Annual Report 2005

Transcription

Annual Report 2005

GE Money Bank
GE Money Bank, a.s.
BB Centrum
Vyskočilova 1422/1a
140 28 Praha 4-Michle
Tel.: +420 224 443 636, 224 443 632
Fax: +420 224 441 500
Information line: 844 844 844
Please visit our web pages
www.gemoney.cz
GE Money Bank –Annual report 2005
Annual Report 2005
Content:
1
Opening word
– Opening word
– Financial results of GE Money Bank, a.s., in 2005
5
Basics data about the bank
– Description of GE Money Bank, a.s.
– The Bank’s Shareholders
– Overview of the Bank’s Operations
11
Information on bank management
– Supervisory Board, Board of Directors and Management of the Bank
– Members of the Supervisory Board
– Members of the Bank’s management
17
Board of Directors’ Report
– Board of Directors’ Report on Operations and Assets
– Economic results of GE Money Bank, a.s.
21
Sophisticated Economic Indices of the Bank
– Basic Economic Data of GE Money Bank, a.s.
25
Forecast for 2006
27
Auditor’s report to the shareholders of Bank
– Supervisory Board Report
– Auditor’s report
31
Charity and sponzoring
35
Report on Relations between Related Parties
43
Financial Statements
– Assets
– Liabilities
– Off-balance sheet items
– Profit and loss account
– Summary of changes in equity
49
Notes to the financial statements
Opening word
ANNUAL REPORT GE MONEY BANK
1
OPENING WORD
Dear customers,
shareholders, colleagues,
Last year was a year of change for GE Money Czech
Republic. As of 17 January, 2005 all GE Capital businesses
operating in the Czech market were re-branded to GE
Money, including GE Money Bank, a.s. The new brand was
successfully established on the market through the launch
of new products and services. As a result, loans to
customers increased to CZK 47.9 billion (an increase of
28.8%), the net profit reached CZK 2,673 billion
(an increase of 19.2%) while the capital adequacy remains
stable at 23.41%. The number of customers grew to
806 708 (an increase of 7.8%) and the number of current
accounts increased by 2.6% to 948 306.
2005 was successful not only for GE Money Bank, a.s. but also for its
customers and partners, as well as for the General Electric (GE) Group
as a whole. GE, one of the largest global companies based on market
capitalization, of which GE Money Bank, a.s. is a key part, generated
a net profit after taxes of USD 16.3 billion in 2005. The profit of the
financial division, GE Money (GE Consumer Finance), which represents
one of the six GE divisions, was more than USD 3 billion in 2005. GE
Money provides financial products including credit cards, consumer
loans, sales – finance loans, leasing and mortgages to more than 120
million customers in 51 countries all over the world. Total GE Money
assets at the year end reached USD 158.8 billion. The GE Annual
report 2005 is available at www.ge.com.
GE Money Czech Republic and Slovakia is one of the most important
GE businesses in Central and Eastern Europe. In the Czech Republic,
GE Money (GE Consumer Finance) is represented by GE Money Bank,
a.s. together with GE Money Multiservis, a.s. and GE Money Auto, a.s.
In 2005 GE Money Bank, a.s. continued its dynamic growth
particularly in relation to its lending products linked to the new brand.
GE Money Bank, a.s. has maintained a very clear-cut profile since the
very beginning – to retail and corporate clients we want to provide
quick, easy, and affordable products and services that can be flexibly
adjusted to their needs.
In 2005 GE Money Bank, a.s. introduced a number of new products
and services – flexible Konto Genius and Genius Student accounts,
Hypotéka naopak (Reverse Mortgage - a mortgage loan approved
2
before selecting a property), and Expres Business, a fast and flexible
loan for small and medium-sized enterprises (SME). Since the spring
of 2005, GE Money Bank, a.s. has been the only European bank
through whose ATMs clients can apply for credit (thanks to the unique
Infolimit service), and since November 2005 GE Money Bank’s clients
have had access to fully-fledged electronic account statements.
As at 31 December 2005 the volume of provided Expres Loans
totalled CZK 17.2 billion, which represents an increase of 29% in
comparison with the total volume of CZK 13.3 billion at the end
of 2004.
The volume of granted mortgage loans grew at an even faster rate;
primarily due to interest rates, which hit a record low. GE Money Bank,
a.s. guarantees its interest rates to all clients who meet the scoring
requirements; thanks to this approach, clients know from the start
what interest rate the bank will offer for a particular type and amount
of mortgage loan and the period for which the rate will be fixed.
Moreover, in 2005 the bank significantly simplified and accelerated
the mortgage loan approval process. At the end of 2005 the volume
of mortgage loans totalled CZK 10.4 billion, which represents growth
of 38.2% in comparison with the end of 2004 (CZK 7.56 billion).
The popularity of loans for small and medium-sized enterprises also
surged last year. At the beginning of 2005 the newly re-branded GE
Money Bank, a.s. presented its new lending products for small and
medium-sized enterprises. These included the Expres Business loan,
OPENING WORD
whereby business clients can now obtain an any-purpose loan of up
to CZK 0.5 million: the business client needs only to provide his
income tax return and the bank will communicate a provisional
decision on the loan within a few minutes of filing the application. The
bank also introduced its new Operative Business any-purpose loan by
means of which business clients can obtain any amount from CZK
300,000 to 5 million. As at 31 December 2005 the overall portfolio
of loans to this customer segment amounted to CZK 17.36 billion. In
comparison with the portfolio at the end of 2004 (CZK 14 billion) this
represents an increase of 24%.
In respect of deposit products, client demand focused on the new
Konto Genius account, whose key competitive advantage is its
flexibility and low charges. With a Konto Genius account, the client
can select more products and services at his own discretion in
addition to a current account, and can add, remove, or change them
as required. By the end of 2005, one-half of current accounts had
been opened as part of a Konto Genius package.
At the end of 2005 GE Money Bank, a.s. had 224,000 registered users
of its Internet Banka, i.e. 20% more than at the end of 2004.
Transactions entered via Internet Banka accounted for 23% of all
transactions. Overall, direct banking accounts for 77% of all
transactions.
In 2005 GE Money Bank, a.s. increased the number of its branches to
201 (up by 9 branches year on year), while the number of its ATMs
rose to 390, up by 28 year on year.
GE Money Bank, a.s. emphasizes recruitment of the best people on
the market, their professional development and an enhanced
motivation system for existing employees. We invest heavily in
training and development opportunities, coaching, comprehensive
feedback and internal traineeships in other departments or abroad.
GE Money Bank, a.s. also strengthened its employee benefits. We are
well aware that only good and motivated employees are able to
deliver the results expected by our clients and shareholders.
Our strategy remains unchanged. A team of excellent employees,
product innovation and simplification and improvement of our
processes through digital technology are the key building blocks for
our success. Fast, simple and accessible services and processes
make GE Money Bank, a.s. a bank which is growing, profitable and
secure.
Thank you for your support and I am looking forward to another
successful year in 2006.
The best things are only ahead of us.
Gerard Ryan,
Chairman and CEO
GE Money Bank, a.s.
3
OPENING WORD
Financial results of GE Money Bank, a.s. in 2005
Number of
clients
Year-on-year change
Number of
deposit accounts
Year-on-year change
Number of
payment cards
Year-on-year change
Number of
branches
Year-on-year change
Number of ATMs
Year-on-year change
Expres loan volume
(billions of CZK)
Year-on-year change
Mortgage volume
(billions of CZK)
Year-on-year change
Loans for
SME volume
(billions of CZK)
4
Year-on-year change
Basic data about the bank
5
BASIC DATA ABOUT THE BANK
Description of GE Money Bank, a.s. as at 31.12. 2005
Business name:
GE Money Bank, a. s.
Registered office:
Vyskočilova 1422/1a, Prague 4-Michle
Registration No:
25 67 27 20
Legal form:
joint-stock company
Date of incorporation:
9 June, 1998
Date of last change:
26. 7. 2005 (reason: changes in the representation on behalf
of GE Money Bank, a.s.)
Registered Capital:
CZK 510,000,000
Status:
100% paid up
Type, form, and nominal value of issued shares:
510 registered common stock shares in documentary form, each with a nominal value of CZK 1,000,000
Own shares held, interim documents and other securities with the right to be exchanged
for own shares:
GE Money Bank, a.s. does not hold any own shares or similar securities.
Increase in registered capital:
On 25 March 2003 the registered capital was increased by CZK 10,000,000.
6
Supervisory Board
Position
Since
James Desmond O’Shea
Chairman
Suzan Elizabeth Crichton
Member
Pavel Zídek
Member elected by employees
Board of Directors
Position
Gerard Ryan
Chairman
03. 12. 2002
Christoph Glaser
Member
05. 05. 2005
Miroslav Červenka
Member
28. 11. 2002
Jan Rollo
Member
29. 10. 2003
22. 10. 2004
22. 6. 2004
29. 11. 2005
Since
Number of staff, recalculated (as at 31. 12. 2005):
Centre
949 employees
Points of sale
1079 employees
Total
2028 employees
Number of points of sale of the Bank, including booths (as at 31. 12. 2005) – 201
7
The Bank’s Shareholders
GE Capital International Holdings Corporation
Corporation Trust, 1209 Orange Street, Wilmington, Delaware, the United States of America
100% stake in the voting rights
100% direct stake in the registered capital of the Bank
Subject of business:
foundation of subsidiaries with registered offices outside the United States of America, exercising of rights related to the respective
ownership interests and provision of funds to the founded companies through loans or otherwise.
8
Overview of the Bank’s Operations
The following activities may be carried out according to the licence to operate as a bank:
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
accepting deposits from the public;
providing loans;
investments in securities on own account;
financial leasing;
clearing and settlement;
issuing payment instruments such as payment cards, traveller’s cheques;
issuing guarantees;
opening letters of credit;
administering collections;
trading on own account or on clients’ account:
with foreign exchange (on own account without limitation, on clients’ account with the exception of foreign securities and currency
derivatives);
with futures and options including currency and interest deals (on own account with the exception of the purchase and sale
of derivatives on own account for another person)
with transferable securities (trading on own account with the exception of the purchase and sale of securities on own account for
another person);
financial brokering;
consultancy on business matters;
services as a depository;
exchange operations (purchase of FX);
provision of banking information;
lease of safety boxes;
Overview of basic operations and services carried out by the Bank:
Business in crowns:
1. opening and maintaining current, term and savings accounts denominated in Czech crowns and related services;
2. cheque administration;
3. passbooks;
4. local letters of credit and collections;
5. credit and commercial services (commercial, consumer, mortgage loans);
6. bill administration;
7. bank guarantees;
8. purchase of receivables.
FX business:
1. opening and maintenance of FX current and term accounts;
2. exchange operations;
3. foreign letters of credit and collections;
4. clean payments;
5. cheque services;
6. bank guarantees;
7. bill administration;
8. providing loans;
9. factoring, forfeiting
Other products and services:
1. card services (by card types);
2. information and consultancy services;
3. providing banking information;
4. exchange of banknotes and coins.
9
10 ANNUAL REPORT GE MONEY BANK
Information on bank
management
11
INFORMATION ON BANK MANAGEMENT
Supervisory Board, Board of Directors and
Management of the Bank
Supervisory Board
Chairman
Susan Elizabeth Crichton
Member
Pavel Zídek
Member elected by the employees
Held since: 22. 10. 2004
Held since: 22. 6. 2004
Held since: 29. 11. 2005
Gerard Ryan
Chairman
Christoph Glaser
Member
Miroslav Červenka
Member
Held since: 3. 12. 2002
Held since: 5. 5. 2005
Held since: 28. 11. 2002
Board of Directors
Jan Rollo
Member
Held since: 29. 10. 2003
Division
Division Director
Position
HR
Niamh Hegarty
Chief Human Resources Officer
Held since
1. 7.2005
Risk Management
Pavel Vyhnálek
Chief Risk Officer
1. 7. 2002
Legal
Tomáš Černý
Chief Legal Counsel
Retail Banking
Jan Rollo
Chief Retail Banking Officer
1. 11. 2003
Commercial Banking
Radomil Štumpa
Chief Commercial Banking Officer
1. 11. 2003
Marketing
Erich Čomor
Chief Marketing Officer
14. 6. 2004
Customer Relationship Management
David Bytsrzycki
Chief Customer Relationship Management Officer
Information Systems
Pavel Zídek, temporarily appointed
Chief Information Technology Officer
Quality
Eduard Česnek, temporarily appointed
Chief Quality Officer
Finance
Christoph Glaser
Chief Financial Officer
Operations
Jonas Hasselrot
Chief Operating Officer
1. 5. 2003
Compliance
Petr Karel
Chief Compliance Officer
1. 7. 2002
Internal Audit
Jana Pěchoučková
Internal Audit Manager
Third Party Products Division
Not appointed
1. 4. 2005
1. 5. 2004
1. 12. 2004
22. 11. 2004
Members of the Supervisory Board
graduated from the Irish University College in Cork in 1977 and
received his doctorate there. After his studies, he began working
at Arthur Andersen & Co and in 2000, he qualified as an authorized
accountant.
In 1981, he began working with Ulster Investment Bank Limited,
a subsidiary of Natwest Bank. He held various positions in
corporate banking, temporary financing and in international
structural financing. He was appointed Director in 1988. In 1991,
he joined Cambridge Finance and in 1992, he moved to
Woodchester Investments where he held several positions in risk
management. The company became part of GE Consumer Finance
in 1998 and Des O’Shea was appointed as Risk Management
Director for GECF Europe. In 2001, he moved to his present position
as growth and business development manager in GECF Europe. He
was appointed as a member of the Supervisory Board of GE Money
Bank, a.s. in 2003 and became the Chairman of the Board one year
later.
studied LCB (Language and Culture for Business Program) at
Birmingham University. She started her carrier in 1979 with the
Forward Trust Group, where she worked for the legal department
until 1987. In 1987, she was appointed to the position of European
Legal Counsel at Avco Trust Ltd. She joined GE Consumer Finance in
the United Kingdom in 1999; her first role was Senior Legal Advisor
and since 2001, she has been the General Counsel for the entire GE
Consumer Finance Europe. In 2004, she became a member of the
Supervisory Board of GE Money Bank, a.s.
Pavel Zídek
graduated from ČVUT in Prague and worked for several years with
various companies as information technology manager. In 1991, he
joined Agrobanka, where he held various positions in the IT
Department. Following the bank’s acquisition by GE, he became
Senior IT Manager and later a member of the Supervisory Board,
elected by the Bank’s employees (in 2001 and also in 2005).
13
Members of the Bank’s management
Gerard Ryan
graduated from university in Ireland. After his
studies, he began working with an Irish
consultancy firm. He gained experience while
working for several international companies in
Ireland and in Great Britain, where he held
various positions, mostly focusing on finance.
From 1992, he worked with Woodchester
Credit Lyonnais Plc, acquired in 1998 by GE.
Within the GE Group, he has worked as Finance Director and
Business Development Manager. He joined GE Money Bank, a.s.
in 2002 as its Chief General Officer and Chairman of the Board of
Directors.
Jan Rollo
graduated from ČVUT in Prague. From 1989,
he worked as a specialist in the IT Department
at Swissair in Switzerland. He was
subsequently project manager of the PHARE
Program at the European Union Delegation in
Prague. He has worked in the banking
industry since 1994, first with Bank Austria
where he was responsible for relations with
key customers, marketing and direct banking, and then Citibank,
where he managed the product management department; he was
involved in managing the SME section. He joined GE Money Bank,
a.s. as Director of Commercial Sales and since 2000, he has been
the Chief Commercial Banking Officer and member of the senior
management of GE Money Bank, a.s.
Christoph Glaser
joined GE in 1997 on a European Management
Development Program. From 1999, he was
Executive Audit Manager at GE Corporate
Audit ultimately specializing in businesses
within the financial division of GE Consumer
Finance. Since December 2004, he has been
the Financial Director of GE Money Bank, a.s.
and since 2005 he has also been a member of
the Board of Directors.
Pavel Vyhnálek
graduated from the Mendel University in Brno.
From 1992, he worked for Československá
obchodní banka. Among other positions, he
worked as a credit officer responsible for large
corporate companies, a branch director, and
mortgage banking director; he was involved in
the privatization of ČSOB and in the
integration of IPB into ČSOB. Ultimately he
was responsible for risk solutions in retail loans and mortgage
loans across the whole ČSOB group in the CR and the SR. He was
engaged in acquiring the mortgage license for ČSOB in the SR and
he was the Chairman of the ČMHB Supervisory Board. In 2002,
he joined GE Money Bank, a.s. as its Chief Risk Officer
Petr Karel
graduated from the Faculty of Law at Charles
University in Prague and from the University
of Economics in Prague where he obtained his
PhD. From 1995, he worked for a consortium
of international consultancy companies
involved in consultancy for the Czech
Government. From 1999, he worked for GE
Money Bank, a.s. as a lawyer. He then worked
for two years at Komerční banka as a regional manager where he
was responsible for special deals. In 2002, he accepted an offer
from GE Money Bank, a.s. and became its Chief Compliance Officer.
Jana Pěchoučková
graduated from the Faculty of Economics and
Administration at the University of Pardubice.
After graduation, she worked for Optaglio
from 2000 until 2001 when she
joined GE Money Bank, a.s. as an internal
auditor. In December 2004, she was
appointed to the position of Manager of
Internal Audit at GE Money Bank, a.s.
Tomáš Černý
Jonas Hasselrot
previously worked as a manager in the
American Express Travel Centre in Stockholm.
He managed more than 100 travel representatives and was responsible for the economic
results of the Centre which has a 40% market
share in Scandinavia. Later, he worked as
Customer Service Director of the company for
Benelux and for Scandinavia where he was
responsible for a number of processes in the areas of customer
services, cross-selling of new products to existing customers, approval of loans and collection of overdue payments. Since 1 May, 2003,
he has been the Chief Operations Officer of GE Money Bank, a.s.
graduated from the Law Faculty of Charles
University and attended many special
programs in Great Britain. Before joining GE
Money Bank, a.s., Tomáš worked for five
years in the Prague office of Weil Gotshal
& Manges, a leading international law firm,
focusing mainly on commercial law,
banking, mergers and acquisitions. Before his
work for Weil Gotshal & Manges Tomáš spent 2 years with Deloitte
& Touche and also worked for the international law office of Clifford
Chance. In April 2005 he was appointed Chief Legal Counsel
of GE Money Bank, a.s.
Radomil Štumpa
graduated from the Faculty of Law at
Masaryk University in Brno. Over the course of
ten years of legal practice, he gained
experience at the Brno Court, the prosecutor’s
office in Prague and in 1994 he became
a member of the Czech Bar Association. As an
attorney he worked for the international legal
office of McKenna & Co and of Allen & Overy
based in London. In 1997, he joined Citibank as Vice President and
Chief Legal Counsel and was responsible for all legal matters
relating to Citicorp in the Czech Republic. After the acquisition of
Agrobanka, he joined the Bank in 1998 as Chief Legal Counsel of GE
Capital Czech and Slovak Republics, and at the same time was an
official representative of the GE shareholders. In 2000, he became
a member of the senior management of GE Money Auto, a.s. and
became its Chief Executive Officer and Chairman of the Board.
Since 1 November 2003, he has been in charge of the commercial
banking division of GE Money Bank, a.s.
David Bystrzycki
studied at the Faculty of Mathematics at
Charles University. Between 1997 and 2000,
he held various positions in the marketing
department of Philip Morris, a.s. – his last role
there was manager of the market research
department. Prior to that, he worked for the
market research agencies AC Nielsen and
AISA. He joined GE Money Bank, a.s. four
years ago. In 2001, he became manager of the market research
team and from 2002 he was manager of the direct marketing
department. He was responsible for cross–selling of products and
for telemarketing. Since 1 May 2004, he has been in charge of the
customer relations management department, which includes both
direct marketing and telesales.
Erich Čomor
graduated from the University of Economics
in Prague in 1993. At the end of the nineties
he received his MBA from the J. L. Kellogg
School of Management in the USA. Erich
started his professional career with KPMG
Consulting, where he worked from 1992 until
1993. He then moved to Procter & Gamble,
where he was brand manager until 1996.
Before joining GE Money Bank, a.s., Erich spent seven years with
McKinsey & Co as an engagement manager. There he was involved
in consulting in the area of introducing and selling the bank’s
products during which time he acquired a deep knowledge of both
the Czech and European banking markets. Since 2004, he has been
Manager of marketing at GE Money Bank, a.s.
Niamh Hegarty
graduated from the University College Dublin;
she studied foreign languages and in 1989,
she received her bachelor's degree. In 1995
she received the title of Master of Business
Administration at the Trinity College in Dublin.
Before joining GE, she had held various
positions in Dunnes Stores, Ann O'Brien
Personnel Consultants and in Quaestus
Management Consultants in her native Ireland, predominantly in
Marketing and HR. In 1996, Niamh joined GE Plastics and
progressed through various positions in the HR team. In 2004, she
was appointed HR Manager in GE Advanced Materials – Americas
and in July 2005 was appointed Chief Human Resource Officer of
GE Money Bank, a.s.
15
Organizational structure of the Bank
Supervisory Board
D. O’Shea, S. Crichton, P. Zídek
Board of Directors
G. Ryan, J. Rollo
Ch. Glaser, M. Červenka
Chief Executive
Officer’s Office
Chief Executive Officer
G. Ryan
Retail Banking Division
Chief Retail Banking Officer
J. Rollo
Commercial Banking Division
Chief Commercial Banking Officer
R. Štumpa
Risk Division
Chief Risk Officer
P. Vyhnálek
Legal Division
Chief Legal Counsel
T. Černý
Finance Division
Chief Financial Officer
Ch. Glaser
Operations Division
Chief Operations Officer
J. Hasselrot
Compliance Division
Chief Compliance Officer
P. Karel
Marketing & Product Development Division
Chief Marketing & Product Development Officer
E. Čomor
Human Resources Division
Chief Human Resources Officer
N. Hegarty
Customer Relationship Management Division
Chief Customer Relationship Management Officer
D. Bystrzycki
Quality Division
Chief Quality Officer
E. Česnek*
Third Party Products Division
* temporarily appointed
Information Technology Division
Chief Information Technology Officer
P. Zídek*
Internal Audit Department
J. Pěchoučková
Internal Audit Manager
Board of Directors’
Report
17
BOARD OF DIRECTORS’ REPORT
Board of Directors’ Report on Operations and Assets
The business strategy of GE Money Bank, a.s. in 2005 was based on providing
financial services to individuals and small to medium-size enterprises. A portfolio of
modern and top-quality products offered at 201 points of sale throughout the Czech
Republic and 390 ATMs is aimed at satisfying our customers’ needs.
The success of our strategy and business operations in 2005 can
be seen from the economic results of the Bank, which has recorded
a significant increase in demand for its credit products – both
consumer loans and loans for small to medium-size enterprises.
This is evidenced by the year-on-year increase in provided loans of
28.6%. In 2005, the volume of loans provided to clients was CZK
47,9 billion, while as at 31 December, 2004 it was CZK 37.2 billion.
This trend was positively reflected in the interest margin. The
portfolio quality remains high.
Thanks to the continued growth in loans provided, the net profit of
GE Money Bank, a.s. grew 19.2% year-on-year to CZK 2.672 billion
as at 31 December 2005. At the end of 2004 the bank had achieved
a net profit of CZK 2.242 billion, which was reinvested as in previous
years. The net profit per employee grew to CZK 1.318 million as at
31 December 2005 compared with CZK 1,091 million at the end of
2004 – an increase of 20.8% year-on-year.
Despite the continuing credit expansion, GE Money Bank, a.s. has
retained a high rate of capital adequacy – 23.41% at the end of
last year, making GE Money Bank, a.s. one of the most stable
financial institutions in the Czech market.
GE Money Bank, a.s. invested significantly in 2005 into the rebranding from GE Capital Bank, a.s. to GE Money Bank, a.s. and also
opened 9 new points of sale and 28 new ATMs. Productivity
increased as a result of the achieved growth and the opening of
the new points of sale and the number of employees therefore
decreased from 2 056 at the end of 2004 to 2 028 at the end of
2005.
GE Money Bank, a.s. had 806,708 clients as at 31 December 2005
(year-on-year growth of 7.8%), in respect of which it maintained
948,306 deposit accounts (+2.6%). Total deposits received from
clients increased by 4.3% in a very stable and unchanged market,
while GE Money Bank, a.s. maintained deposits of CZK 47.40 billion
as at 31 December 2005 compared with CZK 45.42 billion as at 31
December 2004.
GE Money Bank’s total assets were CZK 64,163 billion as at 31
December 2005, representing year-on-year growth of 7.3%.
Return on Assets (ROA) reached a value of 4.30% at the end of
2005 compared with 3.76% at the end of 2004, representing an
increase of 14.4%. The Return on Equity (ROE) was 21.13% as at 31
December 2005, which was 2% less than in 2004 – 21.56%.
The Board of Directors of GE Money Bank, a.s. is satisfied with the
Bank’s results for 2005 and would like to thank all of its customers
for placing their trust in the Bank and using its services.
Gerard Ryan,
Chairman of the Board of Directors
Christoph Glaser,
Member of the Board of Directors
Miroslav Červenka,
Jan Rollo,
BOARD OF DIRECTORS’ REPORT
Economic results of GE Money Bank, a.s.
(in thousands of CZK, according to Czech accounting standards)
Net income
(CZK thousands)
Year-on-year change
Client deposits
(CZK thousands)
Year-on-year change
Loans to clients
(CZK thousands)
Year-on-year change
Capital
(CZK thousands)
Year-on-year change
Total Assets
(CZK thousands)
Year-on-year change
Net profit
per employee
(mil. CZK)
Year-on-year change
ROA
Year-on-year change
Capital
adequacy
Year-on-year change
19
Sophisticated Economic
Indices of the Bank
21
SOPHISTICATED ECONOMIC INDICES OF THE BANK
Basic Economic Data of GE Money Bank, a.s.
(according to Czech accounting standards):
Total assets
(mil. CZK)
* The reduction compared
to 2001 was due to a change
in the accounting methodology
imposed by CNB.
Net profit
(mil. CZK)
Client deposits
(mil. CZK)
Capital Adequacy
(%)
SOPHISTICATED ECONOMIC INDICES OF THE
Number of
employees
Number of
points of sale
23
Forecast for 2006
25
Forecast for 2006
Forecast for 2006
The priority for 2005 was to re-brand GE Capital Bank, a.s. to GE Money Bank, a.s.
The change was part of the international strategy of GE Money (GE Consumer
Finance) to create a strong global brand for the whole organisation. This aim was
reflected in our strategy: while changing brand, continue to meet the financial
services requirements of our customers and, in so doing, retain existing satisfied
clients and gain new ones. We also maintained our impressive track record of
consistent growth in assets and profitability with a relentless focus on good
customer service, product and service innovation and development of our people.
This strategy has once again enabled us to exceed our targets for the year. With
this in mind, we will continue to apply this strategy in the year ahead.
2006 will bring new challenges for us. The dynamic growth of our
portfolio and the number of customers of GE Money in the Czech
Republic and Slovakia will require increased capacity.
We started to build a new Customer Service Centre in Ostrava in
2005, which we expect to open in the first half of 2006. Our
competitors are continuously launching new and better products,
therefore, to retain our market position, we have to accelerate our
development of new products while continuously improving our
existing product range. Regulatory pressure on the banking sector
is increasing and this also generates product structure changes.
Financial literacy and responsible lending are increasingly topics of
the day to assist customers in selecting the right product to cover
their needs. Bank and non-bank credit bureaux are merging, which
should positively affect credit portfolio quality and further
accelerate and simplify the whole loan application process.
Our strategic pillars in 2006 will be the same as last year.
excessive debt, and make sure that he/she fully understands the
financial products he/she has decided to sign up for at the outset.
Innovation.
If we want to achieve long-term success in the market we must
always be one step ahead our competitors. All our competitors are
using similar IT platforms and to some extent similar products;
however, a competitive advantage still exists in having the right
employees in an organisation and I am delighted to say that I
believe we are a leader in this field. Our teams use their creativity
to create new added value products and services that reflect the
needs of our customers. Therefore, we will provide maximum
support in 2006 to innovation and new ideas and reflect them, as
quickly as possible, in the development of new products. During
2005 GE Money Central and Eastern Europe region was created.
I am convinced that this will further accelerate best practice
sharing and new product development among the countries
in the region.
Growth.
In 2006, we will further enhance the synergies between the
products and services offered by all GE Money businesses in the
Czech Republic. In this way, our more than 1.7 million customers
will receive just the right service most suitable for their needs, and
when they need it most.
Consistent customer orientation.
Every customer is different. In 2006 we will pay strong attention to
sales of our products and services, to ensure that it is easy to
become a GE Money Bank customer, and to relations with our
existing customers so that it is beneficial to remain our customer.
We will focus on customers who are using any single product (for
example a consumer loan) and we will offer them revolving
products – for example a credit card. We will carefully analyze the
customer’s ability to repay the loan to protect him/her from
People.
In 2006 we will do our best to find, attract, develop and retain the
best people in the Czech employment market. We will do this by
using all forms of best practice available to us from our worldwide
organisation and by maintaining the very strong and positive
reputation we have in the market place for being a great business
to work for.
I am confident that we will further increase our market share in
2006 both in consumer loans, mortgages and loans to small and
medium-size enterprises.
Gerard Ryan
Auditor’s report to the
shareholders of Bank
27
SUPERVISORY BOARD REPORT AND AUDITOR’S REPORT
Supervisory Board Report
The Supervisory Board has carried out its tasks in compliance with the legislation of the Czech Republic, the Articles of the Bank and the
Rules of Procedure. The Board of Directors of GE Money Bank, a. s., provided all supporting documents and information necessary for audit
activities.
The Supervisory Board has discussed the Bank’s operating results for 2005 as reported in the financial statements, including the enclosures
audited by the auditor and has reached the conclusion presented to the General Meeting:
The Supervisory Board recommends that the General Meeting approves the financial statements for 2005.
James Desmond O’Shea,
Chairman of the Supervisory Board
Susan Elizabeth Crichton,
Supervisory Board member
Pavel Zídek,
Supervisory Board member elected by the employees
SUPERVISORY BOARD REPORT AND AUDITOR’S REPORT
Auditor’s report
Auditor’s report to the shareholders of GE Money Bank, a.s.
On the basis of our audit, on April 7, 2006 we issued an auditor’s report on the Bank’s statutory financial statements, which are
included in this annual report, and our report was as follows:
“We have audited the accompanying financial statements of GE Money Bank, a.s. for the year ended 31 December 2005. These
financial statements are the responsibility of the Bank’s management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with the Act on Auditors and International Standards on Auditing and the relevant
guidance of the Chamber of Auditors of the Czech Republic. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by the Bank’s management, as well as evaluating the
overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements present, in all material respects, a true and fair view of the assets, liabilities, equity and
financial position of GE Money Bank, a.s. as of 31 December 2005 and the results of its operations for the year then ended in
accordance with the Act on Accounting and relevant legislation of the Czech Republic.”
We have reviewed other financial information in the annual report for consistency with the audited financial statements. In our
opinion, the information is consistent in all material respects with the audited financial statements.
The management of the Bank is responsible for the completeness and accuracy of the report on relations between related
parties. Our responsibility is to review the accuracy of the information included in the report. During our review nothing came to
our attention that would cause us to believe that the information contained in the report is materially inaccurate.
Prague 21 April 2006
KPMG Česká republika Audit, s.r.o.
Licence number 71
Ing. Vladimír Dvořáček
Partner
Ing. František Dostálek
Partner
Osvědčení číslo 176
29
Charity and sponzoring
31
CHARITY AND SPONZORING
Ge Money volunteers assist those in need
Charity efforts and support for nonprofit projects are an important part of GE
culture. Last year, GE Money Bank, a.s., GE Money Auto, a.s. and GE Money
Multiservis, a.s. provided assistance both in terms of financial donations and
through the voluntary work of their employees.
Financial assistance to the needy in GE communities
The benevolent activities of GE Money are appreciated by
organizations that provide care for physically and socially deprived
children and adults, children's homes, centers for substituted family
care, elementary schools, educational centers and a number of
projects aimed at regenerating green areas.
Financial support is provided to these organizations if they apply
for a GE grant. An application for a GE grant is submitted by the
organization in question to the GE Grant Committee through the
organization's guarantor, in most cases a GE employee, who works
near the organization that is applying for the grant (for instance the
manager of a GE Money Bank, a.s. branch located in the same city
as the organization's registered office. Such regional ties proved to
be very useful last year. Last year alone, based on approved GE
grants, 39 projects were implemented with a total value of more
than CZK 1 million (see the enclosed table).
In June 2005, representatives of GE Money Bank, a.s. handed over
a cheque in the amount of CZK 20 thousand to the Motýlek
community center. The center is located in Prague's Černý Most
area and it is operated by the Association for Assistance to
Handicapped Children. The mission of the association is to provide
multi-sided assistance to children with impaired health and to
socially handicapped children. The purpose of this assistance is to
enable handicapped children to grow up in an undisturbed family
environment and to become integrated members of society.
As part of its benevolent activities, GE Money Bank, a.s. also assists
educational and nonprofit organizations by donating renovated
PCs and other IT equipment to them.
Support to those in need in 2005
The Association for the Deaf and Hearing-Impaired in the ČR, Most
The associated SOS of children villages Prague- the Castle
DANETA, s.r.o.; a private special school for pupils with multiple disabilities in Hradec Králové
Friends of the House for Children in Chomutov
PROTEBE – non profit association in Prague 2
The club for people with cystic fibrosis in Prague 5
The Foundation of Charter 77, Prague 1
TYFLOCENTRUM Liberec o.p.s. Liberec
Garden – institute of social care in Kladno
Q KLUB; 747 67 Hrabyně 3
Athletic sport club ELNA, Počerady
Home for Children; Balkán Plumlov
Center of Education for the Mentally Handicapped, Přerov
Association for Help to Handicapped Children, Prague 9
Special School, Česká Lípa
HOSPICE MOVEMENT - VYSOČINA Nové Město na Moravě
EWSC LITA SPORT PRAHA, Praha 5
Diocesan charity, Brno
Home for Children, Ostrava-Slezská Ostrava
Nonprofit Association “Life without Barriers”, Nová Paka
VIA Association of the Deaf and Blind, Prague 5
The City of Prachatice
The Association of St. J. N. Neumann in Prachatice
ÚSVIT; an association helping mentally handicapped people in Havlíčkův Brod
SONS United Organization of the Blind and Purblind, Blansko
ENERGIE o.p.s.; Hornická 106; 435 13 Meziboří; CZ;
RAINBOW Zámeček, a nonprofit organization, Havířov-Šumbark
ÚAMK - RACING CLUB LIBEREC; Hanychovská 37; 460 10 Liberec; ČR;
Special schools: Pod parkem 2788; Ústí nad Labem; CZ;
INEX – Association of Voluntary Activities Prague 1
The Club of Parents and Friends of Children’s Center in Kladno
Association of Secondary School Clubs of the Czech Republic, Brno
The Club of Parents and Friends of the Children’s Center in Březejc Velké Meziříčí
Domestic Assistance and Care Servicse – Hewer, Prague 10
VOLTIŽ o.s. Olomouc-Chválkovice
Special school for pupils with speech impediments and SPC, Hořičky
Elementary school and kindergarten in Bernartice nad Odrou
GE ELFUN; Hybernská 18; 110 00 Praha 1
Czech Radio; department of radio fees, Prague 2;
Hamza’s professional sanatorium for children and adults in Košumberk Luže
GE ELFUN Praha 1
Czech Red Cross - assistance to South East Asia after floods
GE ELFUN Prague 1
Total
CZK
5 000.00
8 000.00
10 000.00
10 000.00
10 000.00
10 000.00
10 000.00
10 000.00
10 000.00
10 000.00
20 000.00
20 000.00
20 000.00
20 000.00
20 000.00
20 000.00
20 000.00
20 000.00
20 000.00
20 000.00
20 000.00
30 000.00
30 000.00
15 000.00
15 000.00
15 000.00
15 000.00
15 000.00
15 000.00
15 000.00
15 000.00
15 000.00
15 000.00
15 000.00
24 000.00
28 000.00
29 000.00
1 300 000.00
29 750.00
57 120.00
65 460.00
286 000.00
1 394.70
2 358 724.70
33
GE Elfun Volunteers
A key role in the charitable activities of GE Money in the Czech
republic is played by Elfun, an organization which associates
volunteers from among the employees and which provides
assistance, through these employees, to various areas and communities around the world. An important part of Elfun's activities is
volunteerism benefiting the communities in which GE is present.
Approximately 53 500 volunteers have contributed more than
1 million hours of voluntary work as part of Elfun efforts across the
world to support more than one thousand different projects. In the
Czech Republic, the Elfun Organization was established as early as
2000 and today it assists dozens of projects in three main areas –
education, assistance for children and handicapped people and
protection of the living environment. In 2005, more than 500 GE
volunteers contributed several thousand hours of voluntary work in
the Czech Republic.
Among the long-term projects, in which GE Elfun participates in the
Czech Republic, is Klokánek (“Little Kangaroo”) – a project run by
the Fund of Endangered Children.
In the Czech Republic, Elfun also cooperates with the House of
Children of Charlotta Masaryková in Zbraslav, for which GE Money
employees organize regular collections of diapers, Easter and St.
Nicholas presents, and excursions into the countryside.
Blood donorship is a regular activity of GE Money employees. Last
year, there were three such events and more than 150 GE
employees donated blood.
Assistance to Asia following the devastating floods
In 2005, GE took a full part in the efforts to assist the regions of
South East Asia that were damaged by devastating floods. GE
Money Bank transferred the income from fees to the Czech Red
Cross Account amounting to CZK 43 thousand and the income
from payment orders made by its customers to the accounts of
five major charity organizations, which helped to address the
devastating consequences of the disaster. The Czech Red Cross
also received almost CZK 77 thousand from the bank’s employees
and another CZK 243 thousand from GE Money Bank. In total, GE
Money in the Czech Republic and in the Slovak Republic and its
employees contributed an amount of CZK 363 thousand. Moreover,
on a global scale, GE and its employees contributed more than 11
million dollars to assist the affected region.
GE Money employees themselves collected CZK 76 924 in a special
account of GE Money Bank, a.s.. They also helped indirectly – by
participating in the GE employees’ satisfaction survey which was
held in February 2005 in all GE business across the world. For each
employee of GE Money in the Czech Republic and in Slovakia, that
completed the questionnaire, GE Money donated an amount of
CZK 100 to the Czech Red Cross. As a total of 2437 GE Money
employees in the Czech Republic and Slovakia completed the
questionnaire, GE Money contributed a total of CZK 243 700.
Assistance to the High Tatra Mountains
A tornado, which swept the High Tatra Mountains on 19 November
2004, destroyed a large wooded area in the National Park and in its
surroundings.
GE Money assisted with the restoration of the area in 2005. Besides
the financial contribution amounting to SK 200 000, which GE
Money donated in December 2004, its employees also helped
personally, to ensure that the High Tatras would again be a
paradise for tourists and lovers of the mountains. In May 2005,
97 employees helped with repairing the damage after the tornado
and spent 2100 hours cleaning approximately 5 hectares of
damaged woods above the cog railway in Starý Smokovec. In
August 2005, almost 150 employees of GE Money from Bohemia
and Slovakia focused on the area of Štrbské Pleso and spent two
afternoons cleaning almost 8 hectares of damaged woodland.
More information about Elfun and the voluntary work and
sponsorship of GE Money in the Czech Republic is available at
www.gemoney.cz - see “Sponsoring and Charity”, or at
www.elfun.org.
Report on Relations
between Related Parties
35
REPORT ON RELATIONS BETWEEN RELATED PARTIES
Report on Relations between Related Parties
In accordance with Article 66a paragraph 9 of Act No. 513/1991 Coll.,
the Commercial Code, as later amended, this report has been produced on the
relations between GE Capital International Holdings Corporation (“the Controlling
Entity”), with its registered office at Corporation Trust, 1209 Orange Street,
Wilmington, Delaware, USA and GE Money Bank, a.s. (“the Controlled Entity”
or “the Bank”), with its registered office in Prague and between the Controlled
Entity and other entities controlled by the Controlling Entity for the reporting
period 1.1.2005 – 31. 12. 2005.
Ge Structure
General Electric Company
100 %
99.8 %
GE Investments, Inc.
100 %
General Electric Capital
Services, Inc.
0.2 %
MRA Systems, Inc.
100 %
General Electric Capital
Corporation
100 %
100 %
GE Capital International
Holdings Corporation
Global Consumer Finance
Limited
100 %
100 %
100 %
GE Money Bank,
a.s.
GE Money Auto,
a.s.
GE Money Auto, a.s.
(SR)
GE Money
Multiservis, a.s.
99 %
1%
GE Capital (Czech)
Holdings, s.r.o.
GE Money
Multiservis, k.s. (SR)
Since 15 December, 2004, GE Money Multiservis, a.s. became shareholder of GE Money Auto, a.s.
37
1. RELATED PARTIES
The above should be changed to say “On 15 December, 2004...
became a shareholder…“
GE Money Bank, a.s. is part of GE Consumer Finance,
a multinational corporation focusing on providing financial services
particularly to small and medium sized clients. The Bank cooperates with other companies within the GE Group which jointly
use its distribution network to provide their services under normal
commercial conditions.
2. LIST OF OTHER CONTRACTS AND LEGAL ACTS
a) List of contracts
Paid contracts - commitments
The Bank has concluded the below specified contracts with
GE Group companies with the resulting commitments arising from
them. These are mandate contracts with companies with
registered offices in the Czech and Slovak Republics according to
which the Bank invoices a proportionate part of the costs.
The Bank cooperates with GE Money Multiservis, a.s
(“Multiservis”) by making its distribution channels available to
Multiservis clients. Clients of Multiservis who are OK card holders
can withdraw cash at branches of the Bank. For this service
Multiservis pays a fix fee for each transaction.
The Bank also cooperates with Multiservis in the area of credit
card handling, distribution and transactions related to the GE
Maestro Credit Card/Master Card. The Bank maintains the whole
portfolio in its Vision Plus system. Multiservis pays a fixed fee to
the Bank for each issued and monitored card and also for each
transaction made using these cards. The cost of each card is
reviewed once a year based on the actual costs incurred and the
profit margin of the Bank.
The Bank has concluded contracts with GE Group companies
covering deals made on the money market according to the Bank’s
instructions and on the account of the Bank. Another type of
contract with attaching commitments is a contract on use of the
GE logo and trade mark. In addition, the Bank has concluded
contracts on the provision of support by GE companies in Dublin
and Stamford to its HQ departments and to the Bank’s
management.
Contracts with affiliated GE companies
GE Money Bank, a.s,
GE Money Multiservis, a.s.
Hybernská 18, Prague 1, Post Code 110 00
Vyskočilova 1422/1a, Prague 4, Post Code 140 28
Mandate Contract
GE Money Bank, a.s,
Contract on business co-operation
No financial commitments
GE Money Bank, a.s,
GE Money Auto, a.s.
Mandate Contract
GE Money Bank, a.s,
Dobrovičova 8, Bratislava, Post Code 811 09,
GE Money Bank, a.s,
GE Money Auto, a.s.
Mandate Contract
Slovak Republic
Mandate Contract
Dobrovičova 8, Bratislava, Post Code 811 09,
Slovak Republic
GE Money Bank, a.s,
Contract on supplied services
Contracts with other companies of the GE Group
GE Money Bank, a.s,
GE GmbH Vienna, Austria
GE Capital Corporation
Contract on treasury services
GE Money Bank, a.s,
GE Capital Corporation –
Utilization of GE networks
Vyskočilova 1422/1a, Post Code 140 28
GE Money Bank, a.s,
GE Capital Registry, Inc.
Trade mark utilization
GE Money Bank, a.s,
GE Corporate Computer Services Limited -
Fees for mediation of services V+
Europe Station, Kingswood
GE Money Bank, a.s.
Summer Street 1600, Stamford, U.S.A
GECB HQs
GE Money Bank, a.s.
Contract on support for departments of
GE Money Bank, a.s,
GE International Incorporated
Summer Street 1600, Stamford, U.S.A
GECB HQs - IT services
GE Money Bank, a.s.
GE Capital Woodchester Ltd.
Golden Lane, Dublin 8, Ireland
GECB HQs
GE Money Bank, a.s.
GE Capital Inernational Services
Contract on SW support
GE Towers, Sector Road, Sector 53
Contract signed on May 12, 2004
Gurgaon 122002, India
GE Money Bank, a.s.
GE Capital Inernational Services
Contract on SW support
GE Towers, Sector Road, Sector 53
Contract signed on May 14, 2004
Gurgaon 122002, India
GE Money Bank, a.s.
3135 Easton Turnpike, Fairfiled
E-mail service
Connecticut 06431, USA
GE Money Bank, a.s.
GE Capital Global Financial Restructuring
201 High Ridge Road, Stamford CT 06927
SW usage (licence fee)
GE Money Bank, a.s.
GE Capital Woodchester Ltd.
Golden Lane, Dublin 8, Ireland
GECB HQs
GE Money Bank, a.s.
GE International, Inc.
Shelton, Connecticut USA
GE Money Bank, a.s.
General Electric Capital Corporation
Global contract between GE and INDUS
a INDUS SOFTWARE PRIVATE LIMITED
SW usage contract - INDUS
GE Money Bank, a.s.
GE Corporate Company and Telindus
Global contract between GE and Telindus
GE Money Bank, a.s.
GE Consumer Finance and Global
Global contract between
eXchange Services, Inc. (Telindus)
GE and Global eXchange services – contract
about telecommunication and security
transfer systems maintenance
GE Money Bank, a.s.
Global contract between GE
and Ford Motor Company
and Ford Motor Company
Contract for company car bonuses
39
Sub-lease contracts - receivables
The Bank has concluded sub-lease contracts with GE Group
companies which have their centre in the building of the BB Centre
in Vyskočilova street. The Bank recharges the costs related to the
rented premises in the BB Centre proportionally to the listed
companies on a monthly basis.
The Bank has also concluded sub-lease contracts with
Multiservis, which uses part of the premises of the Bank in the
regional cities for to sell its products. It pays the Bank a rental fee
including a proportion of the operating costs of the point of sale.
GE Money Bank, a.s,
Sub-lease contract - in BB Centre, Prague 4,
GE Money Bank, a.s,
GE Money Auto, a.s.
GE Money Bank, a.s,
GE Capital (Czech) Holdings, s.r.o.
GE Money Bank, a.s,
Global Financial Restructuring Czech
Sub-lease contract - in The Park No. 2294/2,
Vyskočilova 1a/1422, Prague 4 Postal Code 140 28
V Parku 2294/2, Postal Code 148 00
Prague 4 Chodov
GE Money Bank, a.s,
Two Corporate Drive, Shelton, USA
GE Money Bank, a.s,
GE Medical Systems, SA – organizační složka
Vyskočilova 1a/1422, Prague 4, Postal Code 140 28
GE Money Bank, a.s,
GE Medical Systems Česká Republika, s.r.oi.
GE Money Bank, a.s,
GE Money Auto, a.s.
Sub-lease contract – Plzeň, Anglické nábřeží 1
GE Money Bank, a.s,
GE Money Auto, a.s.
Sub-lease contract – Olomouc, Opletalova 2
GE Money Bank, a.s,
GE Money Auto, a.s.
Karla IV. 502
GE Money Bank, a.s,
GE Money Auto, a.s.
Sub-lease contract – Brno, Lidická 31
GE Money Bank, a.s,
GE Lighting, s.r.o.
Purkyňova 45/2740, Brno, Post Code 612 00
Sub-lease contract – Hradec Králové,
Sub-lease contract – Brno, Lidická 31
GE Money Bank, a.s,
Sub-lease contract - in The Park Building
Husova 5, Prague 1, Post Code 110 00
No. 2294/2, Prague 4-Chodov
GE Money Bank, a.s.
GE Money Bank, a.s.
GE Money Auto, a.s.
GE Money Bank, a.s.
GE Capital (Czech) Holdings, sr.o..
GE Money Bank, a.s.
GE Money Auto, a.s.
Sub-lease contract – Jaromeř,
Vyskočiulova 1a/1422, Prague 4, Postal Code 140 28
Ve Sladovnách 37
GE Money Bank, a.s.
GE Money Auto, a.s.
Sub-lease contract – České Budějovice,
Vyskočiulova 1a/1422, Prague 4, Postal Code 140 28
Jírovcova 1863/1
Mandate contracts and other contractual receivables
The Bank also provided services in the non-retail area to GE
companies in the Czech and Slovak Republics. The services were
supplied under normal commercial conditions. The Bank has
concluded a contract with Global Consumer Finance Ltd on
supplying IT (Information Technology) project management services.
The Bank provides traditional banking services to affiliated
companies under normal commercial conditions, for example the
maintenance of accounts.
GE Money Bank, a.s,
GE Money Bank, a.s,
GE Money Auto, a.s.
GE Money Bank, a.s,
GE Money Multiservis, k.s.
Mandate Contract
Mandate Contract
Dobrovičova 8, Bratislava, Post Code 811 09, SR
GE Money Bank, a.s,
GE Money Auto, a.s.
Dobrovičova 8, Bratislava, Post Code 811 09, SR
GE Money Bank, a.s,
Mandate Contract
Mandate Contract
Contract on co-operation – concluding
revolving credit contracts on behalf of
Multiservis, withdrawal through O.K. card
GE Money Bank, a.s,
Global Consumer Finance Ltd.
Contract on supplied services for IT projects
Hybernská 18, Prague 1,
Summer Street 1600, Stamford, U.S.A.
management
GE Money Bank, a.s,
Contract on co-operation – concluding OK
Karta agreements
GE Money Bank, a.s,
Contract on co-operation – concluding loan
agreements On behalf of Multiservis
GE Money Bank, a.s,
GE Money Multiservis, k.s.
Contract on a movable lease
Bottova 7, Bratislava, Post Code 811 09, SR
Terminated on April 7, 2005
GE Money Bank, a.s,
GE Money Auto, a.s.
Bottova 7, Bratislava, Post Code 811 09, SR
Terminated on April 30, 2005
GE Money Bank, a.s,
GE Money Auto, a.s.
Bottova 7 8, Bratislava, Post Code 811 09, SR
Terminated on December 31, 2005
GE Money Bank, a.s,
Terminated on February 28, 2005
GE Money Bank, a.s,
GE Money Auto, a.s.
GE Money Bank, a.s,
Vyskočilova 1422/1a, Prague 4, Post Code 140 28,
b) List of other legal acts
No legal acts have been concluded during the reporting period
in favour of the Controlling Entity or entities controlled by the
Controlling Entity outside the scope of legal acts normally
performed by the Controlling Entity in exercising its rights as
a shareholder of the Controlled Entity.
3. OTHER GOODS AND SERVICES PROVIDED AND
OFFSETS RECEIVED
During the reporting period, the Controlled Entity did not
receive or provide, in favour or at the request of the Controlling
Entity or entities controlled by the Controlling Entity, any goods or
services or offsets in excess of those normally received from or
provided to the Controlling Entity as a shareholder of the Controlled
Entity.
41
4. GE Money Bank, a.s. RECEIVABLES FROM AND PAYABLES TO OTHER RELATED PARTIES
31. December, 2005
CZK M
Receivables
Payables
GE Money Multiservis, Czech Republic
850 472
27 697
GE Money Multiservis, Slovak Republic
56
7
GE Capital (Czech) Holdings, Czech Republic
36
37 230
GE International Zurich, Schwitzerland
41
–
GE International, Shelton BUC: M45000
25 877
763
GE International, Czech Republic
GE ELFUN
GE Medical Systems S. A., Czech Republic
Czech Republic
84
–
–
970
1 842
–
24
–
GE Money Auto, Česká republika
183 325
6 073
GE Money Auto, Slovak Republic
259
–
GE Consumer Finance, Watford
3
–
GE Equipment Services CZ, Říčany u Prahy
1
–
Global Financial Restructuring Czech, Prague 4
4
–
14
–
9
–
GE Industrial Brno, CZ
Amersham Health (Cnetral East Europe), HaldelsGmbh, Prague 8
GE Capital Woodcherster Limited Golden Lane, Ireland
GE Capital Europe Limited London, UK BUC: 20001X
GCF – Global Cards, London, UK
3 032
–
46
–
1 390
–
68
–
GE Capital Commerzial Finance International, Stamford, USA
449
–
GE Capital Global Cons.Finance Stamford, USA BUC: EB7045
1 703
–
18
227
5
–
GE Client Business Services Fort Myers FL, USA
GE Capital, Gdaňsk, Poland
GE Corporate Audit Staff, Fairfield, USA
GE Consumer Finance UK Limited, Leeds, UK
66
–
GE Money Services, Gmbh, Eisenstadt, Austria
93
–
Ge Money Bank, Hannover, Germany
GE Card Services North America, Stamford, USA
GE Corporate Component, Philadelphia
46
–
125
–
–
193
GE Capital – GCF, Sao Paulo, Brasil
733
–
GE Consumer Finance Brasil, Sao Paulo, Brasil
225
–
9
–
168
–
GE Real Estate Europe, Paris, France
GE Money Bank AB, Stockholm
General Electric Capital Bank SA, Barcelona, Spain
37
–
155
–
22
–
GE Crotonville Training BUC: A01300
–
120
GE Nuovo Pignone Holding BUC: RS1011
–
80
1 070 437
73 359
GE Capital Bank, Budapest, Hungary
GE Capital Asia Pacific, Hong Kong
Total
5. ASSESSMENT
The Bank declares that it has not suffered any detriment as
a result of entering into the above listed contracts, or as a result of
the above listed legal acts, other goods and services provided and
offsets received.
Financial Statements
Name of the Bank:
Registered office:
Identification no:
Business:
Date of preparation:
Code of the Bank:
GE Money Bank, a.s.
Vyskočilova 1422/1a, Praha 4
25672720
Bank
7 April 2006
0600
43
FINANCIAL STATEMENTS
ASSETS
Balance sheet as at 31 December 2005
CZK 000
Note
1
Cash in hand and balances with central banks
2
State zero coupon bonds and other securities eligible
for refinancing with the CNB
15
of which: a) securities issued by government institutions
b) others
3
Receivables from banks and cooperative savings associations
13
of which: a) repayable on demand
b) other receivables
4
Receivables from customers - members of cooperative savings associations
14
b) other receivables
6
7
2 313 214
3 068 392
490 148
4 078 227
490 148
4 078 227
0
0
11 186 700
13 253 702
56 821
57 944
11 129 879
13 195 758
47 896 504
37 238 532
477
409
47 896 027
37 238 123
16
39 027
16 105
Participation interests with substantial influence
17
240
240
Intangible fixed assets
18
of which: a) establishment costs
b) goodwill
10
Tangible fixed assets
11
Other assets
Prepaid expenses and accrued income
Total assets
The notes set out on pages 50 to 68 form part of these financial statements.
0
0
250 371
256 156
0
0
0
0
19
777 167
841 770
215 816
179 690
20
1 106 428
913 848
of which: land and buildings for operating activities
13
2004
Shares, mutual fund certificates and other investments
of which: in banks
9
2005
103 368
114 699
64 163 167
59 781 671
LIABILITIES
Balance sheet as at 31 December 2005
CZK 000
2
Note
Due to customers - members of cooperative savings associations
2005
2004
47 400 258
45 428 245
33 829 769
30 847 966
13 570 489
14 580 279
22
1 179 188
1 416 629
113
24 366
24
12 523
14 447
21
b) other payables
4
Other liabilities
5
Deferred income and accrued expenses
6
Provisions
of which: a) provision for pensions and similar obligations
b) provision for taxes
c) other
8
Registered capital
23
of which: a) registered paid-up capital
b) own shares
0
0
0
0
12 523
14 447
510 000
510 000
510 000
510 000
0
0
4 701 979
9
Share premium
25
4 701 979
10
Reserve funds and other funds from profit
25
102 000
102 000
102 000
102 000
0
0
of which: a) statutory reserve funds and risk funds
b) other reserve funds
c) other funds from profit
13
0
0
Gains (losses) from revalution
26
403
0
of which: a) assets and liabilities
26
403
0
b) hedging derivatives
0
0
0
0
14
Retained earnings (or accumulated losses) from previous years
c) participation interests
25
7 584 005
5 341 830
15
Profit (loss) for the accounting period
25
2 672 698
2 242 175
64 163 167
59 781 671
Total liabilities
45
OFF-BALANCE SHEET ITEMS
CZK 000
Note
2005
2004
6 685 515
6 500 297
12 290
51 619
Off-balance sheet assets
1
Commitments and guarantees granted
3
Receivables from spot transactions
28
4
Receivables from fixed term transactions
3 537 267
6 019 332
6
Receivables written-off
2 933 619
3 050 598
Off-balance sheet liabilities
1
Commitments and guarantees received
2
Collateral and pledges received
3
Payables from spot transactions
4
Payables from fixed term transactions
398 362
347 674
38 736 853
31 118 750
12 269
51 710
3 574 332
6 105 277
PROFIT AND LOSS ACCOUNT FOR THE YEAR
ENDED 31 DECEMBER 2005
CZK 000
1
2
Note
2004
4 293 912
Interest income and similar income
4
4 657 295
of which: debt securities
4
23 054
219 916
Interest expenses and similar expenses
4
(208 260)
(236 861)
0
0
of which: debt securities
3
2005
Income from shares and participation interests:
173
156 496
of which: a) income from participation interests with substantial influence
0
0
b) income from participation interests with controlling influence
0
0
5
173
156 496
c) income from other shares and participation interests
5
4
Commission and fee income
6
2 561 005
2 312 167
5
Commission and fee expenses
6
(315 855)
(288 329)
6
Gain or loss from financial operations
7
119 039
114 677
7
Other operating income
8
646 669
812 057
8
Other operating expenses
8
(32 213)
(205 088)
9
Administrative expenses
9
(3 193 755)
(2 954 459)
of which: a) employee expenses
9
(1 261 556)
(1 226 646)
of which : aa) social and health insurance
9
(328 559)
(320 129)
9
(1 932 199)
(1 727 813)
(385 026)
(388 949)
24
417 732
586 611
24
(1 470 718)
(1 584 708)
2 796 086
2 617 526
b) other administrative expenses
11
Depreciation, creation and use of reserves
and adjustments to tangible and intangible FA
12
Release of adjustments and provisions for receivables
13
Write-offs, creation and use of adjustments
and guarantees, income from written-off receivables
and provisions for receivables and guarantees
19
Current year profit (loss) from ordinary activities before tax
23
Income tax
24
Net profit (loss) for the accounting period
25
(123 388)
(375 351)
2 672 698
2 242 175
47
Summary of changes in equity in 2005
Own
shares
0
Share
premium
4 701 979
Reserve
funds
102 000
Capital
funds
0
Revaluation
gains (losses)
0
Profit
(loss)
5 341 830
Total
10 655 809
0
0
0
0
0
0
2 242 175
2 242 175
Balance as at 31 December 2004
510 000
0
4 701 979
102 000
0
0
7 584 005
12 897 984
Balance as at 1 January 2005
510 000
0
4 701 979
102 000
0
0
7 584 005
12 897 984
0
0
0
0
0
403
0
403
0
0
0
0
0
0
2 672 698
2 672 698
510 000
0
4 701 979
102 000
0
403
10 256 703
15 571 085
CZK 000
Registered
capital
510 000
Net profit (loss) for the accouning period
FX gains (losses) and gains (losses)
not included in the profit and loss statement
Net profit (loss) for the accouning period
Balance as at 31 December 2005
Notes to the financial
statements
49
NOTES TO THE FINANCIAL STATEMENTS
1. BASIC INFORMATION
2. SIGNIFICANT ACCOUNTING POLICIES
a) Establishment and description of the Bank
GE Money Bank, a.s., formerly GE Capital Bank, a.s., (“the bank”)
was established on 9 June 1998 by a contribution of capital from
GE Capital International Holding in the amount of CZK 2 000 million.
From this initial capital, the bank purchased selected assets and
liabilities from Agrobanka, a.s., a bank, which had earlier been put
into enforced administration by the Czech National Bank.
On 22 June 1998, the date of purchase, the assets and liabilities
acquired were recorded in the bank’s balance sheet at the values
determined in the Purchase Agreement.
On 17 January 2005 the bank was renamed from GE Capital
Bank, a.s. to GE Money Bank, a.s. as part of a global rebranding
initiative implemented by the parent company. The aim is to use
the worldwide experience of GE Money not only for uniform
communication, but also for improvement of processes and to
strengthen our mutual relationships and intensify the successful
cooperation with clients.
The significant accounting policies adopted in the preparation
of the financial statements are set out below:
Registered office
GE Money Bank, a.s.
140 25 Praha 4
Česká republika
Identification number
25672720
Members of the board of directors
Members of
the supervisory board
Gerard Ryan (předseda)
Jan Rollo
James Desmond O’Shea (předseda)
Christoph Glaser
Pavel Zídek
Miroslav Červenka
Changes in the Commercial Register
In 2005, the board of directors changed as follows:
• on 22 January 2005, Sonia Slavtcheva resigned from the
board of directors,
• on 5 May 2005 Christoph Glaser was appointed as a member
of the board of directors.
For organizational structure see page 16
b) Basis of preparation
The financial statements have been prepared on the basis of
accounting maintained in accordance with the Act on Accounting
and relevant regulations and decrees of the Czech Republic. They
have been prepared under the historic cost convention on the
basis of full accrual accounting, except for selected financial
instruments that are stated at fair value.
The financial statements have been prepared in accordance
with the Czech Ministry of Finance decree regulating the layout
and definition of financial statements and disclosure requirements
of banks and certain financial institutions dated 6 November 2002
(N. 501/2002).
Numbers in brackets represent negative amounts.
These financial statements are non-consolidated financial
statements.
a) Transaction date
Depending on the type of transaction, the transaction date is
defined as the date of payment or collection of cash; the date of
purchasing or selling of foreign currency or securities; date of
payment or collection from a customer's account; date of order to
a correspondent to make a payment, settlement date of the bank’s
payment orders with the ČNB clearing centre, the value date
according to a statement received from a bank’s correspondent
(statement means SWIFT statement, bank’s notice, received media,
bank statement or other documents); the trade date and
settlement date of transactions with securities, foreign currency,
options or other derivatives; the date of issue or receipt of a
guarantee or opening credit line; the date of acceptance of values
into custody. Accounting transactions involving the purchase or
sale of financial assets with a usual term of delivery (spot
transactions) as well as fixed term and option contracts are recorded in off-balance sheet accounts from the trade date until the settlement date.
A financial asset or its part is derecognised from the balance
sheet if the bank loses control over the contractual rights to this
financial asset or its part. The bank loses this control if it exercises
the rights to the benefits defined in the contract, if these rights
expire or if they are waived by the bank.
b) Debt securities, shares, units and other investments
Treasury bills, bonds and other debt securities and shares including units and other investments are classified into the portfolio
held to maturity, the portfolio valued at fair value through profit or
loss, or the available for sale portfolio, based on the Bank’s intention. Only debt securities can be classified into the portfolio held to
maturity.
Treasury bills, bonds and other debt securities are recorded at
amortised/accreted cost. Accrued interest income is part of the
carrying amount of these securities. Shares, units and other
investments are recorded at acquisition cost.
Premiums and discounts on debt securities are amortised/
accreted through the profit and loss account over the period from
the date of purchase to the date of maturity using the effective
interest rate method. In the case of securities which have a residual
maturity of less than 1 year from the date of purchase, the
premium and the discount are amortized/accreted equally through
the profit and loss account over the period from the date of
purchase to the date of maturity.
Debt securities and shares, units and other investments valued
at fair value through profit or loss are measured at fair value and
gains/losses from this revaluation are charged to the profit and loss
account in “Gain or loss from financial operations”.
Available for sale securities and shares, units and other
investments are measured at fair value and gains/losses from
this revaluation are charged to equity in “Gains (losses) from
revaluation”. When the security is sold the respective revaluation
difference is charged to the profit and loss account in “Gain or loss
from financial operations”.
The fair value used for the revaluation of securities is
determined based on the market price published as at the date of
the fair value measurement, if the bank can prove that the securi-
ties can be sold for that market price.
For debt and equity securities traded on the public market, fair
values are equal to the price on the public market of OECD countries, if, at the same time, the condition of securities liquidity is fulfilled.
If it is not possible to determine the fair value as the market value (i.e. the bank can not prove that it is possible to sell the securities for such a market price), the fair value is estimated as an adjusted value of securities.
The adjusted value of securities equals the share proportion of
equity for shares, the share proportion of the fund’s net asset value
for units, and the present value of the security for debt securities.
Adjustments are established to debt securities held to maturity.
Adjustments to these securities are created by an amount that reflects only the change in the risk of the issuer, but not the change in
risk-free interest rates, calculated on an individual basis.
Transactions where securities are purchased under a commitment to resell (resale commitment) are treated as collateralised
lending transactions. The legal title of securities subject to resale or
repurchase commitments is transferred to the lender. Securities received under a resale commitment are recorded in off-balance sheet
accounts in “Collaterals and pledges received”. The lending granted
under a resale commitment is recorded in ‘Receivables from banks
and cooperative savings associations’ or ‘Receivables from customers - cooperative savings association’s members.’ Interest on debt
securities received under a resale commitment is not accrued.
Income arising under resale commitments as the difference
between the selling and purchase price is accrued over the period
of the transaction and recorded in the profit and loss account as
“Interest income and other similar income”.
c) Participation interests with substantial influence
A participation interest with substantial influence is one in
which the bank holds at least 20 per cent of the subject’s registered
capital. In this case, the bank has substantial influence over the
subject’s management, which arises from participation in
registered capital, or from agreement or articles of association
regardless of the percentage of participation.
Participation interests with substantial influence are valued at
acquisition cost net of adjustments due to the temporary decrease
in the value of the participation interests calculated on an
individual basis.
d) Receivables from banks and customers
Receivables are carried net of adjustments. Accrued interest
income is part of the carrying amount of receivables.
Receivables are reviewed for recoverability. Adjustments are
created for specific receivables as considered appropriate. The
methodology for creating adjustments in the appropriate accounting period is described in note 29. Adjustments created by debiting
expenses are reported in “Write-offs, creation and use of adjustments and reserves to receivables and guarantees” in the sub-ledgers used to calculate the income tax liability.
The tax-deductible portion of the period charge for the creation
of adjustments for credit losses is calculated in accordance with
the requirements of section 5 (“Banking reserves and adjustments”)
and section 8 (“Adjustments to receivables from debtors subject to
bankruptcy or composition proceedings”) of the Act on Reserves
N. 593/1992 Coll.
Receivables are written off when the bank has determined the
receivable to be permanently irrecoverable.
The write off of unrecoverable receivables is accounted for in
“Write-offs, creation and use of adjustments and reserves to receivables and guarantees” in the profit and loss account. Adjustments
and reserves are reduced in an equal amount to the amount written off in the same account in the profit and loss account.
Recoveries of loans previously written off are included in the profit
and loss account in “Release of adjustments and provisions for receivables and guarantees, income from written-off receivables”.
The bank also accrues interest income from classified receivables. Adjustments to accrued interest income are established in
accordance with the appropriate requirement of the ČNB.
Receivables from customers purchased from a third party are
initially recorded at the discounted value of the gross receivable
actually due under the contracts with the customers. To the extent
that a customer repays any portion of the receivable in excess of
the discounted value originally assigned to the receivable, this difference is recorded as operating income.
e) Creation of provisions
A provision represents a probable cash outflow of uncertain timing and amount. Provisions are established if the following criteria are met:
• a present obligation exists (legal or factual) as a result of a
past event,
• it is probable that an outflow of resources will be required to
settle the obligation; “probable” meaning a probability exceeding 50%
• the amount of the obligation can be reliably estimated.
f) Intangible and tangible fixed assets
Tangible and intangible fixed assets are stated at historical
cost and are depreciated using the straight-line method over their
estimated useful lives as shown in the following table.
Software
5 years
Cars
4 years
Technical improvement of buldings
10 years
Furniture
10 years
Equipment
5 years
Establishment costs - other intangible fixes assets
5 years
PCs and servers
3 years
Leasehold improvements are depreciated on a straight-line basis over the shorter of the lease term or the relevant asset’s remaining useful livetime.
Intangible fixed assets costing less than CZK 60 000 and tangible fixed assets costing less than CZK 40 000 with a useful lifetime
of less than 1 year are charged to the profit and loss account in the
period in which they are acquired.
g) Foreign currency translation
Transactions denominated in foreign currencies are recorded
in the local currency at the actual exchange rate on the date of the
transaction. Assets and liabilities denominated in foreign currencies
together with unsettled spot foreign exchange transactions are
translated into the local currency at the ČNB foreign exchange rate
prevailing on the balance sheet date. Foreign exchange gains or
losses arising from the translation of assets and liabilities denominated in foreign currencies are recognized in the profit and loss
51
account in “Gain or loss from financial operations”.
h) Financial derivatives
Trading instruments
Financial derivatives held for trading are carried at fair value.
Gains (losses) from the changes in fair value are recorded in the
profit and loss account in “Gain or loss from financial operations”.
The bank uses all of its trading financial derivatives for
macro-hedging purposes.
The fair value of financial derivatives is determined as the
present value of expected cash flows from these transactions,
using valuation models generally accepted on the market. The
parameters used in these models, such as foreign exchange rates,
yield curves, volatility of financial instruments, etc. are derived from
the market.
i) Taxation
Tax non-deductible expenses are added to and non-taxable
income is deducted from the profit for the period to arrive at the
taxable income which is further adjusted by tax allowances and
relevant credits.
Deferred tax is provided on all temporary differences between
the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes multiplied
by the enacted income tax rate for the period when the timing
difference is expected to reverse. A deferred tax asset is recognized
only to the extent that there are no doubts that there will be future
taxable profits available against which this asset can be utilized.
j) Financial leasing
Assets acquired under financial leases are recorded in
“Tangible fixed assets” when the legal ownership is transferred to
the bank. Lease payments are recorded in “Other operating
expenses”.
4. NET INTEREST INCOME
CZK 000
Interest income
from deposits
from loans
from debt securities
72 992
56 325
4 561 249
4 017 671
23 054
219 916
(208 260)
(236 861)
from deposits
(206 043)
(233 975)
(2 217)
(2 886)
4 449 035
4 057 051
from loans
Net interest income
The bank waived or did not claim default interest of TCZK 11
012 (2004: TCZK 7 950).
5. INCOME FROM SHARES AND PARTICIPATION INTERESTS
CZK 000
2005
2004
and participation interests
173
156 496
Total
173
156 496
2005
2004
425 397
547 605
1 900 197
1 536 122
Income from dividends
6. FEES AND COMMISSIONS
CZK 000
Fee and commission income from
payment processing
lending activities
235 411
228 440
2 561 005
2 312 167
payment processing
(166 885)
(262 069)
other
(148 970)
(26 260)
(315 855)
(288 329)
Total
In 2005, the bank changed the method of recognizing revenue
related to insolvency insurance (a product of the Cardif Pro Vita
insurance company). In 2004, the bank used the gross method for
recognizing income from the Cardif insurance and related
expenses, while since 2005, due to an amendment to the
agreement signed by the bank and the Cardif Pro Vita insurance
company, the bank has been recognizing Cardif insurance in
“Other operating income” in the net amount only.
The comparative figures for 2004 have been changed
accordingly. An amount of TCZK 270 864 has been moved from
“Commission and fee income” to “Other operating income”.
A further amount of TCZK 105 105 has been moved from
“Commission and fee expense” to “Other operating income”.
The overall impact of the above mentioned movements on retained
earnings is zero.
2004
4 293 912
Interest expense
other
3. CHANGES IN ACCOUNTING POLICIES
2005
4 657 295
Fee and commission expense from
Total
7. GAIN OR LOSS FROM FINANCIAL OPERATIONS
CZK 000
2005
2004
Gains/losses from securities transactions
2 565
(1 381)
Gains/losses from derivative transactions
(60 103)
(69 914)
Gains/losses from foreign exchange
transactions
66 766
55 498
Foreign exchange gains / losses
109 811
130 474
Total
119 039
114 677
8. OTHER OPERATING INCOME AND EXPENSES
CZK 000
The average number of bank employees during the period was
as follows:
2005
2004
646 669
812 057
Service revenues
32 032
115 796
Commissions from third parties
88 982
70 103
Members of the Board of Directors
4
4
42 554
33 421
3
3
5 614
8 343
15
15
Other operating income
Rent
Sale of fixed assets
Damages
538
218
Income related to purchased loans
685
17 026
Correction
183 181
395 048
Cardif insurance
255 656
165 759
Employees
Other Executives
2005
2004
2 028
2 056
10. INCOME AND EXPENSES RESULTING FROM
PARTICIPATION INTERESTS WITH SUBSTANTIAL
INFLUENCE
Other
37 427
6 343
Other operating expenses
32 213
205 088
2005
2004
Royalties
85 358
73 616
Fee and commission expense
21 916
8 865
Deposit insurance
44 951
89 015
Total
21 916
8 865
9 587
9 587
(123 173)
0
15 490
32 870
Withholding tax
Tax penalty
Other
CZK 000
11. TRANSACTIONS WITH RELATED PARTIES
CZK 000
In 2005, the central financial office of Prague 1 cancelled the
additional tax assessment covering the period 1998-2000 (see Note
27 a). Consequently, the associated penalties of TCZK 123 173 were
also cancelled.
Receivable
2005
2004
1 088 604
1 053 362
Payable
88 066
275 206
Income
256 644
180 117
Expense
392 911
421 771
9. ADMINISTRATIVE EXPENSES
CZK 000
Employee expenses
2005
2004
1 261 556
1 226 646
Wages and salaries
932 997
906 517
Social and health insurance
328 559
320 129
17 207
28 436
Of which wages and salaries paid to:
Members of the Board of Directors
and executives
Other administrative expenses
0
0
1 932 199
1 727 813
of which expenses for audit,
legal and tax advisory
Total
22 058
28 197
3 193 755
2 954 459
The bank did not pay any bonuses tied to equity in 2005 and
2004.
53
12. INCOME AND EXPENSES ACCORDING TO SEGMENT
a) Business segments
Retail Banking
CZK 000
Interest income
2005
2004
2005
2004
3 405 147
3 033 012
1 252 148
1 260 900
Interest expense
Fee and commission income
Corporate Banking
(143 135)
(157 105)
(65 125)
(79 756)
2 043 957
1 724 098
517 048
588 069
(290 834)
(256 846)
(25 021)
(31 483)
52 964
51 023
66 075
63 654
Fee and commission expenses
Gains or losses from financial operations
b) Geographical segments
Czech Republic
CZK 000
Interest income
Interest expense
European union
Other
2005
2004
2005
2004
2005
2004
4 621 260
4 264 638
16 062
13 010
19 973
16 264
(206 649)
(235 222)
(718)
(765)
(893)
(874)
Fee and commission income
2 541 190
2 293 611
8 832
7 790
10 983
10 766
Fee and commission expense
(313 411)
(285 595)
(1 089)
(1 039)
(1 355)
(1 695)
118 118
112 787
411
822
510
1 068
Gains or losses from financial operations
13. RECEIVABLES FROM BANKS
a) Analysis of receivables from banks
CZK 000
2005
2004
Standard
11 186 700
13 253 702
Net receivables from banks
11 186 700
13 253 702
b) Analysis of receivables from banks by type of security
received
CZK 000
2005
2004
Security held by the bank
7 648 832
11 364 463
Unsecured
3 537 868
1 889 239
11 186 700
13 253 702
Total
During 2005 the bank created an adjustment of TCZK 325 796
(2004: TCZK 264 618) to the portfolio of consumer loans, bringing
the total adjustments created on a portfolio basis to TCZK 1 832
987 (2004: TCZK 1 792 667). The bank determined the amount of
these adjustments using a statistical model derived from its past
experience of overdue receivables (see Note 30 d). During 2005 the
bank restructured receivables from customers totalling TCZK 56
483 (2004: TCZK 146 755)
b) Analysis of receivables from customers by sector
CZK 000
Financial institutions
Non-financial institutions
14. RECEIVABLES FROM CUSTOMERS
Insurance institutions
a) Analysis of receivables from customers
CZK 000
2005
2004
43 314 097
34 038 646
Special mentioned
3 530 476
2 352 806
Sub-standard
1 075 496
914 807
Standard
Doubtful
Loss
351 236
285 783
5 140 954
4 252 978
Adjustment to potential losses
from receivables
(5 515 755)
(4 606 488)
Net receivables from customers
47 896 504
37 238 532
2005
2004
301 477
362 142
12 589 079
9 950 722
1 572
26
Government sector
52 938
75 533
Non-profit organisations
39 933
11 509
Self-employed
Resident individuals
Non-residents
Total
6 671 859
5 670 039
33 752 003
25 771 415
3 398
3 634
53 412 259
41 845 020
c) Analysis of receivables from customers by sector and type of security received
As at 31 December 2005
CZK 000
Personal
guarantee
Bank
guarantee
Mortgage
Performance
guarantee
Bill of
exchange
Held
by Bank
Unsecured
Total
0
0
227 248
720
0
0
73 509
301 477
3 054
52 484
9 254 188
141 512
2
46 571
3 091 268
12 589 079
0
0
1 456
0
0
0
116
1 572
Government sector
0
0
42 176
0
0
0
10 762
52 938
Non financial institutions
Non profit organizations
0
0
30 577
0
0
0
9 356
39 933
Self employed
0
17 226
4 266 169
62 636
6
13 468
2 312 354
6 671 859
1
0
8 056 706
3 026
0
0
25 692 270
33 752 003
Non resident individuals
0
0
0
0
0
0
3 398
3 398
3 055
69 710
21 878 520
207 894
8
60 039
31 193 033
53 412 259
Personal
guarantee
Bank
guarantee
Mortgage
Bill of
Held
exchange
Unsecured
by Bank
Total
0
0
11 577
0
0
0
350 565
362 142
9 950 722
Total
CZK 000
Non financial institutions
Performance
guarantee
300
17 662
8 318 407
158 568
2
94 995
1 360 788
0
0
0
0
0
0
26
26
Government sector
0
0
56 376
1 000
0
0
18 157
75 533
Non profit organizations
0
0
1 522
0
0
244
9 743
11 509
0
2 519
2 725 412
82 715
4
29 839
2 829 550
5 670 039
16
0
5 792 671
0
0
0
19 978 728
25 771 415
Self employed
Non resident individuals
Total
0
0
0
0
0
0
3 634
3 634
316
20 181
16 905 965
242 283
6
125 078
24 551 191
41 845 020
d) Net receivables from customers written-off and recovered
CZK 000
e) Receivables from persons with a special relationship to the
bank
2005
2004
113 956
217 796
4 102
25 823
59 665
Board of
Write-offs
Self-employed
Non-residents
Total
138 247
117
12
256 422
303 296
46 882
142 614
Recoveries
Self-employed
Total
9 259
0
374
2 747
56 515
145 361
CZK 000
Supervisory
directors
Executives
At 31 December 2004
3 242
11 617
board
0
At 31 December 2005
3 107
14 677
384
These receivables represent loans provided under standard
employee conditions.
55
15. STATE ZERO COUPON BONDS AND OTHER
SECURITIES ELIGIBLE FOR REFINANCING WITH
THE ČNB
16. SHARES, UNITS AND OTHER INVESTMENTS
a) Analysis of shares, units and other investments by individual
portfolio based on the bank’s intention
a) Net book value of state zero coupon bonds and other
securities eligible for refinancing with the ČNB
CZK 000
2005
2004
available-for-sale
39 027
16 105
Net book value
39 027
16 105
Shares, units and other investments
CZK 000
2005
2004
State treasury bills
490 148
4 078 227
Net book value
490 148
4 078 227
As at 31 December 2005 the bank held State zero coupon
bonds under resale commitments with a market value of TCZK 7
648 832 (2004: TCZK 11 364 463), which are reported in the off-balance sheet in “Collaterals and pledges received”.
b) Analysis of State zero coupon bonds and other securities
eligible for refinancing with the ČNB by individual portfolio
based on the bank’s intention
b) Analysis of shares, units and other investments available for
sale
Book Value
CZK 000
2005
2004
18 698
15 724
Issued by financial institutions
- Unlisted
Issued by non-financial institutions
CZK 000
2005
2004
State zero coupon bonds and other
securities available-for-sale
490 148
4 078 227
Net book value
490 148
4 078 227
- Unlisted
20 329
381
Total
39 027
16 105
17. PARTICIPATION INTERESTS WITH SUBSTANTIAL INFLUENCE
CZK 000
Registered
office
Business
activity
Víta Nejedlého 509/15
service databank
Name
Other
categories
of equity
Share
in equity
1200
910
20%
1200
910
Registered
capital
Share of
voting rights Book value
At 31 December 2005
Czech Banking Credit Bureau, a.s.
Praha 3 SW, HW and network
Total
20%
240
240
At 31 December 2004
Czech Banking Credit Bureau, a.s.
Víta Nejedlého 509/15
service databank
Praha 3 SW, HW and network
Total
1200
2
1200
2
20%
20%
240
240
18. INTANGIBLE FIXED ASSETS
a) Movements in intangible fixed assets
Software
Establishment
Cost
As at 1 January 2004
908 181
2 045
Additions
141 514
0
Disposals
(968)
0
1 048 727
2 045
CZK 000
Assets not
yet in use
Minor intangible
fixed assets
Total
22 446
0
932 672
166 739
207
308 460
(138 226)
(149)
(139 343)
50 959
58
1 101 789
1 101 789
Costs
1 048 727
2 045
50 959
58
Additions
116 631
0
105 193
0
221 824
Disposals
(16 851)
0
(116 632)
(58)
(133 541)
1 148 507
2 045
39 520
0
1 190 072
695 714
1 943
0
0
697 657
Charge for the period
148 795
102
0
0
148 897
Amortization and Adjustments
Disposals
(921)
0
0
0
(921)
843 588
2 045
0
0
845 633
843 588
2 045
0
0
845 633
109 338
0
0
0
109 338
Disposals
(15 270)
0
0
0
(15 270)
937 656
2 045
0
0
939 701
205 139
0
50 959
58
256 156
210 851
0
39 520
0
250 371
Net book value
b) Establishment costs
The bank’s first year of operations was 1998 and it capitalized the following establishment costs incurred during the period between its
foundation and incorporation: travel expenses of TCZK 181 and other costs of CZK 1,864 million. Establishment costs were amortised over
5 years.
57
19. TANGIBLE FIXED ASSETS
a) Movements in tangible fixed assets
CZK 000
Land and Buildings
Furniture
and Fittings
Equipment
Low value tangible Land and Buildings Other Fixed Assets
fixed assets
not yet in use
not yet in use
Total
Cost
250 964
140 067
1 033 186
624
15 649
13 854
Additions
32 754
22 302
235 434
28 941
49 917
297 916
1 454 344
667 264
Disposals
(4 834)
(11 272)
(39 736)
(18 227)
(32 754)
(257 736)
(364 559)
278 884
151 097
1 228 884
11 338
32 812
54 034
1 757 049
278 884
151 097
1 228 884
11 338
32 812
54 034
1 757 049
Additions
74 032
38 509
178 776
21 476
43 657
171 310
527 760
Disposals
(4 810)
(14 299)
(127 057)
(22 493)
(74 032)
(217 284)
(459 975)
348 106
175 307
1 280 603
10 321
2 437
8 060
1 824 834
69 517
56 229
607 916
0
0
0
733 662
32 211
25 197
181 025
0
0
0
238 433
Disposals
(2 534)
(2 095)
(52 187)
0
0
0
(56 816)
99 194
79 331
736 754
0
0
0
915 279
99 194
79 331
736 754
0
0
0
915 279
38 249
26 441
192 790
0
0
0
257 480
Disposals
(2 716)
(11 169)
(111 207)
0
0
0
(125 092)
134 727
94 603
818 337
0
0
0
1 047 667
Amortization and Adjustments
Net book value
179 690
92 066
471 830
11 338
32 812
54 034
841 770
213 379
80 704
462 266
10 321
2 437
8 060
777 167
b) Tangible fixed assets held under finance leases
The bank is committed to payments under finance leases for fixed assets (not included in the tangible fixed assets of the bank) as follows:
CZK 000
Office equipment
Paid during 2005
Due within
1 year
Due within
1 to 5 years
Due in
following years
Total lease
payments
remaining
80
0
0
0
0
Other fixed assets
6 717
0
0
0
0
Total
6 797
0
0
0
0
20. OTHER ASSETS
b) Due to persons with a special relationship to the bank
CZK 000
2005
2004
270 772
312 526
CZK 000
Other cash values
588 129
341 123
Clearing account for payments
149 078
0
1 847
1 179
Other debtors
Clearing accounts
Other
Deferred tax assets
Less: Adjustments
Total
Executives
Supervisory
board
At 1 January 2004
2 856
7 632
2 839
Additions
1 100
8 275
459
At 31 December 2004
3 956
15 907
3 298
At 1 January 2005
3 956
15 907
3 298
841
49
232
914
8 683
Additions
0
0
64 085
33 379
Disposals
(268)
(9 027)
0
107 344
345 226
3 688
6 880
4 139
(75 790)
(128 500)
1 106 428
913 848
Positive fair value of derivates
Accruals
Board of
directors
21. DUE TO CUSTOMERS
At 31 December 2005
c) Due to participation interests with substantial influence
The bank had no amounts due to participation interests with
substantial influence as at 31 December 2005 or as at
31 December 2004.
a) Analysis of due to customers by sector
22. OTHER LIABILITIES
CZK 000
2005
2004
2005
2004
137 320
139 738
Other creditors
779 431
987 661
7 891 966
6 551 658
Other payables
399 757
428 968
359 980
303 916
CZK 000
Due to customers on demand
Government sector
Self-employed
Non-residents
Total
43 873
6 716
1 773 468
2 272 093
755 959
661 363
5 798 613
5 423 584
17 062 937
15 433 533
365 633
359 281
33 829 769
30 847 966
Due to customers with fixed maturity
37 073
44 570
1 948 136
1 818 953
72 438
76 194
Government sector
275 411
286 698
236 216
256 251
Self-employed
536 444
541 593
7 904 204
8 520 474
Non-residents
Total
87 776
91 604
11 097 698
11 636 337
Due to customers with a notice period
Self-employed
Non-residents
0
40
844
1 786
2 461 794
2 928 246
10 153
13 870
Total
2 472 791
2 943 942
Total
47 400 258
45 428 245
of which:
Accruals
Other payables to clients
Fair value of fixed term contracts
Clearing technical account
Others
Total
1 698
12 085
37 980
94 628
99
18 134
0
205
1 179 188
1 416 629
Other creditors includes CZK 327 million payable to GE Capital
International Holdings Corporation as at 31 December 2005 (2004:
CZK 327 million). GE Capital International Holdings Corporation intends to use this amount to increase the bank’s registered capital.
23. REGISTERED CAPITAL
In order to establish the bank, GE Capital International Holdings
Corporation subscribed 500 shares of original capital each with a
nominal value of CZK 1 000 000 for which it paid CZK 2 000 million.
During 1998 the bank issued 10 ordinary shares each with
a nominal value of CZK 1 000 000. Each share was issued at a
premium of CZK 1 970 750 thousand and was fully paid up. The
increase in registered capital was recorded in the Commercial
Register on 25 March 2003. From 25 March 2003 the registered
capital of GE Money Bank, a.s. is CZK 510 million.
During 2005 the bank did not issue any ordinary shares.
59
The shareholders of the bank as at 31 December 2005 are:
CZK 000
Name
Seat
Number
Ownership %
United States
510
100
510
100
GE Capital
Int'l Holding
Tax deductible reserves for credit and guarantee losses
Total
Created during the current year
Guarantees
Used during the current year
No person with a special relationship to the bank held any
shares as at 31 December 2005 or 31 December 2004.
Standard loans
Guarantees
24. RESERVES AND ADJUSTMENTS FOR POSSIBLE
CREDIT LOSSES
2004
1 669
1 608
Guarantees
Release of reserves no longer considered necessary
Balance of tax deductible reserves as at 31 December 2004
1 608
0
2 405
Guarantees
Standard loans
Guarantees
11 686
0
0
0
Standard loans
0
Guarantees
0
(1 568)
Balance of non tax deductible reserves as at 31 December 2005
10 118
Total
12 523
0
0
(516)
b) Adjustments to classified receivables
2 761
Non tax deductible reserves for credit losses
0
Balance of tax deductible reserves as at 31 December 2005
Tax deductible reserves for credit losses
Standard loans
0
0
(356)
Guarantees
0
0
Guarantees
2 761
Non tax deductible reserves for credit and guarantee losses
a) Reserves for possible credit and guarantee losses
CZK 000
2005
CZK 000
2 004
2004
Tax deductible adjustments for credit losses
10 152
411 232
10 152
658 667
0
0
Write-off of loans and advances
0
Cover of losses from loans sold
(470)
Release of adjustments no longer considered necessary
Balance of non tax deductible reserves as at 31 December 2004
11 686
Balance of tax deductible adjustments as
Total
14 447
at 31 December 2004
(63 196)
(63 196)
0
(23 344)
983 359
Non tax deductible adjustments for credit losses
FX rate differences
3 374 683
(7 195)
596 201
(326 890)
(18 215)
(308 675)
(13 670)
Balance of non tax deductible adjustments as
at 31 December 2004
3 623 129
Total adjustments for credit losses as at 31 December 2004
4 606 488
CZK 000
2005
c) Other adjustments to losses from receivables
(tax non-deductible)
Tax deductible adjustments for credit losses
983 359
CZK 000
899 845
(113 639)
126 642
14 783
(29 542)
(84 097)
(12 925)
(125 954)
Balance of other adjustments as at 31 December 2004
128 500
2004
0
Balance of tax deductible adjustments as
at 31 December 2005
1 643 611
3 623 129
FX rate differences
1 555
8 745
(1 196)
(60 259)
(202 377)
Balance of other adjustments as at 31 December 2005
75 790
(90 916)
(111 461)
128 500
622 918
2005
Non tax deductible adjustments for credit losses
CZK 000
(173 081)
Balance of non tax deductible adjustments as
at 31 December 2005
3 872 144
Total adjustments for credit losses
5 515 755
25. RETAINED EARNINGS, RESERVE FUNDS AND OTHER FUNDS ALLOCATED FROM PROFIT
The bank proposes to allocate the 2005 profit as follows:
CZK 000
Profit
Retained earnings
Statutory reserve fund
Capital funds and other
funds from profit
7 584 005
102 000
4 701 979
102 000
4 701 979
Balance at 31 December 2005 before
allocation of 2005 profit
Profit for the year 2005
2 672 698
Proposed allocation of 2005 profit:
Transfer to retained profits
(2 672 698)
2 672 698
10 256 703
26. VALUATION DIFFERENCES
CZK 000
Balance at 1 January 2005
Available for sale securities
0
Decrease
(1 570)
Increase
1 973
Balance at 31 December 2005
403
61
27. INCOME TAX AND DEFERRED TAX
ASSET / LIABILITY
28. OFF-BALANCE SHEET
a) Current income tax
During 2002 the Financial Authority conducted a tax inspection
covering the years 1998-2000. As a result of the inspection the
Financial Authority assessed the bank additional taxes of TCZK 114
494 for 1999. In 2005, the central financial office of Prague 1
cancelled the additional tax assessment made in 2001. As a result,
the above mentioned additional tax assessment has been
cancelled.
a) Irrevocable contingent liabilities arising from acceptances
and endorsements, other written contingent liabilities and
assets pledged as collateral
CZK 000
Notes acceptances and endorsements
Payables resulting from guarantees
Letters of credit and financial guarantees
b) Deferred tax liability / asset
Deferred income taxes are calculated on all temporary
differences using the tax rate for the year in which the difference is
expected to reverse.
Deferred income tax assets and liabilities are attributable to the
following items:
CZK 000
2005
2004
Deferred tax assets
554 423
1 028 772
Credit provisions
535 890
378 381
Tax loss carry-forward
Tangible and intangible fixed assets
Swap loss carry-forward
0
508 839
10 760
141 552
7 773
0
Deferred tax liability
(447 079)
(683 546)
Discounted loans receivable
(447 079)
(683 546)
107 344
345 226
Net deferred tax asset/(liability)
A deferred tax liability of TCZK 237 882 (2004: an asset of TCZK
375 351) results from the change in the balance of the net deferred
tax asset calculated as at 31 December 2005 compared with
31 December 2004.
c) Income tax expense
CZK 000
Deferred income tax
2005
2004
237 882
375 351
Cancellation of additional tax
assesment (see Note 27 a)
Income tax expense
(114 494)
0
123 388
375 351
2005
2004
6 556 204
6 402 701
16 777
15 182
Customers
Total
112 534
82 414
6 685 515
6 500 297
b) Guarantees issued in favour of persons with a special
relationship to the bank
The bank did not issue any guarantees in favour of persons
with a special relationship to the bank as at 31 December 2005 or
as at 31 December 2004.
c) Guarantees issued in favour of participation interests with
substantial influence
The bank did not issue any guarantees in favour of participation interests with substantial influence as at 31 December
2005 or as at 31 December 2004.
d) Off-balance sheet financial instruments
Contractual amounts
CZK 000
Fair value
2005
2004
2005
2004
0
Trading instruments
Forward foreign exchange purchase contracts
44 828
0
(10)
(44 958)
0
(12)
0
3 492 449
6 016 000
(37 044)
(85 945)
(37 066)
(85 945)
Forward foreign exchange sale contracts
Interest rate swap contracts
Total
e) Residual maturity of financial derivatives
CZK 000
Up to 3 months
3 mths to 1 year
1 year to 5 years
Over 5 years
Without
specification
Total
At 31 December 2005
Trading instruments
Forward foreign exchange purchase contracts
Forward foreign exchange sale contracts
44 828
0
0
0
0
44 828
(44 958)
0
0
0
0
(44 958)
19 949
1 071 000
2 401 500
0
0
3 492 449
34 000
533 800
5 448 200
0
0
6 016 000
At 31 December 2004
Trading instruments
f) Borrowing facilities
The bank has available overdraft facilities of up to USD 100 million from ABN AMRO Bank N. V. in accordance with agreement
No 98/50000004BM/1 dated 1 July 1998.
29. FINANCIAL INSTRUMENTS – MARKET RISK
The bank is exposed to market risks arising from the open
positions of transactions with interest rates, equity and currency
instruments, which are sensitive to the changes in conditions on
financial markets.
a) Trading
The bank holds trading positions in certain financial
instruments including financial derivatives. The bank’s business
strategy is concentrated on closing open positions and it therefore
purchases and sells financial derivatives for macro-hedging
purposes. The majority of financial assets are held to maturity.
The bank manages the risks associated with its trading
activities at the level of individual risks and individual types of
financial instruments. The basic instruments used for risk
management are volume limits for individual transactions, stop
loss limits and Value at Risk (VaR) limits. The quantitative methods
applied to risk management are described in “Risk management
methods” below.
The majority of derivatives are contracted on the OTC market
as a result of the non-existence of a public market for financial
derivatives in the Czech Republic.
b) Risk management
The selected risks to which the bank is exposed as a result of
its activities, the management of positions arising as a result of
these activities and the bank’s approach to the management of
these risks are described below. More details on the procedures
used by the bank to measure and manage these risks are provided
in “Risk management methods”.
Liquidity risk
Liquidity risk arises as a result of the type of financing of the
bank’s activities and management of its positions. It includes the
risk that the bank is unable to finance its assets using instruments
with appropriate maturity and the risk that the bank’s is unable to
dispose of / sell its assets for an appropriate price within an
appropriate time frame.
The bank has access to diversified sources of funds, which
comprise deposits and other savings, securities issued, loans
accepted and equity. This diversification makes the bank flexible
and limits its dependency on one financing source. The bank
regularly evaluates its liquidity risk, in particular by monitoring
changes in the structure of its financing and comparing these
changes with the bank’s liquidity risk management strategy, which
is approved by the bank’s board of directors. The bank also holds,
as part of its liquidity risk management strategy, a portion of its
assets in highly liquid funds, such as State treasury bills and similar
bonds.
63
Residual maturity of the bank’s assets and liabilities
CZK 000
Up to 3 months
3 mths to 1 year
1 year to 5 years
Over 5 years
Without
specification
Total
1 782 546
0
0
0
530 668
2 313 214
At 31 December 2005
Cash and deposits with CB
State zero coupon bonds
Receivables from banks
Receivables from customers
0
490 148
0
0
0
490 148
11 186 700
0
0
0
0
11 186 700
5 847 479
10 273 349
17 475 627
9 391 847
4 908 202
47 896 504
0
0
0
0
39 027
39 027
0
0
0
0
240
240
106 393
749 131
0
0
1 278 442
2 133 966
Shares, units
Other assets
0
0
0
0
103 368
103 368
Total
18 923 118
11 512 628
17 475 627
9 391 847
6 859 947
64 163 167
Due to customers
45 272 477
1 515 489
505 376
8 446
98 470
47 400 258
711 010
1 698
0
0
16 050 088
16 762 796
0
0
0
0
113
113
Total
45 983 487
1 517 187
505 376
8 446
16 148 671
64 163 167
Gap
(27 060 369)
9 995 441
16 970 251
9 383 401
(9 288 724)
0
Cumulative Gap
(27 060 369)
(17 064 928)
(94 677)
9 288 724
0
0
Other liabilities
Accrued expenses and deferred income
At 31 December 2004
Cash and deposits with CB
2 240 441
0
0
0
827 951
3 068 392
State zero coupon bonds
2 392 939
1 685 288
0
0
0
4 078 227
Receivables from banks
13 253 702
0
0
0
0
13 253 702
5 736 676
8 824 246
12 850 374
6 362 733
3 464 503
37 238 532
16 105
Receivables from customers
Shares, units and other investments
0
0
0
0
16 105
0
0
0
0
240
240
102 874
365 499
0
0
1 543 401
2 011 774
0
0
0
0
114 699
114 699
Total
23 726 632
10 875 033
12 850 374
6 362 733
5 966 899
59 781 671
Due to customers
42 979 074
1 722 329
625 513
10 934
90 395
45 428 245
1 010 424
25 033
0
0
13 293 603
14 329 060
0
0
0
0
24 366
24 366
Total
43 989 498
1 747 362
625 513
10 934
13 408 364
59 781 671
Gap
(20 262 866)
9 127 671
12 224 861
6 351 799
(7 441 465)
0
Cumulative Gap
(20 262 866)
(11 135 195)
1 089 666
7 441 465
0
0
Other assets
Other liabilities
Accrued expenses and deferred income
The above table shows the residual maturity of the accounting value of the items, not the total expected cash flows.
Interest rate risk
The bank is exposed to interest rate risk as a result of interestbearing assets and liabilities with different maturity dates, interest
rate re-fixing periods and volumes during these periods. In the case
of variable interest rates, the risk arises from changes in the
individual types of interest rates, such as Pribor, the announced
rate of interest on deposits, etc. The bank’s interest rate risk
management activities are aimed at optimising net interest income
in accordance with the bank’s strategy approved by the board of
directors and minimising the risk of a loss.
Interest rate derivatives are generally used to manage the
incongruity between the interest sensitivity of assets and liabilities.
These transactions are carried out in accordance with the bank’s
strategy for the management of assets and liabilities approved by
the board of directors.
The carrying amounts of assets and liabilities and the nominal
(notional) values of interest rate derivatives are recorded either in
the period in which they are due or in the period in which the
interest rate changes, whichever occurs earlier. Certain assets or
liabilities are allocated to individual periods on the basis of an
expert judgement due to their expected repayment or non-defined
maturity dates.
Currency risk
Assets and liabilities denominated in foreign currency including
off-balance sheet exposures represent the bank’s exposure to
currency risks. Both realised and unrealised foreign exchange gains
and losses are reported directly in the profit and loss account.
c) Risk management methods
Interest rate risk
The bank uses an “interest rate sensitivity model“ to monitor
the interest rate risk, which measures the sensitivity to a change in
market interest rates. The model is based on the classification of
interest rate sensitive assets and liabilities into particular time periods with regard to their maturity, meaning the residual maturity in
the case of fixed rate items or the re-pricing period, meaning the
residual re-pricing period in the case of floating rate items. The
model comprises 1-month time periods up to 10 years and one
time period over 10 years.
The bank’s interest rate risk management strategy is based on
the “matched-funding” principle, under which the bank attempts to
maintain interest rate sensitive assets in an amount equal to the
interest rate sensitive liabilities in each time period. Potential
mismatches are caused by:
The “Earnings-at Risk” model supplements the interest rate
sensitivity model. This model quantifies the impact of various
interest rate development on the bank’s earnings.
The bank does not enter into any speculative transactions.
Currency risk
The bank has set currency risk limits based on its net currency
exposure in individual currencies. The bank has determined a
currency risk limit of 1% of the bank’s capital with respect to
individual currencies and a limit of 5% of its capital with respect to
the total net currency exposure.
The bank does not enter into any speculative transactions.
Value at Risk
The bank applies the Value at Risk (“VAR”) method, to determine
the potential loss from an unfavourable movement on the market
within 1 day at a 99% confidence level. The VaR values are calculated on a daily basis. The VaR method is used in addition to the
“interest rate sensitivity model” in respect of the interest rate risk
and in addition to the management of open positions in respect of
currency risk.
At 31 December
2005
Average for
2005
VaR of interest rate instruments
737
7 683
VaR of currency instruments
216
235
At 31 December
2004
Average for
2004
VaR of interest rate instruments
939
1 295
VaR of currency instruments
148
283
CZK 000
CZK 000
Stress Testing
Stress testing of interest and currency risk is carried out on a
regular basis using historical scenarios of important movements in
the financial markets and other internally defined improbable
scenarios. The results of the testing show the impact of the
scenarios on the bank’s profit and loss statement.
a) new interest rate sensitive assets;
b) new interest rate sensitive liabilities;
c) natural movement of interest rate sensitive assets from
one time period to another;
d) natural movement of interest rate sensitive liabilities from
one time period to another.
65
30. FINANCIAL INSTRUMENTS – CREDIT RISK
The bank is exposed to credit risks as a result of its trading
activities, providing loans, hedging transactions, investment and
mediation activities.
Credit risks associated with trading and investment activities
are managed using the methods and instruments used to manage
the bank’s market risks.
a) Classification of receivables
The bank classifies receivables into individual categories in
accordance with ČNB decree No.9 issued on 6 November 2002,
which sets out the rules for creating specific adjustments and
provisions for receivables from financial services and the
procedures for acquiring specific categories of assets. The
classification is as follows:
Standard receivables
A standard receivable is a receivable about which there is no
doubt that it will be fully repaid. Principal, interest and fees are
consistently paid and are not more than 30 days overdue. None of
the receivables from the debtor have been restructured in the last
two years due to any deterioration in the debtor’s financial situation. The following can also be considered as standard receivables:
• a receivable from a debtor who has, pursuant to a special
regulation of the Czech National Bank, been assigned a zero
risk weight and where no payment of principal, interest
orfees is more than 540;
• a receivable supported in full by high-quality security and
where no payment of principal, interest or fees is more than
540 days past the due payment date.
Special mentioned receivables
A special mentioned receivable is a receivable which, given the
financial and economic condition of the debtor, is likely to be fully
repaid. Principal, interest and fees are paid, with some problems,
but are no more than 90 days past the due date of payment. None
of the receivables from the debtor has been restructured in the last
six months due to any deterioration in its financial situation. The
following can also be considered as special mentioned receivables:
• a receivable from a debtor who has, pursuant to a special
regulation of the Czech National Bank, been assigned a zero
risk weight and where one or more payment of principal,
interest or fees is more than 540 days;
• a receivable fully secured by a person who has, pursuant to
a special regulation of the Czech National Bank, been
assigned a zero risk weight and where one or more payments
of principal, interest or fees is more than 540 days.
Substandard receivables
A substandard receivable is a receivable which, given the
financial and economic condition of the debtor, might not be fully
repaid, but is most likely to be repaid in part. Principal, interest and
fees are paid, with some problems, but are no more than 180 days
Doubtful receivables
A doubtful receivable is a receivable which, given the financial
and economic condition of the debtor, is unlikely to be fully repaid,
but may be, and is likely to be, repaid in part. Principal, interest and
fees are paid, with some problems, but are no more than 360 days.
Loss receivables
A “loss receivable” is a receivable which, given the financial and
economic condition of the debtor, cannot be fully repaid. The
expectation is that such a receivable will not be recovered or will be
recovered only in part and in only a very small amount. Principal,
interest and fees are more than 360 overdue. The following are also
considered as loss receivables:
• a receivable from a debtor in composition proceedings;
• a receivable from a debtor who has been declared bankrupt,
except in the case of a receivable against assets arising after
the declaration of bankruptcy..
This classification is maintained on a monthly basis. The main
criteria for classification are the following:
• the financial condition of the debtor and fulfillment of the
agreed upon repayment schedules
• provision of requested information by the debtor
• restructuring (or non restructuring) of the receivable
• declaration of bankruptcy or compensation proceedings
In addition, the bank uses an internal rating system for
receivables. This system comprises 9 categories, of which the first
seven correspond to the classification of standard receivables in
accordance with the ČNB’s classification. The other categories
correspond to the categorisation in accordance with the ČNB’s
classification. The internal rating system also assesses, apart from
the overdue period, the quality of management, market position of
the debtor, external environment, collateral structure and financial
ratios and indicators, such as the balance sheet structure,
operating cash flow, productivity, liquidity, etc.
The bank does not include the following receivables in the
above system of categorisation:
• consumer overdraft loans (Flexikredit) with accrued interest
• unapproved overdrafts on current accounts
b) Evaluation of collateral
The bank generally requires collateral for loans granted to
certain debtors before the loans are provided. As acceptable
collateral, which reduces the gross credit exposure for the purpose
of calculating adjustments, the bank considers the following types
of collateral:
• Cash
• Securities
• First-class receivables
• Bank guarantees
• Guarantees provided by reputable third parties
• Real estate
• Machinery and equipment
The bank’s assessment of the net realisable value of the
collateral is based on an expert appraisal or internal evaluation
prepared by the bank’s specialist department. The net realisable
value of the collateral is determined by applying a correction
coefficient to this value, which reflects the bank’s ability to realise
the collateral when necessary. The bank updates the correction
coefficients and the collateral value on a regular (half-yearly) basis.
c) Calculation of adjustments
When calculating adjustments, the bank considers the gross
book value of the individual receivables reduced by the net
realisable value of the collateral. To these net receivables, which
are determined as described above, the bank creates the following
adjustments in accordance with ČNB Decree No. 9 issued on
6 November 2002:
• Special mentioned
• Sub-standard
• Doubtful
• Loss
1-19,99%
20-49,99%
50-99,99%
100%
Adjustments for consumer overdraft loans are calculated using
the results obtained from the Markov model (see Note 30 d).
In respect of sub-standard, doubtful and loss receivables, an
adjustment to accrued interest of 100% is created in accordance
with ČNB Decree No. 9 issued on 6 November 2002, as amended.
d) Credit risk measurement models for consumer loans
For consumer loans, which are not written off in accordance
with US GAAP rules (based strictly on days overdue), credit risk is
monitored by the bank using models that enable prediction of
future losses. The GRR (Gross Roll Rate) model is used for revolving
loans. The Markov model, which is based on Markov chain theory,
is used for other types of loan. The Markov model, which is based
on Markov chain theory, is used for other types of loan. Future
losses on loans, which are not written off in accordance with US
GAAP rules, are predicted on the basis of loan movements between
individual model statuses (groups of accounts with similar
characteristics). The parameters for the GRR model are based on
the previous year experience. The parameters for the Markov
model are based on the previous two years’ experience. The model
parameters and future loss calculations are based on data in the
bank’s database. The reserve calculation is based on expected
future losses over the following 12-month period. These future losses are reduced by the expected payment amounts (recoveries) to
be received over the following 12-month period from loans already
written off according to US GAAP rules.
e) Concentration of credit risk
The concentration of credit risk arises as a result of the
existence of loans with similar economic characteristics affecting
the debtor’s ability to meet his obligations. The bank treats a
receivable from a debtor or an economically connected group of
debtors that exceeds 3% of the bank’s capital as a significant
exposure. The bank has created a system of internal limits for
individual countries, industries and debtors in order to prevent
significant concentrations of credit risk. At the balance sheet date
the bank did not have any significant concentration of credit risk
with respect to any individual debtor.
Sector analysis
An analysis of the concentration of credit risk according to
individual industries / sectors is included in Notes 13a, 14b and 14c.
Analysis by geographical areas
CZK 000
Czech Republic
2005
2004
64 538 629
55 037 143
Slovakia
5 436
5 854
Germany
21 619
12 170
Other
33 275
43 555
Total
64 598 959
55 098 722
Adjustments are not analysed by geographical area.
f) Claiming of debtors’ receivables
The bank established a “Collections” department that manages
certain receivables, the recovery of which is threatened. This
department undertakes the necessary legal steps, carries out
restructuring of receivables, etc. in order to ensure the maximum
recovery, including the realization of collateral, and represents the
bank on creditors’ committees if bankruptcy is imposed on the
debtors.
The collections department is divided into Early and Late
Collections. The Early Collections division is responsible for
managing the collection of receivables up to 90 days overdue.
Upon expiry of this period the receivable is moved automatically to
the Late Collections department.
g) Quality of the credit portfolio
The quality of the credit portfolio is regularly monitored by the
bank's Risk Department on a monthly basis. The quality of the
bank's portfolio is stable and the percentage of classified
receivables is also stable at around 19%. The ratio of the
commercial and retail portfolios to the total credit receivables is
similar to that in prior years. The share of mortgages within the
bank's total lending increased to 19% and it is expected that this
trend will continue in the future.
31. OPERATIONAL, LEGAL AND OTHER RISKS
The bank defines operational risk as the risk of possible losses
due to the internal or external fraud, system outage, other external
events or legal and documentary risks. Internal processes are
controlled and improved on an ongoing basis by the bank’s Internal
Audit department and through implementation of the requirements
of the Sarbanes Oxley Act.
Operational risks and information about related losses are
managed and monitored on a delegated basis. Direct losses on
property or losses influenced by employees are the responsibility
of the bank’s damage commission. External and internal fraud,
their monitoring and prevention is carried out by the Anti Fraud
Officer. The problems connected with IT systems failures are solved
by IT security and the impact of negative external events is
minimized by physical security. The legal and documentation risk is
minimized by standardization of legal conditions and by external
legal assessment of contracts with a significant impact on the
banking portfolio.
67
32. LITIGATION
Three lawsuits are currently pending against the bank as
defendant, which contest the validity of the Agreement on the Sale
of a Part of the Enterprise of Agrobanka Praha, a.s., dated 22 June,
1998. In the case of Václav Sládek, a shareholder of Agrobanka
Praha, a.s., in liquidation, and of the members of the Supervisory
Board of Agrobanka Praha, a.s., in liquidation, the lawsuits are
conducted for a declaration of invalidity of the Agreement. The
lawsuit conducted by HZ, spol. s r.o., the liquidator of Agrobanka
Praha, a.s., in liquidation, is conducted for a declaration of validity
of the Agreement. In all the lawsuits, the bank insists on, and has
furnished the court with its position based on extensive legal
analyses supporting the validity of the Agreement on the Sale of a
Part of the Enterprise, and, in addition, has highlighted procedural
defects on the side of the plaintiffs, which alone constitute grounds
for dismissing the actions. However, should the plaintiffs be
successful in having the original purchase and sale contract
declared null and void, the impact could have a significant impact
on the bank’s financial position. At the date of preparation of the
financial statements the impact of such an outcome is
undeterminable, however the management is convinced that the
plaintiffs are unlikely to be successful in their actions.
33. SUBSEQUENT EVENTS
There have been no events subsequent to the balance sheet
date that require adjustment of or disclosure in the financial statements or the notes thereto.
Sent: 7 April 2006
Responsible person for accounting
Name and signature: Lenka Hušková
tel.: 22444 3335
Responsible person for financial statements
Name and signature: Jana Janečková
tel.: 22444 2337
GE Money Bank
GE Money Bank, a.s.
BB Centrum
140 28 Praha 4-Michle
Tel.: +420 224 443 636, 224 443 632
Fax: +420 224 441 500
Information line: 844 844 844
Please visit our web pages
www.gemoney.cz
GE Money Bank –Annual report 2005
Annual Report 2005

Annual Report 2005

Transcription

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