PODGORIČKA BANKA - Societe Generale Montenegro

Transcription

PODGORIČKA BANKA
SOCIETE GENERALE GROUP A.D., PODGORICA
FINANCIAL STATEMENTS FOR THE YEAR
ENDED DECEMBER 31, 2011
PODGORIČKA BANKA SOCIETE GENERALE GROUP A.D., PODGORICA
CONTENTS
Page
Independent Auditors’ Report
1-2
Income Statement
3
Balance Sheet
4
Statement of Changes in Equity
5
Cash Flow Statement
6
Notes to Financial Statements
7 – 37
Analysis to the financial statements for 2011
38 - 50
Short form
51 - 56
English Translation of Financial Statements issued in Montenegrin Language
3
4
5
6
NOTES TO FINANCIAL STATEMENTS
1.
FOUNDATION AND BUSINESS ACTIVITY
Podgorička Banka A.D., Podgorica was established as a spin-off of Montenegrobanka D.D.,
Podgorica in the course of 1992.
On November 21, 2001, the Central Bank of Montenegro issued an approval enabling the Bank to
continue its operations pursuant to Decision 27.
Following the aforementioned privatization process that took place in 2005, the majority interest in
the Bank is held by Societe Generale, Paris, France. On September 26, 2006, the Bank was inscribed
in the Central Register of the Commercial Court in Podgorica under the registration number 40000880/019, operating the activities as Podgorička Banka Societe Generale Group A.D.,
Podgorica.
The Bank is licensed to perform credit, depositary and guarantee operations, as well as foreign
payments transactions, depo transaction, to provide safekeeping services, issuance, processing and
recording of payment instruments (including credit cards, travellers’ and banks’ cheques).
The Bank is seated in Podgorica, at the street address Novaka Miloševa 8a.
As of December 31, 2011, the Bank was comprised of a Central Office located in Podgorica and 20
branch offices located throughout the territory of Montenegro.
As of December 31, 2011, the Bank had 267 employees (December 31, 2010: 255 employees).
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2.
BASIS FOR PREPARATION AND PRESENTATION OF THE FINANCIAL STATEMENTS
2.1.
Basis for preparation and presentation of the financial statements
The Bank maintains its accounting records and prepares its statutory financial statements in
accordance with the Accounting and Auditing Law of Montenegro (Official Gazette of Montenegro,
no. 69/2005, no. 80/2008 and no. 32/2011) and specifically, in accordance with the relevant
Decision pertaining to the application of International Accounting Standards (“IAS”) in Montenegro
(Official Gazette of Montenegro, no. 69/2002). Accordingly, International Financial Reporting
Standards (IFRS) are applicable for financial statements starting from January 1, 2003.
The financial statements are presented in the format required under Articles 17 and 18 of the
Accounting and Auditing Law of Montenegro and European Union Directive numbered 86/635/EEC
dated December 8, 1986, which relates to the annual reports of banks and other financial
institutions. Such statements represent the complete set of financial statements as defined under
the law, which differ in some respects from those defined under the of IAS 1, “Presentation of
Financial Statements”.
The accounting policies adopted in the preparation and presentation of the financial statements for
the period ended December 31, 2011 differ from the IFRS requirements primarily in the allowances
for the impairment of financial instruments as required by IAS 39 – “Financial instruments:
Recognition and measurement” and disclosures of financial instruments as required by IFRS 7 –
“Financial instruments: Disclosures“. The impairment of financial instruments was estimated in
accordance with the applicable Regulations of the Central Bank of Montenegro (Note 3.7). Such
policy might result in significant differences from the amounts which would be determined, had the
allowances for the impairment of financial instruments been estimated based on discounted
expected future cash flows by applying the original effective interest rate, as required by IAS 39,
“Financial Instruments: Recognition and Measurement”. In addition, the Bank suspended calculated
interest on loans classified in categories C, D and E (“impaired assets” in accordance with the
Decision of the Central Bank on minimum standards for risk management in banks), the decision also
stipulates that the risk assets classified as category E should be written off from balance sheet
assets and recorded as off balance sheet under “written-off loans”.
Due to the potentially significant effects of the above-described matters, the accompanying
financial statements cannot be described as having been prepared in accordance with International
Financial Reporting Standards.
In the preparation of the accompanying financial statements, the Bank has adhered to the
accounting policies described in Note 3, which are in conformity with the accounting, banking and
tax regulations prevailing in Montenegro.
The official currency in Montenegro and the Bank’s functional currency is Euro (EUR).
8
2.
BASIS FOR PREPARATION AND PRESENTATION OF THE FINANCIAL STATEMENTS
(continued)
2.2.
Use of estimates
The presentation of financial statements requires the Bank’s management to make best estimates
and reasonable assumptions that affect the assets and liabilities’ amounts, as well as the disclosure
of contingent liabilities and assets as of the date of the preparation of the financial statements, and
the income and expenses arising during the accounting period. These estimations and assumptions
are based on information available as of the date of the financial statements preparation. However,
actual outcome may vary from the estimated values. The most important estimates were performed
on the following balance sheet positions:
Provisions on loans and interest receivables
Provisions on deposits placed in other banks
Provision on equity investments
Provisions on off - balance sheet items
Provisions on employee benefits
Provisions on litigations and claims
Useful life of intangible and tangible assets
Bank's financial statements include provisions, calculated by an actuary, based on the estimated
present value of retirement benefits and jubilee awards to employees upon vesting in respective
rights, using of Projected Unit Credit method. However, the Bank’s future operating results may
vary from the estimated values.
3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
3.1.
Income and Expense Recognition
Interest income and expense are recognized in the income statement for all instruments measured
at amortized value using the effective interest method.
The effective interest rate method is a method of calculating the amortized cost of a financial asset
or a financial liability and of allocating the interest income or interest expense over the relevant
period. The effective interest rate is the rate that discounts estimated future cash payments or
receipts over the expected life of a financial instrument or, where appropriate, a shorter period, to
the net carrying amount of the financial asset or financial liability. When calculating the effective
interest rate, the Bank estimates cash flows considering all contractual terms of the financial
instrument (i.e. prepaid payment options) but does not consider future credit losses. The
calculations include all fees and commissions paid or received between parties to the contract that
are an integral part of the effective interest rate, transaction costs and all other premiums or
discounts.
Interest income and interest expense, including penalty interest and operating income and expenses
related to interest-bearing assets and liabilities are accounted for on an accrual basis.
Fees for banking services and fee and commission expenses are recorded when due, i.e., when
realized.
Income and expenses arising from loan and guarantee origination are accounted for an accrual basis
by using effective interest rate.
9
3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
3.2.
Foreign Exchange Translation
Transactions denominated in foreign currencies are transferred into euros by using official average
exchange rates prevailing on the Interbank Market effective at the date of each transaction.
Assets and liabilities denominated in foreign currencies are translated into euros by applying the
official average exchange rates, as determined on the Interbank Market, prevailing at the balance
sheet date.
Net foreign exchange gains or losses arising upon the translation of transactions, and the assets and
liabilities denominated in foreign currencies are credited or charged to the income statement.
Commitments and contingent liabilities denominated in foreign currencies are translated into euros
by applying the official average exchange rates prevailing on the Interbank Market, at the balance
sheet date.
3.3.
Leasing
The leases entered into by the Bank are operating leases. The payments made under operating
leases are charged to operating expenses in the income statement on a straight-line basis over the
period of the lease agreement duration.
3.4.
Taxes and Contributions
Income Taxes
Current income taxes
Income taxes are calculated and paid in accordance with income tax regulations defined under the
Montenegrin Income Tax Law, Article 28 (Official Gazette of Montenegro, no. 80/2004, no. 40/2008
and no.86/2009) as per the effective proportional tax rate of 9% on taxable income.
The base for the income tax calculation is determined based on the income stated in its statutory
statements of income following certain adjustments to its income and expenses performed in
accordance with the Montenegrin Income tax Law (Articles 8 and 9, regarding the adjustment of
income and Articles 10 to 20 pertaining to the adjustment of expenses).
Capital losses may be set off against capital gains earned in the same year. In case there are
outstanding capital losses after the set-off of capital losses against capital gains earned in the same
year, these outstanding losses are available for carry-forward in the following 5 years.
The Montenegrin tax regulations do not envisage any tax losses of the current period to be used to
recover taxes paid within a specific carry-back period. However, any current year losses reported in
the annual corporate income tax returns may be carried forward and used to reduce or eliminate
taxes to be paid in future accounting periods, but only for a period of a maximum of five years.
Deferred income taxes
Deferred income tax is determined using the balance sheet liability method, for the temporary
differences arising between the tax bases of assets and liabilities, and their carrying values in the
stand alone financial statements. The currently-enacted tax rates at the balance sheet date are
used to determine the deferred income tax amount. Deferred tax liabilities are recognized for all
taxable temporary differences. Deferred tax assets are recognized for the deductible temporary
differences, and the tax effects of income tax losses and credits available for carry forward, to the
extent that it is probable that future taxable profit will be available against which deferred tax
assets may be utilized.
10
3.
3.4.
Taxes and Contributions (continued)
Taxes, contributions and other duties not related to operating results
Taxes, contributions and other duties that are not related to the Company’s operating results,
include property taxes, employer contributions on salaries, and various other taxes and
contributions paid pursuant to republic and municipal regulations.
3.5.
Cash and Cash Equivalents
Cash and cash equivalents comprise cash (EUR and foreign currencies), balances with the Central
Bank of Montenegro and other banks.
3.6.
Loans
Loans approved by the Bank are recorded in the books when funds are transferred to the loan
beneficiary’s account.
Loans are stated in the balance sheet in the amount of placement approved, as decreased by the
principal repaid and allowance for impairment which is based on the assessment of risk inherent in
certain placements and risks which have been historically identified in the credit portfolio. The
Bank’s management applies the methodology prescribed by the Central Bank of Montenegro in its
evaluation of the risks (Note 3.7).
3.7.
Allowances for Impairment and Provisions for Potential Losses
The Decision issued by the Central Bank of Montenegro regarding minimal standards for
management of credit risks in banks („Official Gazette of Montenegro, no. 60/2008, 41/2009) i.e.
the Decision regarding temporary measures for management of credit risks in banks („Official
Gazette of Montenegro, no. 64/2009, 87/2009, 66/2010 and 70/2010) sets forth the following:
elements of credit risk management, minimum criteria and manner of classifying assets and balance
sheet items which render the Bank susceptible to credit risk, manner of calculating and suspending
uncollected interest, manner of determining the minimum provisions for potential losses contingent
on the Bank's exposure to credit risk. The Bank's risk-weighted assets, within the meaning of this
Decision, are comprised of loans, interest, fees and commissions, lease receivables, deposits with
banks, advances and all other items included in the balance sheet exposing the Bank to default risk,
as well as guarantees issued, other sureties, effectuated letters of credit and approved, but
undrawn loan facilities, as well as all other off-balance sheet items being the Bank's contingent
liabilities.
Pursuant to the aforementioned Decision, loans and other risk bearing assets are classified into the
following categories:
A category (“Good”) – including assets assessed as collectible in full pursuant to the
agreement;
B category (“Special Mention”) – with B subcategory including items for which there is low
probability of loss, but which, still the same, require special attention, as the potential risk,
if not adequately monitored, could diminish their collectability;
C category (“Substandard assets”) – with C1, C2 and C3 subcategories for which there is
high probability of loss, due to the clearly identified collectability issues;
D category (“Doubtful assets”) – including items the collection of which is, given the
creditworthiness of loan beneficiaries, quality of collaterals, highly unlikely;
E category (“Loss”) – including the items which are uncollectible in full, or will be collectible
in an insignificant amount.
11
3.
3.7.
Allowances for Impairment and Provisions for Potential Losses (continued)
In accordance with the amendments to the above stated decisions on minimal standards for
management of credit risks in banks, the Bank applied the following percentages and days of delay
by categories of risk:
Risk category
A
B1
B2
C1
C2
C3
D
E
As of December 31 2011.
% provisions
Days of delay
0%
3%
3%
15%
30%
50%
75%
100%
<30
31-60
61-90
91-150
151-210
211-270
271-365
>365
As of December 31 2010.
% provisions
Days of delay
0%
3%
3%
15%
30%
50%
75%
100%
<30
31-60
61-90
91-150
151-210
211-270
271-365
>365
The amount of provision for potential losses has not been provided for Bank's placements classified
into category A. The estimated amount of provision for potential losses is computed by applying the
following percentages to the corresponding categories: 3% for placements classified into category
B, from 15% to 50% for placements classified into category C, 75% for placements classified into
category D and 100% for placements classified into category E.
As in accordance with the Decision issued by the Central Bank of Montenegro, the Bank is to
suspend any accrued, uncollected interest and should terminate any further accruals of interest on
its non-performing assets, unless the non-performing assets are secured by quality collateral and
are in the process of collection, to the extent that such asset recoveries are anticipated within a
reasonable period of time (generally, not exceeding three months). Following the suspension of
interest accruals on non-performing assets, the Bank remains under an obligation to record the
subsequent, matured interest on the same basis, on its off-balance sheet records and upon
classification, designates the accrued income into E category. The Decision further prescribes that
the risk bearing assets classified into E category should be written off from balance sheet items and
recorded in the off-balance sheet records under “Loans written off.”
Pursuant to the Decision, provisions for potential losses on assets are calculated based on the
carrying value net of any deductible items of collaterals based on:
cash deposits,
irrevocable guarantees of the Government of Montenegro and
irrevocable guarantees of the countries or central banks of the OECD member countries,
banks with credit rating better than BBB+ pursuant to the ratings of the agency Standard &
Poor’s, i.e., any equivalent rating of other internationally acclaimed rating agencies and legal
entities whose business operations are under the control of the Central Bank of Montenegro.
12
3.
3.8.
Equity Investments in legal entities and securities available-for-sale
Securities available-for-sale include securities which cannot be classified as trading financial assets
or as held to maturity and are comprised of equity investments in other legal entities.
Equity instruments legal entities that do not have a quoted market price in an active market and for
which other methods of reasonably estimating fair value are inappropriate and unworkable, are
measured at cost, less any allowance for impairment.
Investments in Plantaže A.D., Podgorica are recorded at fair value.
After initial recognition, unrealized gains and losses arising from changes in the fair value of
available-for-sale financial assets are recognized directly in equity (revaluation reserves), until the
financial asset is derecognized or impaired at which time the cumulative gain or loss previously
recognized in equity should be recognized in profit or loss.
Dividends on available-for-sale equity instruments are recognized in the income statement when the
entity’s right to receive payment is established.
3.9.
Held to maturity securities
Held to maturity securities relates to purchase of Treasury bills with maturity of 182 days, which
are issued by the Government of Montenegro. Income is recognized on a monthly bases based on
approved (contracted) discount. Part of the T-bills was funded from obligatory reserve, which the
Bank holds with the Central Bank of Montenegro. In accordance with Article 8 of “The decision on
reserve requirements for banks to be Held with the Central Bank of Montenegro” (Official Gazette of
Montenegro no. 35/2011 dated July 27, 2011) the Bank can hold up to 25% of the Bank’s obligatory
reserve requirements in the form of treasury bills issued by the Government of Montenegro.
3.10.
Business Premises, Other Property and Equipment and Intangible Assets
Business premises, other property, equipment and intangible assets at December 31, 2011 are
recorded at purchase value less accumulated depreciation and/or amortization. Purchase value
represents the prices billed by suppliers together with all costs incurred in bringing the respective
asset to the location and condition necessary for its intended use.
Depreciation and/or amortization are calculated on a straight-line basis on purchase value of
business premises and other property, equipment and intangible assets in order to write them off
over their expected useful lives. Depreciation and/or amortization are calculated using the following
prescribed annual rates:
Rate in %
Property
Computer equipment
Furniture and other equipment
Vehicles
Intangible assets
3.3
25.0
15.0
15.0
30.0
13
3.
3.10.
Business Premises, Other Property and Equipment and Intangible Assets (continued)
The calculation of depreciation and/or amortization commences when asset is placed into use.
Pursuant to the Article 13, paragraph 6 of the Income Tax Law ("Official Gazette of Montenegro"
no. 80/2004 and 40/2008 and 86/09) value of buildings for tax purposes is calculated using the
proportional method or equipment and application software by applying digressive method for the
entire period, regardless the date of activation.
3.11.
Impairment of tangible and Intangible assets
At each balance sheet date, the Bank’s management reviews the carrying amounts of the Bank’s
tangible and intangible assets. If there is any indication that such assets have been impaired, the
recoverable amount of the asset is estimated in order to determine the extent of the impairment
loss. If the recoverable amount of an asset is estimated to be less than its carrying value, the
carrying amount of the asset is reduced to its recoverable amount.
An impairment loss is recognized as an expense of the current period and is recorded under other
operating expenses. Where impairment loss subsequently reverses, the carrying amount of the
asset is increased up to the revised estimate of its recoverable value. However, this is performed so
that the increased carrying amount does not exceed the carrying value that would have been
determined had no impairment loss been recognized for the asset in prior years.
3.12.
Provisions
Provisions are recognized when the Bank has a present legal or constructive obligation as a result of
past events, and when 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.
3.13
Employee Benefits
Employee Taxes and Contributions for Social Security
In accordance with the regulations prevailing in Montenegro, the Bank has an obligation to pay
contributions to various State’s social security funds. These obligations involve the payment of
contributions on behalf of the employee, by the employer in an amount calculated by applying the
specific, legally-prescribed rates. The Bank is also legally obligated to withhold contributions from
gross salaries to employees, and on behalf of the employees, to transfer the withheld portions
directly to government funds. These contributions payable on behalf of the employee and employer
are charged to expenses in the period in which they arise.
Retirement benefits and other long term employee benefits
In accordance with the Collective Bargaining Agreement, the Bank has an obligation to disburse an
employment retirement benefit to a retiree, in an amount equal to six average net salaries effective
in the Bank in the month prior to the employee’s retirement. In addition, employees are entitled to
receive jubilee awards at their 10th, 20th and 30th employment anniversaries with the Bank as
follows:
-
for 10 years of service – one minimal salary in the Bank,
for 20 years of service – two minimal salaries in the Bank,
for 30 years of service – three minimal salaries in the Bank
14
3.
3.13.
Employee Benefits (continued)
Retirement Benefits and Other Long Term Employee Benefits (continued)
The Bank's financial statements as of December 31, 2011 include provisions calculated by an
actuary based on the estimated present value of retirement benefits and jubilee awards to
employees upon vesting in respective rights, using of projected unit credit method.
3.14.
Financial Liabilities – Borrowings
Borrowings are initially recognized at fair value less transaction costs. Subsequently, borrowings
are carried at their amortized value; all differences between the realized inflows (less transaction
costs) and the amounts repaid are carried through profit and loss over the period of using the
amounts borrowed by applying the effective interest rate method.
3.15.
Fair Value
In accordance with IAS, “Financial Instruments: Disclosures and Presentation”, the fair value of
financial assets and liabilities should be disclosed in the Notes to the Financial Statements. For
these purposes, the fair value is defined as an amount at which an asset can be exchanged, or a
liability settled, between knowledgeable willing parties in an arm’s-length transaction. The Bank
should disclose the fair value information of those components of assets and liabilities for which
published market information is readily available, and for which their fair value is materially
different from their recorded amounts.
In Montenegro, sufficient market experience, stability and liquidity do not exist for the purchase and
sale of receivables, investments and other financial assets or liabilities, for which published market
information is presently not available. Fair value cannot readily be determined in the absence of
active capital and financial markets, as generally required under the provisions of IFRS/IAS.
According to the opinion of the management of the Bank, the reported carrying amounts are the
most valid and useful reporting values under the present market conditions and accounting
regulations of Montenegro and Central Bank’s regulations for financial reporting. In the amount of
the identified estimated risk that the carrying value will not be realized, a provision is recognized
based on a relevant decision of the Bank’s management.
15
4.
INTEREST INCOME AND EXPENSE
a)
Interest Income
In ’000 EUR
Deposits with:
- foreign banks
- Central Bank
Loans:
- state institutions
- corporate customers
- retail customers
Held to maturities
b)
2011
2010
47
25
21
23
72
44
196
9,055
9,971
264
6,232
8,078
19,222
14,574
83
-
19,377
14,618
2011
2010
317
70
716
907
51
69
199
1,165
2,010
1,484
3,936
3,491
5,946
4,975
2011
2010
2,211
257
134
70
(167)
969
576
(5)
(80)
60
2,672
1,353
Interest Expense
In ’000 EUR
Deposits with:
- financial institutions
- state institutions
- corporate customers
- retail customers
Liabilities arising on loans and other borrowings
5.
PROVISIONS FOR LOSSES
a)
Charge for the Period
In ’000 EUR
Net, provisions /(release of provisions) based on:
- deposits with foreign banks
- loans
- interest
- country risk
- off-balance sheet items
- operating risk
16
5.
PROVISIONS FOR LOSSES (continued)
b)
Movements on the Account of Allowance for Impairment of Uncollectible Receivables and
provisions in 2011
In ’000 EUR
Balance, beginning of year
Charge for the year, net
Transfer to off-balance
sheet items
Balance, end of year
Loans and
Lease
Operations
(Note 11)
Interest
Off-Balance
Sheet Items
(Note 19)
Operating
Risk
(Note 19)
Total
2,733
2,211
9
257
131
134
179
70
3,052
2,672
(1,522)
(258)
-
(17)
(1,797)
3,422
8
265
232
3,927
Year 2010
In ’000 EUR
Balance,
beginning of year
Charge for the
year, net
Reversal of
provisions, net
Transfer to offbalance sheet
items
Balance, end of
year
OffBalance
Sheet
Items
(Note
19)
Operating
Risk
(Note 19)
Total
Bank
deposits
Loans and
Lease
Operations
(Note 11)
Interest
Country
risk
167
3,806
12
5
211
119
4,320
-
969
576
-
-
60
1,605
(167)
-
-
(5)
(80)
-
(252)
-
(2,042)
(579)
-
-
-
(2,621)
-
2,733
9
-
131
179
3,052
17
6.
FEE AND COMMISSION INCOME AND EXPENSE
a)
Fee and Commission Income
In ’000 EUR
Loan origination fees
Fee and commission income from off-balance-sheet operations
Fee and commission income from payment transactions
Fee and commission for foreign payments
Fees and commission on credit card business
Fee and commission for payroll
Other fee and commission income
b)
2010
1,008
325
1,114
773
1,208
294
532
765
512
1.233
809
1,264
314
548
5,254
5,445
2011
2010
302
108
391
207
336
248
3
276
37
265
135
289
201
20
1,595
1,223
2011
2010
741
34
60
-
1,871
67
54
38
38
174
7
9
1,047
2,046
Fee and Commission Expense
In ’000 EUR
Fees and commissions payable to the Central Bank
Fee and commission expense from payment transactions
Deposit insurance premium fees
Loan and guarantees fees
Visa and Master card fees
Fees and commissions for electronic banking
Other fee and commission expense
7.
2011
OTHER INCOME, net
In ’000 EUR
Collected receivables previously written off
Income from foreign exchange operations
Dividend income
Reversal of prior year expenses
Revenue from other services – transportation of money and
valuables
Other income
18
8.
GENERAL EXPENSES
In ’000 EUR
Net salaries
Taxes and contributions on salaries
Jubilee awards and severance pays for voluntary abandonment
of workplace
Remunerations to the Management Board members
Business trip expenses
Other fees
Rentals
Maintenance
Depreciation and amortization charge:
- property and equipment (Note 12)
- intangible assets (Note 15)
Security
Insurance premiums
Taxes payable
Sponsorships and donations
Advertising
Electricity and fuel
Telecommunication services and postal expenses
Office material
Cost of purchasing payment cards
Professional services
Provisions for employee benefits (Note 18)
Expenses from operational losses
Other costs
9.
INCOME TAXES
a)
Components of Income Taxes
In ’000 EUR
Current income taxes
Deferred income taxes
2011
2010
3,454
2,194
3,382
1,925
110
69
52
176
441
602
1,294
52
74
232
448
624
688
76
315
146
140
56
488
155
302
63
169
622
40
17
356
854
111
286
118
92
34
333
180
329
62
194
421
(54)
237
414
10,732
11,642
2011
2010
441
(12)
147
140
429
287
19
9.
INCOME TAXES (continued)
b)
Numerical reconciliation between tax expense and the product of accounting results
multiplied by the applicable tax rate
In ’000 EUR
2011
2010
(Loss)/Profit before tax
4,707
2,996
424
270
11
(6)
5
4
8
429
287
9.11%
9.57%
Income tax at statutory rate of 9%
Tax effects of expenses unrecognized for tax purposes
Value of investments not exceeding 5% of the tax group cost
Other
Income tax reported in income statement
Effective interest rate
The tax rate used in 2011 and 2010 amounts to 9% and is applied to the taxable profit of legal
entities in Montenegro as in accordance with the Corporate Income Tax Law.
c)
Deferred tax assets
In ’000 EUR
Arising from the temporary difference between the basis at
which property and equipment are recognized in the tax balance
and their carrying value
Deferred tax assets (Note 15)
December 31,
2011
December 31,
2010
24
-
12
-
24
12
December 31,
2011
December 31,
2010
12
12
-
152
10
(150)
24
12
2011
2010
120
-
120
-
Movement during the year was as follows:
In ’000 EUR
Balance, at the beginning of the year
Calculated deferred tax during the year
Transferable tax losses
d)
Deferred tax liabilities (Note 18)
In ’000 EUR
Deferred tax liability as effect of booked unrealized losses on
available for sale financial assets
20
10.
CASH AND DEPOSIT ACCOUNTS HELD WITH DEPOSITORY INSTITUTIONS
In ’000 EUR
Cash in hand:
- in EUR
- in foreign currency
Gyro account
Correspondent accounts with foreign banks
Obligatory reserves with the Central Bank of Montenegro
Time deposits with foreign banks
Other
Decembar 31,
2011
Decembar 31,
2010
7,087
761
11,804
1,795
8,747
1,089
17
5,066
686
21,064
1,679
8,851
15,308
8
31,300
52,662
The Bank’s obligatory reserves at December 31, 2011 were set aside in accordance with the Central
Bank of Montenegro Regulation with respect to the “The decision on reserve requirements for banks
to be held with the Central Bank of Montenegro” (Official Gazette of Montenegro no. 35/2011 dated
July 27, 2011). Pursuant to the afforested, the obligatory reserve is calculated by applying the
reserve percentages as of:
-
9,5% on deposits base which is consisted of demand deposits and deposits with agreed maturity
up to one year, or up to 365 days and
8.5% on deposit base which is consisted of deposits with agreed maturity over one year, or over
365 days.
On deposits with agreed maturity over one year, or 365 days, and clause on possibility of
termination of the deposit within less than one year, the rate appiled is 9.5%.
The obligatory reserve is to be calculated by applying the aforementioned ratios on average amount
of deposits during the previous week, two days before the expiry of the maintenance period.
The Bank’s obligatory reserves represent the minimum deposits set aside onto domestic accounts of
obligatory reserves and/or onto the accounts of the Central Bank of Montenegro (“CBM”) held
abroad, In accordance with the Decision, the Bank can hold up to 25% of the Bank’s obligatory
reserve requirements by restricting the treasury bills issued by the Government of Montenegro. For
the amount of 25% of the obligatory reserve requirement deposited by banks, the Central Bank pays
interest at the annual rate of 1% up to the eighth day of the month for the preceding month. The
obligatory reserve is held in EUR.
As of December 31, 2011, time deposits with foreign banks in the amount of EUR 1,089 thousand
relate to a deposit placed with Societe Generale New York maturing over the period of four days and
accruing interest at an annual rate of 0.8%.
21
11.
LOANS AND LEASES
31. decembar
2011.
31. decembar
2010.
279
2,249
135
1,455
13
232
2,389
202
1,375
5
Short-term loans:
- Government
- municipalities (public institutions)
- privately-owned corporate entities
- state owned corporate entities
- retail customers
- other
8,000
9
37,383
3
2,054
7
13
29,205
2,134
30
Long-term loans:
- state owned corporate entities interest
- retail customers
- other
74,862
8,312
2,419
96,077
44
64,518
7,842
1,776
87,564
53
233,301
(3,422)
197,338
(2,733)
229,879
194,605
In ’000 EUR
Matured loans:
- state owned corporate entities interest
- retail customers
- other
Less: Provisions for credit losses on loans
Short-term loans to corporate entities are mostly approved for working assets with maturities from
1 to 12 months, while long-term loans are mostly approved with maturities from 12 to 180 months
and mostly relate to corporate entities operating in the field of trade, mining and energy and
construction industry. Short-term loans to corporate entities are mostly approved at an interest
rate of 2.5% to 19% per annum.
Short-term loans to retail customers are approved with maturities from 6 to 12 months at rates
ranging from 8% to 17.5% annually. Long-term loans to retail customers include loans for housing
construction, adaptation of residential and business premises, financing the purchase of
consumables and other purposes, maturing within 13 to 360 months at an annual interest rate from
0.74% to 21.9%.
As for the geographic concentration of loans to customers, the Bank’s portfolio mostly includes
loans to customers residing on the territory of Montenegro.
As of 31 December 2011, the total amount of loans that are secured by parent bank guarantees,
guarantees of some other members of the Societe Generale Group or guarantee issued by
Government of Montenegro is EUR 29,951 thousand. These loans are secured by guarantees in the
amount of EUR 30,670 thousand.
22
11.
LOANS AND LEASES (continued)
The concentration of the Bank’s gross loan placements with clients per separate industries was as
follows:
December 31,
December 31,
In ’000 EUR
2011
2010
Agriculture, hunting and fishing
Construction
Mining industry and energy
Real-estate trade
Trade
Service industry, tourism and accommodation industry
Transport, storage, post and telecommunication
Administration and other public utilities
Retail customers
Other
7,600
16,139
6,116
23,169
47,772
1,356
4,503
9,602
99,587
17,457
126
10,675
13,143
25,463
40,818
858
666
1,809
88,077
15,703
233,301
197,338
Buildings
Equipment and
Other Assets
Total
Cost
Balance, January 1, 2010
Additions
Sale and disposal
3,670
39
(65)
5,041
239
(39)
8,711
278
(104)
Balance, December 31, 2010
3,644
5,241
8,885
7559
-
154
(575)
7713
(575)
11,203
4,820
16,023
1035
121
(17)
3,266
733
(37)
4,301
854
(54)
1,139
3,962
5,101
121
-
567
(555)
688
(555)
1,260
3,974
5,234
Net Book Value:
- December 31, 2011
9,943
846
10,789
- December 31, 2010
2,505
1,279
3,784
12.
BUSINESS PREMISES AND OTHER FIXED ASSETS
Movements in 2011 and 2010 are presented in the following table:
Additions
Sale and disposal
Accumulated Depreciation
Balance, January 1, 2010
Amortization (Note 8)
Sale and disposal
Amortization (Note 8)
Sale and disposal
As of December 31, 2011, the Bank doesn’t have property under pledge to ensure repayment of
loans and other liabilities.
23
13.
EQUITY INVESTMENTS IN OTHER LEGAL ENTITIES
In ’000 EUR
Banks and financial institutions:
- AIK banka A.D., Niš, Republic of Serbia
- JUBMES banka A.D., Belgrade, Republic of Serbia
- Beogradska berza A.D., Belgrade, Republic of Serbia
- Lovćen osiguranje A.D., Podgorica
- CG Broker A.D., Podgorica (the Bank's equity interest 11.57%)
Other legal entities:
- Plantaže A.D., Podgorica (the Bank's equity interest 9.23%)
- Central Depository Agency, Podgorica A.D., Podgorica
- Tržište novca A.D., Belgrade, Republic of Serbia
- Montenegro Airlines A.D., Podgorica
14.
December 31,
2011
December 31,
2010
7
3
6
10
32
7
3
6
10
32
58
58
3,158
5
5
3
5,317
5
5
3
3,171
5,330
3,229
5,388
SECURITIES HELD TO MATURITY
As of December 31, 2011 securities held to maturity amounted EUR 5,438 thousand and it relates
to purchase Treasury bills with maturity of 182 days, which are issued by the Ministry of finance of
Montenegro. On 4th auction dated August 29, 2011, the Bank purchased EUR 3.5 million T bills,
with interest rate 3.25% annually, and on 7th auction dated December 27, 2011 additional EUR 2
million, with interest rate of 4.5% annually.
Unamortized discount of T-bills at the end of period amounted EUR 62 thousand. Part of T-bills was
funded from obligatory reserve, which Bank holds with the Central Bank of Montenegro. In
accordance with Article 8 of “Decision on reserve requirements for banks to be held with the Central
Bank of Montenegro” (Official Gazette of Montenegro no. 35/2011 issued on July 27, 2011) the
Bank can hold up to 25% of the Bank’s obligatory reserve requirements in T-bills.
24
15.
OTHER ASSETS
December 31,
2011
December 31,
2010
Interest, fee and commission receivables
Deferred interest income
Deferred management fee on loans received
Intangible assets
708
828
105
214
697
600
134
129
Prepaid expenses:
- leasehold improvements
- other expenses
Receivables from employees
Deferred tax assets (Note 9)
Receivables arising from advance payments of income tax
Receivables from dividends
Receivables from clients for legal costs
Other receivables
195
81
55
24
104
106
213
107
109
55
12
57
52
65
25
2,633
2,042
In ‘000 EUR
Intangible assets are mostly comprised of licenses and software. The movements on intangible
assets in the course of 2011 and 2010 were as follows:
December 31,
2011
December 31,
2010
Cost
Balance, January 1,
Additions
607
161
526
81
Balance, December 31,
768
607
Provisions
Balance, January 1,
Amortization
478
76
367
111
554
478
Net Book Value:
214
129
In ’000 EUR
25
16.
DEPOSITS
In ’000 EUR
Demand deposits:
- Government of Montenegro
- funds
- retail customers
- non-profit organizations
- other
Short-term deposits:
- Government of Montenegro
- retail customers
-non-profit organizations
Long-term deposits:
- retail customers
December 31,
2011
December 31,
2010
4,054
502
29,115
1,861
2,750
594
26,395
4,685
20
4,117
1,174
50,200
140
3,762
493
27,356
4,196
58
69,976
91,496
4,395
9,890
11,944
24,768
21
589
150
293
19,061
20
51,018
20,113
2,765
1
2,028
-
1,000
543
203
500
4,794
2,246
125,788
113,855
Demand deposits of retail customers, corporate customers, public and other organizations are
placed at an interest rate from 0.3% to 0.75% annually. Short-term and long-term deposits of retail
customers denominated in EUR are deposited at an interest rate ranging from 0.30 % to 8.25%
annually.
Short-term and long-term deposits of corporate customers denominated in EUR are placed at
interest rates ranging from 1.55% to 7% annually.
26
17.
LIABILITIES BASED ON LOANS AND BORROWINGS
In ’000 EUR
Liabilities towards related parties:
Societe Generale, Paris, France
Liabilities towards foreign creditors:
European bank for reconstruction and development
(„EBRD“)
December 31,
2011
December 31,
2010
103,500
103,000
15,000
4,000
118,500
107,000
As of December 31, 2011, liabilities based on loans and other borrowings in the amount of EUR
118,500 thousand include loans from parent bank loans in the amount of EUR 103,500 thousand
received from the parent bank with maturities up to one year accruing interest at rates ranging from
4.230% to 5.357% annually.
As of December 31, 2011, the Bank has liabilities toward the European bank for reconstruction and
development in the amount of EUR 15,000 thousand arising from long-term loans. The loan in the
amount of EUR 25,000 thousand is obtained for the period of five years and grace period of two
years, with interest at rate of 2.65% + 6M EURIBOR for financing development of small and medium
enterprises in Montenegro. The loan is to be repaid after grace period, in semi-annual instalments.
Undrawn amount of the loan from the European Bank for Reconstruction and Development as of 31
December 2011 amounts to EUR 10 million.
Maturity of obligations on this basis is as follows:
In ’000 EUR
Up to 1 year
from 1 to 2 years
from 2 to 3 years
from 3 to 4 years
from 4 to 5 years
December 31,
2011
December 31,
2010
105,642
4,286
4,286
4.286
-
103,000
571
1,142
1,143
1,144
118,500
107,000
27
18.
OTHER LIABILITIES
In ’000 EUR
Deferred interest on deposits
Deferred loan fees
Interest accrued on loans and deposits
Provisions for employee benefits
Insurance premiums for loans issued to retail customers
Payment transactions with foreign countries
Taxes payable
Deferred tax (Note 9)
Advances received
Liabilities arising from foreign currency savings deposits
Dividends payable
Accounts payable to suppliers
Commission jobs
Payables to employees
Payables to merchants - installment purchases
Accrued liabilities
Other liabilities
December 31,
2011
December 31,
2010
537
1,114
765
510
401
362
567
120
420
266
285
329
97
470
303
208
180
363
807
2,889
470
542
93
271
599
291
285
96
87
443
215
215
215
6,934
7,881
The provisions for employee benefits as of December 31, 2011 in the amount of EUR 510 thousand
present value of the expected future payments to employees with regard to retirement benefits and
jubilee awards after fulfilling the conditions, which is calculated by an authorized actuary using
Projected Unit Credit method.
The assumptions used for the purpose of assessment of the present value of expected future
outflows for leaving payments, retirement and jubilee awards are summarized in the table below:
The assessment on
December 31,
December 31,
2011
2010
%
%
Discount rate – Retirement benefits
Discount rate – Jubilee awards
Movement of labour
Inflation rate
The expected growth rate of salaries
3.99
3.56
1
1.65
-
3.99
3.56
1
1.65
-
The movements in the provisions for employee benefits are summarized in the table below:
2011
2010
Balance, beginning of the year
Provisions during the year (Note 8)
470
40
524
(54)
510
470
28
19.
PROVISIONS FOR LOSSES ON OFF-BALANCE SHEET CREDIT EXPOSURES
December 31,
2011
In ’000 EUR
December 31,
2010
265
232
131
179
497
310
Provisions for losses contingent on:
- off-balance sheet items (Note 5)
- operational risk (Note 5)
20.
EQUITY
As of December 31, 2011 the Bank's equity was comprised of 96,736 common shares (December
31, 2010: 96,736 common shares), having the par value of EUR 255.65.
The Law on Banks (Official Gazette of Montenegro, no. 17/2008 and 44/2010) defines the minimum
amount of initial capital of Bank in the amount of EUR 5,000 thousand. As of December 31, 2011
the Bank’s equity complied with the prescribed minimum capital requirements.
The ownership structure of the Bank’s equity as of December 31, 2011 and 2010 was as follows:
Naziv akcionara
Societe Generale, Paris,
France
Plantaže A.D., Podgorica
Hrvatska poštanska
banka AD
NFD Aureus global
developed O.I.F., Croatia
East Capital Holding,
Stockholm, Sweeden
Others
21.
Number of
Shares
2011
In '000
EUR
Number
of Shares
2010
In '000
EUR
%
Share
%
Share
87,602
2,824
22,395
722
90.56%
2.92%
87,602
2,824
22.395
722
90.56%
2.92%
-
-
-
2,851
731
2.95%
1,834
469
1.90%
-
-
-
1,116
3,360
285
860
1.15%
3.47%
1,116
2,343
285
598
1.15%
2.42%
96,736
24,731
100.00%
96,736
24,731
100.00%
COMPLIANCE WITH REGULATIONS OF THE CENTRAL BANK OF MONTENEGRO
In accordance with the regulations of the Central Bank of Montenegro, the Bank is obliged to
maintain the minimum capital adequacy ratio of 10%. The Bank is also required to maintain certain
ratios pertaining to the volume of its activities and composition of risk assets in compliance with the
Law on Banks (Official Gazette of Montenegro, no. 17/2008 and no. 44/2010) and regulations of the
Central Bank of Montenegro.
The Bank’s solvency ratio as of December 31, 2011 amounted to 14.85% (December 31, 2010:
15.83%).
29
22.
OFF-BALANCE-SHEET ITEMS
In ‘000 EUR
December 31,
2011
December 31,
2010
Guarantees, other contingent liabilities and commitments:
Guarantees to corporate entities:
- payment guarantees
- performance bonds
Irrevocable commitments for undrawn credit facilities
Unsecured letters of credit
17,099
7,375
16,427
2,829
13,070
5,120
7,537
1,757
Guaranties received
38,515
50,334
25,483
222,269
360,522
292,503
107,860
18,299
5,645
171,509
39
11,633
178,763
302,829
228,780
80,940
10,142
2,283
117,154
39
7,060
6,492
1,393
1,619
7,489
5,379
1,471
1,209
1,302,938
1,025,929
Received collaterals:
- administrative ban
- guarantees and pledge
- bonds
- mortgage and fiduciary
- - insurance policies
- movables
- deposits
- pledge of movable property
- other
Other off-balance sheet items:
- commission business
- loans written-off
- other written-off assets
- written-off and suspended interest
30
23.
RELATED PARTY TRANSACTIONS
Related party transactions relate to Parent Bank, other members of Societe Generale Group, Bank’s
shareholders, Bank’s management and employees of the Bank.
December 31,
2011
December 31,
2010
1,036
77
3
-
833
75
29
57
7
1,116
1,001
1,089
13,800
1,508
1,089
15,308
6,142
4,998
6,142
4,998
3,157
5,317
3,157
5,317
11,504
26,624
603
170
206
4
35
983
35
103,500
103,000
103,500
103,000
30
1,852
30
1,852
236
65
236
65
Total liabilities
104,749
104,952
Receivables / (Liabilities), net
(93,245)
(78,328)
In ’000 EUR
Receivables
Correspondent accounts with foreign banks:
- Societe Generale Paris
- Societe Generale New York
- Societe Generale Banka Serbia A.D., Belgrade
- SKB Banka, Ljubljana
- Societe Generale Zurich Branch
Time deposits with related parties:
- Societe Generale New York
Loans:
- Plantaža A.D, Podgorica
Equity investments in other legal entities:
Total receivables
Payables
Deposits:
- Građevinar d.o.o.
- Lovćen osiguraje
- Klinički centar Crne Gore
- Plantaža A.D., Podgorica
Borrowings:
Interest payables:
Other payables:
As of 31 December 2011, the total amount of guarantees received from the Parent bank and other
members of Societe Generale Group, used as collaterals for loans, amount to EUR 27,455 thousand.
Also, Societe Generale Group issued guarantees to the Banks client for the deposit placed to the
Bank in amount of EUR 7 millions.
31
23.
RELATED PARTY TRANSACTIONS (continued)
At December 31, 2011, loans to employees amounted to EUR 3,183 thousand (December 31, 2010:
EUR 2,817 thousand) and mostly referred to the approved long-term loans bearing interest rates
ranging from 4% + 6M Euribor to 8.02% + 6M Euribor annually.
Expenses and revenues as a result of related party transactions during 2011 and 2010 are listed
below:
In thousand of EUR
December 31,
December 31,
2011
2010
Off-balance-sheet items
Guarantees issued:
100
50
- Građevinar d.o.o.,
153
153
Guarantees received:
In ’000 EUR
Income
Interest income:
Fee and commission income:
Total income
Expenses
Interest and fees expenses:
- Građevinar d.o.o.
- Lovćen Osiguranje
Other expenses:
Total expenses
Expenses, net
253
203
34,455
46,600
34,455
46,600
2011
2010
304
46
342
21
350
363
17
4
17
4
367
367
1
1
3,573
4,629
3,575
4,629
380
222
380
222
3,955
4,851
(3,588)
(4,484)
32
24.
MATURITY ANALYSIS OF FINANCIAL ASSETS AND LIABILITIES
The Bank is exposed to daily calls on its available cash resources which influence the available cash
resources held on the current accounts or from deposits. The Bank does not maintain cash
resources to meet all of these needs since historical experience demonstrates that a minimum level
of reinvestment of maturing funds can be predicted with a high degree of certainty.
The contractual maturities of the Bank’s asset and liability components as of December 31, 2011
were as follows:
In '000 EUR
Up to one
month
From
1 to 3
month
From
3 to 6
month
From
6 to 12
month
From
1 to 5
years
Over 5
years
Total
31,300
-
-
-
-
-
31,300
9,591
14,025
30,364
45,420
94,857
39,044
233,301
1,419
3,472
1,208
1,966
-
-
3,229
-
5,438
5,856
42,310
18,705
32,330
45,420
98,086
39,044
275,895
74,236
7,272
6,220
29,904
8,155
1
125,788
27,000
5,602
18,142
20
15,000
20
45,500
313
12,858
262
281
118,500
6,498
Total
106,838
25,434
21,240
75,717
21,275
282
250,786
Maturity gap:
- December 31, 2010
(88,677)
(15,185)
(4,491)
18,517
85,242
33,220
28,626
- December 31, 2011
(64,528)
(6,729)
11,090
(30,297)
76,811
38,762
25,109
- December 31, 2010
(88,677)
(103,862)
(108,353)
(89,836)
(4,594)
28,626
- December 31, 2011
(64,528)
(71,257)
(60,167)
(90,464)
(13,653)
25,109
% of total liquidity-bearing
assets:
- December 31, 2010
(38.80%)
(45.40%)
(47.40%)
(39.30%)
(2%)
12.50%
- December 31, 2011
(25.70%)
(28.40%)
(24.00%)
(36.10%)
(5%)
10.00%
Financial assets
Cash balances and deposit
accounts with depository
institutions (Note 10)
Loans and other receivables
(Note 11)
Securities held to maturity
(Note 14)
Other financial assets
Total
Financial liabilities
Deposits (Note 16)
Obligations based on loans
and other borrowings (Note
17)
Other financial liabilities
Cumulative GAP:
The Bank’s liquidity, characterized by its ability to settle its due obligation, depends on one hand on
the balance sheet structure, and on the other hand, on the matching between cash inflows and
outflows. The structure of the Bank’s financial assets and liabilities classified according to their
relevant maturities at December 31, 2011 indicates the existence of a liquidity gap in the period upto-one-year. The primary reason for this gap lies with the fact that the short-term sources of funds
have maturities from one month up to one year, while loans from the Parent Bank have been placed
for longer periods of time.
33
25.
INTEREST RATE RISK
The Bank is exposed to various risks associated to changes in levels of market interest rates that
consequently affect the Bank’s financial position and cash flows. Interest rate risk requires special
treatment under the existing local circumstances of frequent interest rate movements, and the
irregular relationship between capital supply and demand. Interest rate risk is unfavourable when
there is fluctuation in the price of a loan with respect to the level of the interest rates applied to
deposits, on one side, and the potential to reduce the optimal difference between the average
interest rates on loans, and those on deposits, on the other.
The table below shows the Bank’s exposure to interest rate risk as of December 31, 2011:
In ’000 EUR
Up to one
month
From
1 to 3
month
From
3 to 6
month
From
6 to 12
month
Over 1
year
Total
3,276
150,225
3,472
29,199
1,966
6,952
11,483
35,442
3,276
5,438
233,301
153,501
32,671
8,918
11,483
35,442
242,015
63.43%
13.50%
3.68%
4.74%
14.64%
100.00%
61,659
68,500
7,216
50,000
6,006
-
29,795
-
8,264
-
112,940
118,500
130,159
57,216
6,006
29,795
8,264
231,440
56.24%
24.72%
2.60%
12.87%
3.57%
100%
9,393
(2,580)
(19,807)
1,882
29,412
18,300
- December 31, 2011
23,342
(24,545)
2,912
(18,312)
27,178
10,575
Cumulative GAP:
- December 31, 2010
9,393
6,813
(12,994)
(11,112)
18,300
- December 31, 2011
23,342
(1,203)
1,709
(16,603)
10,575
Interest rate sensitive assets
Interest-bearing deposits in other
institutions
Securities held to maturity (Note 14)
Loans and other receivables
Total:
% of total interest-bearing assets
Interest rate sensitive liabilities
Interest bearing deposits
Interest-bearing borrowings (Note17)
Total:
% of total interest-bearing
liabilities
Interest rate exposure:
- December 31, 2010
34
26.
CURRENCY RISK
The following table summarizes the net foreign currency exposure of the Bank as of December 31,
2011. The Bank takes on exposure resulting from fluctuations in prevailing foreign currency
exchange rates on its financial position and cash flows. The management establishes limitations on
the exposure level per currencies and in total amount and monitors such exposure on regular basis.
In ’000 EUR
RSD
USD
GBP
CHF
Other
Total
-
2,031
111
221
144
2,507
-
2,148
12
55
1
2,216
Assets in foreign currencies
Contracts for the purchase foreign
currencies and other off-balance sheet
accounts for foreign currency exchange
Liabilities in foreign currencies
Contracts for the sale of foreign
currencies and other off-balance
sheet accounts for foreign currency
exchange
Net foreign exchange exposure:
- December 31, 2011
-
-
-
-
-
-
-
(117)
99
166
143
291
- December 31, 2010
-
40
77
71
60
248
% of first-tier capital:
- December 31, 2011
-
(0.37%)
0.32%
0.53%
0.46%
- December 31, 2010
-
0.15%
0.28%
0.26%
0.22%
Aggregate open position:
- December 31, 2011
291
- December 31, 2010
248
- December 31, 2011
0.94%
- December 31, 2010
0.91%
27.
LITIGATION
As of December 31, 2011, the Bank was involved in several litigations filed by legal entities and
individuals, while the Bank runs a case against one legal entity for unlawful benefit. According to the
assessments made by the Bank’s Legal Department, as of December 31, 2011 the total amount
sought in legal suits against the Bank totals EUR 2,500 thousand. As of December 31, 2011, the
Bank disclosed in the accompanying financial statements provisions for potential losses on
litigations in the amount of EUR 232 thousand.
In addition, the Bank filed several litigations against legal entities and private individuals to collect
receivables in the total amount of EUR 4,905 thousand.
35
28.
OPERATING LEASE
Agreements on operating lease, along with the contracted lease period refer to the lease of business
and residential premises. The Bank is not allowed to purchase the leased business premise after the
lease period expires.
During 2011, the lease expense amounted to EUR 441 thousand (2010: EUR 448 thousand).
The lease of business and residential premises represent the commitments for the average period
from 1 to 6.5 years with reference to the agreements concluded with the legal entities, i.e. from 2
to 5 years with reference to the agreements concluded with individuals.
Commitments arising from the agreements on operating lease of business and residential premises
for the period ended as of balance sheet date not disclosed in the financial statements are as
follows:
Up to 1 year
from 1 to 2 years
from 2 to 3 years
from 3 to 4 years
from 4 to 5 years
29.
December 31,
2011
December 31,
2010
288
228
217
171
85
206
138
31
-
989
375
EARNINGS PER SHARE
Earnings per share is calculated by dividing the annual net profit attributable to ordinary shares
owners with a weighted average number of ordinary shares that were outstanding during the period.
The Bank is registered as a limited liability company whose share capital consists of 96.736
common shares. Earnings per share on 31 December 2011 amounted to EUR 44.22 (December 31,
2010: EUR 28.01).
30.
TAX RISKS
Montenegrin tax legislation is subjected to varying interpretations, and legislative changes occur
frequently. The interpretation of tax legislation by tax authorities as applied to the transactions and
activities of the Company may not concur with the views of the Bank’s management. Consequently,
transactions may be challenged by the relevant tax authorities and the Company could be assessed
additional taxes, penalties and interest. The fiscal periods remain open for review by the tax
authorities with regard to the tax-paying entity’s tax liabilities for a period of five years.
36
31.
FOREIGN EXCHANGE RATES
The official exchange rates for major currencies used in the translation of balance sheet items
denominated in foreign currencies, into euros as of December 31, 2011 and 2010 were as follows:
USD
CHF
GBP
32.
December 31,
2011
December 31,
2010
0.7729
0.8226
1.1972
0.7530
0.8016
1.1625
EVENTS AFTER THE BALANCE SHEET DATE
Management is not aware of any other events after the balance sheet date that would require either
adjustments or additional disclosures in the financial statements.
37
ANALYSIS TO THE
FINANCIAL STATEMENTS FOR 2011
ANALYSIS TO THE FINANCIAL STATEMENTS
A
ANALYSIS TO FINАNCIAL STATEMENTS
I
INTRODUCTION
Financial Statements of Podgorička banka Societe Generale Group A.D., Podgorica (the "Bank"),
which were subject of audit have been prepared in accordance with Accounting standards and
regulations of Montenegro and regulations of Central Bank of Montenegro governing financial
reporting of banks. The prescribed forms of financial statements were submitted in due time to the
Central Bank of Montenegro.
II
INCOME STATEMENT AND BALANCE SHEET ANALYSIS
Detailed analysis of the balance sheet and income statement is provided within Notes 4 and 31 to
the financial statements.
B
REVIEW AND EVALUATION OF QUALITY AND FINANCIAL POSITION OF THE BANK
I
QUALITY OF THE BANK’S ASSET
Classification of asset and the corresponding balance sheet items, in terms of determining asset
quality, was carried out in accordance with the Decision of the classification of bank assets,
provisions and reserves for loan losses issued by the Central Bank of Montenegro (,,Official Gazette
of Montenegro", no. 41/2010) and the Decision of the Central Bank of Montenegro on temporary
measures for managing credit risk in banks ("Official Gazette of Montenegro" no. 64/2009,
87/2009, 66/2010 and 70/2010). On the basis of classification performed and in accordance with
internal policies, the Bank has made provisions for potential losses as of December 31, 2011 in
amount of EUR 3,927 thousand (December 31, 2010: EUR 3,052 thousand).
Based on audit performed and classification of the selected sample of bank’s debtor checked, the
auditor, based on relevant Decisions of the Central Bank of Montenegro, has confirmed the
classification performed by the Bank.
Available information on indicators of business of the debtor are taken into account when
determining the classification of assets and the required reserves for potential losses of the Bank,
as well as the quality of debt service, renewal of loans to the same debtors during the year, the
quality of the collection instruments and evidence of credit and interest charges in 2011.
38
B
(continued)
I
QUALITY OF THE BANK’S ASSET (continued)
Summing up the results of a quality of balance sheet and off-balance sheet assets of the Bank from
the point of payment collection and the need to create reserves for the provision of the Bank from
potential losses in accordance with the stated approach, the following relations and parameters
were provided:
Risk bearing balance sheet and off-balance sheet assets of the Bank as of December 31, 2011 and
2010 consists of the following:
In ‘000 EUR
2011
Loans
Less: Loans secured by
cash deposit
Less: Loans secured by
guarantees
Amount
In %
Formed
reserve
Amount
In %
Formed
reserve
233,301
-
3,422
197,338
-
2,733
(1,777)
-
-
(1,564)
-
-
(30,670)
-
-
(49,671)
-
123
200,854
83
3,422
146,103
76
2,856
422
7,479
3
8
-
577
23,816
12
9
-
34,175
14
265
22,117
12
310
242,930
100
3,695
192,613
100
3,175
Accrued interest
Other asset items
Taken over and potential
obligations
Total exposure to risk
2010
As of December 31, 2011, the structure of the Bank’s investments made by risk categories,
decreased for cash deposits and Government guarantees as well as guarantees of the banks with the
rating BBB+ or higher, is as follows:
In ‘000 EUR
Category
Loans
Calculated
interest
Other
asset
Off-balance
record
Total
In %
A
B
C
D
163,721
29,266
6,935
932
157
235
24
6
7,479
-
26,487
7,427
261
-
228,514
36,928
7,220
938
84
13
3
-
200,854
422
7,479
34,175
242,930
100
As of December 31, 2011, risk bearing balance sheet and off-balance sheet assets comprise the
total sum of assets classified from the point of collectibility and represent 85.35% of total assets
(before taking into consideration impairment for loan losses and impairment losses on other assets).
The loan policy of the Bank is in compliance with the Decision of the Central Bank of Montenegro on
minimum standards for the management of loans concentration and doing business with related
entities.
39
B
(continued)
II
CAPITAL AND CAPITAL ADEQUACY
As of December 31, 2011 the share capital of the Bank comprises of 96,736 common shares with
nominal value of 255.65 EUR.
As of December 31, 2011, retained earnings amount to EUR 5,420 thousand (December 31, 2010:
EUR 1,142 thousand).
The core capital of the Bank, formed in accordance with the Decision on Adequacy of equity
("Official Gazette of Montenegro", no. 60/2008, 41/2009), as of December 31, 2011 amounts to
EUR 31,350 thousand. The core capital of the Bank as of December 31, 2011 comprises of the basic
elements of the Bank's own funds: paid share capital at nominal value, reserves that were formed at
the expense of profit after tax (legal, statutory and other reserves) and retained earnings,
decreased for deductions.
Supplementary capital of the bank as of December 31, 2011 amounted to EUR 1,343 thousand and
consists of revaluation surplus achieved by reducing to the market fair value of investments in
equity of other legal entities.
Bank’s own funds as of December 31, 2011 amounts EUR 32,661 thousand and represent the sum
of core capital, supplementary capital and deduction in the amount of EUR 32 thousands for
investment in the other financial institution.
Risk-weighted balance sheet assets, formed in accordance with the Decision on Adequacy of equity
of the Bank at December 31, 2011 amounted to EUR 164,148 thousand, while risk-weighted offbalance assets amounted to EUR 24,517 thousand.
As of December 31, 2011 the solvency ratio of the Bank amounted to 14.85%.
III
LIQUIDITY OF THE BANK
Liquidity risk management is defined by the Procedure for managing liquidity risk which defines the
responsibilities of the fund departments (handling the funds and the first level of responsibility),
financial director (the function of financial control and the second level of responsibility) and
General Executive director (the highest level of responsibility) and ALCO Committee.
Liquidity of the Bank is defined as its ability to settle its liabilities as these fall due. The Bank is
exposed to daily management of withdrawal of funds by customers, affecting the funds available
from current accounts, deposits, withdrawals of loans. The Bank does not have a need to maintain
the level of funds so that it could come out to meet all potential claims, estimating that the minimum
level of reinvestment of maturing funds can be predicted with certainty. Compliance and controlled
non-compliance of maturities and interest rates of assets and liabilities are fundamental for the
Bank's management. It is unusual for banks to ever fully agree on investments and resources, since
the different types of business transactions are carried out for an indefinite period.
Procedure for managing liquidity risk defines that the Bank's liquidity is based on a regular and
stable collection of receivables in their due dates, and accordingly the Bank monitors the funds
disbursed from the point of probability of charging in due time. The primary sources of Bank’s funds
are deposits of domestic legal entities and individuals as well as short-term loan lines approved by
the parent bank.
40
B
(continued)
III
LIQUIDITY OF THE BANK (continued)
The Bank maintains its liquidity by constantly monitoring the alignment of resources and
placements in order to be able to settle all of its commitments and commitments of its depositors,
while at the same time trying to meet the needs of the founder and business customers in approving
the loans, i.e. to adjust maturities of loans with borrower’s needs.
Liquidity of the Bank as of December 31, 2011 and 2010 can be closely looked from the following
indicators:
2011
2010
Loans
---------------------Deposits
=
233,301
---------------------125,788
x 100 =
185.47%
173.28%
Liquid assets
---------------------Deposits
=
31,300
---------------------125,788
x 100 =
24.88%
46.24%
Liquid assets
---------------------Total assets
=
31,300
---------------------284,626
x 100 =
11.00%
20.26%
Liquid assets
---------------------Short-term liabilities
=
31,300
---------------------229,229
x 100 =
13.65%
23.68%
Maturity alignment of financial assets and Bank’s liabilities as of December 31, 2011 has been
shown in note 24 to financial statements.
IV
INTEREST RATE RISK
Existing interest rates are determined by a decision on the interest rate for the individuals and legal
entities. This decision defines the basic goals and guidelines for interest rate policy, principles and
methods of determining the interest rates, by which the Bank arranges agreements, calculate and
charge interest on loans and other receivables, i.e. pays on deposits and other funds received.
The Bank is exposed to various risks associated with the effects of fluctuations in the prevailing
levels of market interest rates on its financial position and cash flows. In accordance with the policy
for managing market risks, the Bank controls the risk of interest rate fluctuations by establishing
internal limitations for the ratio of total bank exposure to interest rate changes in each period and
total assets of 6%.
41
B
(continued)
IV
INTEREST RATE RISK (continued)
Lending interest rates applied to loans granted to corporate entities during 2011 are as follows:
Type of a loan
Interest rate
Corporate entities:
- short-term loans from a Bank
- short-term loans from other resources
- short-term loans provided to banks and other financial
organizations
- arranging loan
- long-term loans from Bank
- long-term loans from other resources
- loans for small and medium entities up to 24 months
- loans for small and medium entities over 24 months
- loans for entrepreneurs up to 24 months
- loans for entrepreneurs over 24 months
8.36% to 18% p.a.
by individual contracts
3M EURIBOR + 8.64% do 16.50% p.a.
from 9,90% to 18% p.a.
3M EURIBOR + 8.69% to 16.50% p.a.
from 11% to 19% p.a.
3M EURIBOR + 11.50% to 16.50% p.a.
Lending interest rates applied to loans granted to individuals during 2011 are as follows:
Type of a loan
Interest rate
Individuals:
- cash loans
- customers loans
- car loans
- loans for renovation and financing up to 40 months
- loans for renovation and financing over 60 months
- housing loans
7.00% - 17.50% p.a.
11.00% - 15.00% p.a.
6.95% - 14,50% p.a.
9.55% - 14.55% p.a.
3M euribor + 8.25% to 15.75%
6M EURIBOR + 5.3% to 11.12% p.a.
Deposit interest rates which were applicable on corporate during 2011 were as follows:
Deposit type
Interest rate
Deposits on demand
Short-term deposits
Long-term deposits
from 0.30% p.a. to 0.75% p.a.
42
B
(continued)
IV
INTEREST RATE RISK (continued)
Deposit interest rates which were applicable on deposits of retail customers during 2011 were as
follows:
Deposit type
Interest rate
Deposits on demand
Savings deposits:
- EUR
- other currencies
Time deposits in EUR:
- a month
- three months
- six months
- 12 months
- 24 months
- 36 months
Time deposits in foreign currencies (USD):
- three months
- six months
- 12 months
V
0.30% - 0.75% p.a.
0.50% p.a.
Interest free
1.00% - 2.15% p.a.
1.50% - 6.25% p.a.
3.50% - 5.30% p.a.
4.00% - 8.25% p.a.
4.50% - 6.00% p.a.
5.75% - 6.50% p.a.
0.30% p.a.
0.60% p.a.
0.75% p.a.
CURRENCY RISK
The Decision issued by the Central Bank of Montenegro regarding minimal standards for
management of credit risks in banks („Official Gazette of Montenegro, no. 60/2008) establishes the
following limits regarding the open foreign currency position:
Individual open position at the end of the day for the currencies of daily exchange rate on the
reference list of the European Central Bank - max 15% of the core capital.
The aggregate open position at the end of the day for the currencies of daily exchange rate on
the reference list of the European Central Bank - max 20% of the core capital
The net open positions at the end of the day for other currencies, may amount to no more
than 5% of the core capital on an individual basis (currencies which are not at the reference
exchange rate list of the European Central Bank)
The net open positions at the end of the day for other currencies, may amount to no more
than 10% of the core capital on an aggregate basis.
43
B
(continued)
V
CURRENCY RISK (continued)
As of December 31, 2011 foreign currency exposure of the Bank was as follows:
In ’000 EUR
RSD
USD
GBP
CHF
Other
Total
-
2,031
111
221
144
2,507
-
2,148
12
55
1
2,216
Assets in foreign currencies
Contracts for the purchase of foreign
exchange
Liabilities in foreign currencies
Contracts for the sale of foreign
exchange
Net foreign exchange exposure:
- December 31, 2011
-
-
-
-
-
-
-
(117)
99
166
143
291
- December 31, 2010
-
40
77
71
60
248
- December 31, 2011
-
(0.37%)
0.32%
0.53%
0.46%
- December 31, 2010
-
0.15%
0.28%
0.26%
0.22%
Aggregate open position:
- December 31, 2011
291
- December 31, 2010
248
- December 31, 2011
0.94%
- December 31, 2010
0.91%
44
B
(continued)
VI
COUNTRY RISK
In accordance with the Decision on minimum standards for Country Risk management (“Official
Gazette of Montenegro” no. 08/05), the Bank has adopted a Policy and Procedures of country risk
management.
Country risk presents a probability of incurring losses to the Bank, due to the inability to collect
receivables from entities outside Montenegro because of political, social and economic reasons of
the country where the seat of the debtor is. As of December 31, 2011, the Country risk as well as
the required capital for country risk was calculated using the current Decision on methodology for
measuring country risk in the banks ("Official Gazette of Montenegro" no. 60/08 dated on October
9, 2008).
Country risk as of December 31, 2011 was calculated using the current methodology rating of
debtor countries. Country risk management policy defines the following percentages of reserves in
line with the “rating” of land the bank has exposure to (Standard & Poors'):
Risk categories
Non-risk countries
Low-risk countries
Medium-risk countries
High-risk countries
Risk weight
0%
50-100%
150-250%
minimum 300%
During 2010, the Bank has presented income from cancellation of reserves from the Bank's
exposure to country risk in the amount of EUR 5 thousand.
VII
OPERATIONAL RISK
In accordance with the Decision on minimum standards for operational risk management in banks
("Official Gazette of Montenegro" no. 24/2009), which was adopted at the Council meeting of the
Central Bank of Montenegro, held on February 23 and 24, 2009 the Bank has adopted a Policy for
managing operational risk.
Operational risk is defined as the risk of loss due to improper or inappropriate conduct and actions
of employees, inadequate and / or errors in processes and organization, inadequate and / or errors
in systems and infrastructure or due to external factors and influences.
In accordance with the Decision of the Central Bank of Montenegro, the Bank is obliged to inform the
Central Bank of losses arising from operational risk exceeding 1% of venture capital, within eight
working days from the date of loss.
As of December 31, 2011, the provisions for operational risk amount to EUR 232 thousand
(December 31, 2010: EUR 179 thousand).
45
B
(continued)
VIII
INTERNAL CONTROL AND INTENAL AUDIT SYSTEM
Organizational structure of the Bank establishes levels and lines of authority and responsibility with
a clear delimitation between the function of management and leadership function. The management
bodies are: the Assembly of the Bank and the Board of Directors of the Bank.
Bank is managed by the General Executive Director of the Bank.
The Bank, as a separate organizational unit, organized Internal Audit department. Internal audit
department performs its activities in accordance with the internal audit procedures and annual plan
of activities.
In accordance with these internal procedures the internal audit activities include but are not limited
to:
Compliance with relevant rules, guidelines, instructions and standards;
Evaluation of the reliability of rules and diversification of duties within the banking operations;
Review and estimation of effectiveness and benefits of financial and administrative controls;
Monitoring the adequacy, reliability, safety integrity of accounting and other management
information systems;
Review of effectiveness and efficiency of banking operations;
Testing the validity of measures used to achieve banking operations;
Test and evaluation of the adequacy and effectiveness of internal control system;
Review of application and effectiveness of risk management procedures and assessment of
the methodology of risk assessment;
Assessment of information systems, with special emphasis on electronic information systems
and banking application;
Assessment of the accuracy and reliability of accounting financial statements;
Assessment of the banking system in the determination of capital in relation to the estimated
risk;
Testing of transactions and functioning of specific internal control procedures;
Adherence to legal and statutory regulations, code of ethics, implementation of policies and
procedures;
Conducting special investigations.
When reporting to the Bank's management, internal audit operates independently in order to
establish and report on the adequacy, reliability and effectiveness of controls used by the Bank's
risk management, which has a preventive effect on achievement of the objectives of banking, and
reporting whether the banking resources are used efficiently and effectively in achieving the
objectives of banking.
46
C
REVIEW OF BANK’S ORGANIZATIONAL STRUCTURE
The Bank is seated in Podgorica with branch offices in Podgorica, Danilovgrad, Nikšić, Kolašin, Biјelo
Polje, Rožaje, Berane, Cetinje, Ulcinj, Bar, Budva, Tivat, Igalo and Kotor.
Bank is managed by Board of Directors
Sectors responsible to Board of directors are:
Prevention of money laundering and terrorism financing
Monitoring Bank’s compliance with the legislations
Internal Audit
The Bank has two main business areas, which are managed by Executives Officers:
-
Main Banking Operations Management Area
Main Banking Operations Management Support Area
The Bank performs its activity through the following organizational units – Departments, i.e.
Independent Departments, which are:
Main Banking Operations Management Area:
Risk management – RISK
-
Operational and market risk
Credit risk
Recovery
Legal affairs
General secretariat
Internal communication
-
Commercial Division
Retail (branch offices)
-
Central region
South region
North region
Corporate
-
Operations with Bank’s key clients- KAM
Loan analysis
Quality department
Strategy, marketing & advertising
-
Product development
Advertising and communication
47
C
REVIEW OF BANK’S ORGANIZATIONAL STRUCTURE (continued)
Main Banking Operations Management Support Area:
-
Finance Division
Accounting department
Treasury
Main Vault
Financial planning and control
-
Resources Division
Human resources
Projects and organization – DPO
Real estate and security
Informative technologies – IT
Supply and Logistics
-
Back Office Division:
Retail back office
Corporate back office
Means of payment
Cards and E-banking
-
Cards
E – banking
As of December 31, 2011, the Bank had 267 employees (December 31, 2010: 255 employees).
48
C
REVIEW OF BANK’S ORGANIZATIONAL STRUCTURE (Continued)
Qualification structure of the Bank, as of December 31, 2011 was as follows:
No. of
employees
Ph.D.
Masters
University degree
College degree
High school degree
Qualified
Low qualification
In %
1
3
119
20
116
2
6
0.37
1.12
44.57
7.49
43.45
0,75
2.25
267
100.00
As of December 31, 2011 the General Executive Director of Podgorička banka Societe Generale
Group А.D., Podgoricа was Mrs. Branka Pavlović.
The members of Board of Directors as of December 31, 2011 were:
Name
Bank/Company
Jean-Dider Reigner
Branka Pavlović
Andre-Marc Prudent
Didier Colin
Sonja Miladinovska
Verica Maraš
Marc Monel
Societe Generale Group, France
Podgorička banka Societe Generale Group A.D.,
Podgorica, Montenegro
Societe Generale Bank, Slovenia
Societe Generale banka, Serbia
Plantaže A.D., Podgorica, Montenegro
Function
President
Member
Member
Member
Member
Member
Member
The members of Risk Committee, as of December 31, 2011 were:
Name
Andre-Marc Prudent
Jean-Didier Reigner
Marc Monel
Bank/Company
Splitska banka, Croatia
Function
President
Member
Member
The members of Credit Risk Management Committee, as of December 31, 2011 were:
Name
Bank
Tamara Koljenšić
Radule Raonić
Slobodan Vujović
Branka Pavlović
Function
President
Member
Member
Member
49
C
REVIEW OF BANK’S ORGANIZATIONAL STRUCTURE (Continued)
The members of the Audit Board, as of December 2011, were:
Name
Bank
Jitka Pantučkova
Marc Monel
Nataša MohorčičZobec
D
Ohridska banka Macedonia
Societe Generale Group France
Societe Generale Bank Slovenia
Function
President
Member
Member
REPORT IN SHORT FORM
In accordance with the Decision on Reports which banks submit to the Central Bank of Montenegro,
the report in a short form consists of Auditor’s opinion on financial statements of the bank, Income
Statement and Balance Sheet, data on the composition of the Board of Directors, the Committee on
Credit Risk Management and Supervisory Committee, information about the General Executive
director and Internal Auditor of the Bank and data on performance indicators.
50
53
54
SHORT FORM OPINION
DATA ON BOARD OF DIRECTORS COMPOSITION, CREDIT RISK MANAGEMENT COMMITTEE,
SUPERVISORY COMMITTEE, GENERAL DIRECTOR AND INTERNAL AUDITOR OF THE BANK
As of December 31, 2011 the members of Bank’s Board directors were:
Name
Bank/Company
Jean-Dider Reigner
Branka Pavlović
Andre-Marc Prudent
Didier Colin
Sonja Miladinovska
Verica Maraš
Marc Monel
Podgorica, Monetenegro
Societe Generale Bank Slovenia
Societe Generale banka, Serbia
Plantaže A.D., Podgorica, Montenegro
Societe Generale Group, Francuska
Function
President
Member
Member
Member
Member
Member
Member
The members of Risk Committee, as of December 31, 2011 were:
Name
Bank/Company
Andre-Marc Prudent
Jean-Didier Reigner
Marc Monel
Splitska banka, Croatia
Function
President
Member
Member
As of December 31, 2011 the members of Credit risk management committee were:
Name
Bank
Tamara Koljenšić
Radule Raonić
Slobodan Vujović
Branka Pavlović
Function
President
Member
Member
Member
The members of the Audit Board, as of December 31, 2011 were:
Name
Bank
Jitka Pantučkova
Marc Monel
Nataša MohorčičZobec
Ohridska banka, Macedonia
Societe Generale banka, Slovenia
Function
President
Member
Member
As of December 31, 2011 the General Executive director of Podgorička banka Societe Generale
Group А.D., Podgoricа was Mrs. Branka Pavlović.
As 0f December 31, 2011 the director of Internal audit department was Mrs. Vukosava Kuburović.
55
SHORT FORM OPINION
BANK’S PERFORMANCE INDICATORS AS OF DECEMBER 31, 2011
Bank’s performance indicators as of December 31, 2011 were as follows:
Indicators
Achieved
Core equity
Additional equity
Bank’s funds
Weighted balance sheet assets
Weighted off-balance sheet assets
Solvency ratio
Return on average assets
Return on average capital
31,350 thousand EUR
1,343 thousand EUR
32,661 thousand EUR
164,148 thousand EUR
24,517 thousand EUR
14.85%
1.61%
13.61%
56

PODGORIČKA BANKA - Societe Generale Montenegro

Transcription

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