Annual Report

A NEW MEANS OF
COMMUNICATION
A N N U A L
R E P O R T
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OFFERS YOU
AB.LV 7-77-55-55
AIZKRAUKLES BANKA
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FACTS AND
NUMBERS
A TRUE BANKER
TO BE THE BEST
MY RIGA
RIGA
GUIDE
THE ISSUE
OF THE HOME
The Central Theme
RIGA’S STYLE IN
THE BANKING BUSINESS
contents
*
* Stability. Time is the best advisor (we are in the banking business since 1993).
AB.LV is the Riga style in the banking business, combining the best of European banking
traditions with an individual approach to each client. Working with us you are doing good
to your business. That's one lasting investment, and we guarantee the security of it.
02
MY RIGA
Marija Naumova, Agnese Zeltiña, Mårtiña Rîtiñß, and Alvis
Hermanis on Riga, its singularity, and their feelings on it.
03
LETTER FROM THE EDITOR
The question of choice and new searches in the bank’s activities.
04
06
10
13
14
NEW IN 2005
Behind these events – Aizkraukles Banka and people, a brief
review of our accomplishments.
16
THE ISSUE OF THE HOME
We will help you build a house and make it modern, striking
and homely. AB.LV’s portfolio of credit products and the advice
of experts and designers are at your disposal.
20
SUPPORT
Social responsibility – an integral part of any serious business’s
reputation. About significant projects supported by the bank in
2005.
22
24
25
64
FACTS AND FIGURES
And once again about our accomplishments – laconically and
graphically! For lovers of statistics, and not only
RIGA’S STYLE IN THE BANKING BUSINESS
AB.LV’s chairman of the board Ernests Bernis’ reflections on
the bank’s current and future values.
TO BE THE BEST
They have achieved the title, The Best. Coincidence of circumstances, a great honour or a feeling of great responsibility?
P.S.
AB.LV co-owner O¬egs Fi¬s knows the formula of success for
a modern company.
GUIDE
Our necklace – from the “pearls” of Riga tourism. Try it on for
yourself!
WHAT DOES IT MEAN TO BE A TRUE BANKER?
AB.LV’s best employees paint a written portrait of the modern
banker.
FINANCIAL REVIEWS
After all, we are a bank. :)
ASTROLOGY
Not seriously, but perhaps a bit seriously about your business
and finances...
editor’s letter
my Riga
Mårtiñß Rîtiñß,
restaurant owner
Marie Naumova,
singer
I like this city on days when
warm rain is falling, when old
ladies are selling flowers in Old
Riga, and horses’ hoofs are
thumping in front of a carriage.
Christmas, Midsummer’s Day
and Easter markets, where one
can buy real honey and handcrafts from true craftsmen. I
enjoy Riga’s quiet little corners
– the so-romantic pier, where
the sun sinks into the sea over
the Daugava, the paths and
bridges of Kronvalda Park – so
mysterious, as if you weren’t
even in the city. The smell of
fresh bread wafting from bakeries, and outdoor cafes where
you can enjoy a cup of tea
while taking your time –
moments that so very much
remind me of Paris. I like taking
walks in MeΩaparks, listening to
the voices of the zoo’s dwellers,
and wandering past colourful,
restored Art Nouveau buildings.
I enjoy this city’s secret,
because every day you see
something new. I
Chocolate ?? Gateau every day! So
the people that live at the edge of
Niagara Falls or in a luxury suite at
The city of Riga contained most of
the Venetian in Las Vegas might
what little I knew of the history and appreciate what I do when I walk in
culture that I was familiar with, so it the woods here minutes outside Riga
was the most exciting. Yet Riga is a and smell the rich humus where the
small capital for a small country, so morels and 4000 other species of
everything comes in nice bite-size
fungus grow, and marvel at the soliproportions that make it easier to
tude and sounds of blue forests that
digest and come to grips with. The
are so abundant, taking up almost
heart and soul of Latvia quickly
half of our land mass. I
reveals itself and shows its strengths,
weaknesses and uniqueness.
England had 20 plus years to grab
me, Canada about the same, yet
Latvia got to me at first sight. I fell
for her like a love-struck adolescent
who is giddy about the future but
does not quite know why, and an
everyman in mid-life crisis who
needs to woo and be wooed, but
now can truly appreciate the object
of his affection.They say that 'less is
more', and it is this observation in
Agnese Zeltiña,
film actress
Countless elegant, beautiful places –
in stylish interiors one can sink into,
and hide and forget everything with
a cup of properly prepared green tea
in hand..
Teahouses, bookstores, charming little
chemist‘s shops, markets, cute shops in
the most unimaginable places.
Old Riga is so special that one can
walk around there as if among many
rooms, constantly discovering something new and unnoticed – gates,
churches, cobblestone, courtyards...
with cats, grapevines; the building
roofs and balconies alone are worthy
of wonder...
the search for beauty and things to In Riga I have glass, reflections, shalove and value that guides my sens- dows and the music of the wind, tile
roofs, tower roosters and rain on the
es today, and I think that living in
cobblestones!!!! Fantastic pastries,
Riga has helped me see that.
chocolate and bran croissants like
I have seen the Grand Canyon, the
nowhere else in the world.
Taj Mahal, the Canadian Rockies
I get a feel for Riga best when sitting
and the Swiss Alps and they take
in FABRIKA restaurant – reserve the
your breath away! But I have to
breathe. It's just me, but I had to get third table from the entrance to the
right! I
away because it was too rich.
Cover
Experimental style production of
an AB.LV employee
Model – Baiba Jurkåne
Style and photo – Dmitrijs Po¬akovs
Make up – Natålija Vozñesenska
Alvis Hermanis,
theatrical director
The least stylish places, it seems
to me, are Old Riga and
Jurmala. Tallinn and Prague
have old cities just like Old Riga;
there is no difference.
There is nothing in Old Riga for
Rigans to do.
When guests who have never
been in Riga come to visit me, I
take them to the outskirts –
“Maskachka“, Grîziñkalns, and
the other side of Çaka Street.
Now that’s interesting!
We go to the Central Market,
of course.
In Vecmîlgråvis there is a bathhouse, a real one, one of those
Soviet-style kind – on Emmas
Street. When I am abroad with
the theatre, we always visit the
bathhouses. We look for them
in all cities, all countries. And I
must say that the experience
that is available in Vecmîlgråvis
at the Emmas Street bathhouse
cannot be had at any Budapest
bathhouse or Arab thermal
waters! Here real blokes with
birch branches, as they say,
“speak from the heart”!I
Photographs and illustrations
Dmitrijs Po¬akovs
Viesturs Masteiko (photos of objects)
Karlîna Vîtoliña (M. Naumova’s photo)
Photo of A. Zeltiña – from personal
collection
“The issue of the home” photo –
“Müsmåjas” magazine
Interior visualisations – Aivars Burakeviçs
Plan of Riga centre – Dita Målniece
Horoscope illustrations – Inga Rußmane
Creative group
Editor in chief – Viktorija Òakißeva
Project artist – Dmitrijs Po¬akovs
Artistic director – Ûanete Zariña
Creative director – Andris Romanovskis
Layout designer – Inta Eihmane
Project manager – Lîga Saidåne
Executive director – Ilze Apine
Text authors
Marija Naumova
Agnese Zeltiña
Mårtiñß Rîtiñß
Alvis Hermanis
Viktorija Òakißeva
Ernests Bernis
Irina Lastovska
Romåns Surnaçovs
Sergejs Mazurs
O¬egs Fi¬s
O¬egs Sirotins
Liena Britåne
Aivars Burakeviçs
Påvels Ínejersons
Translation, proofreading
Roberts Lîsmanis
Antra Çigure
Natella Grigorjan
Idea Media
Concept, idea copyright
Rhino design agency Co LTD
Project, execution
Rhino design agency Co LTD
All rights are protected by the Copyright Law of
the Republic of Latvia. Reproduction without
prior permission by AB.LV and other holders of
rights forbidden.
Printed in the EU
Ladies and Gentlemen!
It took me some time to decide how to address you in
the first pages of this publication that is not very typical
for a bank. “Readers”, “clients and partners”,
“friends”…. There are many choices, and this is important! At some point you made your choice to begin your
collaboration with Aizkraukles Banka. Perhaps you have
not yet made this decision, and you need just a couple
of arguments for this business contact to take place. In
this publication you fill find the missing arguments.
In this year he have made our selection in favour of an
informal, and thus more honest manner of contact, of a more modern language of communication, of closer contact with readers, where every reader is an individual, and every
client a VIP. For precisely this reason we transformed our official, dry-in-form-and-content bank’s annual review into a striking, attractive and informatively saturated lifestyle
magazine. You may be accustomed to seeing such magazines in airport terminals, hotel
foyers or your interior design office. Now you have the unique opportunity to find such a
magazine at our bank’s client centre or representative office. Our magazine, just like its
shiny brethren on store shelves, will tell you about people, tendencies, news and opportunities, all united by one common style, which we at AB.LV call “Riga’s style in the
banking business”.
AB.LV’s style has been honed for years through our effective teamwork, and polished by
our professionalism and the commitment of our specialists. Our style has formed and
developed along with the bank, and that now serves to enhance our reputation. These
here are the cornerstones from which AB.LV’s history has developed: stability and security, precision and accuracy, a thrifty attitude towards time, and the traditions of a
European business city. But at the core of this history is our client and the client’s trust in
Aizkraukles Banka.
Loyalty – that is the code of our style. We are proud to know this code. The components
that form it may be found in this magazine. You will see what inspires us, as well as in
whose name we work, what accomplishments we have reached, and what we strive for,
why we are just the way we are, and why your path leads to our door. However, if for
some reason words do not convince you, we have also provided you with the numbers.
Our financial performance will tell you about AB.LV just as eloquently!
In choosing a new style of communication, we unvaryingly remain…
truly your bank!
Viktorija Òakißeva,
Editor of the 2005 Annual Report
AB.LV Head of the Marketing Department,
International Division
AB.NEWS
With the
direct participation of
AB.LV, the
Latvian-American
financial forum (LAFF) was created. The aim of the organisation is to
promote the development of Riga as a
regional financial centre, strengthen the
competitiveness of the country on an
international level, and to make Latvia’s
business environment transparent and
responsible. LAFF will begin its operations in 2006 as a research and educational institute, a structure for cooperation between the state and private sector, and representative of the interests
and values of its founders: various commercial banks in Latvia. I
AB.LV lowered its
mortgage loan interest rate to that of European
banks’ rates. Our clients get the
best offer on the market: from
0.8% + the inter-bank rate. Our
bank wishes to achieve the standards of European quality!
Good ideas continue to abound and
prevail! In 2005 the “For my best
friend” campaign continued. The
number of participants compared to
2004 has doubled. Every bank client
in Latvia who received a mortgage
On September 28, 2005
LNT hosted the premiere
showing of “The issue of
the home”. Its creation is
also a great accomplishment of our bank! We
gave as a present to our
clients new style and
opportunities! (For more
information see p. 16)
In May of 2005 the deputy
manager of AB.LV’s Moscow representative office
took part in a reception at
the embassy of the Republic of Latvia in the
Russian Federation. The
event was organised by the
loan at AB.LV and brought the bank
President of Latvia in hoa new borrower earned a loan holinour of the 60th anniverday – no interest for one month. The
sary of victory in the Sebank paid it in place of the client! I cond World War. Oleg Korolov had the honour of
presenting a short speech
and meeting the President
in a private discussion. I
In summer of 2005 the bank turned
its attention to the world’s experience in research on the optimisation of
business processes. Of the many theories and experience we have selected a strategy of “frugal production”,
the effectiveness of which has proven by the success of Toyota.
Among the processes, mortgage
loans were selected, since they are
the bank’s main field of business in
the Latvian market. The aim of the “Mortgage loan
kaidzen” is the prevention of losses in the process of issuing and servicing of mortgage loans, both of the client as
well as the bank. By the way, the word kaidzen translated
from Japanese means continuous improvement. I
Who would have thought that our
bank has so many creative individuals, especially in the field of artistic
photography! Affirmation of this was
the photo competition announced in
2005. The winners’ best works were
included in the 2006 corporate
calendar. I
In June of 2005 AB.LV opened its representative office in St. Petersburg.
It is important to us that cooperation
with our foreign clients be effective and
comfortable. For this reason we go to
our clients, opening representative
offices in centres of strategic importance to the bank. At AB.LV foreign clients
always have the possibility to visit our
The educational programme “What is a loan?” was
office in their native city and consult
In 2005 we offered our foreign
created with the direct participation of AB.LV. In
with our bank’s specialists regarding
2005 the bank attracted students from the Stockclients two new serviholm School of Econnomics in Riga for the compaces: SMS control of card any issues of interest to them. I
ny popularising this programme. The “What is a
transactions, which gualoan?” competition for youths
rantees complete security
was announced, “Loan days”
of transactions with paywere organised, the web
ment cards, and a new
page www.kasirkredits.lv
financial instrument: credit
(“what is a loan”) was upbased on pledge of a ship.
dated, and new booklets
More information about
were printed and distributhese services is available
ted. All this was done so that people in Latvia would have access to on our corporate web page
comprehensive information about www.ab.lv. I
mortgage loans and issues related
thereto. I
In April 2005 in Riga we opened
our new “Krasts” client service
centre. AB.LV’s target client in
the local market is the economically active Riga inhabitant,
thus we seek to ensure our
clients quality and convenient
service and always to be within
grasp. I
Banks, let’s be friends! This was the decision of the
hockey teams of AB.LV and Russian’s MDM bank. In
2005 two friendship games took place in Riga and
Moscow, the result of which, of course, was a friendly draw! It is our belief that hockey is not only a great
sport, but also a secure investment in the development of mutually beneficial partner relations. I
AB.LV’s New Year’s party was
tied to marking a festive and
joyful event. In compiling the
annual results, three of our employees were awarded the title
“Best bank employee”. If one
takes into consideration that the
main hero of our party was His
Highness the Cinematographer,
we can safely say that we have
our own Oscar recipients!
In 2005 AB.LV became a member of the European
Business Association (EBA) in Russia. Since 1995 the EBA
has represented the interests of 350 European companies in Russia, and facilitates their advance in the Russian
market. Becoming a member of EBA, we have obtained
the possibility always to be informed of what is happening in a centre of our business interests. I
On September 30, 2005 we invited our clients
in Latvia to an unusual social event – a Kitchen
Party at Radisson SAS hotel, or, more specifically, to its kitchen! Where else is it possible to
speak from the heart, if not in the kitchen?
About accomplishments and problems, about
future plans and hopes. And, of course, in the
kitchen it is possible to find various treats,
starting from traditional crisps to exotic
seafood. Guests had the opportunity to test
their ability in creating marzipan figurines
and in various culinary (and not only) competitions.
We are convinced that on this evening our clients
had fun and that the refreshments were tasty! I
International music stars visiting Riga – that is
something rare. And making it to their concerts
doesn’t come off for everyone. We like to obtain
presents and create joy by giving them away, especially to our clients! In the spring of 2005, AB.LV
invited its clients in Latvia to a Moby concert. The
striking performance will remain in the memories of
the bank’s clients for a long time, also due to the
fact that before and after the concert they had the
opportunity to talk with bank employees in a special room
arranged for this purpose. We are prepared to establish relations with our clients based on trust just about all night long!
author interview
“The client’s loyalty cannot be bought, but it can be earned.”
Ernests Bernis. Co-owner and Chairman of the Board of Aizkraukles Banka
About the bank. when I am asked
how important the bank is in my life, I
don’t philosophise much. The bank is
the thing that has worked out for me.
Together with my colleagues.
Today banks have achieved the status of
a necessity in life for almost everybody.
If I have to give a specific characterisation, banks have become the active person’s ally, companions throughout the
course of life. Along with banks, people
experience both the good as well as the
bad times in life.
Currently the term “the bank as a financial supermarket” is used, though I don’t
share this view. Behind a bank’s every
product or service are people. Here very
much is dependent upon its corporate
culture, the philosophy that the bank observes in its work. Impersonal products
provide for a certain level of growth, but
increase a large group of various risks.
This is not acceptable to us – a bank is
not a machine, but a living organism
working for the good of people and
owing to people.
must be prepared to adopt unpopular
decisions. If a client’s activities will be
contrary to our policy, then we must part
bank – that is an indisputable fact.
ways. That is the way it has been and the
Though attracting a client to the bank,
way it will be. Only then can it be called
that is only half the job. The most impor- a policy.
tant thing is holding on to the client, making him yours for many years. That is
As I said, the banking business is a relaserious, sometimes hard, work that retionship business. Owing to the personal
quires serious resources and effort.
contact with me and other managers, it is
In my opinion, loyalty is that which can- possible for clients to receive answers to
not be purchased and cannot be expthose questions to which my employees
loited. It appears suddenly, but develops cannot provide answers. I, in turn, gain
over a certain period of time by mutual
the opportunity to learn from the clients
work. To me the key to client loyalty to of the level of service quality that my
AB.LV is our openness and integrity in bank’s employees provide. This is a
our relations with clients. That which we mutually beneficial process both for
say to and promise our clients we also
clients, as well as me. Thus forms our
do. If at some point our services, for
reliance upon each other. I can say that
example, turn out to be not very compe- in our relationships 1 + 1 is more than 2.
titive, we don’t try to hide this fact beInterests, needs and knowledge are
hind a flashy banner. If we are not capa- pooled, and the end result is more than
ble of providing what the the client is
the solos of two individuals.
hoping for, we say so directly. Loyalty
Some clients I know better, maintain
arises from mutual work. It is that which relations with, meet with regularly, and
the client feels, that which arises when a interest me as people. I think that they,
problem or some issue is successfully
too, analogically feel a humanistic inteWhat does the general mission of a bank resolved. Loyalty – it means a special
rest toward me. This, of course, is a
relationship.
consist of today? I once had to choose
rather small circle of people with whom
A specific example. If a loan officer and I maintain informal relations of sorts.
among various options: the good, the
the bank do not see potential in a relaevil, the balancing factor, the driving
tionship, or do not consider a project to About development. In the
force. I’ll say this: there’s no need to
be promising, then we tell the client so
idealise or demonise the bank’s role in
world around us, society is in a process
properly, in a manner he understands
the contemporary world. The bank and
of constant motion, development and
the people who work there perform spe- from the very beginning. We are catetransformation. I seek to grasp these tengorically against the practice of signing dencies. To imagine, model, guess, feel
cific necessary functions. The bank is
without a doubt a partner. I know many an agreement containing terms that with the development vectors of economic,
people who have been using one bank’s time will become impossible to fulfil.
political and social processes, both in our
services for decades. However, there are This contains the essence of our policy – country, as well as in those countries
following corporate and professional
also clients who change banks like
with which we have business ties.
gloves. We at AB.LV seek to justify the principles. Without a doubt, when conInformation is obtained from various
sidering
and
formulating
our
policy,
we
initial trust expressed in us by seeking
sources.
take into account our clients’ needs.
long-term co-operation. Though we
It is difficult to come up with something
However, when implementing it, we
don’t refuse to provide one-time servinew in banking services. That which has
Loyalty as a factor in success. Without the client, there is no
page 7
RIGA’S STYLE
IN THE BANKING
BUSINESS
ces. It is part of our job.
author interview
been created earlier is applied to certain
circumstances. Without a doubt, new
business directions appear in the banking
field, though more commonly it is something good that has been forgotten. A
time comes when particular services are
easy to sell. For example, currently I
clearly feel that the time has come for
wealth management services, both in
Latvia and abroad.
When discussing the bank, people try to
determine our level of conservativeness,
forgetting about our involvement in the
processes going on around us. The
rhythm is created by the environment in
which we live, thus I can safely state that
the banking business is not a conservative business. That is a myth that, I
think, has been created by people far
removed from the banking business.
Currently everything is developing so
rapidly, and the speed of this process is
increasing from year to year. A bank’s
products and technologies must continually be improved; for this reason alone
we cannot work conservatively.
Nevertheless, if I have to admit to a certain amount of conservatism in our business, then it lies in the fact that we as a
bank have not changed our philosophy
practically from the very first days of
our existence. Although it could better
be referred to as consistency. It is the
following of those principles that to
some extent are not even written. It also
refers to what has already been said
about client loyalty, which cannot be
bought, but must be earned.
Work is work. There is a rather
page 8
broadly accepted attitude that one’s company and colleagues are like family.
I have never claimed that our bank is capable of replacing the employee’s family. It is completely natural that along
with work relations my employees form
other relationships with their colleagues.
This is normal, though work must
always be the priority. Our bank
employs people representing various
nationalities and cultures. We employ
families, distant relatives, and close
friends. I am already repeating myself by
saying that the work place is first of all a
professional union, with which contact
takes up a significant part – but still just
a part – of people’s lives.
People who work at AB.LV are bound
by certain things. Close and understandable values, a world outlook and a certain code of behaviour. That which we
term “corporate culture”. I would say
that it is a very delicate substance,
almost inexpressible by words, though
people who have worked with us for a
certain amount of time absorb it and in
fact with their work express belonging
to and acceptance of this corporate culture. It cannot be measured in money or
replaced. It provides the employee with
the opportunity to feel like part of a big
company and contribute with an effort
that corresponds with the employee’s
abilities and skills.
payments. And everything works fine.
However where there are no ready algorithms, people make the decisions. In my
opinion, it is rather easy to determine the
proportions of human and technological
activity. Process implementation may be
viewed from the perspective of economic utility. That element that proves
more effective we “switch on”.
Currently we are moving issuing of mortgage loans over to paper-less data flow.
However, the role of people in the process may not be underestimated. It is
people who create the technology and
functioning algorithms and monitor for
changes. Because the world around us is
constantly changing. We strive to react in
People in the age of high
time and be in front, without relying sotechnology. We are currently talking lely upon technology. We have our own
a great deal about a person’s role in the
outlook on the processes occurring, in
company during a period of rapid techno- accordance with which we adopt our delogical advancement. Can a bank be in the cisions. I do not have a ready recipe for
avant garde of technical progress, while at human and technological symbiosis.
the same time observing its code of ethics There are, however, two influencing facand preserving its humanity? Is symbiosis tors: the economy and the client’s reaction.
and harmony possible?
Riga’s style. I am pleased that in the
It is well known that three components
are necessary for business: people (em- banking business, by Riga’s style we
understand precisely our style of busiployees and clients), a technical basis
ness. Over the years Aizkraukles Banka
(computers and other equipment) and
the third – that which we call technolo- has become one of the trendsetters in the
banking industry.
gy. That is what connects people with
equipment. What role do people play in Currently we have all of the preconditions
and opportunities to make Riga’s style
this, and what is that of equipment or
artificial intelligence – this is an issue of recognised and understood around the
the specific historical period. Every new world. Riga as one of the financial centres
discovery in the field of technology pro- of Europe – this is a real possibility. I bevides people with a new level of co-ope- lieve that we will be able to judge the
ration, where artificial intelligence com- results already in a few years, when we
plements the person, and doesn’t replace will have established those favourable
him. Because people over the course of geographic and historical factors that
all these years have not lost their live tie Riga has had and still has. One-hundred
years ago Riga was the third, but at one
with one another. Technology is not
time also the second city after St. Peterscapable of replacing the warmth of
burg and Moscow in terms of industrial
human relations. The risk arises where
production capacity and business deveindividuality may be lost or becomes
lopment in the Russian empire. This also
impersonal, but in such case all of the
explains why Riga is so beautiful and
foundation of society would be destroyed. Nature has programmed us with why we have so many beautiful art nouveau buildings, including AB.LV’s main
the desire for contact. For this reason
office on Elizabetes Street. Of course,
mankind will never surrender its posisince then the world order has changed
tion.
completely, but that which occurred
100 years ago was not a coincidence. And
Our bank utilises technology to the exour task is to prove the city’s once-high
tent necessary for each particular situation. We have transactions that are prac- economic status.
I was born and raised in this city, and I
tically not dependent upon human resources, such as processing of automatic have never wanted to move away from
Riga. Although Innsbruck is warmer,
Salzburg more beautiful, and Luxembourg wealthier… only here do I feel
completely comfortable. Even in the difficult times that I have experienced living and working in Riga.
I suppose it is a question of realising
one’s roots. I like many different places
in the world. But I have often asked
myself: would I want to live there? And
always my answer has been a resounding, “No!” However, in order for these
feelings to form, it is necessary to leave
Riga and travel somewhere now and
then. Although there is often lousy
weather, little sun, dampness, poor
roads, and enough difficulties… this is
our home, our marks in the stone.
We are constantly visited by clients and
partners from Russia and other CIS
countries. Their interest in Riga has various reasons. It is not only our favourable geographic location. It is also the
great number of people who understand
Russians well. In the end, we have all
received a similar education and grown
up in one and the same country. Without
regard to the many different nationalities
in this country, which was later divided
by borders, a certain unity between us
has remained. First and foremost we as
partners are very convenient and pleasant to people in Russia. We understand
them better, and we speak the same language. We know and love the country
that was once our home too.
Currently Riga is not a leader in economic ratings, but it has a real possibility
to climb upward in these ratings and to
develop. This could create huge potential
for our city and our bank, too. Riga is
becoming a serious financial centre in
our northern European region. And that
which isn’t even worth talking about
today could become real and feasible in
5-10 years. I recall the time 11 years ago
when we just started our business in Riga, when our bank employed 30 people
and the volume of our business was
100-150 times smaller than it is now.
Even then I could not imagine what we
would accomplish. I recognise that our
bank’s initial strategy was an intuitive
inclination toward stability and independence. Our current strategy reflects
my understanding of the necessity to be
flexible, alert and decisive. For this very
reason I do not exaggerate the significance of strategy, although, of course, in
the banking business one cannot do
without it.
And so, speaking of Riga’s style, we
come to three main elements: 1) consistency in achieving one’s goals; 2) internal freedom; 3) openness to everything
new.
300 Spartans. I don’t believe that is a strategic outlook.
Do you know what one of Sparta’s laws says? “Win
together or die together.” Sparta’s rulers were wise.
They, despite paying a cost of 300 of their soldiers’
lives, managed to defeat a larger and greater enemy
that awaited them in Sparta. The Spartans were given
the choice of surrendering, of laying down their
weapons. But they battled for four days and four
nights. And then the mighty Persian army surrendered.
Also, I can’t not think about the way
results are achieved. The manager of a
bank once said that he would never
want to become similar to one of the
This illustration serves as an example to me. It is possible to defeat a stronger opponent if you are in the
right place at the right time, work in a unified team,
and believe that your chosen path is the correct one.
The meaning of existence. What is the point of the existence of our bank?
The bank cannot simply exist by itself. It is the many people, each one fulfilling a certain
function. The satisfaction that our employees gain from their work, from each investment in
working together. From these things forms the metaphysical point of the existence of the
bank. This involves many vectors that must be aligned.
The bank – to some extent it is an instrument of self-fulfilment and self-development. If I
was an inferior manager, the shareholders would request that I resign. If I as a shareholder
was dissatisfied with the results of the bank’s performance, I would probably discontinue
this business. If I as an employee did not enjoy working here, I would leave. And I am not
talking about material satisfaction. I am talking about the moral return that is felt by all –
shareholders, managers and employees. I enjoy the fact that I most always gain satisfaction
from everything that I do. No psychological fatigue. Every day is interesting to me. Both
success, as well as failure. By the way, the latter also is very useful: the ability to overcome
misfortunes, to resolve problems – it is a test of character, a stimulus for future work. I
Irina Lastovska,
From left to right: Romåns Surnaçovs, Irina Lastovska, Sergejs Mazurs
Please meet the best AB.LV employees of 2005 – Irina Lastovska, Romåns
Surnaçovs and Sergejs Mazurs! They are not only professionals at their
work and true bank patriots, but also colourful personalities – smart and
honest individuals with a sense of humour. It is truly a pleasure to communicate with them, and a conversation about the job each one loves
page 10
provides food for serious thought.
page 11
TO BE THE BEST
good sense. The most dangerous mistake a
banker can make is choosing the wrong
Head of the Loan Operations and
Investment Accounting Department strategy for the bank. I believe in systematic, rising development. A stable, reliStarted working at Aizkraukles Banka in able bank and an economy in a state of
development – two inseparable, mutually
1996. Began her career working in the
intertwined things. For this reason I would
Correspondent Accounts Department.
Currently heads a broad spectrum of the probably invest in local manufacturing.
bank’s activities, as they relate to loan
I would emphasise being well informed,
operations and investments, payment
bright minds and being prepared for chancards, checking operations, and money
ge, as well as implementation of new sertransfers. Notices everything! Is highly
regarded as a result. Dislikes “weak links vices, development of the bank’s technologies, and increase in the scope of operain the chain”, which are removed by
tions. Due to the increasing standard of
streamlining the work process. Life’s
motto: “Stability and inner harmony – the living in Latvia, the number of investsource of quality in both personal life and ments among the population is expected
work”. As proof of this – 20 years of mar- to increase, thus I would promote deveriage, and 10 years at Aizkraukles Banka. lopment of new bank products to attract
funds. Companies are becoming increasAnd proud of it.
ingly effective with handling their surplus
“I was born in Riga, and I can’t imagine a funds, thus idle money may only be
more fitting place to live and work. Here found in the private sector.
everything is in harmony – the people, the
Further, with regard to programs that seek
nature, and the architecture. I associate
the city with stability and constant devel- to attract funds for clients that are better
off, I would offer secured, long-term creopment. In Riga I see a similarity with
our bank, where everything is constantly dit lines for those who like to spend freely,
in motion. We always have to be in front; while providing them with a statement on
we cannot ease up. Neither the bank, nor I a regular basis. Depending on the rate of
are allowed to reach the point where we loan repayment, the client would also have
repeated access to an existing line of cresay, “Now we’re done; the job is findit, up to the amount that has already been
ished….”
repaid. This way transactions could be
simplified, without the need to reapply for
My stance towards the nomination is a
philosophical one. It is the result of a com- a new line of credit each time. People
bination of factors outside my control, par- quickly get used to what is good. The
tially my merits, but most importantly, re- client won’t start running from bank to
cognition for the work of my colleagues in bank in search of a better deal, knowing
my department. Without their support and that if he has proved himself as a trustworthy client, he may receive cash without
professionalism it would be difficult to
delay (up to his credit limit) for any necesaccomplish anything. Relations in the
department are family-oriented and based sary purchases. The most important thing
on mutual understanding. We are in a con- is to simplify the procedure to its ministant state of development. When employ- mum, and may the client’s appetite
increase while eating. I
ees fully take part in the work process,
they get a better feel for the process itself
Romåns Surnaçovs,
and feel responsibility for their performHead of the Payment Cards
We asked 2005’s best various questions about life ance. It is very important to inspire colDepartment
and work, and, of course, about Riga and Riga’s
leagues and for them to be like-minded.
particular style, which everyone experiences indi- That is the only way to achieve good
Started working at the bank in 1999 as a
vidually. The questions fall into four categories:
results.
payment operator. Rapidly climbed the
Riga’s style, the nomination “Best Employee”,
career ladder, being promoted to paywork as a whole, and the bank’s development and All in all, I wouldn’t change anything at
strategy i.e. “Me in the president’s chair”. In con- our bank. Our strong performance speaks ment card specialist, private banker, senior private banker, until successfully
clusion they painted a written portrait of a true
for itself. I must say that a woman being
reaching the responsible position of Head
banker (see page 24).
in a management position at a bank or
of the Payment Cards Department. His
heading a department at a large bank is
Our laureates’ answers are presented in the form more of an exception than the rule. With humanistic and professional reputation
unfolds in the recognition of his closest
of a monologue, which, we hope, will provide the some difficulty I can imagine myself as
reader with a better image of the whole AB.LV
the bank president. But I know one thing colleagues: “Working with him and
under his management is a pleasure. In
team’s humanistic characteristics and motivation. for sure: working with money requires
to be the best
addition to all of Romåns’ other skills in handlings his
tasks and various problems that arise in his work, his
graceful and respectful attitude toward his colleagues
would increase the work drive at any workplace.” In
2005 he considers the most striking event in his life to be
the birth of his daughter.
the best bank, according to all indicators!
We convinced everybody of this. One of
the students was so surprised by this corporate patriotism that she joined us at the
bank as an employee! And hasn’t regretted it since; I made it a point to ask her. I
“Riga’s style. With regard to the bank and working with
clients, this style is definitely the hard work of a private
banker, which may be characterised easily and definitively: contact, contact, and contact once again. About
our services, about business, about specific tasks, about
resolving problems, about the weather, about recreation,
about children…. All so that the client, when hanging up
the telephone, smiles and notes in his appointment calendar, “AB.LV – OK”!
Sergejs Mazurs,
Riga is my city, my home. It is good to return to Riga
after being in Moscow, when I especially feel: God, how
I love my city!
The title “Best Employee – 2005” came so unexpectedly
that I wasn’t even surprised, as funny as that sounds. In
any event I wasn’t flustered. The feeling of having been
named best employee in the fourth quarter was still fresh.
I think that just like Juliet Roberts, I received an Oscar
for “accomplishments in the field”…. In my opinion, this
is a gesture of appreciation (the very highest, no less) for
all of my work at AB.LV. Why me, and not someone
else, seeing as we all work like the devil? I don’t know, I
guess I just got noticed more often. After this nomination
my conviction that I have chosen the right path has
strengthened. Thus, something is working out.
I’m not even thinking about assuming the “throne” at
AB.LV. The authority of the shareholders of Aizkraukles Banka is undisputable and final. Experience has proven that decisions, even those that initially didn’t seem
correct, turned out to be the only correct ones. What
would I change? I would expand the opportunities for
employees to further their education. We need uninterrupted development. Also, I would begin to develop
actively asset management and develop real private banking traditions. For this we have all the preconditions:
we have developed well the initial stage of formation of
capital for our clients; now the time has come to oversee
this capital. Our clients know us well and trust us.
And with regard to patriotism. We truly are AB.LV
patriots. We diligently follow the ratings and strive to
surpass our earlier accomplishments, and treat the business like our own. We take part in the experience and
bend over backwards to make sure everything we do is
useful and beneficial to our bank.
page 12
Once a colleague and I took a course in business
English. The group consisted of employees of various
banks, as well as some people working outside of the
banking sector. Regardless of the topic we happened to
be discussing, the result was always the same: AB.LV –
1-2 kilometres, and due to its regularly
running trams and very different, yet stylish, inhabitants. I love Riga because
everything is here that I call my life: family, home, friends, work, interests, memories and plans. I love it and that’s that.
The nomination is a great honour for me.
And a good deal of fortune. Working
Business Process Optimisation
with people every day, I’ve come to learn
Specialist
that there are very, very many superior
Joined the bank in 2002 as an operator in employees at AB.LV. We have a wonderful, talented, and professional workplace
the Transactions Department and soon
became a training specialist at the AB.LV that works to its best ability every day.
training centre. His wealth of experience But the fact that my work and its results
have been noticed is partially a congruin teaching information technology and
ence of favourable factors: events, timing,
economics at a school proved useful.
Afterwards became the youngest analyst and the attention given to them….
in the Business Technologies Department
and led projects related to the most com- Has anything changed? I think that the
changes in my professional life are related
plex and responsible field of business
process development: the bank’s system. not to the award itself, but to the desire to
In 2005 discovered a new direction – effi- develop. I got lucky; my work provides
cient production. Became so involved that me with a great deal of joy and satisfache is currently working with optimisation tion, and the fact that it does the bank
good is a double pleasure. It is my view
of customer service business processes.
that not only the best, but each employee
And his involvement is contagious!
must first of all love the job that he does.
Manages to get a lot done: in 2005
We devote up to 40% of the time that we
became a godfather, visited Estonia’s
are awake to work, and if we are doing a
largest islands with friends, visited Kyiv
and Barcelona, and celebrated his birth- job that we don’t love, then first of all we
can’t be truly happy and, second of all,
day on a business trip to Moscow.
we don’t develop professionally.
“Riga’s style? The first thing that comes
Yes, it’s not easy managing a bank…. I
to mind is strong black coffee at the “13
chairs” café on Dome Square. Riga’s style would simultaneously choose two direc– it’s a particular combination of a rhythm tions for development. In a few words,
these would be services for clients that
of life, world outlook and system of vacurrently have money, and for those that
lues. I can safely refer to Riga as my fawill have it in future. All of these services
vourite city in the world, despite the fact
must be easy to process and of superior
that I was born in the city of Lutsk in
western Ukraine. I like to feel the presence quality.
of history in the streets of Old Riga. I like
Clients having access to free capital and
the compactness of Riga and its unique
wishing to increase it should be provided
cosiness. The city of course consists not
only of buildings, but also of people who with support in the form of investment
products – mutual investment funds and
create its unique atmosphere. The singuindividual investment portfolios.
larity of Rigans lies in the fact that we
understand eastern and western culture
equally well, given our location on a
For those wishing to improve their lives
bridge of sorts between Western Europe
today by finding a stable job, I would
and Eastern Europe. Rigans are reserved
develop consumer loans, and also purand orderly like westerners, but also hos- chases that could be financed on the spot,
pitable and generous like Slavs, speak
whether it be a shop, a travel agency or an
many languages and are very considerate apartment (when a courier delivers goods
toward their home, Riga. I love Riga for
ordered over the internet).
the fact that on its every street and in
every home one can feel the singular soul Without a doubt, I am not forgetting
of the city, for its compactness and acces- about the development of other demanded
sibility to everything one may need within products. After all, I’m the president…
p. s.
by O¬egs Fi¬s>
co-owner and the bank’s Deputy Chairman of the Board
The value of an employee at a company –
this is not a philosophical question, it is
an axiom. We appreciate and respect our
employees not only in words. The nomination “Best AB.LV employee”, which is
awarded to our colleagues each quarter,
and also after evaluating work performance over the course of the year, is only the
visible part of our appreciation. With the
nomination we show our employees that
we as the bank’s managers value our employees highly and are interested in their
professional development. It is customary
and logical that employees receive material appreciation for their everyday work
for the good of the bank (i.e. a salary). In
addition to this we strive to discover and
foster individual development. This requires a special culture of expression of
gratitude. For this reason the title “Best
AB.LV employee” is not only recognition
for the fruits of one’s labours, but also recognition for reaching a new level of performance. Our bank’s sphere of business
requires competitive professionals whose
achievements increase the bank’s overall
competitiveness. People are coming to us.
I can’t say that we abide by certain criteria when hiring, but I can say that the best
of the best work for us.
Informal contact is very necessary, especially for new employees. That is the
usual way of fitting in at a workplace. Our
“old”, united team is always open to reinforcements, and new faces are well received. If needed, we provide them with advice or assist them with a particular task.
Speaking of corporate culture at AB.LV,
I would like to note that the influence of
employees on the daily work process is
enormous. Our employees are always
provided with the opportunity to express
their opinions and offer solutions for situations that arise at work. With us, initiative is never punished. It is well known
that a barrier or great distance in relations
between bank management and employees complicates the decision-making
process. At the same time co-ordinated
teamwork increases by several times the
quality and effectiveness of decisions.
Employee loyalty – this is a current topic
for any contemporary business. In order
to understand and assess the needs and
desires of our employees and their attitudes towards the workplace, we regularly
conduct corporative surveys. According
to the latest survey results, more than
84% of AB.LV employees are satisfied
When Aizkraukles Banka opened its Riga with their work at the bank and view the
future with optimism. This figure indibranch in 1995, the list of employees
didn’t even have 50 names. Currently we cates a great deal, but it is not the fulfilment of our dreams. Our goal is an indihave nearly 500. The average age of
AB.LV employees is 30. This means that cator of 100%.
our people are in the most active stage of
life and are ready to focus on career deve- For an employee to be loyal to the company where he works, he must be proud
lopment. And we in turn offer them an
to work there. Our employees are always
appropriate environment.
informed about what is happening at the
bank; what our aims, plans and achieveI am pleased when I see smiling, active
ments are; and what our public image is
colleagues at the bank. To me this is the
best motivation. It is also pleasant to note like. If a person has access to such inforthat our employees like to spend their free mation, then he is grounded in real values
and sees the advantages that working at
time with their colleagues. We are all
very athletic, and for this reason the bank the bank provide him with. And then
offers its employees various sports activi- work brings him satisfaction, and the
ties, and every summer we all attend the bank gets a loyal employee. See, such a
simple formula for success. I
big AB.LV sports festival.
1. AB.LV’s central office building on 23 Elizabetes
Street – an outstanding example of Riga’s architectural
Art Nouveau pearls. In 2004 the renovated building
received first place in the category “Best Reconstructions of 2004”. A walk around the immediate neighbourhood will provide connoisseurs of architecture
with an aesthetic treat.
5
2. Fabrika Restaurant, famous
not only for its owner, former
2
prime minister of Latvia, currently successful businessman, and real “sea dog” – Måris Gailis. It is popular due to its delicious food and first-rate service. Nearby is îpsala, the
largest exhibition centre; a public swimming pool; and an exclusive
residential neighbourhood.
7. Gütenbergs Hotel is located in the very heart of Old
Riga, the tourist mecca of Latvia. This intimate, homely
hotel has deservedly captured the attention not only of
tourists, but of Rigans as well, not least because of its
roof restaurant. Even on a chilly evening, wrapped in a
fuzzy blanket with a class of cognac in hand, you can
enjoy the beautiful view that opens up of the old city.
1
3. Berga bazaar – a real oasis in the
noisy centre of Riga. Here one can walk
along the tiled paths between the reconstructed buildings and visit art galleries,
modern stores, refined restaurants and
culinary shops. A small fragment of
good old Europe!
4
4. Jürmala – this is without a doubt our
symbol. It is also nostalgia, memories, summer camps, first romantic meetings…. And
not only for Rigans, but also for many visitors to Latvia. Jomas Street and Dzintaru
concert hall, cosy restaurants, hotels and
spas – all these things await you in summer.
5. The Riga Sports Arena was specially constructed for the needs of the 2006 world
hockey championships. We still don’t know
who will be crowned champion, but we
believe that on the ice there will be an
intense but honest battle, new records will be
set and the fans will let their feelings show!
6. National Opera of Latvia – union of striking, stately classical architecture and contemporary theatrical genres. It’s no coincidence
that productions of Latvia’s opera and ballet
masters are an event not only in Riga, but
beyond Latvia’s borders as well. The square
adjacent to the Opera is a popular recreational area for Rigans.
8. Tickets to performances of the
8
New Riga Theatre have to be
reserved a year in advance – that’s how unique and
impressive are the style and vision of Alvis Hermanis
and his talented troupe. Though our foreign clients
have the opportunity to attend performances in
Moscow, where the theatre regularly performs on tour.
3
9
6
7
10
9. Balsam Bar – one of the most popular party places
in Old Riga. Here you can always listen to quality
music, the courteous bartenders prepare special cocktails, and you will be among fun people ready to
rejoice until morning, when, on your way out, you can
check out the most noteworthy structure in the old
city: the Dome Cathedral.
10. The largest national-style restaurant
LIDO is popular not only with its broad
selection and good kitchen, but also its
wooden architecture, comfortable outdoor recreational zone and entertainment. Tasty foods (just like homemade),
the best local beers, catchy music – what
more do you need to have fun?
EXPERT
OPINION
O¬egs Sirotins
Head of International Division
Theorising about style in general and
with regard to our bank, and about the
client’s place in the hierarchy of values in this
style, brings one to an obvious thought: without
the client there wouldn’t be anything at all – no
bank, no style. Today, all banks throughout the
world have standardised their offers so very much
that the client can only be surprised with one
thing – special treatment. Therein also lies the
uniqueness of the banking business – it is a business of relationships. If we have managed to
develop a relationship with a client and maintain
it for years, that means that our business has a
future. Aizkraukles Banka’s clients have together
with us experienced complicated and difficult
times. We have never turned away from clients if
they have experienced problems; rather, we have
sought to find effective solutions together. In
most cases clients come to us based upon the recommendation of their colleagues, partners or
friends. In order for these recommendations to
be only positive, we work hard and with all our
efforts. Although I cannot fail to mention that we
have acquired many of our faithful, long-term
clients thanks to the charisma of some of our
employees, who possess such a talent for persuasion that it is impossible to resist them!
To our clients Riga is a comfort. When he comes
to visit us, the client leaves all of his problems and
troubles at home; here he RELAXES. For example,
our clients from Russia remark how quiet Riga is,
as if nothing is happening, the small distances....
Just think about it – the airport is located 15 minutes from the centre! But when staying at a
hotel in the centre of Riga, the client asking for
driving directions to our bank practically experiences culture shock when we say: it’s a five
minute walk through the park. To them Riga is
like a resort spa. But that is the very point –
nothing will bother you here. You can enjoy
peace and quiet and rest well from the crazy
rhythm of your Russian megapolis. Our Muscovite
clients are amazed how “inexpensive” Riga’s
restaurants and shops are. And, of course,
Jürmala. Jomas Street, the sea, dunes and pine
trees – that all seems exotic and a treat to them.
If our guest asks where to head, I tell them not to
miss Old Riga, Jürmala and Sigulda. All the more
so because our clients always have little time, and
they must manage to see the local symbols.
lpp. 15
AB.GUIDE
AB.HOME
Mortgage loans are
Aizkraukles banka’s priority business direction in the
local market.
renovations not everyone can afford to
pay a professional designer for his original and often bold ideas. Thanks to
AB.LV and LNT, now it is possible!
Usually at the beginning of the programme participants try to imagine how
they would like their home to look, but
almost always the hosts of “Måjok¬a
jautåjums” manage to surprise them. This
is demonstrated by the exclamations and
first words that the surprised guests utter
when crossing the threshold of their new
home: “Well, we weren’t expecting anything QUITE LIKE THAT!”
Home renovation – this is more or less
a catastrophe that occurs in everybody’s life. As an old adage says, a renovation cannot be finished, it can only
be interrupted. Many of us, standing
powerlessly numb in the middle of a
torn-apart apartment, in-between the
wallpaper glue and the ceiling whitener, have dreamed – if only somebody
would come and finish the renovation
in my place!
A style of sorts emerges also from having a limited budget – but
a small budget sometimes permits the implementation of the
most original ideas! The transformations depicted in these photos took place in Riga – a city full of
contrasts. As full of contrast are the
lives of simple Rigans; just as full of
contrast are the styles that designers
bring into their homes. Just as there
are large and small homes, there are
large and small rooms. Oh how I wish
that in every person‘s living space
there was nothing superfluous! So
that the stylist could afford it, as well
as the person occupying the space.
Liena Britåne,
chief editor of
Müsmåjas magazine
On September 28, 2005, LNT in cooperation with Aizkraukles Banka decided
to lend the people of Latvia a helping
hand by offering viewers a new show:
“Måjok¬a jautåjums”, or “The issue of
the home”. Each show turns the fortune
of one family in Latvia that has received a loan from our bank. These lucky
folks are given the chance to renovate a
room in their home, receive advice
from a professional designer, and borrow interesting design ideas for their
next renovation project I
before
No one will remain
indifferent
Viewers of “Måjok¬a jautåjums” share in
the emotional experience as the homes of
the show’s guests are transformed before
their eyes. The designer’s recommendations and the skill of construction workers
convert even the greyest room into a magazine illustration of “Interiors
of the year”. At the conclusion of each show viewers are treated to the
emotional dessert of viewing the home before and after renovation. It’s
well worth seeing!
Already after the show’s first season it was clear that it aroused a wave
of positive emotions in every family. People’s desire to take part in this
kind of experiment is completely understandable: while doing home
In 2005, thanks to “Måjok¬a jautåjums”,
18 Aizkraukles Banka clients had their
apartments renovated. Witnessing the indescribable joy and genuine excitement
that the show’s guests experience when
they behold their redone homes, we can’t
not share these emotions with them. A renovated bathroom, living room, child’s
room or kitchen – this serves as a stimulus to continue the home improvements
after the show!
after
AB.LV’s Head of the Customer Service
Division and board member Påvels Ínejersons describes our bank’s decision to
participate in this project: “It was interesting for us to observe how everything
takes place in real life, how our clients
live and how they strive to improve their
lives. We wanted to witness the results of
our own work through our clients’ eyes!”
Certain shows stand out with their particular emotionality. Didzis Kurzemnieks,
who ventured to propose to his girlfriend
in front of the camera and by doing so
moved practically everyone in Latvia,
says, “I am very satisfied with my participation in the show ‘Måjok¬a jautåjums’.
We were pleasantly surprised when we
saw that not only was the bathroom renovated, but the hallway as well, and a separate toilet facility was installed and fur-
nished. All the renovation work was conducted at a high professional
level, and everything works perfectly! After the show friends came to
visit and were surprised that in reality everything looks even better than
on television. At first it was hard to believe that that we were in our
own home, though we got used to the changes pretty quickly. Thank
you very much to the show for this experience!” I
page 17
Issue of the home –
dreams come true!
home
Bridging loan
The “Bridging loan” is a specially designed mortgage lending programme to ease the client’s process
of moving to a new home. Clients have one year to
fix up their new home, and only then move into it
and sell their current home.
The main advantages of this loan:
• a year’s time to move;
• during this time client pays bank only interest,
postponing repayment of principal;
• loan of up to 105% of value of home (both properties - old and new – serve to secure loan).
Additional advantages:
• bank covers state and chancellery duties for registration of mortgage in property register;
• discounts on acquisition of furniture and furnishings.
In Riga like nowhere else in the world are
very able people who can create interesting
things in a very short time without much
experimentation. In Riga people like quality
materials and proven values.
Advises designer Aivars Burakéviçß
Riga’s style is a functional minimalism. But not only. People strive
to create an atmosphere seeking wooden floors, old metal items, and
something from industrial machinery and old furniture. The unique is
sought. It is current to mix everything natural with the artificial.
Riga’s interiors typically feature clean lines, monolithic forms and a
tasteful selection of materials. Untreated or polished natural materials
exist along with the absolutely synthetic. Wenge, teak, walnut, glass –
and then perforated plastic that reminds one of ladies’ net stockings.
Sometimes a fully functional room will contain a completely non-functional object worthy of an art installation.
page 18
Latvian understanding of homeliness – we utilise ethnographic elements combined with artefacts from modern life. It is current to mix in
something from modern Scandinavian and Italian furniture design. I
Projects of Aivars Burakéviçs
For those seeking homeliness – warm, light colours with slight contrasts: beige with dark brown, green, all kinds of shades of white. A little bit of kitsch combined with an Eastern ethno – interior yogis create
their environment in harmony with ancient, Eastern-culture interior
decorating
principles.
most convenient customer service centre and photos of our loan officers, but
also on how to arrange for a meeting
with the loan officer of your choice at a
time of your choosing.
Loan processing fees
can be added to the
loan amount
Upon request of the client,
EXPERT
Påvels Ínejersons
Head of the Customer
loan processing fees can be
OPINION
Service Division
added to the loan amount, permitting you to utilise funds more
What is the typical Aizkraukles Banka
effectively – for example, to furnish
client?
your new home. Unlike other banks,
It is not easy to answer this question today,
where the bank usually offers to include when the number of clients is in the thouvarious commission payments in the loan sands. The people who choose us as their
Down payment loan
amount as long as the total does not
home lending bank are very different.
The down payment loan is intended for clients lack- exceed the maximum loan amount perStatistics indicate that Aizkraukles Banka
ing funds for the down payment when purchasing an mitted, Aizkraukles Banka provides the borrowers are mostly people in their active
apartment in a newly constructed apartment building. opportunity to tack on the commission to years: from 25 to 40 years old. Generally
Bank clients may receive a loan of up to 10% of the the loan, even if the maximum loan
they are family people with an average
value of their new home. This is enough entirely or
amount is issued.
income who require LVL 25 – 30,000 to buy
partially to cover the seller’s required deposit. After
a home. They tend to be cautious when
successful construction of the building the bank’s
Home improvement loan borrowing, and try to repay the loan as
client may take out a mortgage under especially faup to 85%
quickly as possible.
vourable terms.
As of September, Aizkraukles Banka has For these people we are the right bank. The
The down payment loan is unsecured. The basis for
also improved the terms on home imhopes with which clients come to us are all
receipt of the loan is the concluded purchase agreeprovement loans. Loans of up to 85% of unique, and the contact develops very indiment between client and seller for acquisition of the the value of the home are available for a vidually. We seek to create a common lanhome. With the help of this loan clients can afford to term of up to 20 years. This loan is inguage and, whether it be issuing loans or
reserve the apartment that best meets their means
tended for renovation, reconstruction or just a routine payment, not to disappoint
and desires while the building is still being construc- improvement of an apartment or house.
people’s hopes.
ted, and upon successful completion the loan turns
In 2005 the market for new homes con- There is no magic way to achieve the high
into a mortgage, without any significant change in
tinued to expand rapidly – Aizkraukles
satisfaction of all clients. But it is possible to
the amount of the loan payment.
Banka also paid particular attention to
work every day so that every client will be
developing elastic and favourable offers fully satisfied with our services. And that
30-year term on loans
on mortgages for new homes.
means one thing – to exceed the client’s
The term on loans for new and renovated homes was
expectations every day. Do we manage to
extended up to 30 years for new and renovated
do this? We seek to monitor this by asking
We finance new homes
homes successfully completed beginning 2003.
this question in our client survey and by askbased on the assessed
ing clients to tell us if there is anything in
amount
Notary services at the Bank
our service we can improve. If you, reader,
At the Bank’s Loan centres “Elizabete” (21 Elizabe- Aizkraukles Banka offers its clients fiare a client of Aizkraukles Banka, I will be
nancing on acquisition of a new home
tes Street, Riga), “Marija” (13 Marijas Street, Riga)
happy to learn your opinion about our serbased
on
the
assessed
amount,
not
taking
and "Vairogs" (226 Brivibas Street, Riga), for the
vice and will help to resolve the problem, if
into
account
the
amount
of
acquisition
ease of the client the Bank also offers notary services
there has been one. Please write me at
indicated
in
the
purchase
agreement.
on the premises, which greatly lessens the time the
[email protected].
This
permits
clients
to
receive
a
loan
not
client has to spend on mortgage loan processing.
only on 100% of the value of the home, Based on what we know – that our number
of clients is increasing and clients recombut also an additional amount for home
Now it’s possible to arrange
mend us to their friends – we are on the
improvements. II
a meeting with a loan officer
right path. I know that we still have some
electronically
way to go, and we will never be able to say
Since late 2005 Aizkraukles Banka’s homepage
that we are at the end of this path.
www.ab.lv has provided not only information on the
I am thankful to every one of our clients for
trusting us with one of the most important
financial decisions in their lives – selecting a
mortgage. And we trust our clients, because
due to them, Aizkraukles Banka exists. I
AB.SUPPORT
On September 23, 2005 the Ministry of Culture of Latvia and
Aizkraukles Banka concluded a cooperation agreement, in
accordance with which the bank became the main patron of
the newly founded Museum of Modern Art. AB.LV will ensure
financial support for the museum during its creation from
2005 to 2015, granting it a donation unprecedented in Latvia
in the world of culture and art – one million lats.
We are convinced that investing in culture and art is
no less important than investing funds in other
spheres of life and work important to the country.
For this reason our bank views its sponsorship
activity in this field as a priority that will foster and
help create a saturated emotional and energetic fund
for formation of a healthy society.
page 20
According to O¬egs Fi¬s “We want to popularise the
principle in society that businessmen not only ask
from the state, but also assist it in implementing
projects important to the country”. I
Other significant projects
supported by the bank:
In supporting various projects at the
National Opera of Latvia, in 2005
Aizkraukles Banka became the general
sponsor of the Gian Carlo Menotti children’s opera “Amal and the Night
Visitors”. This wonderful production,
which celebrates the unlimited fantasy
of children, belief in miracles, patience
and understanding, greatly relates to
our hopes as well. We believe that children are the key to the blossoming of
the future, and for this reason also in
future we will support our new generation in every way and their aspirations
for the new and beautiful. I
In 2005, together with the Culture
Foundation of Latvia, AB.LV signed a
statement of intent that anticipates
undertaking of a support programme
over the course of three years for the
development of Rundåle Castle. This
monument of architecture and art is a
true symbol of Latvia. It is the cultural
pearl of Latvia, which tourists and
guests from around the world come to
visit. Helping to preserve such treasures is part of our responsibility toward
society. I
On November 18, 2005, in honour of
the anniversary of the declaration of the
independence of Latvia, the Latvian
consulate in St. Petersburg organised a
wonderful concert, “Meeting of two
choirs”. In the renovated famous
M. Glinka State Academy chapel, with
its longstanding, rich traditions and excellent acoustics, two choirs performed:
the boys’ choirs from the J. Mediña
Riga High School of Music and the
M. Glinka St. Petersburg School of Music. AB.LV gladly provided financial
support to our consulate in St. Petersburg for the organisation of this concert.
The boys from Latvia had the opportunity to visit one of the most beautiful
cities in the world – a repository of
treasures of Russian culture – as well as
to show music lovers in Russia their
artistry and the art of Latvian choir
singing, which is steeped in tradition. I
In 2005 AB.LV became general sponsor to the VI International New Theatre
festival Homo Novus. This festival initially took place in Daugavpils ten
years ago. In this time, the six Homo
Novus festivals have brought over 50
performances to Latvia, each festival
drawing approximately 8000 viewers.
The festival has garnered European
recognition, gained the status of an independent, non-commercial cultural
project, and received a prize from the
Ministry of Culture of Latvia and
newspaper Diena’s award as the event
of the year in cultural life. The festival’s motto, “Art as a model for life”,
also coincides with the goals our bank
has set forth. To be a professional at
what you do and to work exceptionally
and from the heart – this is also an art
form that we have mastered and improve upon with every year. I
understood by everyone, one that unites us and knocks down any boundaries. In 2005 our bank was general
sponsor to:
• The refined French musical project
Nouvelle Vague, which presented Rigans with European rock music compositions that were once very popular, in
an original, unique and sensuous
female vocal interpretation;
• The Moby concert, the art of which is
very close to us in terms of spirituality
and values. In uniting numerous musical styles, this musician transforms his
performance into an unforgettable
event;
• The excellent jazz quintet concert by
The Real Group from Sweden, which
stirred our experienced Riga audience
with its virtuoso vocal art. I
Our bank has always been particularly
pleased to support interesting musical
projects, because music is a language
page 21
The museum has staked out a lofty goal – to assemble a collection of artwork of an international scale –
and to offer employment to leading expert art historians from various European countries. AB.LV co-owner and chairman of the board Ernests Bernis has
been elected to be chairman of the current International Experts Council.
page 23
page 22
AB.FACTS
portrait of a
true banker
Irina Lastovska
A true banker is a person of the mind, not of emotion. He is progressive, farsighted, knows how
to listen and knowledgeably and precisely expresses his thoughts. His speech and logic are
clear. Otherwise he is not understood. He is social and democratic. He has not drawn a boundary between his private life and work.
Romåns Surnaçovs
What is a true banker like? Banks are considered economic indicators, therefore bankers, too, must be
informed about what is happening in economics and politics, and must understand the laws of economics both on a macro level, as well as on a specific production level. A banker must also be aware
of trends around the world as a whole. Business occupies increasingly greater global proportions, the
speed of information exchange is rapidly increasing, and economic and political changes in other
countries or regions can influence our business not only to a great extent, but also very quickly.
Moreover, as we know, in these interesting times laws drafted in other countries based on the experience of other countries are not always applicable to our situation, considering the specific characteristics of the post-socialistic area. For this reason bankers must be gifted not only with very acute logic,
but intuition also. Being a banker means being constantly in touch with partners, clients, and subordinates, and he must be a psychologist in this field, because people are very different, and each one
requires a different approach: with some one must be strict, with others one must seek out a
compromise.
With regard to the banker’s private life... everything is “prim and proper”, although, if you look at
Aizkraukles Banka’s hockey team, is it possible to imagine that these boys, who are so reckless on the
ice, wear suits and ties during the day at the bank, doing the work I spoke of earlier?! Or to read in the bank’s electronic newspaper the descriptions of our colleagues’ travels? Where do bankers not go in their travels? This demonstrates that our interests and
hobbies are the most diverse, and that in our free time from work we know how to relax and have fun!
Sergejs Mazurs
What pertains to a true banker… Hmm… Well, here it is:
• Arrives at work on time. But if not, then thinks of 10 convincing and excusable reasons.
• Knows how to count money (of course!) and plans his time very well: knows by what time to send money or when he
can wait for it. But if he doesn’t know, then he certainly knows someone who does.
• During the working day, of greatest importance to him are the client’s values. And no “ifs”!
• Never postpones unfinished work until tomorrow, finishes what he has started, without regard for his time, or for that of
his colleagues.
• Fluently speaks and writes in at least two languages. Other languages pose no problem for him either, because the most
important thing is the result – reaching an understanding with the client.
• Always ready to help colleagues and improve the mood at the workplace with a dose of healthy humour. Sings, dances
and is not afraid twice a year to display these abilities to the entire bank (at the bank employees’ corporate concerts on
New Year’s and the summer sporting games)*.
• Drives a car to work and takes the lift, but walks and runs at the gym, which he visits three times a week.
• Regularly pays for cable television, but has no time to watch it.
• An expert on Japanese cooking, mobile telephones and cities on the shore of the Mediterranean Sea. Like to take photographs.
• How else to describe him? When in a hurry – AB.LV’s orange umbrella!
cnh. 24
* Sergejs – actively takes part in the corporate concerts that the bank’s employees organise on New Year’s and the summer sports festival.
AS Aizkraukles banka
consolidated report
for the year 2005
Contents:
Report of the Council and the Board
26
Bank Council and Board
29
Statement of Responsibility of the Council and the Board
30
Financial Statements
Income Statements
31
Balance Sheets and Memorandum Items
32
Statements of Changes in Shareholders’ Equity
33
Cash Flow Statements
34
Notes
Auditors’ Report
35
63
Report of the Council and the Board
Dear Shareholders, Customers and
Business Partners of Aizkraukles Banka,
Aizkraukles banka or the Bank) has succeeded in achieving
considerable financial results. Owing to the successful strategy pursued during the reporting year, the Bank has reached
and even surpassed planned results.
According to the strategic goals set by the Bank, in 2005
Aizkraukles banka continued intensely focusing on development of lending products in the domestic market and
strengthening of its positions in the international market.
The year 2005 was marked also with implementation of
structural changes in the Bank’s management and divisions.
The decentralisation process promoted effectiveness of
financial and operational planning and analysis.
To optimise the Board’s operations, the functions to be
assigned to the Board were strictly defined. Major functions
of the Board encompass approval of business plans and control and analysis of their execution, formulation of the corporate culture, development of an employee incentive
scheme and risk management system, budget approval and
control of budget execution, as well as risk assessment of
Page 26
AIZKRAUKLES BANKA I REPORT OF THE COUNCIL AND THE BOARD
material transactions.
In the end of 2005, an open social organisation called the
es. As a result, additional controlling structures were set up,
result, the Bank has refused business relationships with a
Latvian-American Financial Forum was established, Aizkraukles
and employees were given specialised training. This was
number of high-risk customers.
banka being one of the founders. The objective of the Forum is
accomplished in consultation with the Financial Capital and
to enhance development of the Latvian financial centre, its
Market Commission and correspondent banks.
The Board will recommend that the general shareholders'
competitiveness worldwide, and the transparency and responsi-
meeting approve a resolution on payment of dividends to
bility of the business environment. The Forum members wish to
On 15 June 2005, all Latvian commercial banks signed the
the shareholders of LVL 30 per share.
facilitate economic cooperation between Latvia and the USA,
declaration issued by the Association of Latvian Commercial
creating a new dimension for US companies and investors, as
Banks to take aggressive action against money laundering,
well as ensuring new advantages for Latvian capital in the USA.
wherein the banks declared their clear, implacable and firm
Domestic Market
position on further combat against money laundering.
In 2005, Aizkraukles banka continued consolidating its position in the Latvian market of mortgage lending. As at the
In 2005, the amount of funds attracted by the Bank reached
end of the reporting period, the amount of loans issued for
LVL 480 million, thus exceeding the result as at the begin-
Money laundering is a global problem faced by all financial
housing reached LVL 188 million, thus exceeding the result
ning of the year by 25%. The amount of loans issued to
institutions worldwide. It can lead to undermining public confi-
as at the beginning of the year by 123%. The strengthening
non-residents was also rapidly growing during the reporting
dence in the safety of the financial system both in Latvia and
of the Bank’s leading position in the field of lending to pri-
period. Compared to 2004, the amount of issued loans
other countries. The fight against money laundering is extreme-
vate individuals is confirmed by the fact that the Bank occu-
increased as high as 1.7 times, having reached LVL 29.4 mil-
ly difficult, and criminal threats may be expected in any corner
pies approximately 18% of the market of mortgage lending
lion as at 31 December 2005.
of the world. For this reason, financial institutions, their regulatory bodies and law enforcement bodies actively joined efforts
to private individuals in Riga and Riga region, which is one
of the highest results among Latvian commercial banks.
Investment Business
to carry out the hard work of detecting criminals.
The Bank considers its success in investment business to be
The well-considered lending policy, flexibility, i.e. ability to
one of the greatest achievements of 2005, which is basically
Aizkraukles Banka in the Community
adapt to the wishes of any customer, competitive offers, as
due to an efficient and well-balanced investing strategy.
In 2005, Aizkraukles banka donated funds totalling LVL 745
well as the high level of customer service culture – all of
thousand to various sponsorship and charity purposes.
these account for the excellent results achieved by the Bank
The average balance of the Bank’s liquidity portfolio as at 31
in lending. The Bank in its operations keeps to the highest
December 2005 amounted to LVL 37.5 million and the annual
In addition, the Bank joined the implementation of a national
standards of credit risk management.
return reached 3.55%. The liquidity portfolio comprises debt
project – establishment of the Latvian Museum of
securities issued by credit institutions incorporated in the
Contemporary Art. The Bank signed a long-term cooperation
Financial Results
Having analysed customer service at the domestic market,
The year 2005 was yet another successful financial period
OECD area. The annual return on investments held for an
agreement with the Ministry of Culture of the Republic of
the Bank decided to segregate loan administration (decision-
for the Bank. During the year the Bank has derived net profit
undefined period portfolio was 12.5%, and its average
Latvia whereby financing in the amount of LVL 1 million shall
making) and credit risk assessment functions from those of
of LVL 18 million, which is 2.2 times as much as the result of
amount in 2005 was LVL 64.7 million. Investments held for an
be granted for 10 years to compile museum collections.
the Customer Service Division. These two functions were
the preceding year.
undefined-period portfolio encompass debt securities issued by
merged under a new division – the Loan Administration
the Latvian government and other non-OECD governments,
For the second year in a row, Aizkraukles banka has been
Division. The purpose of such segregation is to achieve indeAs at the end of 2005, the assets of the Bank amounted to
credit institutions and privately held companies. The annual
partner to Latvijas lepnums (The Pride of Latvia), a project
pendent assessment and decision-making in respect of credit
LVL 547 million, which constitutes a 23% increase compared
return on the trading portfolio in 2005 reached 11.6%,
implemented jointly by newspaper Diena and television com-
risks.
whereas the average portfolio amount was LVL 2.1 million.
pany TV3. The mission of this project is to encourage com-
In the beginning of 2005, Aizkraukles banka optimised its
Know your Customer
nificant project supported by the Bank is publishing of a
In view of the intention commonly expressed by the Latvian
book Personalities in Latvian Democracy.
to the beginning of the year. As at 31 December 2005, the
Bank’s gross loan portfolio has reached LVL 278 million.
passion, responsiveness and mutual support. One more sigcustomer service. In April a new customer service centre
According to the financial results of 2005, the Bank’s return
Krasts was opened to combine the settlement centre Motors
on equity (ROE) (measured as fiscal year’s earnings against
and the customer service centre Imanta.
average shareholders’ equity) reached 49.34%, whereas the
return on assets (ROA) (measured as fiscal year’s earnings
International Market
against average assets per annum) was 3.59%.
Regardless of the aforementioned work at optimisation of
customer structure and refusing business relationships with
Having estimated the aggregate financial results of the
high-risk customers, the Bank was also focusing on attracting
Bank, it should be noted that the financial objectives set at
new customers. The Bank’s Moscow representative office and
the beginning of the year have been overachieved. The
its business partners in Russia and other CIS countries played a
increase in the Bank’s assets has not been as rapid as
key role in attracting new customers.
government and Latvian commercial banks to combat money
laundering, the Bank decided to allocate more funds to risk
In March 2005, Aizkraukles banka, Rundale Palace Museum
management related to possibilities of the Bank’s misuse for
and the Latvian Cultural Foundation signed a statement of
money laundering purposes.
intent whereby Aizkraukles banka shall commence its
support programme for development of the Rundale Palace.
In the beginning of 2005, the Bank introduced an improved
In 2005, the Board of the Bank decided to grant LVL 35,000
anti-money laundering mechanism. The key function here
to support construction of a new centre for the Riga Luther
was assigned to the Customer Control Committee, which
Ev.-Luth. Parish.
got actively involved in the implementation of these process-
AIZKRAUKLES BANKA I REPORT OF THE COUNCIL AND THE BOARD
commercial banking, AS Aizkraukles banka (hereinafter,
expected, which is due to intensified customer control. As a
Page 27
In 2005, despite of the tough competition in the market of
Report of the Council and the Board
Bank Council and Board
In 2005, the Bank supported the Latvian concerts of several
The Council of the Bank
The Board of the Bank
Chairman of the Council
Chairman of the Board
musicians: world-famous musician Moby, Nouvelle Vague
and The Real Group. Among other significant cultural projects supported by the Bank, International Theatre Festival
Aleksandrs Bergmanis
Ernests Bernis
Homo Novus and children’s opera Amahl and the Night
Visitors at the Latvian National Opera should be mentioned.
Deputy Chairman of the Council
Jånis Krîgers
Deputy Chairman of the Board
O¬egs Fi¬s
In sports, Aizkraukles banka continued rendering its support
to the Latvian Handball Federation, the leading club
ASK/AB.LV, and the children’s and youth handball club
Member of the Council
Vladimirs Kutovojs
Members of the Board
Påvels Ínejersons
Aleksandrs PåΩe
Skrîveri un Aizkraukle.
O¬egs Sirotins
The management of Aizkraukles banka express its gratitude
for your trust and loyalty to the Bank!
On 4 April 2005, the Council appointed O¬egs Sirotins as
Member of the Board.
Chairman of the Council
Chairman of the Council
Aleksandrs Bergmanis
Aleksandrs Bergmanis
Chairman of the Board
Chairman of the Board
Ernests Bernis
Ernests Bernis
AIZKRAUKLES BANKA I BANK COUNCIL AND BOARD
Page 29
Page 28
AIZKRAUKLES BANKA I REPORT OF THE COUNCIL AND THE BOARD
Riga, 20 February 2006
Riga, 20 February 2006
Statement of Responsibility of the Council and the Board
Income Statements
for the years ended 31 December 2005 and 2004
The Council and the Board of the Bank (hereinafter – the
The aforementioned financial statements are prepared consis-
Management) are responsible for the preparation of the finan-
tently, applying accounting policies in conformity with the
cial statements of the Bank, as well as for preparation of the
International Financial Reporting Standards and on an ongoing
consolidated financial statements of the Bank and its subsidiary
concern basis. Prudent and reasonable judgements and esti-
Interest income
(hereinafter – the Group). The financial statements are pre-
mates have been made by the Management in the preparation
Interest expense
pared in compliance with the requirements of the Republic of
of the financial statements.
Net interest income
Interest income
Group
Bank
Group
2005
2005
2004
2004
LVL '000
LVL '000
LVL '000
LVL '000
4
24 383
24 383
14 677
14 677
4
(6 091)
(6 091)
(2 760)
(2 760)
18 292
18 292
11 917
11 917
Notes
securities
Income from securities
Latvia Law on Credit Institutions, Regulations of the Financial
and Capital Market Commission and other laws of the
The Management of the Bank are responsible for the mainte-
Republic of Latvia applicable to credit institutions.
nance of proper accounting records, safeguarding of the
Group’s assets and prevention and detection of fraud and other
14
14
1
1
Commission and fee income
5
6 944
6 944
5 345
5 345
Commission and fee expense
5
(1 164)
(1 164)
(1 068)
(1 068)
5 780
5 780
4 277
4 277
3 473
Net commission and fee income
Profit on trading with financial instruments
6
9 334
9 334
3 473
7
413
411
474
474
33 833
33 831
20 142
20 142
The financial statements set out on pages 31 to 62 are pre-
irregularities in the Group. The Management of the Bank are
Other operating income
pared in accordance with the source documents and present
also responsible for operating the Group and the Bank in com-
Operating income
fairly the financial position of the Bank and the Group as at
pliance with the Law on Credit Institutions, Regulations of the
Administrative expense
31 December 2005 and 2004, the results of its operations,
Financial and Capital Market Commission and other laws of the
of fixed
assets
and theirofvalue
Depreciation and
value
adjustments
fixedadjustments
assets
changes in the shareholders’ equity and cash flows for the
Republic of Latvia applicable to credit institutions.
Other operating expense
years then ended.
Bank
8
(11 608)
(11 606)
(8 922)
(8 921)
20
(1 643)
(1 643)
(1 274)
(1 274)
9
(389)
(389)
(250)
(250)
A for possible
losses
Allowances
forcredit
possible
credit losses
10
(420)
(420)
(765)
(765)
provision
Release of previously established allowances
10
817
817
414
414
20 590
20 590
9 345
9 346
(2 590)
(2 590)
(1 234)
(1 234)
18 000
18 000
8 111
8 112
Profit before corporate income tax
Profit before
corporate
income tax
Corporate
income
tax
11
Corporate
Net
profitincome
for thetax
year
Net profit for the period
Chairman of the Council
Aleksandrs Bergmanis
Chairman of the Council
Chairman of the Board
Ernests Bernis
Chairman of the Board
Ernests Bernis
Riga, 20 February 2006
The accompanying notes form an integral part of these financial statements.
AIZKRAUKLES BANKA I INCOME STATEMENTS
Riga, 20 February 2006
Page 31
Page 30
AIZKRAUKLES BANKA I STATEMENT OF RESPONSIBILITY OF THE COUNCIL AND THE BOARD
Aleksandrs Bergmanis
Balance Sheets and Memorandum Items
Statements of Changes in Shareholders’ Equity
as at 31 December 2005 and 2004
for the years ended 31 December 2005 and 2004
Group
31/12/2005
Notes Notes
Assets
Group
Bank
Paid-in share
Share
Own
Reserve
Fair value reva-
Retained
Total share-
31.12.02. 31/12/2004
31/12/2005
31.12.01.
31/12/2004
capital
premium
shares
capital
luation reserves
earnings
holders’ equity
LVL ‘000 LVL ‘000
LVL ‘000
LVL ‘000
LVL ‘000
LVL ‘000
Bank
LVL '000
LVL '000
LVL '000
LVL '000
Cash and demand deposits with central banks
12
40 801
40 801
18 870
18 870
Balances due from credit institutions
13
99 716
99 716
164 390
164 390
Demand deposits
86 911
86 911
97 668
97 668
Increase in paid-in share capital
Other balances due from credit institutions
12 805
12 805
66 722
66 722
276 773
276 773
138 146
138 146
1 033
1 033
2 168
2 168
Change in fair value revaluation
1 033
1 033
2 168
2 168
reserve of available-for-sale investments
102 905
102 905
98 767
98 767
Charge to income statement as a
Loans and advances to customers
14
Fair value through profit and loss investments
Debt securities and other fixed income securities
15
Available-for-sale investments
LVL ‘000
10 000
255
(3)
1 250
2 926
10 463
24 891
–
–
–
–
–
(1 800)
(1 800)
5 000
–
–
–
–
(5 000)
–
Increase in reserve capital
–
–
–
250
–
(250)
–
Sale of own shares
–
–
3
–
–
–
3
–
–
–
–
177
–
177
(1 771)
As at 01/01/2004
Dividends paid
Debt securities and other fixed income securities
15
101 212
101 212
98 005
98 005
result of sale
–
–
–
–
(1 771)
–
Shares and other non-fixed income securities
16
1 693
1 693
762
762
Change in deferred corporate income tax
–
–
–
–
239
–
239
Derivatives
17
1 114
1 114
258
258
Net profit for the year 2004
–
–
–
–
–
8 112
8 112
Investments in associated entities
18
12
12
12
12
15 000
255
–
1 500
1 571
11 525
29 851
Investments in subsidiaries
19
–
707
–
707
Dividends paid
–
–
–
–
–
(2 000)
(2 000)
Intangible fixed assets
20
1 205
1 205
789
789
Change in fair value revaluation reserve
Tangible fixed assets
20
7 231
7 231
7 936
7 936
for available-for-sale investments
–
–
–
–
2 789
–
2 789
Investment properties
21
15 988
15 288
12 044
11 344
Charge to income statement as a
Prepaid expense and accrued income
22
258
258
78
78
result of sale
–
–
–
–
(2 775)
–
(2 775)
Corporate income tax prepayment
11
–
–
224
224
Change in deferred corporate income tax
–
–
–
–
(2)
–
(2)
Other assets
23
343
343
810
810
Net profit for the year 2005
–
–
–
–
–
18 000
18 000
547 379
547 386
444 492
444 499
15 000
255
–
1 500
1 583
27 525
45 863
8 655
8 655
8 194
8 194
8 155
8 155
8 194
8 194
500
500
–
–
480 268
480 275
382 861
382 867
Demand deposits
339 325
339 332
313 473
313 479
Term deposits
140 943
140 943
69 388
69 388
Total assets
As at 31/12/2004
As at 31/12/2005
24
Demand deposits
Term deposits
AIZKRAUKLES BANKA I BALANCE SHEETS AND MEMORANDUM ITEMS
Deposits from customers
Derivatives
17
742
742
1 308
1 308
Deferred income and accrued expense
26
1 499
1 499
695
695
Deferred corporate income tax
11
601
601
458
458
Current corporate income tax liabilities
11
1 038
1 038
–
–
Other liabilities
27
982
982
14 399
14 399
Subordinated liabilities
29
7 731
7 731
6 727
6 727
501 516
501 523
414 642
414 648
15 000
15 000
15 000
15 000
255
255
255
255
Reserve capital and other reserves
1 500
1 500
1 500
1 500
Fair value revaluation reserve of available-for-sale investments
1 583
1 583
1 571
1 571
Retained earnings brought forward
9 525
9 525
3 413
3 413
18 000
18 000
8 111
8 112
45 863
45 863
29 850
29 851
547 379
547 386
444 492
444 499
Total liabilities
Shareholders’ equity
Paid-in share capital
Share premium
Retained earnings for the period
Total shareholders’ equity
Total liabilities and shareholders’ equity
Memorandum items
Funds under trust management
28
4 099
4 099
6 685
6 685
Contingent liabilities
28
6 895
6 895
5 110
5 110
Guarantees
4 562
4 562
3 297
3 297
Other contingent liabilities
2 333
2 333
1 813
1 813
43 236
43 236
24 577
24 577
Financial commitments
Page 32
25
The accompanying notes form an integral part of these financial statements.
28
The accompanying notes form an integral part of these financial statements.
Page 33
Balances due to credit institutions and central banks
AIZKRAUKLES BANKA I STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
Liabilities and shareholders’ equity
Cash Flow Statements
Notes to the Financial Statements
for the years ended 31 December 2005 and 2004
Depreciation and value adjustments of fixed assets
Increase in provisions for possible credit losses
Loss from revaluation of foreign currency positions
Group
Bank
2005
2004
2004
LVL '000
LVL '000
LVL '000
LVL '000
20 591
20 590
9 344
9 345
1 643
1 643
1 274
1 274
(631)
(631)
347
347
751
751
190
190
Increase in cash and cash equivalents before changes
22 354
22 353
11 155
11 156
Increase in deferred income and accrued expense
804
804
240
240
(Increase) in prepaid expense and accrued income
(173)
(173)
(37)
(37)
in assets and liabilities, as a result of operating activities
(Increase) in other assets
(Decrease)/ increase in other liabilities
(389)
(389)
(602)
(602)
(13 984)
(13 984)
15 152
15 152
(Increase) in short-term investments*
(2 763)
(2 763)
1 683
1 683
(Decrease)/ Increase in balances due from credit institutions
12 469
12 469
(14 707)
(14 707)
(138 229)
(138 229)
(73 679)
(73 679)
97 407
97 408
161 343
161 349
(Increase) in loans and advances to customers
Increase in deposits from customers
(Decrease)/ increase in cash and cash equivalents from operating
activities before corporate income tax
(Corporate income tax paid)
(Decrease)/ increase in cash and cash equivalents from operating activities
(22 504)
(22 504)
100 548
100 555
(1 186)
(1 186)
(1 883)
(1 883)
(23 690)
(23 690)
98 665
98 672
(5 325)
(5 325)
(13 049)
(12 349)
–
–
–
(707)
Cash inflow/ (outflow) from investing activities
(Purchase) of fixed assets and investment properties
(Purchase) of equity investments in other entities and other long-term investments
Sale of fixed assets
(Decrease) in cash and cash equivalents from investing activities
27
27
30
30
(5 298)
(5 298)
(13 019)
(13 026)
1. General Information
AS Aizkraukles banka (hereinafter – the Bank) was registered in
Aizkraukle, Republic of Latvia, on 17 September 1993, as a joint stock
company. At present, the legal address of the Bank is Elizabetes Street
23, Riga.
The Bank operates seven customer service centres, two lending centres
and two lending offices in Riga and Jürmala. Its main scope of activity is
lending, fund transfers, foreign currency exchange and asset management.
The Bank operates in accordance with the legislation of the Republic of
Latvia and a licence issued by the Bank of Latvia that allows the Bank
to render all the financial services specified in the Law on Credit
Institutions.
Information given herein in brackets represents comparative figures for
the year ended 31 December 2004, unless otherwise stated.
Standards. These accounting policies are in line with those disclosed in
the financial statements for the year ended 31 December 2004, except
for the policy related to accounting for investment in subsidiary (see
explanation o)).
a) Reporting Currency
The financial statements are reported in thousands of lats (LVL’000), unless otherwise
stated.
b) Basis of Accounting
These financial statements are based on the accounting records prepared in accordance with legislative requirements. These records are
maintained under the historical cost convention, modified for revaluation as disclosed below, with adjustments and reclassifications for the
purpose of fair presentation in accordance with the International
Financial Reporting Standards (IFRS) and the Regulations of the
Financial and Capital Market Commission.
c) Basis of Preparation
2. Information on Principal Accounting
Policies
A summary of the principal accounting policies, all of which have been
applied consistently (unless otherwise stated) throughout the years
ended 31 December 2005 and 2004, is set out below.
The financial statements are prepared in accordance with IFRS and the
Financial and Capital Market Commission’s Regulations on Financial
Statements of Banks. The Bank has performed reclassification of certain
items of the balance sheet as at 31 December 2004, income statement,
cash flow statement and notes for the year then ended. Reclassification
effect has no impact on financial year 2004 profit of the Bank and the
Group.
During 2005, the Bank has consistently applied accounting policies,
which are in accordance with International Financial Reporting
The following table summarizes the reclassifications made:
Group
Cash inflow/ (outflow) from financing activities
–
–
6 727
6 727
As
Resta-
As
Resta-
(2 000)
(1 799)
(1 799)
reported
tement
Restated
reported
tement
Restated
–
–
3
3
Assets
LVL ‘000
LVL '000
LVL ‘000
LVL ‘000
LVL '000
LVL ‘000
(2 000)
(2 000)
4 931
4 931
Balances due from credit institutions
164 273
117
164 390
164 273
117
164 390
Increase in cash and cash equivalents
(30 988)
(30 988)
90 577
90 577
Loans and advances to customers
137 967
179
138 146
137 967
179
138 146
Cash and cash equivalents at the beginning of the period
158 703
158 703
68 316
68 316
Fair value through profit and loss investments
2 133
35
2 168
2 133
35
2 168
253
253
(190)
(190)
Debt and other fixed income securities
2 133
35
2 168
2 133
35
2 168
127 968
127 968
158 703
158 703
96 688
1 317
98 005
96 688
1 317
98 005
96 688
1 317
98 005
96 688
1 317
98 005
1 726
(1 648)
78
1 726
(1 648)
78
Dividends (paid)
Sale of own shares
(Decrease) in cash and cash equivalents from financing activities
Profit/ (loss) from revaluation of foreign currency positions
Cash and cash equivalents at the end of the period**
Available-for-sale investments
Debt and other fixed income securities
* Short term investments comprise fixed income securities and shares included in fair value through profit and loss and available-for-sale
portfolios.
AIZKRAUKLES BANKA I CASH FLOW STATEMENTS
31/12/2004
(2 000)
Subordinated loans attracted
Page 34
Bank
31/12/2004
** See the components of cash and cash equivalents in Note 32.
Prepaid expense and accrued income
Liabilities
Balances due to credit institutions and central banks
8 191
3
8 194
8 191
3
8 194
382 563
298
382 861
382 569
298
382 867
Deferred income and accrued expense
1 015
(320)
695
1 015
(320)
695
Subordinated liabilities
6 708
19
6 727
6 708
19
6 727
Deposits from customers
The accompanying notes form an integral part of these financial statements.
AIZKRAUKLES BANKA I NOTES TO THE FINANCIAL STATEMENTS
Profit before corporate income tax
Bank
2005
Page 35
Cash inflow/ (outflow) from operating activities
Group
e) Income and Expense Recognition
Interest income and expense items are recognised on an accrual basis.
Interest income and expense are recognised in the income statement
for financial assets/liabilities measured at amortised cost using the effective interest method.
Commission and fee income and expense are included in the income
statement as they are earned, except for commission income and fee
income and expense directly attributable to financial assets/liabilities
measured at amortised cost – for these assets/liabilities the respective
commission income and fee income and expense form an integral part
of the effective interest rate.
f) Accrual for Employee Vacation Pay
The accrual for employee vacation pay is estimated for the Bank’s personnel based on the total number of vacations earned but not taken,
multiplied by the average daily remuneration expense pursuant to the
Latvian Labour Law, and adding the related statutory social insurance
contributions payable by the employer.
g) Foreign Currency Translation
Transactions denominated in foreign currencies are recorded in lats at
exchange rates set forth by the Bank of Latvia at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated into lats at exchange rates set forth by the Bank of
Latvia at the end of the year. Any gain or loss resulting from a change
in exchange rates subsequent to the date of transaction is included in
the income statement as a profit or loss from revaluation of foreign
currency positions.
The principal rates of exchange (LVL for one foreign currency unit) set
forth by the Bank of Latvia and used in the preparation of the Bank’s
balance sheet were as follows:
Page 36
AIZKRAUKLES BANKA I NOTES TO FINANCIAL STATEMENTS
Reporting date
31 December 2005
31 December 2004
USD
0.593
0.516
EUR
0.703
0.703
RUB
0.0206
0.0186
h) Corporate Income Tax
Corporate income tax is calculated in accordance with Latvian tax regulations at the rate of 15% (15%) and is based on the taxable income
reported for the taxation period.
Deferred taxation arising from temporary differences in the timing of
the recognition of items in the tax returns and these financial statements is calculated using the liability method. Deferred taxation relates
to the future tax consequences of all events that have been recognised
in the Bank’s financial statements or tax returns. The deferred taxation
liability is determined based on the tax rates that are expected to apply
when the timing differences reverse. The principal timing differences
arise from differing rates and methods of accounting and tax depreciation on fixed assets, general (portfolio) allowance for possible credit
losses, accrual for employee vacation pay, and the revaluation of balance sheet items, including securities revaluation and fair value revaluation reserve.
Loans and receivables are non-derivative financial assets with fixed or
determinable payments that are not quoted on an active market. Such
assets are carried at amortized cost using the effective interest method,
less allowance for possible credit losses (impairment), as presented in
Note 10. Profit and loss are recognized in the income statement, upon
a derecognition or impairment of these assets, as well as through
amortization.
For the purposes of these financial statements, finance lease receivables
are classified as loans and advances to customers.
Loans and advances to customers are included in the balance sheet as
they are transferred to the customer’s current account.
j) Finance Leases – Where the Bank is Lessor
Finance leases are recognised as assets and liabilities at amounts equal
at the inception of the lease to the fair value of the leased property or,
if lower, at the present value of the minimum lease payments. The
finance income is allocated to periods during the lease term to produce
a constant periodic return on the net investments outstanding in
respect of the finance leases.
Rentals under operating lease are charged to the income statement on
a straight-line basis over the lease term.
k) Allowance for Possible Credit Losses
Non-performing loans and advances to customers including banking institutions are defined as loans and other credit balances in which contractually due principal is 30 days or more overdue, contractually due interest is
90 days or more overdue, or the Management otherwise believe that the
contractual interest or principal due will not be collected.
The Bank issues mortgage, commercial and consumer loans to customers throughout its market area. The Management of the Bank have
considered both specific and general (portfolio) risks in determining the
allowance for possible credit losses (impairment). The specific allowance
is determined after individually reviewing all credits for potentially
uncollectable amounts and is based on the customer’s financial position, value of collateral, fulfilment of loan agreement and compliance
with the credit exposure limits determined by the Finance and Capital
Market Commission. The general element of the allowance relates to
the losses “incurred, but not yet known to the Bank”, which experience
indicates are present in the Bank’s portfolio of loans and advances to
customers.
When a loan or advance has been classified as non-performing, an
allowance for possible credit losses is established for that specific loan
or advance for the amount of the outstanding balance, which is
deemed impaired. The level of the allowance is based on present value
of expected future cash flows considering relevant factors including,
but not limited to, the Bank’s past loan loss experience, known and
inherent risks in the portfolio of loans and advances, adverse situations
that may affect the borrowers’ ability to repay, the collateral’s value
and current economic conditions, as well as other relevant factors
affecting loan and advance collectability and collateral values. Ultimate
losses may vary from the current estimates.
The value of collateral held in connection with loans and advances is
based on the estimated realisable value of the asset and is taken into
account when determining expected cash flows and accordingly the
allowance.
The above estimates are reviewed periodically, and, as adjustments
become necessary, they are reported in the income statement in the
reporting period in which they become known. The Management of
the Bank have made their best estimates of losses and believe the estimates presented in the financial statements to be reasonable in light of
the available information.
When loans and advances cannot be recovered, they are written off to
off-balance sheet accounts and charged against allowances for possible
credit losses. They are not written off until all the necessary legal procedures have been completed and the ultimate amount of the loss is
determined.
the listed shares, as well as any gain or loss resulting from disposal of
the above securities is included in the income statement under “Profit
on trading with financial instruments”.
Shares and other non-fixed income securities, which are not acquired
for trading purposes, are included in the available-for-sale portfolio.
n) Investments in Associate Entities
Investments in associated companies, in which the Bank directly or indirectly holds more than 20%, but less than 50%, of the shares and voting rights, are valued using the equity method.
o) Investment in Subsidiary
l) Debt Securities and Other Fixed Income
Securities
As at 31 December 2005, the Bank had an investment in a subsidiary,
where the Bank held 100% of the share capital and voting rights.
Fixed income securities are divided into two principal portfolios:
– fair value through profit and loss;
– available-for-sale portfolio:
• liquidity portfolio;
• investments held for undefined period portfolio.
The accounting policy to be applied to the investment in the subsidiary
has been modified following the respective changes in IAS 27. The
investment in the subsidiary is presented in the Bank’s financial statements at cost, whereas previously the equity method was applied.
Adjustments resulting from the aforementioned change in the accounting policy are not material for the purposes of these financial statements.
Appropriate division of fixed income securities into portfolios is determined by the Bank at the moment of their acquisition. All kinds of sale
and purchase of fixed income securities are charged to the balance
sheet on the date of settlement.
Fair Value Through Profit and Loss Portfolio
Fixed income securities are included in the fair value through profit and
loss portfolio if they have been acquired for the purpose of generating
a profit from short-term fluctuations of price or interest rate. The financial assets and liabilities to be included in the trading portfolio are
defined by the Bank’s trading portfolio policy.
Securities held for trading purposes are initially stated at cost and further marked-to-market on the basis of market prices quoted by
Bloomberg. Any gain or loss resulting from marking-to-market the
trading portfolio, as well as any gain or loss resulting from disposal of
the above securities is included in the income statement under “Profit
on trading with financial instruments”.
Available-for-Sale Portfolio
The Bank’s available-for-sale portfolio is comprised of liquidity portfolio
and investments held for undefined period portfolio.
Liquidity Portfolio
The Bank’s and its subsidiary’s financial statements are consolidated in
the Group’s financial statements using the full consolidation method,
combining on a line-by-line basis the respective assets and liabilities at
the period-end, as well as income and expense items for the period
after the date of acquisition, i.e. 8 March 2004, and eliminating intercompany balances in the balance sheet and intercompany transactions
which took place after the date of acquisition (see Note 19).
The acquisition price of a subsidiary is attributed to the fair value of
assets and liabilities of the subsidiary as at the date of acquisition. An
acquisition price which exceeds the fair value of the subsidiary’s assets
and liabilities is recorded as goodwill.
p) Intangible Assets
Intangible assets comprise purchased software that does not constitute
an integral part of hardware and licences. Amortisation is provided
using the straight-line method over the period of acquired rights or
over the estimated useful life of the asset.
q) Tangible Fixed Assets
The liquidity portfolio is aimed at forming the Bank’s liquidity reserve
with a minimum interest rate risk and credit risk. The liquidity portfolio
is comprised of high rating debt securities with high liquidity in the
market and variable interest rate, or the interest rate fixed for no more
than one year.
Fixed assets are recorded at cost less accumulated depreciation.
Depreciation is provided using the straight-line method over the estimated useful life of the asset. Each significant part of the buildings is
depreciated separately. Fixed assets, including leasehold improvements
under the course of construction and preparation, are not depreciated.
Land is not subject to depreciation.
Investments Held for Undefined Period Portfolio
The Bank has applied the following depreciation rates:
The objective of the portfolio is to gain maximum profit from long-term
investments in financial assets. The portfolio is comprised of debt securities with high credit risk profile and/or fixed interest rate that is fixed
for a period exceeding one year, in compliance with the restrictions and
limitations set by the Bank and exercising proper management of
investment-related risks.
Category
Buildings and property improvements
Transport vehicles
EDP equipment and software
Office equipment
m) Shares and Other Non-Fixed Income
Securities
Investments in listed shares held for trading purposes are marked-tomarket. Any unrealised gain or loss resulting from marking-to-market
Annual rate
5.5%
20%
16-33%
10-33%
Costs of maintenance and repair not resulting in increasing capacity or
prolongation of useful life are charged to the income statement as
incurred.
AIZKRAUKLES BANKA I NOTES TO FINANCIAL STATEMENTS
The Bank recognises financial asset and liabilities on its balance sheet
when, and only when, the Bank becomes a party to the contractual
provisions of the instrument.
i) Loans and Advances to Customers
Page 37
d) Recognition of Financial Assets and
Liabilities
During the reporting period, the Bank has acquired real estate with the
main purpose to earn rentals, as well as gain on value appreciation.
Such investments are classified as investment property and are accounted for using the cost model accounting for investment properties.
Under the cost model, accounting investment properties are measured
in accordance with IAS 16’s requirements for this model.
s) Derivatives and Other Off-BalanceSheet Instruments
Derivatives
In the ordinary course of business, the Bank is a party to currency
swaps, futures and forward foreign exchange rate contracts.
Derivative financial instruments are carried at their mark-to-market
value and presented in a separate balance sheet caption “Derivatives”
under assets and liabilities, respectively. Any gain or loss resulting from
revaluation of derivatives is recognised in the income statement as
“Profit on trading with financial instruments”.
Risk management is one of the Bank’s strategic values. During its
course of operations, the Bank is exposed to various financial risks, the
most significant of them being credit risk, liquidity risk and market risks
arising from changes in interest rates, foreign exchange rates and other
factors. The Bank’s risk management policies are approved by the
Board of the Bank and implemented by the Bank’s structural units
operating in the respective areas. The Bank’s Risk Management Division
and Loan administration division monitors the implementation of the
Bank’s risk management policies.
Fair value represents the amount at which an asset could be exchanged
or a liability settled on an arm’s-length basis. Where, in the opinion of
the Management, the fair values of financial assets and liabilities differ
materially from their carrying values, such fair values are separately disclosed in the notes to the financial statements.
v) Cash and Cash Equivalents
Cash and cash equivalents represent the amounts comprising cash and
balances due from the Bank of Latvia and other credit institutions with
original maturity of three months or less and short-term government
bonds with an original maturity of three months or less, less balances
due to credit institutions with an original maturity of three months or
less (see Note 32).
For effective credit risk management, the Bank’s Assets Evaluation
Committee performs a regular analysis of assets and off-balance sheet
liabilities, i.e., their recoverability. Depending on the results of such
analysis, the amount of general (portfolio) and specific allowance is
determined.
The Bank believes that its exposure to credit risk arises mainly from
loans and advances to customers, investments in fixed income securities
and balances due from credit institutions.
The following table provides an analysis of geographical concentrations of the Bank’s assets and off-balance-sheet items.
European
Assets
Union
Other
member
countries in
Other
Latvia
USA
states
OECD area
countries
Total
LVL ‘000
LVL ‘000
LVL ‘000
LVL ‘000
LVL ‘000
LVL ‘000
Cash and demand
38 325
1 482
986
8
–
2 688
27 070
51 578
5 933
12 447
99 716
248 370
865
554
21
26 963
276 773
–
99
–
–
934
1 033
2 703
–
28 080
12 954
57 475
101 212
–
–
130
–
1 563
1 693
Other assets
25 057
–
281
793
27
26 158
Total assets
317 143
29 516
81 609
19 709
99 409
547 386
38 534
437
688
12
10 460
50 131
355 677
29 953
82 297
19 721
109 869
597 517
deposits with central banks
Balances due from credit institutions
Loans and advances to customers
40 801
Fair value through profit and loss investments
Debt securities and other fixed income securities
Available-for-sale investments
3. Risk Management
u) Fair Value of Financial Assets and
Liabilities
AIZKRAUKLES BANKA I NOTES TO FINANCIAL STATEMENTS
The preparation of financial statements in accordance with IFRS
requires management to make estimates and assumptions that affect
the reported amounts of assets, liabilities, income and expenses and
disclosure of contingencies. Future events occur which cause the
assumptions used in arriving at the estimates to change. Such assumptions are based on the most reliable information available to the management in respect to specific events and actions. The effect of any
changes in estimates will be recorded in the financial statements, when
determinable.
In the ordinary course of business, the Bank has been involved in offbalance-sheet financial instruments comprising loan commitments,
financial guarantees and commercial letters of credit. Such financial
instruments do not involve outflow of the Bank’s economic benefits,
thus they are not recorded as the Bank’s liabilities. These financial
instruments are presented in the financial statements off-balance-sheet
upon the conclusion of the respective agreements. The methodology
for provisioning against off-balance-sheet instruments is consistent with
that adopted for establishing allowances on loans and advances to customers, as described in Paragraph w), below.
Funds under trust management are funds managed by the Bank on
behalf of its customers. These funds are not regarded as assets of the
Bank and, therefore, they are not included in the balance sheet.
The Bank manages its credit risk by placing limits on the amount of risk
accepted in relation to one borrower and geographical or industry segments. The exposure to any single borrower, including banks and brokers, is further restricted by sub-limits.
x) Use of Estimates
Other Off-Balance-Sheet Instruments
t) Funds under Trust Management
Page 38
Provisions are recognised when the Company has a present obligation
(legal or constructive) as a result of a past event. It is probable that an
outflow of resources embodying economic benefits will be required to
settle the obligation, and a reliable estimate can be made of the
amount of the obligation. If the effect of the time value of money is
material, provisions are determined by discounting the expected future
cash flows at a pre-tax rate that reflects current market assessments of
the time value of money and, where appropriate, the risks specific to
the liability.
Risk management involves the identification, assessment and control of
the potential risks. The Risk Management Division is an independent
entity and its functions are strictly segregated from the functions of
business structural units.
The risk management system has been constantly improving following
the Bank’s operational and financial markets’ development; the
improvement process is controlled by the Bank’s Internal Audit
Department on a regular basis.
a) Credit Risk
Credit risk is exposure to potential losses in case the Bank’s counterparty or debtor will be unable to pay the contractual obligations to the
Bank.
To ensure proper evaluation of the credit risk before entering into any
cooperation with clients, the Bank performs a comprehensive review of
the client’s solvency and collateral. The financial position of borrowers
is reviewed at least on an annual basis. For purposes of lending to private entities, the Bank has developed an internal rating system applied
when taking a decision on granting a loan. Currently, the Bank is working on a similar system for corporate customers.
Debt securities and other fixed income securities
Shares and other non-fixed income securities
Off-balance sheet items
Total geographical concentration of assets
and off-balance sheet items
The issuers incorporated in a country only for the purpose of attraction
of funds are disclosed as attributable to the country or region where
the guarantors of the issue are located.
b) Liquidity Risk
Liquidity is the Bank’s ability to maintain or ensure sufficient cash and
cash equivalents to meet the expected (everyday) or sudden (critical)
legally justified claims of its creditors. This means the Bank’s ability to
turn its assets into cash with minimal loss or ensure reasonably priced
credit facilities. Based on the Bank’s assets and liabilities structure, the
Board of the Bank has approved a liquidity management policy incorporating a requirement on maintaining a high level of liquidity.
The Risk Management Division ensures liquidity risk assessment and
monitoring. The Financial Markets Division is responsible for ensuring
liquidity and compliance with the set limits.
For ordinary liquidity risk-management purposes the Bank applies the
following indicators:
• net liquidity positions by all currencies in total and by each
separate currency;
• liquidity ratios for different maturity bands;
• major deposits on demand ratio to liquid assets on demand;
• sum of term deposits of one client (group of related clients).
Certain restrictions are defined with regard to the above indicators. For
the purposes of assessment of extraordinary circumstances, stress tests
are applied.
To ensure liquidity, the Bank has established a securities Liquidity portfolio which includes the securities that comply with the following
requirements: high market liquidity, high credit ratings, floating (variable) interest rate or fixed interest rates for a period not exceeding one
year. Liquidity of other securities portfolios is estimated at least on a
quarterly basis.
AIZKRAUKLES BANKA I NOTES TO FINANCIAL STATEMENTS
r) Investment Property
w) Provisions
Page 39
Leasehold improvements are capitalised and amortised over the remaining period of lease contracts on a straight-line basis.
The table below analyses assets, liabilities and memorandum items of the Bank into relevant maturity bands based on the remaining period, as at
balance sheet date, to the contractual maturity date.
On
Up to 1
1–6
Overdue
demand
month
Assets
LVL '000
6 – 12
1 – 5 More than
months months
years
Pledged
5 years Undated
LVL '000 LVL '000 LVL '000 LVL '000 LVL '000 LVL '000
asset
Total
LVL '000 LVL '000 LVL '000
Cash and demand deposits
with central banks
–
40 801
–
–
–
–
–
–
–
40 801
Balances due from credit institutions
–
86 909
3 116
8 936
474
281
–
–
–
99 716
337
6 454
4 847
41 880
42 231
67 664 113 360
–
– 276 773
–
–
1 016
11
6
–
–
Loans and advances to customers
Fair value through profit and loss investments
Debt securities and
other fixed income securities
–
–
1 033
Fair value through profit and loss investments
Debt securities and
–
other fixed income securities
–
95 067
5 115
551
–
–
–
479 101 212
Shares and other non-fixed
–
–
–
–
1 662
–
–
31
–
1 693
Derivatives
–
1 114
–
–
–
–
–
–
–
1 114
Investments in associated entities and subsidiaries
–
–
–
–
–
–
–
719
–
719
Intangible fixed assets
–
–
–
–
–
–
–
1 205
–
1 205
Tangible fixed assets
–
–
–
–
–
–
–
7 231
–
7 231
Investment properties
–
–
–
–
–
–
–
15 288
Prepaid expense and accrued income
–
258
–
–
–
–
–
–
–
258
Other assets
–
–
–
–
–
–
–
343
–
343
135 536 104 046
55 942
44 924
67 945
113 360
24 817
income securities
337
Total assets
– 15 288
The maturity profile of assets, liabilities and memorandum items is
determined on the basis of the following criteria:
– assets are stated at their remaining period to repayment or potential disposal;
– assets invested with option to be received on demand are classified under the category “On demand”;
– assets overdue for more than 14 days, are stated as “Overdue”;
– assets as well as all debit balances on settlement cards and current
account overdrafts overdue less than 14 days are presented under
the caption “On demand”;
– ”Undated” are assets for which, according to the substance of
the transactions, maturity is not defined or assets the maturity of
which cannot be precisely determined;
– all debt securities within the Liquidity portfolio are deemed highly
liquid securities and presented under the caption “Up to 1
month”;
– to assess the period during which debt securities of fair value
through profit and loss portfolio and Investments held for undefined period portfolio may be disposed of without material loss,
the spreads between purchasing and selling prices, as well as the
prices of respective securities and historical fluctuations thereof,
are considered. The distribution into maturity bands is based on
such an assessment;
– liabilities and memorandum items are stated at the remaining
period to their contractual settlement;
– liabilities without any defined maturity and commitments to exercise
them on demand are presented under the caption “On demand”;
– issued guarantees or commitments arising from other types of
guarantees secured by deposit placement with the Bank are
excluded.
The assets which have been impaired are stated net of allowances.
The Financial and Capital Market Commission stipulates that the Bank
should maintain a sufficient amount of liquid assets to meet its contractual liabilities, but no less than 30% of the Bank’s total current liabilities. As at 31 December 2005, the Bank’s liquidity ratio calculated in
accordance with the Financial and Capital Market Commission’s
requirements was 50.7% (66.7%).
c) Currency Risk
The Bank is exposed to the negative effects of fluctuations in the foreign currency exchange rates on its financial position and cash flows.
The exposure to currency risk is calculated for each separate currency
and includes assets and liabilities denominated in foreign currencies, as
well as cash flows arising from derivatives.
The Bank’s Limits policy defines the major principles for limits application and control; limits for foreign currency open positions stipulate
restrictions for each separate currency open position and total currencies open position that are controlled on a daily basis.
479 547 386
Liabilities
and central banks
–
8 155
–
–
–
–
–
–
Deposits from customers
– 340 078
52 342
58 966
20 391
8 498
–
–
– 480 275
Derivatives
–
742
–
–
–
–
–
–
–
742
Deferred income and accrued expense
–
1 499
–
–
–
–
–
–
–
1 499
Provisions for liabilities and charges
–
–
–
–
–
–
–
601
–
601
Other liabilities
–
2 020
–
–
–
–
–
–
–
2 020
Subordinated liabilities
–
13
9
–
–
7 709
–
–
–
7 731
Shareholders’ equity
–
–
–
–
–
–
–
45 863
– 45 863
Total liabilities and shareholders’ equity
–
352 507
52 351
58 966
20 391
16 207
–
46 464
500 547 386
Guarantees
–
65
511
839
662
1 478
–
–
–
3 555
Letters of credit
–
418
231
1 633
51
–
–
–
–
2 333
Unutilised credit lines
–
17 982
–
–
–
–
–
–
– 17 982
Undrawn credit facilities on settlement cards
–
2 197
–
–
–
–
–
–
–
Loan commitments
–
23 030
–
–
–
–
–
–
– 23 030
Capital expenditure commitments
–
27
–
–
–
–
–
–
–
27
Total memorandum items
–
43 719
742
2 472
713
1 478
–
–
–
49 124
Net liquidity position
(260 690)
50 953
(5 496)
23 820
50 260
Total liquidity position
(260 690) (209 737) (215 233) (191 413) (141 153) (27 793) (49 440)
2 197
113 360 (21 647)
31 December 2004
172
118 265 136 603
26 790
47 868
42 236
48 982
21 591
1 992 444 499
Total liabilities and shareholders equity
–
324 901
30 971
13 715
28 269
14 354
–
30 309
1 980 444 499
Memorandum liabilities
–
23 836
488
1 938
892
1 364
–
–
(230 472) 105 144
11 137
18 707
26 518
48 982
(8 718)
Total assets
–
28 518
AIZKRAUKLES BANKA I NOTES TO FINANCIAL STATEMENTS
8 655
Memorandum items
Net liquidity position
Page 40
500
Page 41
AIZKRAUKLES BANKA I NOTES TO FINANCIAL STATEMENTS
Balances due to credit institutions
The Law on Credit Institutions requires that open positions in each foreign currency may not exceed 10% of the Bank’s equity and that the
total foreign currency open position may not exceed 20% of the equity.
The Bank’s currency profile of assets, liabilities, shareholders’ equity as well as cash flows arising from derivatives as at 31 December 2005:
Other
Assets
LVL
USD
EUR
RUB
currencies
Total
LVL ‘000
LVL ‘000
LVL ‘000
LVL ‘000
LVL ‘000
LVL ‘000
40 801
Cash and demand deposits
with central banks
Balances due from credit institutions
Loans and advances to customers
38 325
1 483
956
–
37
4
67 314
23 886
4 848
3 664
99 716
28 648
56 214
191 911
–
–
276 773
Fair value through profit and loss investments
Debt securities and
other fixed income securities
–
934
99
–
–
1 033
553
90 979
7 615
2 065
–
101 212
Fair value through profit and loss investments
Debt securities and
other fixed income securities
Shares and other non-fixed
–
593
31
853
216
1 693
1 112
2
–
–
–
1 114
719
–
–
–
–
719
Intangible fixed assets
1 205
–
–
–
–
1 205
Tangible fixed assets
7 231
–
–
–
–
7 231
Investment properties
15 288
–
–
–
–
15 288
258
income securities
Derivatives
Investments in associated entities and subsidiaries
Prepaid expense and accrued income
258
–
–
–
–
Other assets
283
25
35
–
–
343
93 626
217 544
224 533
7 766
3 917
547 386
Total assets
Since 2005, according to an FCMC decision, the EUR currency open
position is not limited.
As at 31 December 2005, the Bank was in compliance with the above
requirements of the Law on Credit Institutions.
d) Interest Rate Risk
Interest rate risk represents the adverse effect of market interest rate
fluctuations on the Bank’s financial position. The Risk Management
Division ensures interest rate risk assessment and management. The
Financial Markets Division is responsible for maintaining interest rate
risk within specified limits.
Assessment of interest rate risk is conducted trying to cover all parts of
interest rate risk – repricing risk, yield curve risk, basis risk and option
risk.
Interest rate risk is assessed both in terms of income and economic
value. The term economic value means the shareholders’ equity’s economic value that is the difference between the economic value of
assets and that of liabilities. For the purposes of assessment of extraordinary circumstances, stress tests are applied.
For the purposes of limitation of interest rate risk, the limits of acceptable reduction in economic value and modified duration of the
Investments held for undefined period portfolio are fixed. Besides,
derivative financial instruments are utilised to limit interest rate risk.
The table below summarises the Bank’s assets, liabilities and memorandum items distribution into maturity bands following such principles:
– financial instruments with a fixed interest rate are presented by
the earlier of repayment/settlement/maturity date;
– financial instruments with a variable interest rate are presented
according to the next contractual repricing date or interest rate
repricing date.
Distribution of current account balances into maturity bands is based
on the Bank’s historical experience with current account balance sensitivity to changes in interest rates. Derivatives are represented in two
entries: the first entry describes the notional value of the underlying
assets, whereas the second is a compensatory entry showing the opposite value.
Liabilities
Deposits from customers
Derivatives
Deferred income and accrued expense
Provisions for liabilities and charges
Subordinated liabilities
AIZKRAUKLES BANKA I NOTES TO FINANCIAL STATEMENTS
3 828
2 077
–
2
8 655
358 213
88 466
8 593
3 011
480 275
612
106
24
–
–
742
1 318
141
38
2
–
1 499
601
–
–
–
–
601
–
7 731
–
–
–
7 731
1 127
534
308
30
21
2 020
Total liabilities
28 398
370 553
90 913
8 625
3 034
501 523
Shareholders’ equity
45 863
–
–
–
–
45 863
Total liabilities and shareholders’ equity
74 261
370 553
90 913
8 625
3 034
547 386
Neto long/ (short) position on balance sheet 19 365
(153 009)
133 620
(859)
883
–
153 427
(140 621)
173
(108)
Other liabilities
Page 42
2 748
21 992
Off-balance sheet foreign exchange
contracts, assets/ (liabilities)
(11 621)
Net open long/ (short)
currency position
7 744
418
(7 001)
(686)
775
Percentage of shareholders’ equity, (%)
17.0%
0.9%
(15.4%)
(1.5%)
1.7%
Total assets
59 260
292 459
68 801
7 194
16 785
444 499
Total liabilities and shareholders’ equity
51 769
315 781
51 985
9 509
15 455
444 499
(8 616)
22 303
(17 476)
2 684
47
(1 125)
(1 019)
(660)
369
1 377
31 December 2004
Off-balance sheet foreign exchange
contracts, assets/ (liabilities)
Net open long/ (short)
currency position
Page 43
and central banks
AIZKRAUKLES BANKA I NOTES TO FINANCIAL STATEMENTS
Balances due to credit institutions
4. Interest Income and Expense
Up to
1 month
1–3
months
3–6
months
6 – 12
months
Assets
Cash and demand deposits with central banks
LVL ‘000
LVL ‘000
LVL ‘000
LVL ‘000
37 130
–
–
Balances due from credit institutions
88 734
5 921
3 009
6 990
10 660
230 444
20 251
6 599
Loans and advances to customers
1 – 5 More than Non-interest
years
5 years
bearing
Group/Bank
Total
LVL ‘000
LVL ‘000
LVL ‘000
LVL ‘000
–
–
–
3 671
40 801
on balances due from the Bank of Latvia
474
281
1 297
99 716
on balances due from credit institutions
1 731
276 773
98
Fair value through profit and loss investments
other fixed income securities
Interest income
–
–
–
–
487
527
19
1 033
21 506
16 214
1 738
2 428
26 862
30 535
1 929
101 212
2004
LVL ‘000
on loans and advances to customers
on debt securities and other fixed income securities
other interest income
Debt securities and
Group/Bank
2005
Total interest income
386
LV ‘000
72
3 837
1 625
13 945
7 554
6 203
5 426
12
–
24 383
14 677
Fair value through profit and loss investments
Debt securities and
Interest expense
Shares and other non-fixed
on deposits from customers
82
74
4 665
1 985
123
–
–
–
–
–
–
1 693
1 693
on subordinated liabilities
463
Intangible fixed assets
–
–
–
–
–
–
1 205
1 205
other interest expense
881
587
Tangible fixed assets
–
–
–
–
–
–
7 231
7 231
6 091
2 760
Investment properties
–
–
–
–
–
–
15 288
15 288
Other assets
–
–
–
–
–
–
2 434
2 434
154 360
32 795
235 191
23 153
34 229
31 160
36 498
547 386
Total assets
Total interest expense
Average annual interest rates of interest-bearing assets and liabilities:
2005
Average
Interest
Average
Average
Interest
Average
Balances due to credit institutions
monthly
income/
interest
monthly
income/
interest
balance
expense
rate
balance
expense
rate
LVL ‘000
LVL '000
LVL ‘000
LVL '000
and central banks
8 647
–
–
–
–
–
8
8 655
110 046
261 135
37 434
20 391
48 030
–
3 239
480 275
Other liabilities
–
–
–
–
–
–
4 862
4 862
Cash and demand deposits with the Bank of Latvia
21 864
386
1.77
14 082
72
0.51
Subordinated liabilities
–
–
–
–
7 709
–
22
7 731
Balances due from credit institutions, net
139 776
3 837
2.75
95 546
1 625
1.70
Shareholders’ equity
–
–
–
–
–
–
45 863
45 863
Loans and advances to customers, net
202 994
13 945
6.87
101 477
7 554
7.44
Total liabilities and shareholders’ equity 118 693
261 135
37 434
20 391
55 739
–
53 994
547 386
Debt securities
102 291
6 203
6.06
105 739
5 426
5.13
38 413
–
–
(20 363)
(18 177)
–
(127)
32 698
–
–
21 284
–
–
499 623
24 371
4.88
338 128
14 677
4.34
Deposits from customers
Futures, sold
–
Interest rate
repricing maturity gaps
Total assets
Total liabilities an shareholders’ equity
Futures, sold
Other assets, net
35 667 (189 927)
197 757
2 762
(41 873)
12 983
(17 496)
x
297 396
11 285
26 976
18 433
35 672
26 282
28 455
444 499
Balances due to credit institutions and central banks
8 588
82
0.95
5 145
74
1.44
58 617
269 336
5 335
14 677
49 474
–
47 060
444 499
Deposits from customers
431 824
4 665
1.08
291 664
1 985
0.68
–
16 292
–
–
(16 287)
–
5
demand deposits
333 587
1 310
0.39
234 258
561
0.24
98 237
3 355
3.42
57 406
1 424
2.48
7 323
463
6.32
2 040
123
6.03
–
13 353
–
–
1.12
312 202
2 182
0.70
Liabilities
Interest rate repricing
maturity gaps
Assets
Total assets
31 December 2004
term deposits
238 779
(241 759)
21 641
3 756
(13 802)
9 995
(18 605)
x
Subordinated liabilities
AIZKRAUKLES BANKA I NOTES TO FINANCIAL STATEMENTS
Other liabilities
Page 44
2004
Liabilities
Total liabilities
e) Operational Risks
During the course of its operations, the Bank encounters non-financial
risks with exposure to sudden loss. The cause of such risks may be, for
instance, clerical errors or fraud, break-downs in information systems,
insufficient internal control and procedures, etc. The Bank makes every
effort to maintain the lowest possible risk level, meanwhile striving at
not exceeding a reasonable level of expense. Internal control within the
Bank’s structural units and the control exercised by the Risk Management
Division are one of the measures taken to prevent potential loss.
An important part of operational risk management is the upgrading of
the automated transaction control system. When developing the
accounting and control procedures the Bank specifies the measures for
mitigation of operational risks.
Shareholders' equity
Total liabilities and shareholders' equity
15 487
463 222
5 210
36 401
–
–
25 926
–
–
499 623
5 210
1.04
338 128
2 182
0.65
Net interest rate margin, %
3.76
3.64
Margin on investments, %
3.84
3.69
AIZKRAUKLES BANKA I NOTES TO FINANCIAL STATEMENTS
income securities
on balances due from credit institutions and central banks
Page 45
other fixed income securities
5. Commission and Fee Income and Expense
8. Administrative Expense
Commission and fee income
commission on payment transfers on behalf of customers
Group/Bank
Group/Bank
Group
Bank
Group
2005
2004
2005
2005
2004
2004
LVL '000
LVL '000
LVL '000
LVL '000
LVL '000
LVL '000
4 590
3 621
270
270
132
132
commission on transactions with settlement cards
771
738
Remuneration to personnel
5 099
5 098
3 883
3 882
service fees
849
499
Social insurance contributions and similar costs
1 214
1 214
951
951
commission on cash operations
238
211
Rent of premises, repairs and maintenance costs
1 063
1 063
913
913
other commission and fee income
496
276
Advertising and marketing expense
813
813
735
735
Total commission and fee income
6 944
5 345
Donations
745
745
322
322
Equipment maintenance expense and stationary
507
507
437
437
Inter-bank and other communication expense
467
467
512
512
Commission and fee expense
Remuneration to the Council and the Board
correspondent bank service charges
649
556
Training expense
177
177
151
151
commission on transactions with settlement cards
452
466
Investment property maintenance costs
164
164
129
129
other commission and fee expense
63
46
1 089
1 088
757
757
Total commission and fee expense
1 164
1,068
11 608
11 606
8 922
8 921
Other administrative expense
Total administrative expense
In 2005, the Bank employed an average of 466 persons.
6. Profit on Trading with Financial Instruments
Group/Bank
Group/Bank
2005
2004
LVL '000
LVL '000
6 642
3 005
(751)
(190)
Total
5 891
2 815
Profit from sale of available-for-sale securities
3 030
1 771
72
(37)
Profit/ (loss) from sale of trading portfolio securities
Profit from revaluation of trading portfolio
Total
Profit/ (loss) from trading with other financial instruments
Profit/ (loss) from revaluation of other financial instruments
Total
Total profit on trading with financial instruments
11
55
3 113
1 789
31/12/2005
Management
7
75
62
Other personnel
391
388
Total
474
457
Group/Bank
Heads of divisions and departments
9. Other Operating Expense
458
(1 136)
Group/Bank
(128)
5
2005
2004
330
(1 131)
LVL ‘000
LVL ‘000
9 334
3 473
312
216
Intermediary services
Other operating expense
Total other operating expense
AIZKRAUKLES BANKA I NOTES TO FINANCIAL STATEMENTS
7. Other Operating Income
Group
Bank
2005
2005
2004
LVL '000
LVL '000
LVL '000
Income from penalties
271
271
183
Income from rent of premises
110
108
128
–
–
135
32
32
28
413
411
474
Income from sale of foreclosed collaterals
Other operating income
Total other operating income
31/12/2004
8
77
34
389
250
Group/Bank
AIZKRAUKLES BANKA I NOTES TO FINANCIAL STATEMENTS
(Loss) from revaluation of foreign currency positions
The following table specifies employees of the Bank by personnel categories:
Page 47
Profit from foreign currency exchange
Page 46
Bank
10. Allowances for Possible Credit Losses
Deferred corporate income tax calculation:
Group/Bank
Group/Bank
2005
2004
LVL '000
LVL '000
910
1 216
General (portfolio) allowance at the beginning of the period
1 026
769
Total allowances at the beginning of the period
1 936
1 985
414
394
General (portfolio) allowance charged to income statement
–
362
Asset write-off expenses
6
9
Specific allowances at the beginning of the period
Specific allowances charged to income statement
Total allowances charged to income statement
420
765
Release of previously established specific allowances
(207)
(302)
Release of previously established general (portfolio) allowance
(597)
(105)
(13)
(7)
Total release of previously established allowances
(817)
(414)
Total allowance expense, net
(397)
351
7
(2)
74
(31)
Reversal of specific allowances due to write-offs
(315)
(367)
Total change in allowances for the period
(631)
(49)
Recovery of written-off assets
Asset write-off expenses
Decrease in allowance due to currency fluctuations
Specific allowances at the end of the period
876
910
General (portfolio) allowance at the end of the period
429
1 026
1 305
1 936
Total allowances at the end of the period
31/12/2005
over accounting depreciation
Fair value revaluation reserve
31/12/2005
31/12/2004
Portfolio
Specific
Portfolio
allowances
allowances
allowances
allowances
LVL ‘000
LVL ‘000
LVL ‘000
LVL ‘000
876
429
668
1 026
Debt securities and other fixed income
–
–
226
–
Accrued income
–
–
9
–
Other assets
–
–
7
–
876
429
910
1 026
Deferred corporate income tax liability
Page 48
AIZKRAUKLES BANKA I NOTES TO FINANCIAL STATEMENTS
11. Taxation
Theoretical corporate income tax
Permanent differences
Tax rebate
Actual corporate income tax expense for the reporting period
Adjustments to prior year corporate income tax
Total corporate income tax expense for the reporting period
2 397
1 848
(710)
(89)
15%
(1 273)
80
4 010
601
3 052
458
2005
2004
LVL ‘000
LVL ‘000
Deferred corporate income tax at the beginning of the period
458
600
Increase charged to income statement during the period
141
97
2
(239)
601
458
Increase/ (decrease) related to fair value revaluation reserve under equity
Deferred corporate income tax at the end of the period
The movements in tax accounts can be specified as follows:
Prior year adjustments
Paid
Corporate
Personal
Statutory
Value
Real
income
income
social insurance
added
estate
tax
tax
contributions
tax
tax
LVL ‘000
LVL ‘000
LVL ‘000
LVL ‘000
LVL ‘000
(522)
–
(74)
(3)
–
(1 124)
(881)
(1 282)
390
(51)
(13)
–
–
–
–
1 883
881
1 220
(125)
51
Overpaid/ (payable)
as at 31/12/2004
Calculated
Prior year adjustments
Paid/ (refunded)
224
–
(136)
262
–
(2 477)
(1 059)
(1 465)
92
(113)
29
–
–
(39)
(1)
1 186
1 059
1 526
(301)
114
(1 038)
–
(75)
14
–
(Payable)/overpaid
as at 31/12/2005
12. Cash and Demand Deposits with Central Banks
Group/Bank
Profit before corporate income tax
15%
Group/Bank
2005
2004
LVL ‘000
LVL ‘000
20 590
9 345
3 089
1 402
149
86
(619)
(267)
2 619
1 221
(29)
13
2 590
1 234
Cash
Group/Bank
Group/Bank
31/12/2005
31/12/2004
LVL ‘000
LVL’000
3 671
3 774
Deposits with the Bank of Latvia
37 130
15 096
Total cash and demand deposits with central banks
40 801
18 870
Deposits with the Bank of Latvia comprise correspondent account balance as at 31 December 2005.
The average correspondent account balance with the Bank of Latvia
calculated based on the Bank of Latvia’s instructions should exceed the
compulsory reserve requirement set at 8% (4%) of attracted deposits.
As at 31 December 2005, the Bank was in compliance with this
requirement.
AIZKRAUKLES BANKA I NOTES TO FINANCIAL STATEMENTS
Total
Tax
rate
Page 49
Loans and advances to customers
differences
LVL ‘000
2 948
1 861
General (portfolio) allowance and other accrued liabilities
Revaluation of assets, net
Calculated
Specific
rate
LVL ‘000
Payable as at 01/01/2004
Group/Bank
Tax
differences
31/12/2004
Amounts
subject to timing
Accumulated excess of tax depreciation
The structure of the allowances established by the Bank is as follows:
Group/Bank
Amounts
subject to timing
14. Loans and Advances to Customers
Group/Bank
Group/Bank
Group/Bank
Group/Bank
31/12/2005
31/12/2004
31/12/2005
31/12/2004
LVL ‘000
LVL’000
Loans and advances to customers
LVL ‘000
LVL ‘000
Due from credit institutions registered in OECD area
78 637
148 991
Mortgage loans for housing to private individuals
152 687
70 537
Due from credit institutions registered in other countries
18 391
9 715
Utilised credit lines
37 713
17 095
Due from credit institutions registered in Latvia
2 688
5 684
Other mortgage loans
35 295
13 812
Total balances due from credit institutions
99 716
164 390
2 078
564
Finance leases
687
971
Overdrafts on payment cards
495
653
Security deposits
128
113
48 995
36 095
278 078
139 840
5 (8) credit institutions registered in Latvia and 28 (26) financial institutions incorporated in other non-OECD countries.
Balances due from credit institutions
OECD
Other loans and advances to customers
Other
Total
Total
area
Latvia
countries
31/12/2005
31/12/2004
LVL ‘000
LVL ‘000
LVL ‘000
LVL ‘000
LVL ‘000
Correspondent account balances
21 646
459
17 457
39 562
49 236
Overnight deposits
46 604
745
–
47 349
48 432
–
605
–
605
289
10 387
879
934
12 200
66 433
Security deposits
Term deposits
Total loans and advances to customers
Less allowance for possible credit losses
Total loans and advances to customers, net
78 637
2 688
18 391
99 716
164 390
Customer profile
Privately held companies
Bank’s employees
Concentration of balances due from credit institutions by geographical area:
Non-profit institutions serving private individuals
Balances over LVL 15 000 000
due from credit institutions registered in OECD area
31/12/2005
31/12/2004
number
number
1
4
6
7
due from credit institutions registered in other countries
1
–
due from credit institutions registered in OECD area
19
13
due from credit institutions registered in other countries
26
23
6
8
up to LVL 5 000 000
due from credit institutions registered in Latvia
AIZKRAUKLES BANKA I NOTES TO FINANCIAL STATEMENTS
Bank
31/12/2005
31/12/2004
LVL ‘000
LVL ‘000
92 453
49 139
4 232
2 766
–
313
191
181 251
87 431
Total loans and advances to customers
278 078
139 840
Latvian banking legislation requires that any credit exposure to a nonrelated entity or a group of non-related entities may not exceed 25%
of a credit institution’s equity. The total credit exposure to all related
parties may not exceed 15% of equity.
(1 305)
(1 694)
276 773
138 146
As at 31 December 2005, the Bank was in compliance with the above
requirements for non-zero risk credit exposures to related parties and
non-related entities.
The following table provides the distribution of outstanding loans and advances to customers by their interest accrual basis:
Total
Page 50
Group/Bank
Other private individuals
Total loans and advances to customers, net
due from credit institutions registered in OECD area
138 146
142
Municipal enterprises
Less allowance for possible credit losses
from LVL 5 000 000 up to LVL 15 000 000
(1 694)
276 773
Breakdown of loans and advances by customer profile:
Total balances due from credit
institutions
(1 305)
Group/Bank
Group/Bank
31/12/2005
31/12/2004
due from credit institutions registered in other countries
27
23
Interest accrual basis
LVL ‘000
LVL ‘000
due from credit institutions registered in OECD area
26
24
Accrual basis
277 223
139 124
6
8
due from credit institutions registered in Latvia
Non-accrual basis
Total loans and advances to customers
Less allowance for possible credit losses
Total loans and advances to customers, net
855
716
278 078
139 840
(1 305)
(1 694)
276 773
138 146
AIZKRAUKLES BANKA I NOTES TO FINANCIAL STATEMENTS
As at 31 December 2005, the Bank had established correspondent relationships with 23 (24) credit institutions registered in the OECD area,
Overdrafts on current accounts
Page 51
13. Balances due from Credit Institutions
15. Debt Securities and Other Fixed Income Securities
The industry analysis of loans and advances granted to corporate customers is provided below:
Group/Bank
Group/Bank
31/12/2005
31/12/2004
LVL ‘000
LVL ‘000
Group/Bank
Trade
31 616
16 805
31/12/2005
Real estate management
24 138
14 200
Fair value
Construction
15 599
5 607
through
Financial intermediaries
9 285
2 062
Available-for-sale
profit and loss
Available-for-sale
profit and loss
Manufacturing
3 783
2 625
portfolio
portfolio
portfolio
portfolio
Transport and communication
3 553
4 097
LVL ‘000
LVL ‘000
LVL ‘000
LVL ‘000
Agriculture and forestry
1 834
203
Other service industries
873
1 355
Latvian credit institution debt securities
1 914
2 376
Debt securities issued in OECD area
92 595
49 330
Industry profile*
Other industries
Gross loans and advances to corporate customers
* The industry profile of loans with initial maturity of up to 1 year is determined by the Bank based on the industry where the borrower operates,
while for loans with initial maturity exceeding 1 year it is based on the purpose of the loan granted (by the industry for the development of which
the loan has been issued).
Finance lease receivables:
Group/Bank
31/12/2005
31/12/2004
LVL ’000
LVL ‘000
743
1 041
Total gross investment in finance lease
743
1 041
Less unearned interest income
(50)
(67)
Finance lease receivables, gross
693
974
from 1 to 5 years
Latvian government debt securities
Less allowance for possible credit losses
(6)
(3)
Total finance lease receivables, net
687
971
Group/Bank
31/12/2004
Fair value
through
2 089
–
8 296
–
615
–
521
–
Government debt securities
–
–
6 748
–
Issued by credit institutions
39 418
–
32 718
–
1 031
99
387
–
Government and central bank debt securities
8 015
247
7 799
251
Issued by municipalities
1 860
–
1 616
56
23 975
623
12 629
973
Issued by privately held companies
Debt securities issued in other countries
Issued by credit institutions
Group/Bank
Gross investment in finance lease
Bank fixed income debt security breakdown by investment type:
Issued by financial institutions
805
64
1 113
55
Issued by state-owned companies
2 539
–
3 483
107
Issued by privately held companies
20 865
–
22 930
726
101 212
1 033
98 240
2 168
–
–
(235)
–
101 212
1 033
98 005
2 168
Total debt securities and other fixed
income securities
Less allowance for possible credit losses
Total debt securities and other fixed
income securities, net
The above table is prepared based on contractual dates of the lease agreements.
AIZKRAUKLES BANKA I NOTES TO FINANCIAL STATEMENTS
AIZKRAUKLES BANKA I NOTES TO FINANCIAL STATEMENTS
Page 52
Page 53
All assets financed by the Bank under finance lease arrangements consist of transport vehicles.
17. Derivatives
Group/Bank
31/12/2005
31/12/2004
Liquidity
Investments held for
Liquidity
Investments held for
portfolio
undefined period
portfolio
undefined period
LVL ‘000
LVL ‘000
LVL ‘000
LVL ‘000
Latvian government debt securities
Latvian credit institution debt securities
–
2 089
496
7 800
615
–
521
–
The table below presents the notional amounts of foreign currency
exchange contracts and other derivative financial instruments and their
fair values. The notional value of foreign currency exchange contracts is
Notional value
–
–
5 228
Issued by credit institutions
37 354
2 064
32 718
–
–
1 031
–
387
Issued by privately held companies
1 520
Debt securities issued in other countries
Government and central bank debt securities
–
8 015
–
Issued by municipalities
–
1 860
–
7 799
1 616
Issued by credit institutions
–
23 975
–
12 629
Issued by financial institutions
–
805
–
1 113
Issued by state-owned companies
–
2 539
–
3 483
Issued by privately held companies
–
20 865
–
22 930
37 969
63 243
38 963
59 277
–
–
–
(235)
37 969
63 243
38 963
59 042
Total debt securities and other fixed
income securities
Less allowance for possible credit losses
Total debt securities and other fixed
income securities, net
As at 31 December 2005, the Bank had pledged Latvian government
debt securities with a carrying amount of LVL 479 (1,962) thousand as
collateral for repo transactions.
As at 31 December 2005, all debt securities and other fixed income
securities held by the Bank were listed on stock exchanges. As at 31
December 2004 all debt securities and other fixed income securities
held by the Bank, except debt securities issued by one privately held
company in the amount of LVL 1,589 thousand, were listed on stock
exchanges.
Foreign currency
Group/
Group/
Group/
Group/
Bank
Bank
Bank
Bank
Bank
Bank
31/12/2005
31/12/2004
31/12/2005
31/12/2004
31/12/2005
31/12/2004
LVL ‘000
LVL ‘000
LVL ‘000
LVL ‘000
LVL ‘000
LVL ‘000
Spots
5 969
7 941
53
18
3
–
Derivatives
Forwards
Swaps
1 056
5 943
5
205
2
3
154 890
22 897
1 107
14
610
1 271
161 915
36 781
1 165
237
615
1 274
38 413
16 292
2
39
130
34
38 413
16 292
2
39
130
34
Total foreign currency
exchange contracts
Interest rate derivatives
Futures sold
Total interest
rate derivatives
The result of foreign exchange spots is included in the balance sheet captions “Other assets” and “Other liabilities”.
18. Investments in Associated Entities
The following table presents the Bank’s investments in associated entities at the end of the reporting year:
A/s AB Konsultåcijas
AIZKRAUKLES BANKA I NOTES TO FINANCIAL STATEMENTS
Page 54
Business
Cost
Equity
Cost
Equity
profile
value
share (%)
value
share (%)
31/12/2005
Group/Bank
Group/Bank
Total investments in
31/12/2005
31/12/2004
associated companies
Listed on stock
Not listed on stock
Listed on stock
Not listed on stock
exchange
exchange
exchange
exchange
LVL ‘000
LVL ‘000
LVL ‘000
LVL ‘000
1 662
31
731
31
1 662
31
731
31
Total shares and other non-fixed
Group/
exchange contracts
Investments in asociated entities
As at 31 December 2005 and 2004 all of the Bank’s investments in shares are classified as available-for-sale investments.
income securities
Liabilities
Group/
16. Shares and Other Non-fixed Income Securities
Equity shares in foreign corporate entities
Fair value
Assets
Debt securities issued in OECD area
Government debt securities
the amount receivable. The notional value of other derivative financial
instruments is the value of the underlying assets of these instruments.
Consulting
31/12/2004
LVL ‘000
(%)
LVL ‘000
(%)
12
30%
12
30%
12
12
19. Investments in Subsidiaries
On 8 March 2004, the Bank acquired 100% shares of the company SIA
Hanzas 16a, which is engaged in the real estate business. The objective
of the acquisition was the purchase of a land plot owned by the company. The total acquisition price amounted to LVL 702.6 thousand. The
subsidiary’s share capital is LVL 130 thousand, whereas its equity,
including a loan convertible into share capital, at the moment of the
acquisition was LVL 125 thousand. The excess of the acquisition price
over the equity is attributed to the value of the land plot. In April 2004,
the Bank invested an additional LVL 5 thousand through payment for
the remaining unpaid shares. The registered address of SIA Hanzas 16a
is Elizabetes Street 23, Riga.
AIZKRAUKLES BANKA I NOTES TO FINANCIAL STATEMENTS
Group/Bank
Page 55
The Bank’s available-for-sale securities are classified as follows:
20. Intangible and Tangible Fixed Assets
21. Investment Properties
Group/Bank
Group/Bank
31/12/2005
31/12/2004
LVL ‘000
LVL ‘000
Intangible fixed assets
993
423
Prepayments for intangible fixed assets
212
366
1 205
789
131
131
4 070
4 258
Leasehold improvements
544
564
Transport vehicles
368
276
Total intangible fixed assets
Land
Buildings and property improvements
Office equipment:
EDP equipment
Other tangible fixed assets
680
899
1 395
1 752
43
56
Total tangible fixed assets
7 231
7 936
Total net book value of fixed assets
8 436
8 725
Prepayments for tangible fixed assets
The movement in the Group’s and Bank’s investment properties is as follows:
Group
Buildings
Total
Land
Buildings
Total
LVL ‘000
LVL ‘000
LVL ‘000
LVL ‘000
LVL ‘000
LVL ‘000
10 070
2 136
12 206
9 370
2 136
11 506
4 003
50
4 053
4 003
50
4 053
14 073
2 186
16 259
13 373
2 186
15 559
Accumulated depreciation as at 1 January 2005
–
162
162
–
162
162
Depreciation charge
–
109
109
–
109
109
Accumulated depreciation as at 31 December 2005
–
271
271
–
271
271
Net carrying amount as at 1 January 2005
10 070
1 974
12 044
9 370
1 974
11 344
Net carrying amount as at 31 December 2005
14 073
1 915
15 988
13 373
1 915
15 288
Acquisition value as at 1 January 2005
Additions
Acquisition value as at 31 December 2005
Depreciation rate
5%
Buildings and
fixed
property
assets
fixed assets
Leasehold
Land improvements improvements
Transport
vehicles
Office
excluding
equipment prepayments
The Management of the Bank believe that the most credible market
value of investment properties was identified based on the evaluations
presented by several independent valuators. The selling value of the
Bank’s investment properties may differ from the market value as
defined, as the market of such properties is not sufficiently developed.
Rentals from investment properties in 2005 amounted to LVL 108
thousand, whereas the related property maintenance expense was LVL
164 thousand, including direct operating expenses arising from investment property that did not generate rental income amounting to LVL
26 thousand.
LVL ‘000
LVL ‘000
LVL ‘000
LVL ‘000
LVL ‘000
LVL ‘000
LVL ‘000
As at 1 January 2005
887
131
4 555
732
469
4 910
11 684
Additions
784
–
14
97
197
347
1 439
(3)
–
–
(73)
(46)
(91)
(213)
1 668
131
4 569
756
620
5 166
12 910
Group/Bank
Group/Bank
As at 1 January 2005
464
–
297
168
193
2 259
3 381
31/12/2005
31/12/2004
Depreciation charge
214
–
202
116
94
908
1 534
LVL ‘000
LVL ‘000
(3)
–
–
(72)
(35)
(76)
(186)
245
78
675
–
499
212
252
3 091
4 729
Disposals and reclassifications
As at 31 December 2005
Reversal of depreciation
As at 31 December 2005
22. Prepaid Expense and Accrued Income
Prepaid expense
Other accrued income
13
–
258
78
Group/Bank
Group/Bank
31/12/2005
31/12/2004
LVL ‘000
LVL ‘000
194
288
Reposessed property for sale, net
35
23
Result of foreign exchange spots
53
18
Other current assets, net
61
481
343
810
Total prepaid expense and accrued income
As at 1 January 2005
423
131
4 258
564
276
2 651
8 303
As at 31 December 2005
993
131
4 070
544
368
2 075
8 181
20%
–
5.5%
10-25%
20%
10-33%
Depreciation rate
23. Other Assets
(straight-line method)
Clearing balances related to credit cards
Other assets, net
AIZKRAUKLES BANKA I NOTES TO FINANCIAL STATEMENTS
Intangible
The market value of all Bank’s investment properties as at 31 December
2005 was LVL 50,758 (44,967) thousand, whereas the market value of
the Group’s investment properties amounted to LVL 52,372 (46,581)
thousand.
Page 57
Total
AIZKRAUKLES BANKA I NOTES TO FINANCIAL STATEMENTS
5%
(straight-line basis)
The movements in the Group’s and Bank’s intangible and tangible fixed assets, except for investment properties, are as follows:
Page 56
Bank
Land
26. Deferred Income and Accrued Expense
Group/Bank
Group/Bank
31/12/2005
31/12/2004
LVL ‘000
LVL ‘000
281
247
Other accrued expense
1 218
448
Total deferred income and accrued expense
1 499
695
Group/Bank
Group/Bank
31/12/2005
31/12/2004
LVL ‘000
LVL ‘000
Suspense amounts
282
14 192
Other tax liabilities
117
136
The following table provides an analysis of balances due to credit institutions and central banks by their place of incorporation:
Group/Bank
31/12/2005
31/12/2004
LVL ‘000
LVL ‘000
Balances due to credit institutions incorporated in Latvia
6 016
2 404
Balances due to credit institutions incorporated in other countries
2 139
2 427
500
1 982
–
1 381
8 655
8 194
Balances due to the Bank of Latvia
Balances due to credit institutions incorporated in OECD countries
Total balances due to credit institutions and central banks
Accrual for employee vacation pay
27. Other Liabilities
The following table provides an analysis of balances due to credit institutions and central banks by their maturity:
Balances repayable on demand
Repo transaction
Group/Bank
Group/Bank
31/12/2005
31/12/2004
LVL ‘000
LVL ‘000
5 955
6 212
500
1 982
Overnight deposits
2 200
–
Total balances due to credit institutions and central banks
8 655
8 194
25. Deposits from Customers
Group
Bank
Group
Bank
31/12/2005
31/12/2005
31/12/2004
31/12/2004
Sector profile
LVL ‘000
LVL ‘000
LVL ‘000
LVL ‘000
Privately held companies
427 836
427 843
348 568
348 574
46 980
46 980
28 577
28 577
3 652
3 652
2 965
2 965
–
–
1 073
1 073
1 100
1 100
1 001
1001
509
509
525
525
Private individuals
State-owned enterprises
Central governments
Municipalities
Financial institutions
Non-profit institutions serving private individuals
Total deposits from customers
AIZKRAUKLES BANKA I NOTES TO FINANCIAL STATEMENTS
191
152
152
480 275
382 861
382 867
Group
Bank
Group
Bank
31/12/2005
31/12/2005
31/12/2004
31/12/2004
LVL ‘000
LVL ‘000
LVL ‘000
LVL ‘000
49 183
49 190
26 818
26 824
Non-residents
431 085
431 085
356 043
356 043
Total deposits from customers
480 268
480 275
382 861
382 867
Geographical profile of customers’ residence
Page 58
191
480 268
Residents
Cash in transit
Dividends payable
77
–
1
1
Other liabilities
505
70
Total other liabilities
982
14 399
“Suspense amounts” caption as at 31 December 2005 no longer
include incoming money transfers (which as at 31 December 2004
amounted to LVL 13,468 thousand), which in accordance with the
money transfer supervision procedure of the Bank required additional
investigations as to the origin of these payments. According to the
decision of the court the amount has been transferred further.
28. Memorandum Items
Group/Bank
Group/Bank
31/12/2005
31/12/2004
LVL ‘000
LVL ‘000
Outstanding guarantees
4 562
3 297
Letters of credit
2 333
1 813
Total contingent liabilities
6 895
5 110
Loan commitments
23 030
12 658
Unutilised credit lines
17 982
9 709
2 197
1 963
27
218
Contingent liabilities
Financial commitments
Undrawn credit facilities on settlement cards
Contractual commitments on purchase of intangible assets
–
29
Total financial commitments
43 236
24 577
Total contingent liabilities and financial commitments
50 131
29 687
Contractual commitments on reconstruction of the building
Funds under trust management in the amount of LVL 4,099 (6,685)
thousand represent loans issued from the funds specifically assigned by
customers to the Bank. The related credit risk and all other risks remain
fully with the customer who provided these funds to the Bank.
AIZKRAUKLES BANKA I NOTES TO FINANCIAL STATEMENTS
Group/Bank
Page 59
24. Balances due to Credit Institutions and Central Banks
29. Subordinated Liabilities
31. Related Parties
In 2004, the Bank received subordinated loans in a total amount of
USD 13 million. Subordinated loans are included in the second tier of
equity calculation. In accordance with the provisions of the subordina-
ted loan agreements, the lenders have no right to demand anticipatory
repayment of the loans and capitalize the subordinated loans into the
Bank’s share capital.
% of the total
Sum of Accumulated subordinated
the loan
Lender
Related parties are defined as shareholders who have significant influence over the Group, members of the Council and the Board, key management personnel, their close relatives and companies in which they
31/12/2005
Date
Interest
of the
Date of
interest
capital
rate
Currency
agreement
maturity
Amount
Loans issued to related parties
2 965
2
38.46
6.30
USD
24/08/2004
27/08/2009
Related legal entities
Euro swiss LLC
2 965
13
38.46
5.50
USD
02/11/2004
01/12/2009
Other related private individuals
Major lenders in total
5 930
15
76.92
Total loans issued to related parties
USD
Loan commitments
Less provisions for potential credit losses
Other lenders
385
2
5.00
7.50
USD
09/08/2004
10/08/2009
Net loans and
1 394
5
18.08
7.50
USD
02/08/2004
10/08/2009
loan commitments
Other lenders in total
1 779
7
23.08
USD
Total
7 709
22
100
USD
non-residents
Percentage of equity, % (see Note 34)
Terms
LVL ‘000
600
3%-10%
605
6%-18%
1 377
4%-9%
518
3%-24%
465
4%-13%
3 064
310
4%-10%
2 447
3%-24%
92
(187)
(171)
3 187
2 368
6.99
7.47
4%-10%
The Bank has also issued guarantees to related parties totalling LVL 12
(10) thousand for American Express credit cards.
Interest income and expense from transactions with related parties:
30. Paid-in Share Capital
As at 31 December 2005, the issued and registered share capital of the
Bank amounted to LVL 15 million (15 million). The share capital consists
of ordinary shares with voting rights only. All shares have a par value of
LVL 150 (150) each.
The members of the Board directly hold 92.13% (90.99%) of the share
capital, while the members of the Council hold 4.35% (4.35%) of the
share capital.
As at 31 December 2005, the Bank had 119 (146) shareholders, including 22 (28) legal entities and 97 (118) private individuals holding a total
of 100,000 shares.
2005
2004
LVL ‘000
LVL ‘000
Interest income
135
85
Interest expense
23
11
Group/Bank
Group/Bank
31/12/2005
31/12/2004
LVL ‘000
LVL ‘000
32. Cash and Cash Equivalents
The major shareholders of the Bank and the groups of related shareholders are as follows:
31/12/2005
O¬egs Fi¬s
Amount
1 946
As at 31 December 2005, the deposits of related parties with the Bank
amounted to LVL 1,488 (629) thousand. All related party deposits bear
standard interest rates offered by the Bank.
The proportionate share of other lenders (for each individual lender) does
not exceed 10% of the total amount of the subordinated capital.
31/12/2004
Terms
LVL ‘000
Management
LVL ‘000
Multicross LLC
residents
have a controlling interest, as well as subsidiaries and associated entities
of the Group.
31/12/2004
Paid-in
% of the total paid-in
Paid-in
% of the total paid-in
share capital
share capital
share capital
share capital
LVL ‘000
LVL ‘000
LVL ‘000
LVL ‘000
6 967
46.45
6 881
45.88
6 813
45.42
6 727
44.85
154
1.03
154
1.03
6 967
46.45
6 881
45.88
Cash and deposits with the Bank of Latvia
40 801
18 870
Balances due from credit institutions
95 822
148 027
Balances due from credit institutions and central banks
Total cash and cash equivalents
(8 655)
(8 194)
127 968
158 703
33. Contingent Tax Liabilities
Nika Berne
Total group of related shareholders
In 2004, the Republic of Latvia State Revenue Service (SRS) performed a
tax audit of the Bank for the years ended 31 December 2002 and
2001. On 2 July 2004, the Bank received an SRS decision where it suggested making adjustments to the tax calculations for those previous
years, and, as a result, additional taxes and penalties in the amount of
LVL 597 thousand were charged.
The Bank did not agree with the additional tax calculation and penalties
and appealed the SRS decision under the procedure stated by the law.
On 6 July 2005, the Administrative Regional Court considered the
appeal filed by Aizkraukles banka against the decision of the SRS
Director General on calculation of additional corporate income tax and
penalties payable by the above credit institution. The Court upheld the
appeal filed by the Bank on the merits and annulled all the SRS decisions whereby additional corporate income tax and penalties totalling
LVL 530 thousand were charged without reason. The above Court ruling has come into effect.
AIZKRAUKLES BANKA I NOTES TO FINANCIAL STATEMENTS
Ernests Bernis
Page 61
Page 60
AIZKRAUKLES BANKA I NOTES TO FINANCIAL STATEMENTS
Group of related shareholders
34. Capital Adequacy
Auditors’ Report
The capital adequacy ratio of the Bank is calculated in accordance with the Financial and Capital Market Commission’s requirements.
Tier 1
paid-in share capital
share premium
reserve capital
retained earnings
31/12/2005
31/12/2004
LVL ‘000
15 000
LVL ‘000
15 000
255
255
1 500
1 500
9 525
3 413
intangible fixed assets
(1 202)
(789)
current year’s audited profit (not subject to distribution of dividends)
15 000
6 112
40 078
25 491
Total tier 1
Ernst & Young Baltic SIA
11. novembra krastmala 23
Riga, LV-1050
Latvia
Phone: +371 7043801
Fax: +371 7043802
Tier 2
revaluation reserve of available-for-sale investments (55%)
subordinated capital (80%)
870
864
4 625
5 366
Total tier 2
5 495
6 230
Total equity
45 573
31 721
Capital charge for credit risk on banking book
28 854
19 189
capital charge for foreign currency risk
capital charge for position risk
capital charge for counterparty risk
Total capital charge for market risks on trading book
Total capital charge (8%)
Capital adequacy ratio (%)
Minimum capital adequacy ratio (%)
755
60
1 154
767
16
10
1 925
837
30 779
20 026
11.85
12.67
8.00
8.00
To the Shareholders of AS Aizkraukles Banka
We have audited the accompanying financial statements of AS Aizkraukles banka and its subsidiary (hereinafter – the Group) and
the accompanying financial statements of AS Aizkraukles banka (hereinafter – the Bank) for the year ended 31 December 2005, set
out on pages 31 through 62, which comprise the balance sheet, the statements of income, changes in shareholders’ equity and
cash flows, and the related notes. 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 International Standards on Auditing issued by the International Federation of
Accountants. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the finan-
35. Litigation and Claims
In the ordinary course of business, the Bank has been involved in a
number of legal proceedings to recover outstanding credit balances, to
maintain collaterals, and specific transactions. The Management of the
cial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts
Bank believe that any legal proceedings pending as at 31 December
2005 will not result in material losses for the Group.
and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates
made by 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 referred to above give a true and fair view of the financial position of the Group and the
Bank as at 31 December 2005, and of the results of their operations and their cash flows for the year then ended in accordance
with International Financial Reporting Standards issued by the International Accounting Standards Board.
Ernst & Young Baltic SIA
Diåna Krißjåne
Latvian Sworn Auditor
Certificate No. 124
Riga, 20 February 2006
AIZKRAUKLES BANKA I AUDITORS’ REPORT
Personal ID code: 250873-12964
Page 63
Page 62
AIZKRAUKLES BANKA I NOTES TO FINANCIAL STATEMENTS
License No. 17
Astrology. Occupations and Financial Profile
Aries
Financially speaking,
although you can't be
bothered with most
details, money is an exception.
This is due to your strong need to be
independent – if you're in debt, you're
in a sort of financial prison, and will
therefore feel confined and depressed
until you're back in the black; then you
can dash around with the best of
them.Money fuels your sense of
freedom, so try to be responsible
with it.
Cancer
You expound on existing
ideas, so it's not advisable to
pursue your own business.
You're better working within a
given system, improving methods
and earning the respect of your coworkers. You are a natural worrier and saver,
so you've no doubt already planned for
the worst. If you're an extreme case, you
might even amass a fortune just because
you're so concerned about not having
enough to feed your family. Your anxious
temperament will always protect you
financially , but to truly enjoy life, you
need to stop worrying about it so much.
Libra
You have a tendency to
be frivolous with money,
even to take little interest in it, except to use it socially –
you do like your nightlife. But you must
try to be more disciplined with money, to
respect it more, to build a savings
account; otherwise your social spending
will continually consume your prospects
of a sound financial future.
Capricorn
You're quite good with
financial data, so a large
bank, insurance or investment company is a smart
direction for you. As an earth sign and a
hard worker, you appreciate buildings as
well, so real estate and the construction
industry are also recommended. Finally,
Capricorn's connection to the bones and
teeth can lead you to a successful career
as a dentist or orthopedic surgeon.
Taurus
Financially, you are no gambler. You prefer a more conservative approach to money,
which includes stable, long-term investments and a steady, reliable income.
Security is what's important to you. The
only negative in this picture is your
famous obstinance. Without an open
mind, you might not see a good opportunity when it comes along. It's healthy to
be practical – that instinct will always protect you, but sometimes your bull-headedness can get in the way of greatness.
Leo
Surprisingly, you sometimes
have a problem settling into
a career. This is because you
know you were born to
lead, and therefore you have little patience
working your way up the ladder. You will
have to bide your time for awhile, at least,
until your talents and popularity become
obvious to those in charge. If you simply
do not have the patience to be an underling for a while, try employing yourself.
Leos are entertainers; many have successfully created their own businesses.
Scorpio
You are well-suited towards
rising to the top because of
your unique need to control.
Your path is a combination of
hard work, keen maneuvering, and your
subtle power magic. Your investigative
abilities will tip you off to opportunities
and strategies before everyone else, your
suspicious nature will help you ward off
the competition, your powers of manipulation will get you in the right doors at
the right times, and in between all this
you'll work ceaselessly to prove you're the
controller, not the controllee.
Aquarius
You are blessed with a logical, scientific mind, and this alone suits
you to innumerable careers in the
high-tech industries. Since these jobs
are generally secure and pay well, and
since you love this kind of logic-based
work, you'll enjoy success on all levels
here. You want to make a difference in
the world, not get rich. In fact, no one
irks you more than the person who simply chooses a career for the money.
Gemini
Your talent is social.
Anything that involves lots
of human contact is up
your alley, be it sales, promotion, or buying. Your way with words is an asset as
an account executive, salesperson, or
marketing rep. This might get you a promotion, but you're likely to get bored sitting behind a desk and long for the dayto-day human contact again.
Virgo
Your lone weakness, financially,
is a tendency to gamble. It's as
if, knowing you're so stable,
you need the excitement of the big
kill to add spice to your financial life.
Indeed, some Virgos have been known to
succeed as professional gamblers, but
only when they apply themselves using
the same analytical faculties and work
ethic that are usually saved for more traditional vocations. It's okay to have fun
with it here and there, but don't make it
a habit unless you're a dedicated pro.
Sagittarius
Financially, you're
the eternal optimist.
You're a bit too spendthrifty when it comes to shopping and
gambling. You think, "Oh, I'll get rich
soon," so you justify losing money at the
race track or charging impulse buys on a
credit card this way. A little prudence
goes a long way here.
Pisces
Poets, writers, painters,
musicians, actors, and
dancers dominate the list of
famous Pisceans. But what of those who
are not so famous? There are several
other avenues that suit you well. First,
anything to do with fish. Second, you are
inclined toward jobs with creative or
social use of alcohol, such as bartending
or brewing. Third, and similarly, you are
well-suited towards the pharmaceutical
industry – drugs are very Piscean.
Aizkraukles Banka
23 Elizabetes St., Riga, LV-1010, Latvia
Client line: +371 777 5555
Tel.: +371 777 5222; fax: +371 777 5200
www.ab.lv e-mail: [email protected]
* Get it right the very first time (First home loan from AB.LV)