate resulted in a negative effect of EUR 268 thousand (2011: EUR 392 thousand), while the effect of increased
credit risk was positive, amounting to EUR 1,365 thousand (2011: EUR 4,322 thousand).
Loss from the valuation of bonds is the result of the valuation of bonds purchased. The Group provides fair value on the basis of quotes
available from information platforms (Reuters or Bloomberg).
Note 4.18 provide detailed information on the issued securities.
3.7
Changes in fair value from hedge accounting
Bank and Group
2012
2011
Net profit from hedging derivatives
1,566
4,906
Net (loss) from hedged instruments
(1,513)
(5,106)
53
(200)
Total
Using hedge accounting, the Group hedged the fair value of some of its financial liabilities related to a change in interest rates. Hedging
derivatives are disclosed in detail in Note 4.9.
3.8
Bank
Group
2012
2011
2012
2011
Income
298
296
1,944
1,065
Income from leases
191
182
298
301
-
-
1,539
650
107
114
107
114
Expenses
(480)
(640)
(484)
(640)
Taxes and other duties
(313)
(448)
(317)
(448)
Income from inventory
Other operating income
Membership fees
(79)
(91)
(79)
(91)
Contributions to humanitarian organisations
(59)
(79)
(59)
(79)
Other expenses
(29)
(22)
(29)
(22)
(182)
(344)
1,460
425
Total
Taxes and other duties in 2012 pertain to expenses from tax on total assets in amount of EUR 206 thousand (2011: EUR 291 thousand).
64
3.9 Administrative expenses
Bank
Group
2012
2011
2012
2011
Labour costs
(17,758)
(18,825)
(18,054)
(19,096)
Gross salaries and compensations
(12,571)
(13,486)
(12,782)
(13,694)
(1,754)
(1,903)
(1,781)
(1,918)
Social security
(927)
(1,022)
(943)
(1,048)
Employee benefits
(276)
(73)
(279)
(74)
Defined contribution scheme
- post-employment benefits
- other employee benefits
Other labour expenses
General and administrative expenses
247
115
244
114
(523)
(188)
(523)
(188)
(2,230)
(2,341)
(2,269)
(2,362)
(15,276)
(14,090)
(14,906)
(15,344)
IT
(3,426)
(3,516)
(3,426)
(3,516)
Maintenance
(2,049)
(1,771)
(2,103)
(1,784)
Credit cards
(1,805)
(2,383)
(1,805)
(2,383)
Rent
(807)
(719)
(816)
(720)
Advertising
(729)
(787)
(729)
(787)
Material and energy costs
(621)
(658)
(634)
(675)
Office stationery costs
(476)
(564)
(483)
(569)
Audit and consultancy
(225)
(244)
(425)
(440)
(3,952)
(4,264)
(4,923)
(4,402)
(31,848)
(33,731)
(33,398)
(34,372)
Other services
Total
On 31 December 2012, the Bank had 508 employees (2011: 530 employees), of which 42.5% were educated to university level at least,
18.7% held a post-secondary school education, 36.4% held secondary school diplomas, while 2.4% were educated at a lower level. The
average number of employees in 2012 was 524.
The Subsidiary employed 5 workers as at 31 December 2012 and 4 workers as at 31 December 2011.
In the amount of auditing and consultancy costs for 2012, the figure of EUR 52 thousand (2011: EUR 53 thousand) comes from the
auditing of the annual report, with the rest of the costs represented by the payment for supervision and other consultancy services.
3.10 Amortisation and depreciation
Bank
Note
GROUP
2012
2011
2012
2011
Amortisation of intangible assets
4.12
(1,189)
(1,400)
(1,190)
(1,401)
Depreciation of property and equipment
4.10
(2,203)
(2,364)
(2,206)
(2,367)
Depreciation of investment property
4.11
-
-
(30)
(23)
(3,392)
(3,764)
(3,426)
(3,791)
Total
65
3.11 Provisions
Bank
Note
Provisions for legal action
4.27
Provisions for guarantees and commitments
4.27
Total
GROUP
2012
2011
2012
2011
1,000
(108)
1,000
(108)
800
(415)
799
(415)
1,800
(523)
1,799
(523)
Most of the provisions released are based on the adjustment of the present value of future obligations from the denationalisation procedure
and the contingent liabilities from granted undrawn loans and guarantees.
3.12Impairment charges
BANK
Impairment of loans measured at amortised cost
GROUP
2012
2011
2012
2011
(54,558)
(39,160)
(54,558)
(39,160)
Impairment of available for sale financial assets
(10,842)
(9,758)
(10,842)
(9,758)
Impairment of equity securities
(10,842)
(9,850)
(10,842)
(9,850)
Impairment of debt securities
-
92
-
92
Impairment of held to maturity investments
-
(3,752)
-
(3,752)
Impairment of other assets
-
-
-
(8)
(65,400)
(52,670)
(65,400)
(52,678)
Total
The deterioration of economic conditions and increased lack of financial discipline increased the volume of impairment charges on
financial investments of the Bank and Group by 24%.
3.13 Income tax expense
Note
BANK
2012
Deferred tax
Income tax expense
Pre-tax (loss)
Tax calculated at 18%
Expenses not deductible for tax purposes
4.14.1
GROUP
2011
2012
2011
2,553
3,715
2,552
3,715
2,553
3,715
2,552
3,715
(27,537)
(18,590)
(27,508)
(18,530)
4,957
3,717
4,951
3,733
(72)
(169)
(73)
(172)
(2,467)
-
(2,467)
-
Tax relief
75
-
76
-
Income not assessable for tax purposes
60
167
60
167
-
-
5
(13)
2,553
3,715
2,552
3,715
Effect in change in tax rate
Utilization of unrecognized tax losses
Total
Deferred tax receivables result from the loss of the year and the valuation of available for sale financial assets to a lower fair value.
The tax administration may conduct a tax audit for the current reporting period at any time during the next five years and impose
additional liability or penalty on the basis of its findings. The Management Board is not aware of any circumstances, which could
potentially cause a liability.
66
3.14 Basic and diluted earnings per share
BANK
GROUP
2012
2011
2012
2011
Net (loss) - holders of ordinary shares
(24,984)
(14,875)
(24,956)
(14,815)
Number of ordinary shares
508,378
508,378
508,378
508,378
(49)
(29)
(49)
(29)
Basic and diluted net earnings per share (EUR per share)
Basic loss or earnings per share are calculated by dividing net profit by the weighted average number of ordinary shares issued,
decreased by the treasury shares.
Preference shares were converted to ordinary shares in accordance with the shareholders’ decision. At the end of the year, only
ordinary shares form part of the Bank’s capital.
Issued subordinated debt securities do not have any conversion features.
4
NOTES TO STATEMENT OF FINANCIAL POSITION
4.1 Cash and balances with the Central Bank
Bank and Group
Balances with Central Bank
Cash in hand
Total
2012
2011
113,672
157,923
13,814
10,240
127,486
168,163
The Group decreased deposits with the Central Bank in 2012 on the basis of the balance of overnight deposits and term deposits
with 7-day maturities.
The Bank must fulfil the minimum reserve requirement with the Central Bank. The minimum reserve requirement amount depends
on the volume and structure of deposits received. According to the ECB Regulation on minimum reserves, a minimum reserve in
the amount of 1% on all deposits and debt securities with maturities up to 2 years is required. The Bank was able to fulfil the reserve
requirement in 2012 and in 2011 without difficulty.
The minimum reserve requirement funds are usually at the full disposal of the Bank for daily operations, that is why they are included
in cash and cash equivalents in full (Note 4.32). The average minimum reserve requirement amounted to EUR 12,839 thousand on 31
December 2012 (31 December 2011: EUR 25,696 thousand).
4.2 Held for trading financial assets
Bank and Group
Note
2012
2011
11,217
20,409
4.2a
10,786
17,153
4,120
15,255
26,123
52,817
Debt instruments
Derivatives
Equity securities
Total
In accordance with changes in investment policies, the Group has reduced the held for trading financial assets in the debt as well as the
equity instruments segments.
Financial assets held for trading did not form part of assets pledged in 2012 nor in 2011, and no debt securities with original maturities
below three months are held.
67
4.2a Derivatives
Bank and Group
Contractual amount
Fair value
31 December
2012
31 December
2011
2012
2011
IRS
81,661
94,562
7,886
6,517
Currency swaps
18,362
29,191
166
1,314
Futures and forwards
9,278
21,553
2,724
9,313
Option (Interest rate cap)
5,750
6,000
1
9
Currency option
1,123
-
9
-
116,174
151,306
10,786
17,153
Derivatives
Total
In 2012, the Group decreased the volume of forward agreements, the fair value of which amounted to EUR 2,724 thousand at the end of the
year (31 December 2011: EUR 9,313 thousand). The lower fair value in the segment is mainly a result of a decreased volume of investments
and the revaluation of some futures and forward transactions.
The volume of interest rate swaps decreased in comparison with the year before. Fair value increased as the interest rates decreased in 2012.
The Bank is mostly involved in floating for fixed rate swap transactions, where it pays variable and receives fixed interest.
In 2012, the Group reduced the volume of currency swap transactions, whereby the fair value decreased due to the fluctuation of foreign
currency rates.
4.3 Financial assets designated at fair value through profit or loss
Bank and Group
2012
2011
Debt instruments
5,064
7,823
Total
5,064
7,823
The decrease in financial assets designated at fair value through profit or loss comes from debt instruments maturing and EUR 638
thousand fair value reductions (Table 3.6).
Under financial instruments recognised at fair value through profit or loss, the Group reports bonds with embedded derivative
financial instruments that may have a significant impact on expected cash flows. The Group has prepared a policy for these
investments, which also defines the required return and the investment period.
In 2012 and 2011, the Group did not pledge any financial assets designated at fair value through profit and loss.
4.4 Available for sale financial assets
Bank and Group
2012
2011
Balance
Impairment
Balance
170,167
-
177,997
-
47,114
(30,523)
52,731
(27,527)
Total gross
217,281
(30,523)
230,728
(27,527)
Total net
186,758
Debt instruments
Equity instruments
68
Impairment
203,201
Changes in available for sale financial assets:
Bank and Group
Balance as at 1 January 2012
Equity securities
Debt securities
Total available for
sale financial assets
25,205
177,996
203,201
9,692
91,086
100,778
(14,817)
(313)
(15,130)
(100,671)
Purchase
Sale
Realization at maturity
-
(100,671)
7,354
2,068
9,422
(10,842)
-
(10,842)
16,592
170,166
186,758
Change in fair value
Impairment
Balance as at 31 December 2012
Bank and Group
Equity securities
Debt securities
Total available for
sale financial assets
41,075
194,954
236,029
1,242
50,305
51,547
(6,000)
-
(6,000)
Purchase
Sale
Transfer to held to maturity investments
-
(5,001)
(5,001)
Realization at maturity
-
(61,815)
(61,815)
Change in fair value
(1,262)
(539)
(1,801)
Transfer to impairment
(9,850)
92
(9,758)
25,205
177,996
203,201
4.5 Loans and advances to banks
Bank and Group
2012
Balance
At sight
2011
Impairment
Balance
Impairment
8,357
-
19,418
-
Short-term loans
13,686
-
35,569
-
Long-term loans
-
-
78
(11)
Total gross
22,043
-
55,065
(11)
Total net
22,043
55,054
Cash and cash equivalents (Note 4.32) include loans to banks with maturity up to 90 days, in the amount of EUR 22,043 thousand
(31 December 2011: EUR 54,985 thousand).
69
4.6Loans and advances to customer
4.6.1 Analysis by types of borrowers and currency:
2012
Bank
2011
Balance
Impairment
Balance
Impairment
1,704,286
(148,871)
1,778,924
(130,761)
10,151
-
2,705
-
317,993
(10,491)
325,225
(8,208)
1,376,142
(138,380)
1,450,994
(122,553)
Foreign currency
41,325
(5,887)
47,636
(2,593)
Loans to private individuals
18,603
(1,078)
22,019
(1,140)
Loans to companies
22,722
(4,809)
25,617
(1,453)
1,745,611
(154,758)
1,826,560
(133,354)
Local currency
Loans and advances to public sector
Loans to companies
Total
Net total
1,590,853
1,693,206
2012
GROUP
2011
Balance
Impairment
Balance
Impairment
1,699,110
(148,871)
1,775,729
(130,765)
10,151
-
2,705
-
318,058
(10,491)
325,292
(8,208)
1,370,901
(138,380)
1,447,732
(122,557)
Foreign currency
41,325
(5,887)
47,636
(2,593)
18,603
(1,078)
22,019
(1,140)
Loans to companies
22,722
(4,809)
25,617
(1,453)
1,740,435
(154,758)
1,823,365
(133,358)
Local currency
Loans and advances to public sector
Loans to companies
Total
Net total
1,585,677
1,690,007
4.6.2Impairments and write-offs for customers, by types of credit facilities:
Bank
Housing
loans
Consumer and
other loans
Loans to
individuals
Loans to
companies
Total
2,135
6,309
8,444
88,507
96,951
Impairment charges
1,611
1,711
3,322
44,820
48,142
Reversal of impairments
(679)
(1,490)
(2,169)
(7,708)
(9,877)
(4)
(245)
(249)
(1,613)
(1,862)
3,063
6,285
9,348
124,006
133,354
Write-offs
Impairment charges
Sale of receivables
Write-offs
70
2,405
3,059
5,464
57,602
63,066
(1,240)
(1,756)
(2,996)
(8,714)
(11,710)
-
-
-
(24,250)
(24,250)
(6)
(241)
(247)
(5,455)
(5,702)
4,222
7,347
11,569
143,189
154,758
GROUP
Housing
loans
Consumer and
other loans
Loans to
individuals
Loans to
companies
Total
2,135
6,309
8,444
88,507
96,951
Impairment charges
1,611
1,711
3,322
44,824
48,146
(679)
(1,490)
(2,169)
(7,708)
(9,877)
(4)
(245)
(249)
(1,613)
(1,862)
3,063
6,285
9,348
124,010
133,358
Write-offs
Impairment charges
Sale of receivables
Write-offs
2,405
3,059
5,464
57,598
63,062
(1,240)
(1,756)
(2,996)
(8,714)
(11,710)
-
-
-
(24,250)
(24,250)
(6)
(241)
(247)
(5,455)
(5,702)
4,222
7,347
11,569
143,189
154,758
4.7 Other financial assets
BANK
GROUP
2012
2011
2012
2011
Receivables on the course of collection
2,397
2,825
2,397
2,825
Credit card receivables
1,337
1,333
1,337
1,333
Fees and commissions receivables
544
413
544
413
Other
537
200
917
200
(2,097)
(2,746)
(2,097)
(2,746)
2,714
2,029
3,094
2,029
Impairment
Total
Movements in impairment provisions:
Bank and Group
1,068
Impairment
1,739
(61)
2,746
Impairment
1,783
Write-offs
(129)
(2,303)
2,097
71
4.8 Held to maturity investment
Bank and Group
Held to maturity investment
Net Held to maturity investment
2012
2011
Balance
Impairment
Balance
Impairment
270,152
-
273,063
(3,752)
270,152
269,311
The Bank did not have any held to maturity investments pledged in 2012 and 2011.
Changes in held to maturity investments:
Bank and Group
308,663
Purchase
111,395
Transfer from AFS
5,025
Impairment
(3,752)
Redemption
(150,557)
Accrued interest
11,273
Interest paid
(12,736)
269,311
Purchase
26,842
Redemption
(29,997)
Accrued interest
13,714
Interest paid
(9,718)
270,152
4.9 Hedging derivatives
Bank and Group
Contractual amount
Fair value
31. 12. 2012
31. 12. 2011
2012
2011
Hedging derivatives (interest rate swap)
164,150
164,150
6,892
4,838
Total
164,150
164,150
6,892
4,838
Hedge accounting rules (fair value hedge) were applied in the hedging of interest rate risk using interest rate swaps. These hedge
relationships are created in such a way that the characteristics of the hedge instrument and those of the hedged item match (e.g. the
principal terms match). The fair value of hedging instruments has increased compared with the previous year, as the anticipated future
interest rates decreased in 2012.
72
4.10 Property and equipment
Bank
Note
Cost as at 1 January 2011
Assets in
course of
construction
Total
8,059
45
54,711
-
605
605
316
144
(521)
-
-
(1,188)
(283)
-
(1,471)
33,436
12,360
7,920
129
53,845
20,281
9,496
5,358
-
35,135
Land and
buildings
Computer
hardware
Other
equipment
33,375
13,232
-
-
61
Additions
Transfer from assets in course of construction
Disposals
Cost as at 31 December 2011
Depreciation
Depreciation charge
3.10
515
1,247
602
-
2,364
-
(1,179)
(277)
-
(1,456)
20,796
9,564
5,683
-
36,043
Net carrying value as at 31 December 2011
12,640
2,796
2,237
129
17,802
33,436
12,360
7,920
129
53,845
-
-
-
723
723
(6,195)
-
-
-
(6,195)
6
693
153
(852)
-
Disposals
Additions
Removal
Disposals
(202)
(1,067)
(385)
-
(1,654)
27,045
11,986
7,688
-
46,719
20,796
9,564
5,683
-
36,043
517
1,125
561
-
2,203
(5,006)
-
-
-
(5,006)
(138)
(949)
(352)
-
(1,439)
Depreciation
Depreciation charge
Removal
3.10
Disposals
16,169
9,740
5,892
-
31,801
10,876
2,246
1,796
-
14,918
Larger purchases in 2012 are represented by purchases of computer equipment totalling EUR 693 thousand (POS terminals, ATMs) and
the purchases of other equipment. Decreases are mainly the result of the sale and disposal of outdated computers and other equipment.
Based on legal procedures as described in Note 4.31a), the Bank removed the Vodnikova office building, in the denationalisation process,
from its books in an amount of EUR 1,189 thousand.
Property and equipment have not been pledged in 2012 or 2011.
73
GROUP
Note
Additions
Disposals
Assets in
course of
construction
Total
8,121
45
54,865
-
1,475
1,475
145
(523)
-
Land and
buildings
Computer
hardware
Other
equipment
33,451
13,248
-
-
61
317
-
(1,196)
(286)
-
(1,482)
33,512
12,369
7,980
997
54,858
20,286
9,510
5,411
-
35,207
515
1,248
604
-
2,367
-
(1,188)
(280)
-
(1,468)
Depreciation
Depreciation charge
3.10
Disposals
20,801
9,570
5,735
-
36,106
12,711
2,799
2,245
997
18,752
33,512
12,369
7,980
997
54,858
-
-
-
1,154
1,154
(6,195)
-
-
-
(6,195)
(1,295)
Additions
Removal
Transfer to financial lease
-
-
-
(1,295)
Transfer from assets in the course of construction
6
693
157
(856)
-
(202)
(1,067)
(392)
-
(1,661)
(76)
-
-
-
(76)
27,045
11,995
7,745
-
46,785
20,801
9,570
5,735
-
Removal
(5,006)
-
-
517
1,126
563
(5)
-
-
(138)
(949)
Disposals
Transfer to investment property
Depreciation
Depreciation charge
Transfer to investment property
Disposals
3.10
36,106
(5,006)
-
2,206
(357)
-
(1,444)
(5)
16,169
9,747
5,941
-
31,857
10,876
2,248
1,804
-
14,928
The Group’s fixed assets in acquisition, amounting to EUR 1,295 thousand, pertaining to the construction of a new manufacturing
facility in Prebold, have been transferred to long-term financial investments in their entirety.
74
4.11 Investment property
Group
Note
Land
Buildings
Total
33
1,805
1,838
Transfer from inventory
-
1,609
1,609
Disposals
-
(123)
(123)
33
3,291
3,324
-
31
31
Depreciation
Depreciation charge
3.10
-
23
23
-
54
54
33
3,237
3,270
3,324
33
3,291
Transfer from tangible fixed assets
5
71
76
Transfer from inventory
-
(291)
(291)
Disposals
-
(351)
(351)
38
2,720
2,758
-
54
54
-
30
30
Depreciation
Depreciation charge
3.10
Transfer from tangible fixed assets
-
5
5
Disposals
-
(10)
(10)
-
79
79
38
2,641
2,679
Investment property includes land and buildings acquired to be leased out under an operating lease. Rental income of EUR 107
thousand (31 December 2011: EUR 119 thousand) is included in Note 3.8 among Net other operating loss. Maintenance costs related
to investments property of EUR 8 thousand (31 December 2011: EUR 3 thousand) are included in Note 3.9 in Administrative expenses.
As at 31 December 2012, the fair value of investment property was estimated in the amount of EUR 2,940 thousand (31 December
2011: EUR 3,552 thousand).
75
4.12 Intangible assets
Assets in course
of installation
Total
13,061
265
13,326
-
1,070
1,070
Transfer from fixed assets in installation
1,175
(1,175)
-
Disposals
(122)
-
(122)
14,114
160
14,274
BANK
Note
Additions
Software licenses
Depreciation
8,075
-
8,075
1,400
-
1,400
Transfer to property and equipment
(122)
-
(122)
9,353
-
9,353
4,761
160
4,921
14,114
160
14,274
683
Amortisation charge
3.10
Additions
Transfer from fixed assets in installation
-
683
505
(505)
-
14,619
338
14,957
9,353
-
9,353
1,189
-
1,189
10,542
-
10,542
4,077
338
4,415
Depreciation
Amortisation charge
76
3.10
Assets in course
of installation
Total
13,067
265
13,332
-
1,070
1,070
Transfer from fixed asset in installation
1,175
(1,175)
-
Disposals
(122)
-
(122)
14,120
160
14,280
8,076
-
8,076
1,401
-
1,401
Disposals
(122)
-
(122)
9,355
-
9,355
4,765
160
4,925
14,120
160
14,280
-
686
686
508
(508)
-
14,628
338
14,966
9,355
-
9,355
group
Note
Additions
Software licenses
Depreciation
Amortisation charge
3.10
Additions
Transfer from fixed asset in installation
Depreciation
Amortisation charge
3.10
1,190
-
1,190
10,545
-
10,545
4,083
338
4,421
Increases in 2012 are represented by investments in retail operations’ software amounting to EUR 252 thousand and the purchase of
software licences (Microsoft) in a total of EUR 234 thousand. The fair value of intangible assets at the end of the business year does
not deviate from their carrying value.
77
4.13 Investments in subsidiaries
Posest, d.o.o., Celje
Investment
amount
% of
ownership
% voting
rights
Basic equity
capital
Operating
result
31 December 2012
2,257
100.00
100.00
2,124
7
31 December 2011
2,257
100.00
100.00
2,124
56
4.14 Income tax assets
4.14.1 Deferred tax assets
BANK
Current tax
GROUP
2012
2011
2012
2011
-
1,409
-
1,409
Deferred tax
10,087
7,799
10,089
7,802
Balance of assets as at 31 December
10,087
9,208
10,089
9,211
BANK
GROUP
2012
2011
2012
Tax loss
5,141
1,521
5,141
1,521
Available for sale securities
4,649
5,935
4,649
5,935
222
343
224
346
Provisions for liabilities to employees
Marketable securities
Deferred tax assets
2011
75
-
75
-
10,087
7,799
10,089
7,802
Changes in deferred income tax also include effects from the tax rate decrease in Slovenia.
Slovene tax legislation does not set limits or deadlines by which uncovered tax losses must be utilised. Because the Bank plans to
generate profits in the future, deferred tax assets were recognised for the entire tax loss.
78
Changes in deferred tax:
Bank
Note
Balance as at 1 January
Group
2012
2011
2012
2011
7,799
3,412
7,802
3,415
-
(10)
-
(10)
Income statement changes in deferred taxes:
Trading securities
- derecognition of assets
Available for sale instruments - impairment
- establishment of assets for impairment
- effect of change in tax rate
1,626
2,720
1,626
2,720
(1,763)
(488)
(1,763)
(488)
(883)
-
(883)
-
Provisions for liabilities to employees
- establishment of assets
7
1
7
1
(50)
(29)
(51)
(29)
(78)
-
(78)
-
4,000
1,521
4,000
1,521
(381)
-
(381)
-
75
-
75
-
2,553
3,715
2,552
3,715
(803)
502
(803)
502
538
170
538
170
Tax loss
Investment tax relief
Income statement changes in deferred taxes
as at 31 December
3.13
Changes in deferred taxes in the
statement of comprehensive income:
Available for sale securities
- valuation to fair value
- elimination
Changes in deferred taxes recorded in other
comprehensive income as at 31 December
Statement of financial position on 31 December
(265)
672
(265)
672
10,087
7,799
10,089
7,802
4.15 Other assets
BANK
GROUP
2012
2011
2012
Deferred expenses
151
130
157
142
Other receivables
116
112
208
465
47
41
5,584
2,757
314
283
5,949
3,364
Inventories
Total
2011
Most of the inventories pertain to the Subsidiary and the increase on 31 December 2012 amounted to EUR 2,827 thousand. Inventories
increased due to completion and purchase of real estate intended for resale.
79
4.16 Deposits from Central Bank
Bank and Group
Long-term loans from ECB in local currency
Interest rate as at
31 December 2012
2012
2011
0.75%
151,431
80,022
-
-
10,060
151,431
90,082
Short-term loans from ECB in local currency
Total
4.17 Held for trading financial liabilities
Bank and Group
Contractual amount
Fair value
31 December
2012
31 December
2011
2012
43,889
38,195
1,608
814
8,582
12,058
242
609
Foreign currency swaps
11,194
26,557
28
735
IRS
2011
Currency options
1,123
-
9
-
Options (Interest rate cap)
5,750
6,000
1
9
70,538
82,810
1,888
2,167
Total
In securities futures and forward agreements, the fair value represents negative valuations due to forward sale price differences. In 2012,
the Bank reduced liabilities from the negative valuation of forward sales.
The volume of negative fair value interest rate swaps increased in 2012. The Bank mostly records negative valuation in swaps, where it
pays fixed interest and receives variable interest. Liabilities increased, as the market interest rates decreased in 2012.
In 2012, the Group reduced the volume of currency swaps and subsequently the liabilities from these.
4.18 Financial liabilities designated at fair value through profit or loss
Bank and Group
Certificates of deposit with maturity 2012
Subordinated bonds BCE10, with maturity 2017
Total
Interest rate as at
31 December 2012
2012
2011
-
-
1,491
5.00%
33,592
34,655
33,592
36,146
Financial liabilities designated at fair value through profit or loss include the subordinated bond in issue at a nominal amount of EUR
37,000 thousand, which, in accordance with risk management policies, is hedged with a derivative instrument - an interest rate swap.
Within the interest rate swap, the Group swapped the nominal interest rate with a variable one, thus hedging the risk of a decrease in
long-term interest rates.
80
Based on the Decision on the calculation of capital in banks and savings banks, the BCE10 bonds represent the Group’s subordinated
debt, thus being included in Tier I capital up to an amount representing 50% of the Group’s Tier 1 capital and exhibiting the following
characteristics:
- the bonds are not especially insured or guaranteed;
- liabilities from bonds are subordinated to plain debt instruments in the event of bankruptcy or winding up procedures and are
only redeemed once all non-subordinated liabilities to creditors and subordinated liabilities included in Tier 3 capital have been
redeemed, therefore they represent a high risk instrument;
- s ubordinated bonds paid in are only disposable to cover the Group’s loss in the event of bankruptcy or winding up procedures and
are not used to cover loss during the time of the Group’s regular operations.
Accounting for financial liabilities, designated at fair value through profit and loss is based on the elimination of measurement
inconsistencies that would otherwise result from the measuring liability and recognising its gains and losses on different bases. In
this way, the Bank presents more appropriate information about liabilities and the related derivatives on financial liabilities carried at
amortised cost and interest rate swaps carried at fair value.
Subordinated bond BCE10 is listed on Ljubljana stock exchange (Level 2).
4.19 Financial liabilities at amortised cost – deposits from banks
4.19.1 Analysis by currency and maturity
Bank and Group
At sight
In local currency
In foreign currency
2012
2011
519
1,044
7
248
512
796
Short-term
10,048
19,091
In local currency
10,048
19,091
Total
10,567
20,135
4.19.2 Analysis by region
Bank and Group
2012
2011
10,560
11,857
SE Europe
7
3,220
EU
-
5,058
10,567
20,135
Slovenia
Total
81
4.20 Financial liabilities at amortised cost – due to customers
4.20.1 Analysis by currency and maturity and by type of customer
2012
Bank
2011
At sight
Short-term
Long-term
At sight
Short-term
Long-term
Companies
127,358
317,556
268,378
120,631
311,752
317,516
In local currency
125,502
317,268
268,378
118,028
311,528
317,426
1,856
288
-
2,603
224
90
Private individuals
307,192
204,849
188,288
326,206
204,420
198,119
In local currency
295,387
202,372
185,876
313,711
201,421
196,170
11,805
2,477
2,412
12,495
2,999
1,949
434,550
522,405
456,666
446,837
516,172
515,635
In foreign currency
In foreign currency
Total
Total at sight, short-term
and long-term
1,413,621
1,478,644
2012
group
At sight
2011
Short-term
Long-term
At sight
Short-term
Long-term
Companies
127,357
317,556
268,378
120,627
311,752
317,516
In local currency
125,501
317,268
268,378
118,024
311,528
317,426
1,856
288
-
2,603
224
90
Private individuals
307,192
204,849
188,288
326,206
204,420
198,119
In local currency
295,387
202,372
185,876
313,711
201,421
196,170
11,805
2,477
2,412
12,495
2,999
1,949
434,549
522,405
456,666
446,833
516,172
515,635
In foreign currency
In foreign currency
Total
Total at sight, short-term
and long-term
1,413,620
1,478,640
Bank
Slovenia
Group
2012
2011
2012
2011
1,460,861
1,395,625
1,460,865
1,395,624
SE Europe
8,200
7,305
8,200
7,305
EU
7,555
8,222
7,555
8,222
Other
2,241
2,252
2,241
2,252
1,413,621
1,478,644
1,413,620
1,478,640
Total
82
4.21 Financial liabilities, measured at amortised cost – borrowings from banks
4.21.1
Analysis by currency and maturity
Interest rate as at
31 December 2012
2012
2011
255,286
396,023
Long-term loans
2.51%
250,286
380,977
Short-term loans
2.97%
5,000
15,046
255,286
396,023
Bank and Group
Local currency
Total
As at 31 December 2012, the Bank reduced the volume of interbank financing by EUR 153,377 thousand, mostly through regular repayment and prepayment of syndicated loans raised abroad.
Bank and Group
Slovenia
EU
Total
2012
2011
236,173
223,533
19,113
172,490
255,286
396,023
4.22 Financial liabilities at amortised cost – borrowing from customers
Bank and Group
Local currency
Total
Interest rate as at
31 December
2012
2.23%
2011
2012
Short-term
Long-term
Short-term
Long-term
-
3,278
-
6,224
3,278
6,224
83
4.23 Debt securities
Bank and Group
Interest rate as at
31 December 2012
Certificates of deposit in local currency
2012
2011
70,557
86,540
- up to 1 year
3.26%
3,860
11,681
- above 1 year up to 2 years
4.28%
55,451
29,021
4.38%
7,572
42,164
4.97%
3,674
3,674
100,323
98,980
Bonds in local currency
- bonds BCE13 and BCE14, maturity 2015
4.68%
62,304
61,755
- bonds BCE15, maturity 2016
5.00%
38,019
37,225
170,880
185,520
Total
The Bank issued 15th series bonds in February 2011 in a total of EUR 34,150 thousand at an interest rate of 5% annually. The issue
pertains to regular Euro denominated non-materialised bonds designated BCE15. Interest is paid on an annual basis, with final maturity
falling on 15 February 2016. The Bank is liable for all obligations from its bonds. The liabilities from bonds are not hedged or guaranteed
in any other way.
The BCE13, BCE14 and BCE15 series bonds are all listed on the Ljubljana stock exchange, while certificates of deposit are not.
4.24 Subordinated liabilities
Bank and Group
Subordinate certificates of deposit due in 2014 (EUR)
Interest rate as at
31 December 2012
2012
2011
1.35%
250
10,284
Subordinate certificates of deposit due in 2019 (EUR)
5.28%
2,726
-
Subordinate bonds BCE12 due in 2016 (EUR)
6.50%
12,524
12,511
49,622
2.32%
15,103
8.00%
24,672
-
55,275
72,417
Total
In 2007, the Group issued subordinated certificates of deposit in a total amount of EUR 10.25 million at an interest rate of 6M EURIBOR increased
by 1 percentage point, maturing in 7 years with interests paid on a semi-annual basis. In 2012 the Bank redeemed these instruments early.
The redemption totalled EUR 10,000 thousand, so the amount outstanding at the statement of financial position date was EUR 250 thousand.
The Bank issued subordinated certificates of deposit in 2012, maturing in 7 years (in 2019). The nominal amount of the issue was EUR 3
million, the interest rate 5.275% p.a. and the issue price was 90.70%. By issuing these instruments, the Bank improved its capital adequacy,
as the subordinated certificates are included in the calculation of additional capital I.
The BCE11 series subordinated bonds issued in 2007 are deemed innovative financial instruments according to the definitions in the Decision
on the calculation of capital in banks and savings banks and are included in the calculation of Tier 1 capital in accordance with the decision
of the Bank of Slovenia dated 4 December 2007. The following are the main characteristics of the issued innovative subordinated bonds:
-the instrument does not have a set maturity, it can however be called, but no earlier than 10 years after the date of issue, in full, not in part,
with the approval of the Bank of Slovenia;
-they are neither secured nor covered by a guarantee of the issuing bank or related entity or any other form of arrangement that legally or
economically enhances the seniority of the claim;
-liabilities from these bonds are subordinated in full to liabilities toward regular creditors and to liabilities based on subordinated debt
instruments, meaning that in the event of bankruptcy or winding up procedures they are redeemed only after the non-cumulative preferential
shares and regular shares, making them a high risk instrument;
-the Bank cannot pay out the Bank’s operating profit, should it not settle liabilities from innovative instruments during the current year;
-the Bank has an unconditional right to use these funds to cover its losses during regular operations;
-the Bank has the option of withholding interest payments from bonds, should it not have record distributable profit in the previous year,
interest payments are non-cumulative, which is why any holder of the bond no longer has any claim to the interest withheld.
84
The Bank issued the bonds BCE11 in a nominal amount of EUR 50 million at an interest rate of 6M EURIBOR plus 2 percentage points.
The stated interest rate is valid for a period of 10 years, when the bond is callable. Should it not be called, the interest margin step-up
will be 1 percentage point. The first interest payment was due on 28 June 2008, with the following interest coupons paid on a semiannual basis. In 2012, the Bank redeemed EUR 34,855 thousand of the BCE11 series subordinated bonds early and replaced them with
the issue of new BCE16 series subordinated bonds, thus improving capital adequacy.
In 2009, the Bank issued the BCE12 series subordinated bonds. As at 31 December 2012 the amount subscribed was EUR 12,524
thousand at a fixed nominal interest rate of 6.5%, maturing on 15 June 2016. Interest is paid out annually, with the first interest coupon
having matured on 15 June 2010 and the final coupon maturing on 15 June 2016.
As mentioned above, the Bank issued the BCE16 series subordinated bonds in 2012. As at 31 December 2012, EUR 24,672 thousand
has been issued at a fixed nominal interest rate of 8%, maturing on 26 November 2019. Interest is calculated using the straight line
method and is paid out annually. The first interest coupon matures on 26 November 2013; the final interest coupon matures on 26
November 2019.
The subordinated BCE12 and BCE16 bonds have the characteristics of subordinated debt and the Group includes them in the calculation
of Tier I capital. The subscribed subordinated bonds will only be available to cover the Group’s loss in the event of bankruptcy or
winding up procedures and are not available to cover for loss coming from the Group’s regular operations. The bonds are neither
secured nor covered by a guarantee of the issuing bank or related entity or any other form of arrangement that legally or economically
enhances the seniority of the claim. The Bank is fully liable for the obligations from bonds without limit. Liabilities from the bonds
are subordinated to regular debt instruments in the event of bankruptcy or winding up and are only paid once all unsubordinated
liabilities to regular creditors have been settled and the liabilities based on subordinated debt included in Tier II capital have been
settled as well.
Subordinated bonds of the BCE11, BCE12 and BCE16 series are listed on the Ljubljana stock exchange.
4.25 Other financial liabilities
BANK
GROUP
2012
2011
2012
2011
1,745
1,478
1,860
2,067
Suppliers
Debit or credit card payables
1,443
3,661
1,443
3,661
Accrued salaries
1,258
1,534
1,299
1,534
Items in course of payment
673
1,033
673
1,033
Accruals
538
596
538
596
Other
592
656
591
656
6,249
8,958
6,404
9,547
Total
4.26 Derivatives - hedge accounting
Bank and Group
Contractual amount
Fair value
31 December 2012
31 December 2011
2012
2011
Fair value hedging - hedge accounting
-
25,000
-
8
Total
-
25,000
-
8
In 2011, the Group hedged issued bonds and some certificates of deposits taken against interest rate risk with an interest rate swap
(IRS). In 2012, the transactions, which exhibited liabilities from the fair value valuation on 31 December 2011, matured.
The mentioned instruments are accounted for by the Group in accordance with the rules of Hedge Accounting as a fair value hedge.
85
4.27 Provisions
Group
Bank
Pending legal cases
Employee benefits provision
Provisions for guarantees and commitments
Other provisions
Note
2012
2011
2012
4.31a
4,739
7,110
4,739
7,110
2,412
2,171
2,446
2,202
2,242
3,042
2,243
3,042
183
275
183
275
9,576
12,598
9,611
12,629
4.31d
Total
2011
Other provisions relate to the national housing savings scheme (NSVS). Should a saver in the scheme not use the option to take a
housing loan according to the conditions of the NSVS, the Group must return all of the premiums that the saver received during the
saving period to the Republic of Slovenia Housing Fund.
Changes in provisions:
Bank
Provisions made / (released)
Provisions (utilized)
Provisions for
pending legal
cases
Provisions for
guarantees and
commitments
Other
provisions
Total
8,169
2,627
312
11,108
108
415
-
523
(1,167)
-
(37)
(1,204)
7,110
3,042
275
10,427
(1,000)
(800)
-
(1,800)
(1,371)
-
(92)
(1,463)
4,739
2,242
183
7,164
GROUP
Provisions for
pending legal
cases
Provisions for
guarantees and
commitments
Other
provisions
Total
8,169
2,627
312
11,108
108
415
-
523
(1,167)
-
(37)
(1,204)
7,110
3,042
275
10,427
(1,000)
(799)
-
(1,799)
(1,371)
-
(92)
(1,463)
4,739
2,243
183
7,165
Provisions for pending legal cases refer to legal proceedings that relate to the denationalisation process. The building on Vodnikova
Street that the Bank uses as its headquarters had to be returned to the original owners under the Slovene denationalisation act in
2012. The outstanding provisions relate to other claims, filed in court by the original owners of the building. EUR 182 thousand was
used to settle the liabilities to denationalisation beneficiaries (original owners) and EUR 1,189 thousand was used when the building
was derecognised.
86
Changes in provisions for performance guarantees:
Bank and Group
Balance as at 1 January
Provisions made
Provisions (released)
Balance as at 31 December
2012
2011
742
381
1,398
775
(1,326)
(414)
814
742
Changes in employee benefits provisions:
a) post-employment benefits
Bank
Actuarial gains and losses
Interest costs
1,896
Interest costs
1,772
1,513
(208)
93
(9)
(339)
92
(12)
group
Interest costs
1,927
Interest costs
1,803
1,547
b) other employee benefits
(207)
93
(10)
(336)
92
(12)
Bank and Group
Provisions made
Interest costs
232
Provisions made
Interest costs
399
(23)
899
177
11
(21)
512
11
87
4.28 Other liabilities
Bank
Taxes payable
Accruals
Other
Total
Group
2012
2011
2012
2011
416
538
601
827
66
112
66
112
8
8
48
119
490
658
715
1,058
4.29 Share capital
4.29.1 Subscribed capital
The Bank’s share capital comprises 508,629 dematerialised ordinary registered no par value shares.
At the 23 Regular Annual Meeting of Shareholders on 22 May 2008 the Bank's owners authorised the Management Board to increase
share capital during the next 5 years by issuing new shares. The amount of authorised capital may not exceed 50% of the ordinary
shares at the time the authorisation was given, meaning 211,061 shares. The Bank may only issue new shares upon consent of the
Supervisory Board. In October 2008, the Bank successfully increased capital from authorised capital by selling 86,506 shares, the
value of the issue reaching EUR 35 million. The Bank did not issue any new shares in subsequent years.
Preference shares were converted to ordinary shares in accordance with the shareholders’ decision in October 2012.
The Subsidiary is registered as a limited liability company, not a joint-stock company.
Bank shareholders as at 31 December 2012 with shareholdings exceeding 3% are listed in the following table:
- in %
Shareholding rights
Voting rights
40.99%
41.11%
9.36%
9.38%
NFD 1 Delniški podsklad Ljubljana
9.21%
9.23%
Abanka Vipa, d.d., Ljubljana
4.00%
4.01%
Unior, d.d., Zreče
3.88%
3.89%
Zavarovalnica Triglav, d.d., and Kritni sklad Ljubljana
3.75%
3.76%
Nova Ljubljanska banka, d.d., Ljubljana
Slovenska odškodninska družba, d.d., Ljubljana
Number of shares and amount of share capital:
Share capital
Bank
Number of
shares
Ordinary
shares
Preference
shares
Total
508,629
13,584
3,396
16,980
508,629
13,584
3,396
16,980
508,629
16,980
-
16,980
88
4.29.2 Treasury shares
As at 31 December 2012, the Bank’s portfolio included 251 ordinary treasury shares in the total amount of EUR 31 thousand; these
shares are recorded as a deduction of the capital. The number of treasury shares has remained unchanged for a number of years.
4.29.3 Share premium
During 2010, 2011 and 2012 the share premium stood unchanged at EUR 51,380 thousand.
The Group share premium amounted to EUR 51,542 thousand exceeding the Bank’s total by EUR 162 thousand.
4.29.4Reserves
Changes in reserves:
Bank
Statutory reserves
Other reserves
from profit
Retained
earnings
Total
2,904
122,472
-
125,376
Increase from part of net profit for the year
-
1,182
-
1,182
Increase from past dividends not paid
-
37
-
37
2,904
123,691
-
126,595
Decrease from loss carried over
-
(14,875)
-
(14,875)
-
15
-
15
2,904
108,831
-
111,735
GROUP
Statutory reserves
Other reserves
from profit
Retained
earnings
Total
2,904
122,670
157
125,731
Increase from part of net profit for the year
-
1,182
259
1,441
-
37
-
37
2,904
123,889
416
127,209
Decrease from loss carried over
-
(14,875)
60
(14,815)
-
16
-
16
2,904
109,030
476
112,410
Based on the stipulations in Article 64 of the Companies Act, the Bank must form statutory reserves in an amount which allows for the
sum of statutory reserves and capital reserves to reach 10% of the share capital. As at 31 December 2012, the Bank’s statutory reserves
amounted to 17% of the share capital.
Other profit reserves have been formed for unknown risk. After the annual report is approved, the Bank will settle the negative financial
result by charging profit reserves and will include the difference in the calculation of core capital in accordance with the Decision on
the calculation of capital in banks and savings banks.
In line with the Articles of Association, only retained profit may be paid out.
89
4.29.5 Revaluation reserve
Changes in the revaluation reserve:
Bank and Group
Profits from changes in fair value of available for sale
Sale of available for sale securities
Income tax related to other comprehensive income
(Losses) from changes in fair value of available for sale
Sale of available for sale securities
Income tax related to other comprehensive income
3,971
(12,231)
9,758
(886)
672
1,284
(6,339)
10,842
(2,659)
(265)
2,863
4.30 Dividend per share
Dividends payable are not accounted for until they have been ratified at the Bank's annual General Shareholders’ Assembly. The
dividends for 2011 were not paid out (dividends for 2010: EUR 2.10 per ordinary and per preference share).
4.31 Contingent liabilities and commitments
a) Legal proceedings
On 31 December 2012, the Group's provisions for pending legal proceedings amounted to EUR 4,739 thousand from the denationalisation
process (31 December 2011: EUR 7,110 thousand), which according to the Group's estimate are sufficient for the settlement of all
potential liabilities from the denationalisation. In February 2011, the Bank filed a constitutional complaint in objection to the decision
of the Supreme Court of the Republic of Slovenia, stating that a judicial review of the process in connection with the return of business
premises in denationalisation proceedings be dismissed. In May 2012, the Bank received a ruling by the Constitutional Court that
its constitutional complaint regarding the denationalisation process would not be tried. Consequently, it adjusted the amount of
provisions and derecognised part of the management building at Vodnikova from its books.
b) Capital commitments
As at 31 December 2012 and 31 December 2011, the Group did not exhibit any future obligations to acquire property or equipment or
intangible assets.
c) Contingent liabilities and commitments
Documentary (and standby) letters of credit constitute a written and irrevocable commitment of the issuing (opening) bank, on behalf
of the issuer (importer) to pay the beneficiary (exporter) the value set out in the documents by a defined deadline:
- if the letter of credit is payable on sight; and
-if the letter of credit provides for deferred payment – to be paid at maturity, provided that the beneficiary (exporter) presents
documents that are in line with the conditions and deadlines set out in the letter of credit.
A commitment may also take the form of a letter of credit confirmation, which is usually done at the request or authorisation of the
issuing (opening) bank and constitutes a firm commitment by the confirming bank, in addition to that of the issuing bank, which
independently assumes a commitment to the beneficiary under certain conditions.
Commitments to extend credit represent unused portions of authorisations to extend credit in the form of loans, guarantees or letters
of credit. With respect to credit risk on commitments to extend credit, the Group is potentially exposed to loss in an amount equal to
the total unused commitments.
90
d) Breakdown of contractual amounts relating to bank guarantees, documentary letters of credit and assumed liabilities
Bank
Note
Guarantees
- performance guarantees
- financial guarantees
Commitments to extend credits
Total
Provisions
Total
4.27
Group
2012
2011
2012
2011
95,104
96,612
95,104
96,612
70,612
70,282
70,612
70,282
24,492
26,330
24,492
26,330
108,207
176,113
108,207
176,113
203,311
272,725
203,311
272,725
(2,242)
(3,042)
(2,243)
(3,042)
201,069
269,683
201,068
269,683
e) Changes in performance guarantees
Bank and Group
52,338
Approved performance guarantees
69,750
Performance guarantees due
(51,806)
70,282
Approved performance guarantees
48,690
Performance guarantees due
(48,360)
70,612
Commission and fee income from performance guarantees amounted to EUR 1,193 thousand in 2012 (2011: EUR 1,026 thousand). The
amount of unearned commissions from performance guarantees for 2012 is EUR 178 thousand (2011: EUR 155 thousand).
4.32 Cash and cash equivalents
Cash and cash equivalents in the statement of cash flows represent instruments with an original maturity of less than 90 days.
Bank and Group
Note
2012
2011
Cash and balances with the Central Bank
4.1
127,486
168,163
Loans to banks
4.5
22,043
54,985
149,529
223,148
Total
91
4.33 Related party transactions
Related parties comprise key management personnel (Management Board members, Supervisory Board members, senior management
and their immediate family members), companies with significant impact and the Subsidiary.
Gross amounts paid out to key management personnel
2012
Bank
Management
Board
members
2011
Supervisory
Board
members
Senior
management
Total
Management
Board
members
Supervisory
Board
members
Senior
management
Total
1,570
Fix revenue
Variable revenue
Other revenue
Cost reimbursement
Meeting fees
372
-
1,139
1,511
428
-
1,142
-
-
-
-
132
-
110
242
54
-
82
136
89
-
133
222
6
7
31
44
5
3
30
38
-
67
-
67
-
53
-
53
Total
432
74
1,252
1,758
654
56
1,415
2,125
2012
GROUP
2011
Management
Board
members
Supervisory
Board
members
Senior
management
Total
Management
Board
members
Supervisory
Board
members
Senior
management
Fix revenue
Variable revenue
Other revenue
Cost reimbursement
Meeting fees
372
-
Total
1,220
1,592
428
-
1,246
-
1,673
-
-
-
132
-
113
245
54
-
87
141
89
-
142
231
6
7
33
46
5
3
33
41
-
67
-
67
-
53
-
53
Total
432
74
1,340
1,846
654
56
1,533
2,243
The Bank’s Management Board comprised 3 members in 2012. The senior management comprised 14 members (Group: 15 members).
After the change of status of the Bank’s largest owners, the Bank is indirectly owned by the Republic of Slovenia. Consequently, the gross
amounts paid out to Management Board members and to senior management were coordinated with legislation governing the salaries of
management in companies majority-controlled by the Republic of Slovenia.
Gross amounts paid out to Management Board and Supervisory Board members
2012
2011
Revenue
BANK
Revenue
Other
Cost
reimbursement
Total
Fixed
Variable
Other
Cost
reimbursement
Management Board Members
President & CEO
131
-
23
1
155
158
50
1
38
247
Member of the
Management Board &
Deputy CEO
125
-
17
1
143
139
42
1
27
209
Member of the
Management Board
116
-
14
4
134
131
40
3
25
198
372
-
54
6
432
428
132
5
89
654
Total
Total
Fixed
Variable
Fixed remuneration includes gross salary, variable remuneration pertains to part of the salary based on the performance of 2010, other
pertains to holiday pay, and premiums pertain to additional pension insurance and annuity savings and accrued bonuses.
92
2012
2011
Fix
remuneration
Cost
reimbursement
Total
Fix
remuneration
Cost
reimbursement
Total
Supervisory Board members
Old Supervisory Board
-
-
-
4
-
4
Member of the Supervisory Board &
Deputy CEO
-
-
-
5
-
5
Member of the Supervisory Board
-
-
-
4
-
4
-
-
-
4
-
4
-
-
-
4
1
5
11
1
12
5
-
5
5
New Supervisory Board
Member of the Supervisory Board &
Deputy CEO
11
-
11
5
-
9
-
9
4
-
4
9
-
9
4
-
4
9
6
15
4
2
7
9
-
9
4
-
4
9
-
9
4
-
4
67
7
74
53
3
57
Total
In May 2011, a new Supervisory Board was named at the Banka Celje, d.d., Meeting of Shareholders.
Related party transactions
BANK
2012
Management and
with related parties
Senior
management with
related parties
Shareholders
with more than
20% of shares
Posest, d.o.o.
Total
127
-
400
5,918
14,877
21,322
-
6,419
-
6,419
15
-
26
-
1,114
1,155
-
1,987
-
1,987
142
426
14,324
15,991
30,883
32
88
50,557
3,435
54,112
1,013
1,307
322
1
2,643
424
236
5,380
-
6,040
1,437
1,543
5,702
1
8,683
RECEIVABLES
Loans
Securities and derivatives
Liabilities assumed
Guarantees issued
Total
Loan repayments during the year
LIABILITIES
Deposits
Bonds and certificates of deposit
Total
Interest income
Interest expense
4
17
586
347
954
(81)
(58)
(310)
-
(449)
93
BANK
2011
Management and
Senior
management with
related parties
Shareholders
with more than
20% of shares
Posest, d.o.o.
Total
147
380
8,576
12,340
21,443
RECEIVABLES
Loans
Liabilities assumed
Guarantees issued
Total
LIABILITIES
Deposits
-
-
17,515
-
17,515
25
31
-
1,912
1,968
-
-
2,351
-
2,351
172
411
28,442
14,252
43,277
54
84
71,224
3,930
75,292
1,358
1,335
11,203
-
13,896
451
157
8,729
-
9,337
1,809
1,492
19,932
-
23,233
5
16
1,056
331
1,408
(94)
(77)
(550)
-
(721)
Total
Interest income
Interest expense
GROUP
2012
Management and
Senior
management with
related parties
Shareholders
with more than
20% of shares
Total
127
400
5,918
6,445
-
-
6,419
6,419
15
26
-
41
-
-
1,987
1,987
142
426
14,324
14,892
32
88
50,557
50,677
1,228
1,307
322
2,857
424
236
5,380
6,040
1,652
1,543
5,702
8,897
RECEIVABLES
Loans
Liabilities assumed
Guarantees issued
Total
LIABILITIES
Deposits
Total
Interest income
Interest expense
94
4
17
586
607
(87)
(58)
(310)
(455)
GROUP
2011
Management and
Senior
management with
related parties
Shareholders
with more than
20% of shares
Total
147
380
8,576
9,103
17,515
RECEIVABLES
Loans
Liabilities assumed
Guarantees issued
Total
-
-
17,515
25
32
-
57
-
-
2,351
2,351
172
412
28,442
29,026
54
90
71,224
71,368
1,358
1,511
11,203
14,072
451
157
8,729
9,337
1,809
1,668
19,932
23,409
5
16
1,056
1,077
(94)
(83)
(550)
(727)
LIABILITIES
Deposits
Total
Interest income
Interest expense
The Bank in the Group is indirectly controlled by the Republic of Slovenia, as two state-owned companies, namely NLB, d.d., Ljubljana
and SOD, d.d., Ljubljana together hold an interest of over 50% in the Bank.
On 31 December 2012, the total amount of all individually significant loans given to the state and government-related entities was EUR
60,000 thousand (6 transactions), while the same amounted to EUR 115,000 thousand (11 transactions) on 31 December 2011.
The total amount of individually significant loans taken and deposits received came up to EUR 272,600 thousand (24 transactions) on 31
December 2012. The total amount of individually significant loans taken and deposits received on 31 December 2011 was EUR 471,264
thousand (28 transactions), with interest rates swaps amounting to EUR 30,000 thousand on the day.
The effects of the above significant transactions, recognised in 2012 and 2011, have been recorded in the income statement under
interest income and expenses mainly. Interest income in 2012 amounted to EUR 373 thousand, coming in at EUR 16 thousand in 2011.
Interest expenses came in at EUR 656 thousand in 2012, while 2011 saw EUR 7,322 thousand. In its income statement for 2011 the Bank
recognised EUR 97 thousand of losses from the valuation of an interest rate swap transaction it entered into.
The Bank in the Group conducts transactions with related parties, including government related entities in accordance with the Terms
and Conditions of Banka Celje d.d. and the Banka Celje Decision on Interest Rates, which is also used for other clients.
95
Related party transaction contractual interest rates (including government and government related entities) in % p.a.:
- in %
31 December 2012
Interest Rate
Premium
- Reference Interest Rate
- Nominal Interest Rate
Euribor 1 Month - 6 Months
0.3% - 4.2%
Securities
RECEIVABLES
1.2% - 7.7%
0.3% - 4.0%
3.0% - 6.0%
LIABILITIES
Due to customers
- Base Interest Rate
Deposits from banks
Euribor 6 Months
0.3% - 1.5%
0.4% - 4.8%
Base Interest Rate
3.0%
0.3% - 0.6%
Borrowings
Euribor 6 Months
Bonds and Certificates of deposit
Euribor 6 Months
0.6% - 3.1%
6.3%
2.0%
3.1% - 8.0%
- in %
31 December 2011
Interest Rate
Premium
0.3% - 3.8%
RECEIVABLES
Loans and advances to bank
Securities
2.7% - 7.8%
0.8% - 3.5%
Euribor 3 Months - 6 Months
0.3% - 1.4%
3.0% - 7.0%
LIABILITIES
Due to customers
- Base Interest Rate
Deposits from banks
Euribor 6 Months
Base Interest Rate
3.0%
0.3% - 2.1%
Borrowings
Euribor 6 Months
Bonds and Certificates of deposit
Euribor 6 Months
96
0.3% - 1.5%
0.8% - 4.8%
0.6% - 3.1%
6.3%
1.0% - 2.0%
4.0% - 6.5%
4.34 Information on the results of organisational units abroad
The Group has no subsidiaries or associated companies abroad.
4.35Events after reporting date
After the end of the year, there were no significant events that would have had an effect on the Group’s financial position, its profit for
the year and on the disclosures in this annual report.
5
RISK MANAGEMENT
In its operations, the Bank and the Group assume a number of different types of risk, the amount of which depends on the type of
transaction and the preparedness to assume risk. The Bank mainly focuses on the performance of traditional banking operations
and provides its clients with services pertaining to treasury and other financial transactions to a lesser extent. It conducts most of
its operations within the Republic of Slovenia, whereas it is also present in the interbank markets of other EU member states as well
as other low credit risk countries throughout the world. The Bank is also active, to a limited extent, in South East Europe, lending to
corporate and retail clients.
To achieve strategic goals in operations and risk management, the Bank and the Group pay particular attention to capital risk,
profitability risk, credit and liquidity risk, market risks, strategic, operational and interest rate risk as well as reputation risk. The
organisation of the Bank and the Group ensures the separation of commercial organisational units or the units that enter into
transactions and assume risk (front office) from back office operations, where transactions are booked and accounts kept. The risk
monitoring and management function is also separated from the aforementioned two functions. The organisation of the Bank and the
Group is such as to provide for independent operations of individual organisational units up to managerial level, and for an adequate
flow of information up and down as well as between organisational units.
The Bank and the Group utilise a strategy and policies of assuming and managing risk per respective risk type. The strategy of
assuming and managing risk reflects the Bank’s and the Group's fundamental relation to risk within the framework of operations and
includes the objectives and general principles or policies pertaining to assuming and managing risk, the approach to the management
of individual risk types and the approach to the process of assessing adequate internal capital. A policy on assuming risk and risk
management has been prepared for each individual risk type, detailing the capability to assume risk, the risk management process
(organisation rules on the implementation of the process, the identification, measurement or evaluation, management and monitoring
procedures, the system of internal controls), and the responsibility of the Management Board and senior management and other. The
strategy and policies are updated annually and are confirmed by the Bank's Management Board and the Supervisory Board.
By developing internal reporting procedures and the consideration and decision-making process at a number of different bodies within
the Bank and the Group, the Management Board and the entire senior management are actively involved in the risk management
process. By managing risk well, it is the goal of the Bank and the Group to be more responsive and efficient when it comes to changes
in the environment, to get closer to client needs and to ensure long-term financial stability. Assuming and managing risk has become
an important element of the Bank's and the Group’s comprehensive strategy due to the development and characteristics of the
financial system.
Risk management is directly monitored:
- by the Risk Management Division: all risks;
- at Credit Committees (once a week): credit risk;
- at the Liquidity Committees (three times a week, in extraordinary conditions daily): liquidity risk;
- on a monthly basis at the Assets and Liabilities Committee (ALCO): credit, market, liquidity, interest rate, capital and profitability risk;
- at the Management Board level or the Management Committee: operational and strategic risk as well as reputation risk;
- at the Risk Committee: all types of risk.
97
5.1
Credit risk
Credit risk is the risk of loss resulting from a debtor’s inability to meet, for any reason, its financial or contractual obligations in their
entirety. This type of risk includes subcategories, namely country risk, risk of concentration and residual risk. The Risk Management
Division, being an organisationally independent unit in relation to commercial units and answering directly to the Bank's Management
Board, manages the implementation of the policy of assuming and managing credit risk, and regularly reports to the ALCO on the
exposure to credit risk and limit consideration.
The granting of loans includes commercial organisational units, the Risk Management Division and the Operational Support Division.
Granting loans and other transactions is subject to authorisations and legal limitations. Authorisations depend on the rating of the
debtor, the size of the total exposure, loan size, the total limit, collateral and deviation from other conditions. The loan granting
process includes different decision-making levels within the Bank.
The Bank and the Group manage credit risk related to a single debtor or investment (standalone risk), as well as the risk related to the
entire credit portfolio (portfolio risk).
5.1.1 Measuring and managing credit risk
The Bank and the Group measure credit risk for active on-balance sheet items and for commitments and contingent liabilities.
Credit risk is assessed for financial assets measured at amortised cost, for financial assets designated at fair value and for assumed
liabilities from commitments and contingent liabilities. Credit risk is the result of business, commercial and housing loans, credit card
operations, transaction account overdrafts, guarantees and granted undrawn loans, as well as a consequence of the investments in
debt securities and the exposure from transactions with derivatives.
Exposure to credit risk depends on three elements: (1) The probability of default or exposure to the debtor’s rating class, (2) Current
exposure from statement of financial position and commitment and contingent liability items, and (3) The amount of outstanding
debt paid off, in case of default.
(1) The probability of default or exposure to the debtor’s rating class
Internal rating systems have been developed for the classification of the Bank’s debtors into rating classes and for the measurement of
probability of default for different debtor groups (legal entities, individual entrepreneurs and banks). Debtor classification is based on
the estimated qualitative and quantitative elements. In the classification of banks and sovereigns (states), external ratings are usually
considered (Moody’s Investor Service, Fitch Ratings, Standard & Poor’s). Prior to every individual private loan or investment approval,
each individual’s creditworthiness is assessed and the settlement of existing liabilities checked. Before approving a loan, as a rule, an
inquiry is made with the use of the SISBON system (Slovenski Informacijski Sistem BONitet fizičnih oseb – the Slovene Information
System on the Rating of Retail Clients), which includes data on indebtedness and settlement of liabilities by retail clients in the Slovene
banking environment.
Prior to approving a transaction, the Bank classifies a debtor into a rating class, determining the probability of default and expected
loss. On an ongoing - or at least on a quarterly basis – it verifies the adequacy of an individual classification in relation to the debtor’s
financial standing, the settlement of due liabilities and the assessment of qualitative factors, on the basis of which the classification
is retained or the debtor is classified into a higher or lower rating class. Transitional matrices are prepared regularly, showing the
transitions between rating classes and measuring the number of defaults in an observed period. Estimates on the probability of default
for an individual rating class are then adjusted on the basis of data pertaining to defaults.
The internal ratings system with the description of rating classes and the comparison with external ratings:
Internal
rating class
Internal
rating description
Risk level
Comparison with the
Bank of Slovenia ratings
Comparison with Moody’s
Investors Service*
A1, A2, A3
Prime
Investment grade
A
from Aaa to Aa3, from A1 to A3, from
Baa1 to Baa3
B1, B2, B3
Standard
Investment grade
B
from Ba1 to Ba3, from B1 to B3
C1, C2
Substandard
Sub-investment grade
C
from Caa1 and lower
D
Default
Default
D
Default
E
Default - recovery
Default
E
Default
* comparison prepared for banks
98
(2) Current exposure from statement of financial position and commitment and contingent liability items
The level exposure in items of the statement of financial position (loans) and the level of commitment and contingent liability exposures
equal their carrying amount.
(3) The amount of outstanding debt paid off, in case of default
The loss amount in case of default depends on the amount of exposure and the collateral obtained. The Bank and the Group strive toward
securing their receivables to minimise loss. It is important for the Bank and the Group to begin procedures for the settlement of overdue,
unpaid receivables as soon as possible.
Debt securities
In managing credit risk from debt securities, the Bank utilises the external ratings (Moody's Investor Service, Fitch Ratings, Standard &
Poor's) of securities and issuers. In cases where the fair value of an individual security is significantly lower than the original cost and the
drop in value is attributable to reasons pointing to objective evidence of impairment, the Bank recognises the impairment charge for the
investment.
Assumed commitments and contingent liabilities
Assumed commitments and contingent liabilities (off-balance sheet items) include the undrawn part of loans granted, guarantees and
letters of credit. By issuing these instruments, the Bank and the Group commit to providing cash to the counterparty, when so instructed.
The potential exposure to loss from these instruments pertains to credit risk. The same methodologies are applied in measuring credit risk
from assumed commitments and contingent liabilities as are used in measuring credit risk pertaining to loans.
Derivatives
The exposure to credit risk from derivatives pertains to exposure to counterparty risk, namely the risk of a counterparty defaulting prior to
final settlement of cash flow from the transaction. The exposure to credit risk equals the credit replacement value, calculated on the basis
of the current exposure method. The Bank enters into derivative instrument agreements with prime debtors, mainly in foreign currency
transactions, and interest rate swaps. In the event of increased credit risk, the Bank tries to acquire additional collateral. The exposure to
credit risk is managed within the framework of limits pertaining to lending agreements, which are confirmed by the Credit Committee.
Limit definition and monitoring
The Bank calculates limits for loans to individual debtors and to groups of related entities on the basis of data on the existing and future
operations. In doing so, it takes into consideration the legal requirements in connection with the largest exposure limits related to an
individual entity or a group of related entities, which must not exceed 25% of the Bank’s capital, while taking into account its policies as
well. The diversification of exposure to individual debtors or groups of related entities is one of the objectives the Bank is working toward,
which is why it is reducing the number and value of exposures that exceed 10% of its capital. Limits are monitored on an ongoing basis and
are adjusted in relation to the risk profile of the debtor or a group of related entities and the sector in which the debtor is active. Total limits
and their possible increases or decreases are confirmed by the Bank’s Credit Committee. Exposures exceeding 10% of the Bank's capital
require the approval of the Supervisory Board. The Bank has prepared an indebtedness ceiling calculation methodology for corporates
and banks and has implemented indebtedness ceilings for large exposures to private entrepreneurs in 2012.
In addition to limits set for individual debtors or groups of related entities, the Bank also implements structural limits according to sector
or category of debtor, according to geographic area and according to type of activity - thus limiting the risk of portfolio concentration.
Structural limits are usually confirmed annually at ALCO meetings, with their consideration and trends monitored on the basis of monthly
reports. If required, due to economic conditions and exposure to risk, these limits may also be adjusted.
Collateral
The Bank and the Group’s exposure to credit risk is reduced with the implementation of policies regarding collateral. To minimise loss
in the event of default, the Bank and the Group tend to acquire adequate collateral from the debtor, such as a mortgage on commercial
or residential real estate, pledges of financial property (bank deposits, securities) or the acquisition of personal credit insurance by an
adequate provider. Other forms of collateral, such as physical collateral, inventories and cash claims, are considered to be of lesser quality.
Usually long-term loans are collateralised, with a large portion of short-term loans collateralised as well, with the only ones not requiring
collateral being those granted to debtors exhibiting a higher credit rating. In cases where a debtor’s rating worsens, the Bank and the Group
would negotiate additional collateral or a reduction in exposure.
The significant types of appropriate collateral that the Bank and the Group utilise and the related valuation:
- financial assets used as collateral (bank deposits with the Group or cash-assimilated instruments, debt securities, issued by sovereigns,
the central bank or institution, equity and other securities, listed on stock exchanges), which is valued at market and is revaluated on
a daily basis;
- pledged commercial or residential property, valued at fair value;
- personal assurances given by: sovereigns and central banks, regional or local authorities, public sector entities, institutions, insurance
companies and companies with a high credit rating (100% percent of the value).
99
The macroeconomic conditions and the circumstances prevailing in the real estate and capital markets in 2012 required a great deal
of attention to be directed at monitoring the fair value of collateral, especially commercial and residential real estate, while exposures
collateralised with securities continue to decrease with loans maturing and collateral being liquidated in the collection process.
To reduce credit risk, the Bank and the Group do not execute balance sheet netting or use credit derivatives.
Estimating credit risk losses
A methodology for the estimation of credit risk losses has been prepared in accordance with IFRS, which is updated at least once a year
and adapted to the economic conditions. Continuously, or at least on a quarterly basis, estimations are made as to whether there is
objective evidence of impairment relating to financial assets and liabilities assumed on the basis of commitments and contingent liabilities.
Should such evidence exist, the Bank must calculate the amount of loss due to impairment and make provisions for commitments and
contingent liabilities. The methodology of estimating impairment charges is set up according to type of debtor: legal entities and private
entrepreneurs, retail clients, banks and savings banks and prime debtors.
(1) Assessment of impairment charges for exposure to legal entities and private entrepreneurs
The impairment charge may be calculated individually on the basis of the estimated future cash flows or collectively on the basis of
historical data on defaults and losses for groups of exposures with similar characteristics, adjusted to account for current conditions, thus
reflecting the effects of recent operating conditions. Individual estimates pertain to assets individually exhibiting significant characteristics
(exposures above EUR 650,000) and showing signs of impairment (exposures classified lower than B3). If there are no signs of impairment,
the exposure is classified into a group of financial assets with similar characteristics and the impairment is assessed collectively.
Impairment is also assessed individually for financial assets which have already been recognised as impaired (exposures classified C2, D
and E). Impairment is appraised on the basis of estimated future cash flow, including expected repayment from liquidation of collateral.
For exposures not exhibiting signs of impairment or exhibiting individually insignificant impairment (exposures classified A1, A2 and A3, B1,
B2 and B3 and exposures under EUR 650,000), the charge is assessed collectively on the basis of historical default data and loss estimates.
The estimation percentage includes a general risk factor, reflecting current economic conditions and thus impacting the probability of
defaults. The value of the general risk factor is assessed at least once a year on the basis of fluctuations in the general price levels, interest
rates, the settlement of liabilities, fluctuations in the financial and capital markets as well as the real estate market conditions, economic
activity, conditions in the job market and the trends in the energy and raw material markets.
(2) Assessment of impairment charges for exposure to retail
The Bank and the Group classify financial assets in rating groups A, B, C, D and E on the basis of the settlement of liabilities. Individually
significant financial assets (exposures above EUR 400,000), where there is objective evidence to suggest there is a need for the establishment
of an impairment, are impaired individually. The same applies to financial assets already recognised as impaired (exposures classified C,
D and E). For the purpose of collective impairment, financial assets are divided into homogenous groups on the basis of the settlement of
liabilities and in accordance with product groups (housing loans, consumer loans, quick loans, account overdrafts). Impairment charge
percentages are based on past data and adjusted to current conditions, thus differing for every product group and each rating class.
Impairment charge percentages are revaluated once a year.
(3) Assessment of impairment charges for exposure to banks and prime debtors
For banks, impairment is estimated solely on an individual basis. Exposures to prime debtors (sovereigns and central banks) are assessed
using the collective or individual approaches.
Managing credit risk during a crisis
The continuation of unfavourable conditions in the domestic economy and uncertainty in the European financial markets require the
Bank and the Group to continue to implement measures aimed at reducing the effect of the crisis on the financial position and the
profitability of the Bank and the Group. This lending to financially unstable debtors and to debtors from riskier industries is limited, while
exposure to the CEE region is being reduced. The Bank and the Group are trying to obtain additional collateral, keep in contact with
borrowers, and monitor their operations and cash flow for the repayment of debt, so adjusting debtor classification and limits. Efforts are
directed at the recovery of receivables due and in some cases collateral is being liquidated. New investments are granted to debtors mainly
for the financing of regular business operations with good quality collateral. In retail lending, more stringent criteria for the assessment of
creditworthiness are being applied. The Bank and the Group continued to follow their goal of diversifying the credit portfolio according to
debtors or groups of related entities and activities.
It is the Bank’s and the Group's assessment that conditions in the economy and on the financial markets will not stabilise in 2013, which
is why exposure to credit risk remains high. Positive impact on the domestic economy is expected to come from government measures
aimed at increasing payment discipline, regulating the job market, stimulating investment activity and raising the competitiveness of the
domestic economy, as well as from economic activity in European countries and the stabilisation of conditions in the financial markets.
The Bank and the Group will continue to monitor closely debtor rating and the credit portfolio, while adjusting lending policies and credit
risk management to the current conditions. They will also reduce exposure to individual clients or groups of related parties and limit
investments in high risk industries and regions. They will direct their attention to early identification of increased credit risk and continue
to work actively on recovery and foreclose on bad debt.
100
5.1.2
Maximum credit risk exposure
31 December 2012
Bank
Statement of financial position assets
Loans
Maximum
exposure to
credit risk
Fair value of
collateral3
Maximum
exposure to
credit risk
2,092,602
1,765,946
2,249,849
1,738,162
1,615,610
1,677,713
1,750,289
1,656,544
10,151
-
2,705
-
22,043
-
55,054
10,002
325,027
524,409
337,896
496,476
- overdraft accounts and cards
35,358
28,142
35,000
21,110
- housing loans
171,781
357,143
168,963
330,106
- consumer and other loans
117,392
138,869
133,484
145,047
- unauthorised account overdrafts
496
255
449
213
1,255,675
1,153,304
1,352,605
1,150,066
- large companies
546,075
400,532
617,730
435,944
- small and medium sized enterprises (SME)
634,551
714,632
655,483
672,590
75,049
38,140
79,392
41,532
2,714
-
2,029
-
Loans to companies2
- other
22,003
-
37,562
-
Derivatives
10,786
-
17,153
-
Debt securities
Financial assets designated
at fair value through P&L
11,217
-
20,409
-
5,064
-
7,823
-
Debt securities
5,064
-
7,823
-
170,167
73,222
177,997
66,534
Debt securities
170,167
73,222
177,997
66,534
270,152
15,011
269,311
15,084
Debt securities
Derivative financial intruments
designated for hedging
270,152
15,011
269,311
15,084
6,892
-
4,838
-
131,271
52,120
200,143
80,434
Other off-balance sheet exposures
Total
2
Fair value of
collateral3
Loans and advances to state1
Loans and advances to private individuals
1
31 December 2011
24,144
13,719
25,820
12,637
107,127
38,401
174,323
67,797
2,223,873
1,818,066
2,449,992
1,818,596
S tate (sovereigns) includes direct beneficiaries of the Republic of Slovenia budget and foreign central state level units (sovereigns).
S ize of companies defined in accordance with the Companies Act; the micro, small and medium size enterprises (SME) comprise those, which fulfil two
of the following criteria:
- average number of employees is less than 250,
- net sales income does not exceed EUR 35,000 thousand,
- the value of assets does not exceed EUR 17,500 thousand.
Large companies are all those companies, which do not fit the SME criteria.
“Other” shows regional and local state levels, public sector entities, new companies, companies in receivership, societies and other debtors, which do not
provide information on their size.
3
Fair value of collateral equals:
- the market value of financial assets held as collateral,
- 100% of the value of insurance company guarantees, bank guarantees, state and municipal guarantees and prime rated companies,
- values of residential and commercial real estate are equal to market values of comparable real estate.
101
31 December 2012
group
Statement of financial position assets
Loans
Maximum
exposure to
credit risk
Fair value of
collateral3
Maximum
exposure to
credit risk
2,085,092
1,765,946
2,244,621
1,738,162
1,610,814
1,677,713
1,747,090
1,656,544
10,151
-
2,705
-
22,043
-
55,054
10,002
325,092
524,409
337,963
496,476
- overdraft accounts and cards
35,358
28,142
35,000
21,110
- housing loans
171,846
357,143
169,030
330,106
- consumer and other loans
117,392
138,869
133,484
145,047
- unauthorised account overdrafts
496
255
449
213
1,250,434
1,153,304
1,349,339
1,150,066
- large companies
555,504
400,532
626,594
435,944
619,881
714,632
643,353
672,590
75,049
38,140
79,392
41,532
3,094
-
2,029
-
Loans to companies2
- other
22,003
-
37,562
-
Derivatives
10,786
-
17,153
-
Debt securities
Financial assets designated
at fair value through P&L
11,217
-
20,409
-
5,064
-
7,823
-
Debt securities
5,064
-
7,823
-
170,167
73,222
177,997
66,534
Debt securities
170,167
73,222
177,997
66,534
270,152
15,011
269,311
15,084
Debt securities
Derivative financial intruments
designated for hedging
270,152
15,011
269,311
15,084
6,892
-
4,838
-
131,271
52,120
200,143
80,434
Other off-balance sheet exposures
Total
2
Fair value of
collateral3
Loans and advances to state1
Loans and advances to private individuals
1
31 December 2011
24,144
13,719
25,820
12,637
107,127
38,401
174,323
67,797
2,216,363
1,818,066
2,444,764
1,818,596
S tate (sovereigns) includes direct beneficiaries of the Republic of Slovenia budget and foreign central state level units (sovereigns).
S ize of companies defined in accordance with the Companies Act; the micro, small and medium size enterprises (SME) comprise those, which fulfil two
of the following criteria:
- average number of employees is less than 250,
- net sales income does not exceed EUR 35,000 thousand,
- the value of assets does not exceed EUR 17,500 thousand.
Large companies are all those companies, which do not fit the SME criteria.
“Other” shows regional and local state levels, public sector entities, new companies, companies in receivership, societies and other debtors, which do not
provide information on their size.
3
Fair value of collateral equals:
- the market value of financial assets held as collateral,
- 100% of the value of insurance company guarantees, bank guarantees, state and municipal guarantees and prime rated companies,
- values of residential and commercial real estate are equal to market values of comparable real estate.
102
The table shows the Group’s maximum gross credit risk exposure from loans, investments in securities and commitments and contingent liabilities as at 31 December 2012 and 31 December 2011. In 2012, the exposure to credit risk decreased in comparison with the
previous year. Loans decreased by 8% due to a drop in lending to corporates and banks, retail loans to a lesser extent, with exposure
from debt financial instruments dropping by 4% and exposure from derivatives by 37%. Financial guarantees and contingent liabilities
decreased by 34%.
The continuation of the economic and financial crisis also had an impact on the credit portfolio. By carefully managing investment
policies during the crisis and by responsibly managing credit risk, the Group achieved the following results in 2012:
- a s at 31 December 2012 loans that were classified into the highest of investment grade rating classes, namely A and B, represented
74.43% of all loans (31 December 2011: 79.27%), impairment charge coverage increased to 8.78% (31 December 2011: 7.10%);
- t he coverage of exposure with adequate collateral increased and reached 66% of all loans as at 31 December 2012 (31 December
2011: 65%);
- t he Group holds 38% of debt security investments rated at least A, while 91% of investments is rated investment grade (at least Baa3);
- t he consolidated income statement shows impairment charges amounting to EUR 65,400 thousand (2011: EUR 52,678 thousand),
wherein impairment charges for loans measured at amortised cost represent EUR 54,558 thousand (2011: EUR 39,160 thousand)
and securities impairment charges amount to EUR 10,842 thousand (2011: EUR 13,510 thousand). Provisions for commitments and
contingent liabilities were made in an amount of EUR 800 thousand (31 December 2011: EUR 415 thousand). Increased impairment
charges reflect the economic and financial crisis, which resulted in increased defaults and in a drop in the fair value of collateral and
financial assets.
5.1.3 Exposure to credit risk according to type of collateral
The following is a disclosure of all loans (to the state, banks, private individuals and companies), except other financial assets.
Exposure from loans
The table below lists loans according to type of collateral. Secured loans are the ones where the fair value of collateral is greater or equal
to the carrying amount of the loan. Unsecured loans are represented by loans which are entirely unsecured and by the parts of loans
where the fair value of collateral is not sufficient for their repayment.
Bank
Group
31 December 2012 31 December 2011
31 December 2012 31 December 2011
Loans
Loans
Collateral
- deposits
- government guarantee
- insurance company and bank guarantee
- securities
6,717
8,958
6,717
8,958
50,792
65,782
50,792
65,782
119,093
124,780
119,093
124,780
69,705
82,074
69,705
82,074
- residential real estate
179,191
174,446
179,191
174,446
- commercial real estate
595,831
620,574
595,831
620,574
- other *
Secured loans - carrying amount
Unsecured loans - carrying amount
Loans - carrying amount
43,533
55,753
43,533
55,754
1,064,862
1,132,367
1,064,862
1,132,368
548,034
615,893
542,858
612,693
1,612,896
1,748,260
1,607,720
1,745,061
* Other collateral mainly refers to guarantees by guarantors - companies, rated A and to physical collateral to a lesser extent.
For the most part, loans are secured with commercial real estate, followed by residential real estate as well as insurance company and
bank guarantees. The latter are mainly used to secure retail loans. The structure of collateral in 2012 remains similar to 2011. In 2012
the value of loans, collateralised with residential and commercial real estate increased most, while the share of loans guaranteed by the
Republic of Slovenia and collateralised with securities decreased.
103
According to loan type
Bank
31 December 2012
Loans to companies
UnauOverdraft
thorised
accounts Housing Consumer
account
and cards
loans
loans overdrafts
Large
companies
Loans
Loans
and
and
advances advances
SME Other
to state to banks
Total
Collateral
- deposits
6
239
2,695
-
993
2,768
16
-
-
6,717
- insurance company
and bank guarantee
-
-
-
-
48,277
937
1,578
-
-
50,792
27,995
19,558
70,222
229
14
1,034
41
-
-
119,093
- securities
-
51
2,148
-
29,542
32,696
5,268
-
-
69,705
-
131,887
8,572
-
553
36,409
1,770
-
-
179,191
-
8,559
6,232
-
225,352 340,032
15,656
-
-
595,831
- other
25,470
349
-
-
43,533
- 1,064,862
-
388
4,959
-
Secured loans
- carrying amount
12,367
28,001
160,682
94,828
229
317,098 439,346
24,678
-
Unsecured loans
- carrying amount
7,357
11,099
22,564
267
228,977 195,205
50,371
10,151
22,043
Loans
- carrying amount
35,358
171,781
117,392
496
546,075
634,551
75,049
10,151
22,043 1,612,896
Secured loans
- carrying amount
26,955
155,241
102,685
196
349,587
457,185
30,516
-
10,002 1,132,367
Unsecured loans
- carrying amount
8,045
13,722
30,799
253
268,143 198,298
48,876
2,705
45,052
Loans
- carrying amount
35,000
168,963
133,484
449
617,730 655,483
79,392
2,705
55,054 1,748,260
548,034
31 December 2011
104
615,893
group
31 December 2012
Loans to companies
UnauOverdraft
thorised
account
Large
and cards
loans
loans overdrafts companies
Loans
Loans
and
and
advances advances
SME Other
to state to banks
Total
Collateral
- deposits
6
239
2,695
-
993
2,768
16
-
-
6,717
- insurance company
and bank guarantee
-
-
-
-
48,277
937
1,578
-
-
50,792
27,995
19,558
70,222
229
14
1,034
41
-
-
119,093
- securities
-
51
2,148
-
29,542
32,696
5,268
-
-
69,705
-
131,887
8,572
-
553
36,409
1,770
-
-
179,191
-
8,559
6,232
-
225,352 340,032
15,656
-
-
595,831
- other
43,533
-
388
4,959
-
12,367
25,470
349
-
-
Secured loans
- carrying amount
28,001
160,682
94,828
229
317,098
439,346
24,678
-
- 1,064,862
Unsecured loans
- carrying amount
7,357
11,164
22,564
267
238,406
180,535
50,371
10,151
22,043
Loans
- carrying amount
35,358
171,846
117,392
496
555,504
619,881
75,049
10,151
22,043 1,607,720
Secured loans
- carrying amount
26,955
155,241
102,685
196
349,587
457,186
30,516
-
10,002 1,132,368
Unsecured loans
- carrying amount
8,045
13,789
30,799
253
277,007
186,167
48,876
2,705
45,052
Loans
- carrying amount
35,000
169,030
133,484
449
626,594
643,353
79,392
2,705
55,054 1,745,061
542,858
31 December 2011
5.1.4 612,693
Credit risk exposure according to rating class
Exposure from loans
Bank
Total
Group
31 December 2012
31 December 2011
31 December 2012
31 December 2011
Loan
amount
Impairment
amount
Loan
amount
Impairment
amount
Loan
amount
Impairment
amount
Loan
amount
Impairment
amount
1,767,654
(154,758)
1,881,625
(133,365)
1,762,478
(154,758)
1,878,430
(133,369)
Structure
Structure
Prime (A)
44.88%
0.82%
51.32%
2.03%
44.69%
0.82%
51.22%
Standard (B)
29.65%
5.83%
28.00%
9.67%
29.74%
5.83%
28.05%
9.67%
Substandard (C)
6.68%
9.12%
9.17%
24.17%
6.70%
9.12%
9.19%
24.17%
Default (D)
Default (E) recovery
4.67%
14.41%
4.13%
19.13%
4.69%
14.41%
4.15%
19.13%
14.13%
69.82%
7.38%
45.01%
14.18%
69.82%
7.39%
45.01%
100%
100%
100%
100%
100%
100%
100%
100%
Total
2.03%
105
Gross exposure to loans as at 31 December 2012 amounted to EUR 1,762,478 thousand, representing a 6% drop as compared with the
previous year (31 December 2011: EUR 1,878,430 thousand). After accounting for impairment charges, the loan carrying amount is EUR
1,607,720 thousand, being 8% less in comparison to the previous year (31 December 2011: EUR 1,745,061 thousand). Portfolio quality
deteriorated due to the continuing unfavourable economic conditions, with the percentage of loans in the highest rating classes
(classes A and B) decreased to 74.43% (31 December 2011: 79.27%). Exposure to loans, classified as substandard and default increased to
25.57% (31 December 2011: 20.73%), with the Group establishing additional impairment charges on these loans.
According to loan class
BANK
31 December 2012
Rating class
Prime (A)
Loans to companies
UnauOverdraft
thorised
Large
account compaand cards
loans
loans overdrafts
nies
SME
Loans
Loans
and
and
advances advances
Other
to state to banks
Total
35,561
163,294
105,019
298
277,350
143,820
41,193
10,151
16,588
793,274
Standard (B)
-
4,711
2,827
150
214,837
290,090
6,001
-
5,455
524,071
Substandard (C)
-
5,141
5,792
79
28,323
78,624
84
-
-
118,043
Default (D)
-
733
6,776
56
28,008
46,601
347
-
-
82,521
181,050
53,384
-
-
(154,758)
10,151
22,043
1,612,896
Default (E) - recovery
Impairments
Total
-
2,124
3,726
309
9,152
(203)
(4,222)
(6,748)
(396)
(11,595)
35,358
171,781
117,392
496
546,075
(105,634) (25,960)
634,551
75,049
249,745
BANK
31 December 2011
Rating class
Prime (A)
Loans to companies
UnauOverdraft
thorised
Large
loans
loans overdrafts
nies
SME
Loans
and
advances
Other
to state
Loans
and
advances
to banks
Total
35,205
163,300
123,324
296
376,688
166,079
47,870
2,705
50,212
965,679
Standard (B)
-
2,051
2,135
98
158,955
349,654
9,150
-
4,853
526,896
Substandard (C)
-
3,942
10,634
96
29,948
127,922
13
-
-
172,555
Default (D)
-
891
1,345
39
48,279
26,799
320
-
-
-
1,842
1,682
364
37,152
59,636
38,146
(205)
(3,063)
(5,636)
(444)
(33,292)
(74,607)
(16,107)
-
35,000
168,963
133,484
449
617,730
655,483
79,392
2,705
Impairments
Total
77,673
138,822
(11)
(133,365)
55,054 1,748,260
group
31 December 2012
Rating class
Prime (A)
Loans to companies
UnauOverdraft
thorised
Large
loans
loans overdrafts
nies
SME
Loans
and
advances
Other
to state
Loans
and
advances
to banks
Total
35,561
163,328
105,019
298
286,656
128,944
41,193
10,151
16,588
787,738
-
4,711
2,827
150
214,837
290,154
6,001
-
5,455
524,135
Substandard (C)
-
5,141
5,792
79
28,323
78,624
84
-
-
118,043
Default (D)
-
764
6,776
56
28,131
46,601
347
-
-
82,675
181,192
53,384
-
-
(154,758)
10,151
22,043
1,607,720
Standard (B)
Impairments
Total
106
-
2,124
3,726
309
9,152
(203)
(4,222)
(6,748)
(396)
(11,595)
35,358
171,846
117,392
496
555,504
(105,634) (25,960)
619,881
75,049
249,887
group
31 December 2011
Rating class
Loans to companies
UnauOverdraft
thorised
Large
loans
loans overdrafts
nies
Prime (A)
SME
Loans
and
advances
Other
to state
Loans
and
advances
to banks
Total
35,205
163,367
123,324
296
385,429
153,728
47,871
2,705
50,212
962,137
Standard (B)
-
2,051
2,135
98
158,955
349,724
9,149
-
4,853
526,965
Substandard (C)
-
3,942
10,634
96
29,948
127,922
13
-
-
172,555
Default (D)
-
891
1,345
39
48,402
26,950
320
-
-
77,947
Impairments
Total
-
1,842
1,682
364
37,152
59,640
38,146
(205)
(3,063)
(5,636)
(444)
(33,292)
(74,611)
(16,107)
-
(11)
(133,369)
138,826
35,000
169,030
133,484
449
626,594
643,353
79,392
2,705
55,054
1,745,061
Loans to retail decreased by 4% as compared to the previous year due to the decrease of personal consumption loans, while the
housing loan segment increased slightly. Loan quality remains high in spite of the decrease in 2012 (31 December 2012: 92.6% of loans
were classified prime; 31 December 2011: 94%).
Lending to the corporate sector decreased by 7% compared with the previous year, with the quality of these loans decreasing on
account of the increase in insolvency proceedings and defaults.
Credit exposure to banks decreased in 2012 and increased towards sovereigns, however it still remains low. The Bank mainly deals with
low risk sovereign entities and banks.
5.1.5 Credit risk exposure according to impairment and maturity
Loans according to impairment and maturity
31 December 2012
Bank
Loans neither past
due nor impaired
Loans past due
- individually impaired
Loans past due
- not impaired
Loans to
private
Loans to
individuals companies
31 December 2011
Loans to
state
Loans to
banks
Loans to
private
Loans to
Loans to
state
Loans to
banks
321,470
1,054,629
10,151
22,041
339,608
1,234,091
2,705
55,064
14,131
339,824
-
2
6,695
232,900
-
1
995
4,411
-
-
941
9,620
-
-
Impairments
(11,569)
(143,189)
-
-
(9,348)
(124,006)
-
(11)
Total
325,027
1,255,675
10,151
22,043
337,896
1,352,605
2,705
55,054
31 December 2012
GROUP
Loans neither past
due nor impaired
Loans past due
- individually impaired
Loans past due
- not impaired
Loans to
private
Loans to
31 December 2011
Loans to
state
Loans to
banks
Loans to
private
Loans to
Loans to
state
Loans to
banks
321,533
1,049,154
10,151
22,041
339,674
1,230,616
2,705
55,064
14,133
340,055
-
2
6,695
233,113
-
1
995
4,414
-
-
942
9,620
-
-
Impairments
(11,569)
(143,189)
-
-
(9,348)
(124,010)
-
(11)
Total
325,092
1,250,434
10,151
22,043
337,963
1,349,339
2,705
55,054
The increase in defaulting loans is the result of unfavourable economic conditions and the increase in the number of insolvency proceedings.
107
Loans and advances neither past due nor impaired
31 December 2012
Bank
Rating class
Prime (A)
Standard (B)
Substandard (C)
Total
31 December 2011
Loans to
Loans and Loans and
private
Loans to advances advances
to state
to banks
303,593
461,799
10,151
16,588
Loans to
private
Loans to
Loans and Loans and
advances advances
to state
to banks
321,457
590,555
2,705
50,212
7,249
499,866
-
5,453
3,868
506,137
-
4,852
10,628
92,964
-
-
14,283
137,399
-
-
321,470
1,054,629
10,151
22,041
339,608
1,234,091
2,705
55,064
31 December 2012
group
Rating class
Prime (A)
Standard (B)
Substandard (C)
Total
31 December 2011
Loans to
Loans and Loans and
private
Loans to advances advances
to state
to banks
Loans to
private
Loans to
Loans and Loans and
advances advances
to state
to banks
303,656
456,260
10,151
16,588
321,523
587,012
2,705
50,212
7,249
499,930
-
5,453
3,868
506,205
-
4,852
10,628
92,964
-
-
14,283
137,399
-
-
321,533
1,049,154
10,151
22,041
339,674
1,230,616
2,705
55,064
Loans and advances past due and individually impaired
31 December 2012
Bank
Receivables
up to 30 days overdue
Receivables over
30 to 90 days overdue
Receivables over
90 days overdue
Total
Loans to
private
Loans to
31 December 2011
Loans to
banks
Total
Loans to
private
Loans to
Loans to
banks
Total
111
20,283
2
20,396
45
2,112
-
2,157
460
15,557
-
16,017
1,387
20,336
-
21,723
13,560
303,984
-
317,544
5,263
210,452
1
215,716
14,131
339,824
2
353,957
6,695
232,900
1
239,596
31 December 2012
group
Receivables
Receivables over
Receivables over
90 days overdue
Total
108
Loans to
private
Loans to
31 December 2011
Loans to
banks
Total
Loans to
private
Loans to
Loans to
banks
Total
111
20,285
2
20,398
45
2,114
-
2,159
461
15,561
-
16,022
1,387
20,339
-
21,726
13,561
304,209
-
317,770
5,263
210,660
1
215,924
14,133
340,055
2
354,190
6,695
233,113
1
239,809
Loans and advances past due but not impaired
31 December 2012
31 December 2011
Bank
Receivables
Receivables over
Receivables over
90 days overdue
Total
Retail loans
Corporate
loans
399
3,169
596
Loans to
banks
Total
Retail loans
Corporate
loans
Total
-
3,568
336
6,598
6,934
1,111
-
1,707
479
2,346
2,825
-
131
-
131
126
676
802
995
4,411
-
5,406
941
9,620
10,561
31 December 2012
31 December 2011
group
Receivables
Receivables over
Receivables over
90 days overdue
Total
Retail loans
Corporate
loans
399
3,170
596
Loans to
banks
Total
Retail loans
Corporate
loans
Total
-
3,569
337
6,598
6,935
1,112
-
1,708
479
2,346
2,825
-
132
-
132
126
676
802
995
4,414
-
5,409
942
9,620
10,562
109
5.1.6 Credit risk exposure according to impairment approach
Exposure from loans
31 December 2012
Bank
Group approach
Rating class
31 December 2011
Individual approach
Loans Impairments
Group approach
Loans Impairments
Individual approach
Loans Impairments
Loans
Impairments
Prime (A)
776,687
(1,270)
16,587
-
915,467
(2,702)
50,212
-
Standard (B)
474,705
(7,656)
49,366
(1,360)
433,671
(8,984)
93,225
(3,917)
Substandard (C)
17,574
(2,528)
100,469
(11,586)
11,386
(1,555)
161,169
(30,674)
Default (D)
3,518
(1,450)
79,003
(20,852)
2,425
(1,217)
75,248
(24,292)
8,970
(7,837)
240,775
(100,219)
8,283
(7,879)
130,539
(52,145)
1,281,454
(20,741)
486,200
(134,017)
1,371,232
(22,337)
510,393
(111,028)
Total
Fair value of collateral
1,369,321
308,393
1,325,120
331,424
31 December 2012
GROUP
Group approach
Rating class
Individual approach
Loans Impairments
Prime (A)
771,149
Standard (B)
474,769
(7,656)
17,574
(2,528)
3,550
(1,450)
Substandard (C)
Default (D)
Total
31 December 2011
(1,270)
Group approach
Loans Impairments
16,587
Individual approach
Loans Impairments
Loans
Impairments
50,212
-
-
911,925
(2,702)
49,366
(1,360)
433,740
(8,984)
93,225
(3,917)
100,469
(11,586)
11,386
(1,555)
161,169
(30,674)
79,126
(20,852)
2,576
(1,217)
75,371
(24,292)
9,113
(7,837)
240,775
(100,219)
8,287
(7,883)
130,539
(52,145)
1,276,155
(20,741)
486,323
(134,017)
1,367,914
(22,341)
510,516
(111,028)
Fair value of collateral
1,369,321
308,393
1,325,120
331,424
The Bank and the Group recognise impairment charges in accordance with the internal methodology on the formation of impairment
charges and provisions in line with IFRS. Impairment charges are determined individually on the basis of estimated future cash flows in
individually significant exposures and exposures, where there is objective evidence for impairment, while other exposures impairment
charges are determined collectively. As at 31 December 2012, individual assessment was conducted on 28% of the loan portfolio,
representing 87% of impairment charges (31 December 2011: 27% of the loan portfolio or 83% of impairment charges).
According to loan type
Retail loans
Bank
31 December 2012
Group approach
- Impairments
Corporate loans
Overdraft
UnauthoriLarge
accounts and Housing Consumer sed account compacard limits
loans
loans
overdrafts
nies
35,561
175,792
113,758
892
SME
488,307 408,553
Loans and Loans and
advances advances to
Other
to state
banks
48,440
10,151
Total
- 1,281,454
(203)
(4,194)
(4,010)
(396)
(2,765)
(8,037)
(1,136)
-
-
(20,741)
Individual approach
-
211
10,382
-
69,363
331,632
52,569
-
22,043
486,200
- Impairments
-
(28)
(2,738)
-
(8,830)
(97,597) (24,824)
-
-
(134,017)
0.57%
2.40%
5.44%
44.39%
2.08%
14.27%
25.70%
-
-
8.75%
35,358
171,781
117,392
496
546,075 634,551
75,049
10,151
Impairment compared
to loan value
Total
110
22,043 1,612,896
Retail loans
Bank
31 December 2011
Corporate loans
Overdraft
UnauthoriLarge
loans
loans
overdrafts
nies
Group approach
- Impairments
35,205
171,549
129,038
893
SME
Loans and Loans and
Other
to state
banks
519,807 453,247
58,788
2,705
Total
-
1,371,232
(22,337)
(205)
(2,946)
(3,017)
(444)
(3,526) (10,308)
(1,891)
-
-
Individual approach
-
477
10,082
-
131,215 276,843
36,711
-
55,065
510,393
- Impairments
-
(117)
(2,619)
-
(29,766) (64,299) (14,216)
-
(11)
(111,028)
0.02%
7.09%
Impairment compared
to loan value
Total
0.58%
1.78%
4.05%
49.72%
35,000
168,963
133,484
449
10.22%
16.87%
-
617,730 655,483
5.11%
79,392
2,705
55,054 1,748,260
Retail loans
group
31 December 2012
Corporate loans
Overdraft
UnauthoriLarge
loans
loans
overdrafts
nies
Group approach
- Impairments
35,561
175,857
113,758
892
SME
497,613 393,883
Loans and Loans and
Other
to state
banks
48,440
10,151
-
Total
1,276,155
(203)
(4,194)
(4,010)
(396)
(2,765)
(8,037)
(1,136)
-
-
(20,741)
Individual approach
-
211
10,382
-
69,486
331,632
52,569
-
22,043
486,323
- Impairments
-
(28)
(2,738)
-
(8,830) (97,597) (24,824)
-
-
(134,017)
0.57%
2.40%
5.44%
44.39%
2.04%
14.56%
25.70%
-
-
8.78%
35,358
171,846
117,392
496
555,504
619,881
75,049
10,151
22,043
1,607,720
Impairment compared
to loan value
Total
Retail loans
group
31 December 2011
Corporate loans
Overdraft
UnauthoriLarge
loans
loans
overdrafts
nies
Group approach
- Impairments
35,205
171,616
129,038
893
528,548
SME
Loans and Loans and
Other
to state
banks
441,121
58,788
2,705
Total
-
1,367,914
(22,341)
(205)
(2,946)
(3,017)
(444)
(3,526) (10,308)
(1,895)
-
-
Individual approach
-
477
10,082
-
131,338 276,843
36,711
-
55,065
510,516
- Impairments
-
(117)
(2,619)
-
(29,766) (64,303) (14,212)
-
(11)
(111,028)
0.58%
1.78%
4.05%
49.72%
35,000
169,030
133,484
449
Impairment compared
to loan value
Total
5.05%
10.39%
16.87%
-
0.02%
7.10%
626,594 643,353
79,392
2,705
55,054
1,745,061
Loans to banks are assessed individually, while loans to other borrowers are assessed individually and collectively, depending on the
amount of exposure and on the classification or assessment, whether there is objective evidence for impairment.
111
5.1.7 Concentration of exposures according to region and activity
Credit risk exposure according to region
The table below shows credit exposure according to geographical regions. The exposure according to region is determined in accordance
with the address of the debtor's headquarters.
BANK
31 December 2012
Slovenia
EU
SE Europe
Other regions
Total
Loans and advances to state
10,151
-
-
-
10,151
2,574
16,185
1,031
2,253
22,043
Loans and advances to retail
Loans to corporates
330,518
463
5,615
-
336,596
1,285,783
1,224
109,199
2,658
1,398,864
- large companies
550,519
-
7,151
-
557,670
634,255
1,224
102,048
2,658
740,185
- other
101,009
-
-
-
101,009
Total loans
1,629,026
17,872
115,845
4,911
1,767,654
Impairments
(136,259)
(31)
(18,444)
(24)
(154,758)
Total net loans
1,492,767
17,841
97,401
4,887
1,612,896
1,697,911
41,143
131,728
10,843
1,881,625
31 December 2011
Loans and advances
Impairments
(122,442)
(21)
(10,783)
(119)
(133,365)
Total net loans
1,575,469
41,122
120,945
10,724
1,748,260
group
31 December 2012
Slovenia
EU
SE Europe
Other regions
Loans and advances to state
10,151
-
-
-
10,151
2,574
16,185
1,031
2,253
22,043
Loans and advances to retail
Loans to corporates
Total
330,583
463
5,615
-
336,661
1,280,542
1,224
109,199
2,658
1,393,623
567,098
- large companies
559,947
-
7,151
-
619,586
1,224
102,048
2,658
725,516
- other
101,009
-
-
-
101,009
Total loans
1,623,850
17,872
115,845
4,911
1,762,478
Impairments
(136,259)
(31)
(18,444)
(24)
(154,758)
Total net loans
1,487,591
17,841
97,401
4,887
1,607,720
Loans and advances
1,694,716
41,143
131,728
10,843
1,878,430
Impairments
(122,446)
(21)
(10,783)
(119)
(133,369)
Total net loans
1,572,270
41,122
120,945
10,724
1,745,061
31 December 2011
The exposure to Slovenia - as well as the exposure outside Slovenia - has decreased in 2012. The Group reduced exposure to the
EU having reduced exposure to banks as well as the SE European region, where it mainly lends to corporate clients and to a lesser
extent to retail. Risk is high in the SE European markets, which is why the Group formed additional impairment charges, with further
reduction of exposure to the region to be undertaken in 2013. A limit is in place for the largest exposure to the region.
112
Credit risk exposure according to industry
Bank
31 December 2012
Commerce
and motor
vehicle
Manufacturing
repairs Construction Finance Real estate
Loans and advances
to state
Loans and advances
to banks
Loans and advances
to retail
Other
Private
individuals
Total
-
-
-
-
-
-
10,151
-
10,151
-
-
-
22,043
-
-
-
-
22,043
-
-
336,596
336,596
-
-
-
-
-
Loans to corporates
300,959
208,622
150,202
173,342
98,978
- large companies
186,102
85,660
30,412
47,990
10,245
- small and medium
sized enterprises
(SME)
104,015
121,441
93,783
125,352
87,777
- other
Professional,
scientific
and business
industry
165,441 301,320
45,799
- 1,398,864
151,462
-
557,670
101,973 105,844
-
740,185
10,842
1,521
26,007
-
956
17,669
44,014
-
101,009
Total loans
300,959
208,622
150,202
195,385
98,978
165,441
311,471
336,596
1,767,654
Impairments
(13,145)
(8,155)
(26,263)
(53,366)
(12,284)
(17,711) (12,265)
(11,569)
(154,758)
Total net loans
287,814
200,467
123,939
142,019
86,694
147,730 299,206
325,027
1,612,896
Loans and advances
300,958
250,490
166,007
252,309
102,787
167,000 294,830
347,244
1,881,625
Impairments
(14,689)
(8,540)
(23,524)
(34,600)
(14,709)
(18,212)
(9,348)
(133,365)
Total net loans
and advances
286,269
241,950
142,483
217,709
88,078
31 December 2011
(9,743)
148,788 285,087
337,896 1,748,260
group
31 December 2012
Commerce
and motor
vehicle
Manufacturing
repairs Construction Finance Real estate
Loans and advances
to state
Loans and advances
to banks
Loans and advances
to retail
Professional,
scientific
and business
industry
Other
Private
individuals
Total
-
-
-
-
-
-
10,151
-
10,151
-
-
-
22,043
-
-
-
-
22,043
-
-
336,661
336,661
165,441 301,320
-
1,393,623
-
567,099
-
-
-
-
-
Loans to corporates
310,407
208,622
150,325
173,342
84,166
- large companies
195,408
85,660
30,535
47,990
10,245
- small and medium
sized enterprises
(SME)
104,157
121,441
93,783
125,352
72,965
-
725,515
10,842
1,521
26,007
-
956
17,669
44,014
-
101,009
310,407
208,622
150,325
195,385
84,166
165,441
311,471
336,661
1,762,478
- other
Total loans
45,799
151,462
101,973 105,844
Impairments
(13,145)
(8,155)
(26,263)
(53,366)
(12,284)
(17,711) (12,265)
(11,569)
(154,758)
Total net loans
297,262
200,467
124,062
142,019
71,882
147,730 299,206
325,092
1,607,720
Loans and advances
309,855
250,490
166,130
252,309
90,505
167,000 294,830
347,311
1,878,430
Impairments
(14,693)
(8,540)
(23,524)
(34,600)
(14,709)
(18,212)
(9,743)
(9,348)
(133,369)
Total net loans
and advances
295,162
241,950
142,606
217,709
75,796
148,788 285,087
337,963
1,745,061
31 December 2011
In terms of exposure by industry, exposure remains highest to the manufacturing industry, being quite a diversified group in itself. In 2012,
the Bank was able to decrease exposure to financial mediation, commerce and construction the most. In 2013, the Bank and the Group will
continue to pursue the objective of diversified investments according to industry and limit or reduce investments in the higher risk industries.
113
5.1.8 Exposure to credit risk from debt financial instruments
The table below features the carrying value of debt financial instruments classified according to issuer and rating by Moody’s Investor
Service. In 2012, the Bank did not impair debt financial instruments due to increased credit risk. All exposures from debt financial
instruments are neither past due nor impaired.
Bank and Group
31 December 2012
Issuer
Rating by
Moody's
Financial
assets held
for trading
Financial assets
designated at fair
value through P&L
Available for sale
financial assets
Held to maturity
investments
Total
financial
assets
Governments
Aaa to Aa3
-
-
27,270
26,305
53,575
A1 to A3
-
-
18,457
9,972
28,429
Baa2
-
-
14,695
187,881
202,576
Multilateral
development
banks
Aaa
-
-
5,230
-
5,230
Regional units
and public sector
entities
Aaa to Aa1
-
-
15,655
5,079
20,734
Unrated *
-
-
6,634
10,211
16,845
Aaa to Aa3
-
-
19,746
19,875
39,621
A1 to A3
-
1,839
20,054
6,213
28,106
Banks
Baa1 to Baa3
Companies
-
2,093
30,584
4,616
37,293
B1 to B3
4,701
-
4,887
-
9,588
Caa1 to Caa3
6,516
-
-
-
6,516
Ca
-
1,132
-
-
1,132
Unrated *
-
-
6,955
-
6,955
11,217
5,064
170,167
270,152
456,600
Total
* All unrated securities has been classified into the highest rating class A in accordance with internal methodology. More than quarter of the investments
is government guaranteed.
Bank and Group
Issuer
Governments
31 December 2011
Rating by
Moody's
Held to maturity
investments
Total
financial
assets
-
-
21,818
31,415
53,233
-
-
23,212
190,342
213,554
Aaa to Aa3
Baa1 to Baa3
Ba1 to Ba3
B2
Aaa to Aa1
Unrated *
Total
Available for sale
financial assets
Aaa to Aa3
A1 to A3
Other
Financial assets
designated at fair
value through P&L
A1 to A3
Ca
Banks
Financial
assets held
for trading
-
-
-
1,261
1,261
1,148
3,956
34,136
23,195
62,435
-
2,048
65,603
7,821
75,472
-
-
7,458
-
7,458
11,406
606
4,822
-
16,834
535
1,213
-
-
1,748
-
-
5,736
5,072
10,808
7,320
-
15,212
10,205
32,737
20,409
7,823
177,997
269,311
475,540
* All unrated securities has been classified into the highest rating class A in accordance with internal methodology.
The Bank holds 91% of investments in sovereign, bank and public sector debt securities with a rating no lower than Baa3. As at 31
December 2012, investments in EU countries represent 99.5% of all investments, with exposure to more risky European Union member
states (Italy) amounting to EUR 5,233 thousand (31 December 2011: EUR 15,201 thousand exposure to Italy, Spain, Greece).
114
5.1.9 Exposure to credit risk from derivatives
Bank and Group
31 December 2012
31 December 2011
Fair value
Fair value
Derivatives - trading
2,724
9,313
Interest rate swaps
7,886
6,517
166
1,314
Options - interest rate cap
1
9
Option - FX
9
-
10,786
17,153
Interest rate swaps
6,892
4,838
Total
6,892
4,838
Currency swaps
Total
Exposure to credit risk in derivatives is based on the possibility of a counterparty failing to deliver. The Bank enters into interest rate swap
transactions with foreign banks with high credit ratings (at least Baa2 in relation to Moody’s rating). The volume of these transactions
did not increase in 2012, also having a positive impact from valuation. Currency swaps are also done with foreign banks and, to a lesser
extent, with corporates.
The Bank enters into securities forwards with corporate clients. In the event of increased credit risk, the Bank collateralises its receivables
additionally with appropriate types of collateral. The fair value was down in 2012 due to a decrease in the volume of said operations and
the revaluation of some futures and forward transactions to fair value.
5.1.10 Exposure to credit risk from Credit Linked Notes (CLN)
On 31 December 2012, the Bank held 1 bond in an amount of EUR 1,967 thousand (31 December 2011: EUR 6,852 thousand) with Credit
Linked Note characteristics.
An overview of structured debt securities as at 31 December 2012:
Structured debt security (CLN)
Assumed credit risk
UBS JERSEY
Type of CLN
”Credit Inverse Note Floater”
Country I.
Moody's rating
Carrying amount
-
1,967
Baa3
The aforementioned structured instrument is a ''Credit Inverse Note Floater'', meaning that the assumed credit risk of the state is
reflected in the price of the issued security.
In addition to the assumed credit risk, the structured debt note also means taking on the issuer's credit risk. It is recognised at fair
value through profit or loss. The Bank monitors structured products carefully and limits their trading volume.
5.2
Market risk
Market risk is the risk of change in the fair value of financial instruments due to changes in risk factors, being interest rates, currency
rates and financial instrument prices. The most significant risk type within market risk is positional risk pertaining to equity and debt
financial instruments and derivatives. Exposure to currency risk is low.
The Bank assesses market risk as the risk it is exposed to when performing trading activities and the risks it is exposed to in nontrading activities pertaining to market risk factors.
Monitoring and reporting on the amount of exposure to market risk is done using limit systems and using a number of different
methods to measure market risk.
115
5.2.1 Measuring and managing market risk
Positional risk (the risk of change in value of financial investments) in equity and debt securities is present across the whole of the portfolio
as well as at the level of individual transactions. The Bank monitors exposure to positional risk using sensitivity analyses, whereby the
effect of changes in different risk factors (e.g. interest rates) on the value of a financial instrument or a portfolio of financial instruments
is measured. The Bank also applies extraordinary conditions stress scenarios, which reflect the effect such conditions in the financial
markets have on the value of financial instruments.
The Bank manages exposure to positional risk by also utilising a system of limits, which it regularly updates. These are basically separated
into trading and banking book limits and then further from the aspect of financial instrument type, region and issuer. Exposure to positional
risk is also measured at individual transaction level, which is why stop limits have been put in place within the limit system, defined on the
basis of the Group’s preparedness to assume risk.
Currency risk is measured daily by monitoring net positions according to individual foreign currencies. The exposure to currency risk
is monitored with the use of foreign currency position limits, which define the maximum level of an open net position according to an
individual currency.
The Bank also enters into currency and interest rate derivative transactions. Its basic policy in the area of derivatives’ trading is to enter into
transactions to hedge own positions and the positions of customers, whereby the latter transactions are hedged with counter positions.
Transactions are entered into with prime foreign banks.
In measuring market risk, the Bank calculates the capital requirements pertaining to market risk for all items held for trading in line with
the Decision on the calculation of market risk capital requirements for banks and savings banks. The Bank also calculates the capital
requirement for currency risk when the total open position exceeds 2% of regulatory capital.
On 31 December 2012, the Bank performed an analysis of reasonable possible shift, where it simulated the effect a decrease of the carrying
amounts of all equity instruments from the trading and banking book by 20% and all debt instruments from the trading and banking book
by 10% would have on the income statement and the capital. The simulation did not include forward sold instruments.
The results of the analysis are shown in the table below:
31 December 2012
Bank and Group
Effect on income statement
Debt
securities
Equity
securities
31 December 2011
Total
Debt
securities
Equity
securities
Total
(714)
(65)
(779)
(1,491)
(604)
(2,095)
Effect on equity
(17,000)
(3,243)
(20,242)
(17,782)
(5,169)
(22,952)
Total
(17,714)
(3,307)
(21,021)
(19,273)
(5,773)
(25,047)
5.2.2 Sensitivity analysis for financial instruments included in the banking book
The interest rate sensitive financial instruments in the banking book are analysed using the method of interest rate gaps, where the
amount of the gap in an individual time frame is also limited. Exposure to interest rate risk is also measured using sensitivity analyses and
stress tests, prepared on the basis of the estimated duration gap. Based on these two methods, different analyses of interest rate sensitivity
are performed, including stress scenarios.
The sensitivity analysis of all interest rate sensitive financial instruments in the banking book as at 31 December 2012 shows that with a
parallel increase of the interest curve by 50 basis points, the net present value of the said financial instruments would increase by EUR
3,251 thousand (31 December 2011: EUR 1,930 thousand). The effect on the net present value of financial instruments is calculated using
the method of duration gaps between financials assets and liabilities in the banking book.
The simulation of the effect of a change in the interest rate on the income statement shows than an increase of the interest rate by a 50
basis points increases the asset side interest income by EUR 6,304 thousand (31 December 2011: EUR 6,880 thousand) per year, while the
liabilities side interest expenses increase by EUR 5,591 thousand per year (31 December 2011: EUR 5,621 thousand). The net interest income
thus increases by EUR 713 thousand (31 December 2011: EUR 1,259 thousand) should the interest rate increase by 50 basis points. The
analysis includes all interest sensitive transactions maturing or subject to interest fixing within a one year interval. On the liabilities side, at
sight deposits have been excluded as the Bank or the Group estimate that these pertain to liabilities not sensitive to interest rates. A change
in the interest rate is anticipated, not however in the credit premium. A parallel increase of interest by 50 basis points is reasonably due to
the current low level of interest rate and the uncertainty of recovery conditions in the EU economy and on financial markets.
The interest rate sensitive financial instruments in the trading book are analysed in more detail within the framework of market risk,
wherein modified duration and value at risk are calculated.
116
5.2.3 Currency risk
Foreign currency risk is financial risk and represents the danger of financial loss due to changes in currency rates. It is based on the
open foreign currency positions. Thus a change in rates directly affects asset value as well as foreign currency denominated liabilities,
expressed in the reporting currency. The Bank encounters foreign currency risk in international operations, being the result of:
- the assets and the liabilities of the Group are denominated in different currencies;
- the Group trades foreign currencies for its own account.
The risk of foreign currency exposure depends on the net foreign currency positions, on portfolio structure, the volatility of foreign
currencies and on the correlation between these variables.
The table below shows exposure to currency risk on 31 December 2012. It shows the carrying amounts of assets and liabilities according
to currency.
Exposure to foreign currency risk
Bank
31 December 2012
USD
CHF
Other
EUR
Total
125
193
529
126,639
127,486
-
-
-
26,123
26,123
Financial assets designated at fair value through P&L
-
-
-
5,064
5,064
-
-
-
186,758
186,758
Derivative financial instruments designated for hedging
-
-
-
6,892
6,892
7,382
31,460
3,733
1,573,035
1,615,610
Loans and advances
2,823
774
3,518
14,928
22,043
4,537
30,686
215
1,555,415
1,590,853
22
-
-
2,692
2,714
-
-
-
270,152
270,152
TOTAL ASSETS
7,507
31,653
4,262
2,194,663
2,238,085
-
-
-
151,431
151,431
-
-
-
1,888
1,888
Financial liabilities designated at fair value through P&L
-
-
-
33,592
33,592
7,675
8,319
3,387
1,895,775
1,915,156
338
121
53
10,055
10,567
7,320
8,197
3,321
1,394,783
1,413,621
-
-
-
255,286
255,286
-
-
-
3,278
3,278
-
-
-
170,880
170,880
- due to customers
-
-
-
55,275
55,275
17
1
13
6,218
6,249
TOTAL LIABILITIES
7,675
8,319
3,387
2,082,686
2,102,067
Net balance sheet position on 31 December 2012
(168)
23,334
875
111,977
136,018
-
(26,333)
(229)
(262,994)
(289,556)
TOTAL ASSETS
8,366
40,836
5,510
2,401,730
2,456,442
TOTAL LIABILITIES
8,433
8,160
5,303
2,274,428
2,296,324
(67)
32,676
207
127,302
160,118
-
(32,797)
(485)
(287,014)
(320,296)
Net off-balance sheet position on 31 December 2012
- FX Derivatives
31 December 2011
- FX Derivatives
117
GROUP
31 December 2012
USD
CHF
Other
EUR
Total
125
193
529
126,639
127,486
-
-
-
26,123
26,123
Financial assets designated at fair value through P&L
-
-
-
5,064
5,064
-
-
-
186,758
186,758
Derivative financial instruments designated for hedging
-
-
-
6,892
6,892
1,610,814
Loans and advances
7,382
31,460
3,733
1,568,239
2,823
774
3,518
14,928
22,043
4,537
30,686
215
1,550,239
1,585,677
22
-
-
3,072
3,094
-
-
-
270,152
270,152
TOTAL ASSETS
7,507
31,653
4,262
2,189,867
2,233,289
-
-
-
151,431
151,431
-
-
-
1,888
1,888
Financial liabilities designated at fair value through P&L
-
-
-
33,592
33,592
7,675
8,319
3,387
1,895,929
1,915,310
338
121
53
10,055
10,567
7,320
8,197
3,321
1,394,782
1,413,620
-
-
-
255,286
255,286
-
-
-
3,278
3,278
-
-
-
170,880
170,880
-
-
-
55,275
55,275
17
1
13
6,373
6,404
TOTAL LIABILITIES
7,675
8,319
3,387
2,082,840
2,102,221
(168)
23,334
875
107,027
131,068
-
(26,333)
(229)
(262,994)
(289,556)
TOTAL ASSETS
8,366
40,836
5,510
2,398,531
2,453,243
TOTAL LIABILITIES
8,433
8,160
5,303
2,275,013
2,296,909
(67)
32,676
207
123,518
156,334
-
(32,797)
(485)
(287,014)
(320,296)
- due to customers
- FX Derivatives
31 December 2011
- FX Derivatives
118
119
120
121
Exposure to liquidity risk
Bank
31 December 2012
Financial assets designated at fair value through
profit or loss
Carrying Total cash flow
amount (undiscounted)
Up to 1
1-3
3 - 12
month months months
1 - 5 Over 5
years
years
127,486
127,486
127,486
-
-
-
-
26,123
28,930
17,745
5,125
186
3,406
2,468
5,064
5,367
12
2,198
36
3,121
-
116,612
3,822
186,758
198,292
21,374
33,346
23,138
1,615,610
1,747,477
297,796
144,488
453,466
22,043
22,044
22,044
-
-
-
-
1,590,853
1,722,707
273,335
144,293
453,466
586,936
264,677
2,714
2,726
2,417
195
-
1
113
270,152
318,565
3,260
22,506
73,898
156,286
62,615
6,892
6,892
6,892
-
-
-
-
2,238,085
2,433,009
474,565
207,663
550,724
866,362
333,695
151,431
156,074
-
-
-
156,074
-
1,888
1,888
1,888
-
-
-
-
33,592
42,041
-
2,546
922
38,573
-
1,915,156
2,007,300
675,268
288,042
472,267
481,794
89,929
10,567
10,579
519
10,060
-
-
-
1,413,621
1,446,323
657,172
246,560
364,930
175,278
2,383
255,286
276,688
7,805
10,265
59,879
143,157
55,582
3,278
3,389
-
339
1,500
1,550
-
170,880
189,036
4,095
20,778
42,054
122,109
-
55,275
75,036
19
-
3,895
39,691
31,431
6,249
6,249
5,658
40
9
9
533
2,102,067
2,207,303
677,156
290,588
473,189
676,441
89,929
136,018
225,706
(202,591)
(82,925)
77,535
189,921
243,766
Loans and advances
Derivative financial instruments designated for
hedging
TOTAL ASSETS
Financial liabilities designated at fair value through
profit or loss
- due to customers
TOTAL LIABILITIES
GAP on 31 December 2012
586,937 264,790
Commitments and Contingent Liabilities
Guarantees
95,104
95,104
95,104
-
-
-
-
Other commitments
108,207
108,207
108,207
-
-
-
-
TOTAL on 31 December 2012
203,311
203,311
203,311
-
-
-
-
TOTAL ASSETS
2,456,442
2,738,516
555,381
180,430
570,043
1,031,725 400,937
TOTAL LIABILITIES
2,296,324
2,427,582
721,720
299,142
571,897
692,335 142,488
160,118
310,934
(166,339) (118,712)
(1,854)
339,390 258,449
31 December 2011
Guarantees
96,612
96,612
96,612
-
-
-
-
Other commitments
176,113
176,113
176,113
-
-
-
-
272,725
272,725
272,725
-
-
-
-
122
group
31 December 2012
Financial assets designated at fair value through
profit or loss
Carrying Total cash flow
amount (undiscounted)
Up to 1
1-3
3 - 12
month months months
1 - 5 Over 5
years
years
127,486
127,486
127,486
-
-
-
-
26,123
28,930
17,745
5,125
186
3,406
2,468
5,064
5,367
12
2,198
36
3,121
-
186,758
198,292
21,374
33,346
23,138
116,612
3,822
1,610,814
1,743,144
298,160
141,431
450,398
587,786
265,369
22,043
22,044
22,044
-
-
-
-
1,585,677
1,717,996
273,321
141,236
450,398
3,094
3,104
2,795
195
-
1
113
270,152
318,565
3,260
22,506
73,898
156,286
62,615
6,892
6,892
6,892
-
-
-
-
2,233,289
2,428,676
474,929
204,606
547,656
867,211
334,274
151,431
156,074
-
-
-
156,074
-
1,888
1,888
1,888
-
-
-
-
33,592
42,041
-
2,546
922
38,573
-
1,915,310
2,007,455
675,423
288,042
472,267
481,794
89,929
10,567
10,579
519
10,060
-
-
-
1,413,620
1,446,323
657,172
246,560
364,930
175,278
2,383
255,286
276,688
7,805
10,265
59,879
143,157
55,582
3,278
3,389
-
339
1,500
1,550
-
170,880
189,036
4,095
20,778
42,054
122,109
-
55,275
75,036
19
-
3,895
39,691
31,431
6,404
6,404
5,813
40
9
9
533
2,102,221
2,207,458
677,311
290,588
473,189
676,441
89,929
131,068
221,218
(202,382)
(85,982)
74,467
Loans and advances
Derivative financial instruments designated for
hedging
TOTAL ASSETS
Financial liabilities designated at fair value through
profit or loss
- due to customers
TOTAL LIABILITIES
587,785 265,256
190,770 244,345
Guarantees
95,104
95,104
95,104
-
-
-
-
Other commitments
108,207
108,207
108,207
-
-
-
-
203,311
203,311
203,311
-
-
-
-
TOTAL ASSETS
2,453,243
2,820,177
555,424
178,005
569,523
1,031,682 400,644
TOTAL LIABILITIES
2,296,909
2,515,849
722,304
299,142
571,897
692,335 142,488
156,334
304,328
(166,880) (121,137)
(2,374)
339,347 258,156
31 December 2011
Guarantees
96,612
96,612
96,612
-
-
-
-
Other commitments
176,113
176,113
176,113
-
-
-
-
272,725
272,725
272,725
-
-
-
-
123
The table discloses undiscounted cash flow in relation to residual maturity on 31 December 2012, which, in addition to the carrying
amounts of financial instruments, includes the anticipated future interest cash flows. The amounts disclosed are based on spot rates
and interest rates on the reporting date. Innovative subordinated bonds do not mature at any certain date; they are, however, callable
in 2017. This is why these instruments have been included in the ‘’3 to 5 years” category. The interest cash flow has been calculated
for 5 years.
The liquidity gap within the up-to-one month time frame is negative, however the fact must be taken into account that it includes
all at sight deposits under financial liabilities, even though the Central Bank, in line with regulation, only considers at sight deposits
60% weighted for stability. However, financial assets feature securities included in liquidity reserves recorded at remaining maturity,
not in the up to one month time frame. Taking the aforementioned into account, the Bank and the Group actually recorded a liquidity
surplus in the up-to-one month time frame.
Liquidity gaps changed as compared with 31 December 2011 due to the Bank's decreasing total assets and due to lower planned
interest owing to the drops in market interest rates, which is why the time frames up to 1 year and over 1 year are exhibiting lower
liquidity gaps as compared with the previous year.
5.4
In its operations, the Bank and the Group must always exhibit an appropriate level of capital to be able to secure the assets of its
clients and investors. An adequate capital base is security for the different types of risks the Bank and the Group are exposed to in their
ordinary course of business. They must have sufficient capital to suit the risk of their operations and their business strategy.
The Bank's and the Group's capital risk management activities include the following:
- developing and implementing the capital risk management strategy;
- d
evising and updating the policy of capital risk taking and risk management;
- monitoring changes in legislation;
- developing medium- and long-term projections of capital, capital requirements, and relevant capital adequacy ratios, and updating
such projections in case of major changes in operations, in order to identify and monitor future capital requirements;
- r unning quarterly scenarios of extraordinary situations considering the specific position;
- notifying the Bank's managerial and supervisory bodies on relevant capital risk taken by the Bank in the course of its operations;
- establishing and maintaining a system of capital risk management and establishing and controlling the limits of capital adequacy ratio,
core capital ratio, and ratio between the internal capital assessment and capital requirements according to the 1st pillar of Basel II.
In capital risk, the Bank and the Group have specified limit and target ratios presented in the following table:
- in %
Capital adequacy ratio
Tier 1 capital ratio
Internal capital assessment to 1st pillar capital
requirements ratio
Limit value
Target value
10.7
12.0
8.6
9.0
133.8
150.0
The Bank and the Group will start implementing the measures to hedge the capital risk if the capital adequacy ratio or the Tier 1
capital ratio fall below the target values as a result of an increase in the volume and structure of operations, increase of exposure to
risks specified in the first and second pillar of Basel II and the resulting increase in capital requirements and capital needs, or due to
changes in the amount and structure of capital.
In accordance with the provisions of Basel II and the Decision on the calculation of bank and savings bank capital, it is divided into
three categories:
- Tier 1 capital,
- Tier 2 capital,
- Tier 3 capital.
Tier 1 capital represents the highest quality of capital and may be used, together with Tier 2 capital, for the fulfilment of capital
requirements relating to credit, market and operational risk. Tier 3 capital may only be used for the fulfilment of capital requirements
relating to market risk, except the capital requirements for settlement risk and counterparty credit risk.
124
The Bank and the Group must fulfil certain ratios and adhere to certain limits in connection with individual capital components at all
times. The more significant ratios and limits comprise:
- Tier 2 capital may not exceed the level of Tier 1 capital,
- the sum of preferential cumulative shares with a fixed return and subordinated debt included in the Tier 2 capital may not exceed
50% of the Tier 1 capital.
Despite the abovementioned ratios and limits between individual categories or capital components, hybrid instruments, which may
be included in Tier 1 capital, carry additional limitations.
Potential surpluses in individual categories or capital components above the limits set may not be considered in the calculation of
capital.
Tier 1 capital
The components of Tier 1 capital:
- paid up share capital and capital reserves from ordinary shares,
- reserves and retained profit, free from potential future liabilities and approved at the General Meeting of Shareholders in the
amount which is assumed to remain part of capital and will not be distributed; retained loss is included under this item as well as
hybrid instruments based on Tier 1 capital within limits, namely transitional period hybrid instruments with incentive for pay-out
(innovative registered bond in issue - partial redemption in 2012).
Deductibles from the Bank’s and the Group’s Tier 1 capital:
- own shares, with the characteristics of Tier 1 capital,
- intangible long-term assets,
- other negative effects from (net) revaluation surpluses, namely the negative effects from revaluation surpluses in connection with
equities and shares, available for sale and designated at fair value (included in the banking and trading book) and available for
sale debt securities as well as those recognised at fair value (included in the trading book), hybrid instrument surpluses above the
prescribed Tier 1 limit.
Tier 2 capital
The Bank’s and the Group’s Tier 2 capital comprises:
- 80% of the amount of positive surplus effects from the revaluation of available for sale equities and interests, recognised at fair value
(included in the banking and trading book) and available for sale debt securities as well as those recognised at fair value (included
in the trading book),
- surplus from hybrid instruments in the part exceeding the limit for inclusion in Tier 1 capital (innovative registered bond in issue partial redemption in 2012),
- subordinated debt for inclusion in Tier 2 capital (which is gradually discounted from Tier 2 capital at a 20% cumulative discount
during the last five years prior to maturity or redemption).
Deductions from Tier 1 and Tier 2 capital
As at 31 December 2012 and 31 December 2011, the Bank and the Group did not exhibit any deduction from Tier 1 and Tier 2 capital,
as stipulated under Article 30 of the Decision on the calculation of own funds, capital requirements and capital adequacy of banks
and savings banks.
Tier 3 capital
As at 31 December 2012 and 31 December 2011, the Bank and the Group did not have any debt instruments in issue which would merit
inclusion into Tier 3 capital.
125
Capital and capital requirements
I.
1.
2011
2012
2011
TOTAL CAPITAL
for capital adequacy requirements (1+2)
230,628
277,717
231,486
278,489
TIER 1 capital
165,410
205,101
166,268
206,009
16,980
13,584
16,980
13,584
Share premium (regular shares)
51,380
36,658
51,542
36,820
111,735
111,720
112,410
112,334
(24,984)
-
(24,956)
-
Hybrid instruments
Transitory period hybrid instruments, without
pay-out incentives
Transitory period hybrid instruments, with payout incentives
14,937
68,102
14,937
68,102
-
18,102
-
18,102
14,937
50,000
14,937
50,000
Deductibles from TIER 1 capital
(4,638)
(24,963)
(4,644)
(24,831)
Profit reserves and retained profit
Net (loss) for the year
(-) Own shares
(-) Intangible long-term assets
(-) Revaluation reserves (RR) - available for sale
- prudential filters
(-) Hybrid instrument surplus
TIER 2 capital
Surplus of individual capital compnents,
distributable to Tier 2 capital
(Hybrid instruments surplus)
Tier 1 capital adjustments, transferable
to Tier 2 capital - prudential filter
Subordinated debt
II.
GROUP
2012
Paid-up share capital (regular shares)
2.
Bank
CAPITAL REQUIREMENTS
Capital requirements for credit and
counterparty risks
Capital requirements for position and foreign
exchange risks
(198)
(401)
(198)
(401)
(4,415)
(4,921)
(4,421)
(4,925)
(25)
(406)
(25)
(406)
-
(19,235)
-
(19,099)
65,218
72,616
65,218
72,480
-
19,235
-
19,099
1,439
2,563
1,439
2,563
63,779
50,818
63,779
50,818
141,805
154,092
141,964
154,073
128,375
136,834
128,445
136,935
2,199
5,822
2,199
5,822
Capital requirement for operational risk
11,231
11,436
11,320
11,316
III.
CAPITAL ADEQUACY RATIO (I / II x 8) (in %)
13.01%
14.42%
13.04%
14.46%
IV.
CAPITAL RATIO (I.1. / II x 8) (in %)
9.33%
10.65%
9.37%
10.70%
The capital for capital adequacy purposes decreased in comparison to the year before due to the loss of the Bank and the Group in
2012. Lower capital requirements are the consequence of additional impairment costs and lower value of loans, which decreased the
Bank’s and the Group’s exposure to credit risk. Positional risk capital requirements also went down due to the sale of equity financial
instruments and their transfer to the banking book. The drop in capital also impacted a decrease of capital adequacy and Tier 1 capital
ratios.
In 2011, a proposal of the new capital directive CRD IV was adopted, with new legislation coming into effect in 2013 which was later
postponed. In preparing for the changes brought about by the new regulation, the Bank has been analysing the movements in capital
and the fluctuations in capital ratios in line with the provisions of the new capital accord. In 2012, the Bank changed the structure
of capital. Preference shares were converted to ordinary shares, BCE11 innovative bonds were partially redeemed and subordinated
certificates of deposit were also redeemed. The Bank issued a BCE16 subordinated bond and a subordinated certificate of deposit with
a longer maturity, thus improving the structure of capital and capital ratios, especially the ratio of the highest quality Core Tier 1 capital.
The Bank and the Group complied with externally imposed capital requirements throughout 2011 and 2012.
126
5.5
Fair value of financial assets and liabilities
a) Financial instruments not measured at fair value
Bank
Carrying amount
Fair value
2012
2011
2012
2011
1,615,610
1,750,289
1,646,571
1,787,801
22,043
55,054
22,042
55,063
1,590,853
1,693,206
1,621,812
1,730,698
2,714
2,029
2,717
2,040
270,152
269,311
277,306
268,131
1,885,762
2,019,600
1,923,877
2,055,932
151,431
90,082
147,424
85,031
1,915,156
2,167,921
1,919,514
2,163,046
10,567
20,135
10,497
21,171
1,413,621
1,478,644
1,419,284
1,483,804
255,286
396,023
253,902
393,997
3,278
6,224
3,262
6,192
170,880
185,520
170,372
181,422
55,275
72,417
56,450
71,757
6,249
8,958
5,747
4,703
2,066,587
2,258,003
2,066,938
2,248,077
Financial assets
Loans
Total
Financial liabilities
Deposits from the Central bank
- due to customers
- borrowings from costumers
TOTAL
group
Carrying amount
Fair value
2012
2011
2012
2011
1,610,814
1,747,090
1,637,934
1,784,584
22,043
55,054
22,042
55,063
1,585,677
1,690,007
1,612,796
1,727,481
Financial assets
Loans
Total
3,094
2,029
3,096
2,040
270,152
269,311
277,306
286,131
1,880,966
2,016,401
1,915,240
2,070,715
Financial liabilities
Deposits from the Central bank
- due to customers
- borrowings from costumers
151,431
90,082
147,424
85,031
1,915,310
2,159,506
1,919,668
2,167,038
10,567
20,135
10,497
21,171
1,413,620
1,478,640
1,419,284
1,483,800
255,286
396,023
253,902
393,997
3,278
6,224
3,262
6,192
170,880
185,520
170,372
181,422
55,275
72,417
56,450
71,757
TOTAL
6,404
547
5,901
8,699
2,066,741
2,249,588
2,067,092
2,252,069
127
To calculate the fair values of held to maturity financial assets, the Bank and the Group used the quoted market prices and the
methodology based on discounting future cash flows for all other items.
Discount factors for financial assets are calculated on the basis of the reference zero coupon curve according to respective currency.
The discount factors for financial liabilities are calculated on the basis of the interest rate curve for institutions with international
ratings such as those assigned to the Bank.
The statement of financial position shows loans and other receivables in net amounts, meaning that these have been decreased by
the impairment charges.
b) Fair value hierarchy
The Bank defines a hierarchy of valuation techniques based on whether the inputs for those valuations are published or not. Published
inputs reflect market data obtained from independent sources; non-published inputs reflect the Bank's market assumptions.
These two types of inputs have created the following fair value hierarchy:
Level 1 – quoted prices (unadjusted) in active markets for identical assets or liabilities. This level includes listed equity securities and
debt instruments on exchanges (for example, on the Ljubljana Stock Exchange).
Level 2 – inputs other than quoted prices included under Level 1 that are observable for a respective asset or liability, either directly (that
is, as prices) or indirectly (derived from prices). This level includes most OTC derivative contracts, issued structured debt, certificates
of deposit and financial liabilities (BCE10 series subordinated bonds and certificates of deposit). The sources of input parameters like
the EURIBOR yield curve or counterparty credit risk are Bloomberg and Reuters.
Level 3 - inputs for an asset or liability that are not based on published market data. This level includes equity investments with
significant components not based on observable market data.
This hierarchy requires the use of published market data when available. The Group considers relevant and published market prices
in its valuations where possible.
Assets and liabilities measured at fair value
Bank and Group
Level 1
Level 2
Level 3
Total
7,168
18,955
-
26,123
Debt instruments
3,048
8,169
-
11,217
Equity instruments
4,120
31 December 2012
Financial assets measured at fair value:
-
-
4,120
Derivatives
Financial assets designated at fair value
-
10,786
-
10,786
2,093
2,971
-
5,064
Debt instruments
2,093
2,971
-
5,064
178,222
404
8,132
186,758
Debt instruments
169,763
404
-
170,167
Equity instruments
8,459
-
8,132
16,591
187,483
22,330
8,132
217,945
Financial liabilities designated at fair value
-
33,592
-
33,592
Held for trading financial liabilities (Derivatives)
-
1,888
-
1,888
Total liabilities
-
35,480
-
35,480
Total assets
Financial liabilities measured at fair value:
128
Bank and Group
31 December 2011
Level 1
Level 2
Level 3
Total
Financial assets measured at fair value:
19,770
27,691
5,356
52,817
Debt instruments
9,871
10,538
-
20,409
Equity instruments
9,899
-
5,356
15,255
Derivatives
Financial assets designated at fair value
-
17,153
-
17,153
5,834
1,989
-
7,823
Debt instruments
5,834
1,989
-
7,823
196,140
429
6,632
203,201
Debt instruments
177,568
429
-
177,997
18,572
-
6,632
25,204
221,744
30,109
11,988
263,841
Financial liabilities designated at fair value
-
36,146
-
36,146
Held for trading financial liabilities (Derivatives)
-
2,167
-
2,167
Total liabilities
-
38,313
-
38,313
Equity instruments
Total assets
Financial liabilities measured at fair value:
Reconciliation for Level 3 items:
(Loss)
Impairments
Sale
Purchase
Profit
Impairments
20,058
(165)
(7,888)
(18)
1
11,988
86
(7,453)
Sale
(824)
Purchase
4,335
8,132
The Bank and the Group performed a sensitivity analysis, where it simulated the effect a 3rd level decrease in the carrying amount of
equity instruments has on the income statement. Should the fair value of these financial instruments decrease by 30%, this would have
a negative effect on the income statement in the amount of EUR 2,440 thousand (2011: EUR 3,596 thousand).
129
6
SEGMENT REPORTING
The Group's operations comprise three segments:
- retail, incorporating private client accounts, savings, deposits, certificates of deposit, insurance brokerage products, credit and debit
cards, loans, mainly small businesses and private individuals;
- c
orporates, incorporating current accounts, deposits, loans and other credit facilities and payment operations, mainly small and
large companies;
- fi
nancial markets, incorporating trading in financial instruments, securities issued and interbank relations.
In its operations, the Bank primarily performs credit and deposit operations. Segments are disclosed according to the methodology
used in the preparation of an internal report and are discussed at the ALCO, which also comprises Management Board members. The
heads of individual areas of operation receive detailed reports on the operation of their units during the year. Throughout the year
there have been no significant changes in reportable segments.
Liabilities and assets are shown according to segment, based on the segment they were acquired from or the segment in which they
were invested.
Transactions between segments for the purpose of internal accounting are based on harmonised transfer bases (internal transfers of
income effects between segments, keys for the transfer of service costs and administrative unit costs to profit centres). Net interest is
included in the report in accordance with transfer prices from the market, whereby transfer income is applied to some transactions
and transfer expenses to others as well as transfer interest margins, indicating the contribution of an individual transaction to the net
interest of the Bank.
The transfer pricing system for the allocation of net interest revenue was methodologically designed and confirmed by the ALCO
which receives, together with individual segment heads, reports on the transfer prices of interest bearing assets and liabilities on a
monthly basis.
130
The report on operations according to segments for 2012:
31 December 2012
Total income
- external income
Retail
Corporates
Financial markets
Total
40,611
66,651
31,396
138,658
40,611
64,690
31,396
136,697
- income from other segments
-
1,961
-
1,961
23,350
16,930
6,276
46,556
10,419
5,576
(263)
15,732
179
174
8,816
9,169
-
-
751
751
27
51
13,400
13,478
176
87
(5,876)
(5,613)
-
-
459
459
-
-
53
53
79
36
31
146
Income from financial transactions
- dividend income
- net gains from financial assets and
liabilities not classified at fair value
- net (losses) / gains from financial
assets and liabilities held for trading
liabilities designated at fair value
- changes in fair value from hedging
- foreign exchange translation net gains
- net (losses) from derecognition of
assets
Net other operating income
Administrative expenses with
depreciation and amortisation
Provisions
Impairment charges
Profit before income tax
Deferred tax
(103)
-
(2)
(105)
(41)
1,567
(66)
1,460
(24,406)
(9,560)
(2,579)
(36,545)
623
343
554
1,520
(7,467)
(45,497)
(12,436)
(65,400)
2,657
(30,467)
302
(27,508)
-
-
-
Net (loss)
Segment assets
2,552
(24,956)
534,444
1,178,788
520,198
Subsidiary
-
14,877
-
14,877
Not allocated
-
-
-
23,048
Total assets
Segment liabilities
2,233,430
2,271,355
773,990
667,746
659,514
Not allocated
-
-
-
11,297
Equity
-
-
-
158,808
Other segment items
Investments in property and equipment
and in intangible assets
2,101,250
2,271,355
417
1,101
322
1,840
1,006
1,642
778
3,426
131
The report on operations according to segments in 2011:
31 December 2011
Total income
- external income
Retail
Corporates
Financial markets
43,402
66,401
32,300
142,103
43,402
65,248
32,300
140,950
Total
- income from other segments
-
1,153
-
1,153
24,596
22,419
1,880
48,895
10,937
5,716
(268)
16,385
364
(403)
7,168
7,129
-
-
876
876
37
(567)
1,081
551
694
339
1,956
2,989
-
-
3,598
3,598
Income from financial transactions
- dividend income
- net gains / (losses) from financial
assets and liabilities not classified at
fair value through profit or loss
liabilities held for trading
liabilities designated at fair value
- changes in fair value from hedging
-
-
(200)
(200)
- foreign exchange translation net (losses)
- net (losses) from derecognition of
assets
(362)
(175)
(143)
(680)
(5)
-
-
(5)
Net other operating income
Administrative expenses with
depreciation and amortisation
(129)
656
(102)
425
(26,654)
(8,782)
(2,653)
(38,089)
(137)
111
(571)
(597)
(1,563)
(35,947)
(15,168)
(52,678)
7,414
(16,230)
(9,714)
(18,530)
-
-
-
Provisions
Impairment charges
Profit before income tax
Deferred tax
Net (loss)
Segment assets
3,715
(14,815)
538,305
1,178,381
738,742
2,455,428
Subsidiary
-
12,340
-
12,340
Not allocated
-
-
-
Total assets
Segment liabilities
24,997
2,492,765
796,641
707,528
792,628
Not allocated
-
-
-
13,799
Equity
-
-
-
182,169
Other segment items
Investments in property and equipment
and in intangible assets
132
2,296,797
2,492,765
515
1,647
383
2,545
1,156
1,774
861
3,791
Reconciliation of results by geographic area:
31 December 2012
Slovenia
Revenues
Non current assets
122,019
1,338,043
Germany
7,722
42,818
Croatia
5,178
39,073
Austria
2,423
40,182
713
10,180
Bosnia and Herzegovina
Serbia
651
9,211
France
477
22,716
Italy
370
5,233
United Kingdom
347
7,885
Sweden
239
9,452
Russia
200
2,634
94
3,142
Finland
Kosovo
63
-
Denmark
46
2,996
Poland
29
-
Luxembourg
25
10,057
Spain
24
2
Slovakia
19
351
Cyprus
16
-
Switzerland
15
1,893
Norway
15
-
Ukraine
14
-
(141)
623
(366)
15,836
(1,392)
13,965
Greece
Netherlands
Belgium
Other - EU countries
Other
Total
6
2
(148)
27
138,658
1,576,321
133
31 December 2011
Revenues
Non current assets
Slovenia
114,339
1,441,482
Germany
11,364
43,671
Croatia
5,910
50,206
Austria
4,135
44,898
Belgium
2,366
13,731
915
15,441
Netherlands
863
22,158
Bosnia and Herzegovina
807
12,712
Switzerland
423
2,090
United Kingdom
342
7,565
Serbia
Italy
331
11,004
France
315
24,877
USA
267
2,491
Russia
242
3,306
Sweden
218
9,596
FYR of Macedonia
147
67
Finland
92
3,183
Greece
80
3,258
Spain
75
2,936
Ireland
37
-
Slovakia
26
483
Hungary
22
6
Japan
18
-
Ukraine
17
185
Australia
15
-
Poland
14
-
Canada
Denmark
Other - EU countries
Other
Total
134
9
-
(1,288)
2,956
4
49
(2)
-
142,103
1,718,351

Annual Report 2012 Banka Celje, d.d., and the Banka Celje Group

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