OTP BANKA SRBIJA A.D., NOVI SAD Financial Statements Year

Transcription

OTP BANKA SRBIJA A.D., NOVI SAD
Financial Statements
Year Ended December 31, 2014
and Independent Auditors’ Report
Translation of the Auditors’ Report issued in the Serbian language
CONTENTS
Page
Independent Auditors' Report
1
Financial Statements:
Income Statement
2
Statement of Other Comprehensive Income
3
Balance Sheet
4
Statement of Cash Flows
5
Statement of Changes in Equity
6
Notes to the Financial Statements
Appendix: Annual Business Report
7 - 71
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NOTES TO THE FINANCIAL STATEMENTS
December 31, 2014
All amounts expressed in thousands of RSD, unless otherwise stated.
1.
BANK’S ESTABLISHMENT AND ACTIVITY
OTP Banka Srbija a.d., Novi Sad (hereinafter: the “Bank”) is a direct legal successor of Kulska banka a.d.,
Novi Sad. Kulska banka a.d., Novi Sad was registered as a shareholding company with the Commercial
Court of Sombor, in accordance with May 17, 1995 Decision No. Fi 488/95. Pursuant to the Serbian
Business Registers Agency Decision number BD 32735/2007 as of May 18, 2007, the name Kulska banka
a.d., Novi Sad was changed into OTP banka Srbija a.d., Novi Sad. Simultaneously, the status change of
merger and acquisition was registered, whereby Zepter banka a.d. Beograd and Niška banka a.d. Niš were
merged with and acquired by Kulska banka a.d. Novi Sad as the Acquirer; through the aforesaid status
change Zepter banka a.d. Beograd and Niška banka a.d. Niš ceased to exist and were deleted from the
Business Register.
The Bank is registered in the Republic of Serbia to provide banking services of payment transfers, lending
and depositary activities in accordance with the Law on Banks, and it is obligated to operate based upon
principles of liquidity, safety and profitability.
As at December 31, 2014, the Bank consisted of the Head Office in Novi Sad, at No. 80 Bulevar
Oslobođenja Street, 6 regional affiliates and 48 branches.
As at December 31, 2014, the Bank had 670 employees (December 31, 2013: 691 employees).
The Bank’s tax identification number is 100584604.
2.
BASIS OF PREPARATION AND PRESENTATION OF THE FINANCIAL STATEMENTS
2.1.
Basis of Preparation and Presentation of Financial Statements
Legal entities and entrepreneurs incorporated in Serbia are required to maintain their books of account, to
recognize and value assets and liabilities, income and expenses, and to present, submit and disclose
financial statements in conformity the Law on Accounting (hereinafter referred as: the “Law”, Official
Gazette of the Republic of Serbia no. 63/2013). As a large legal entity, the Bank is required to apply
International Financial Reporting Standards (“IFRS”), which as per the aforementioned law comprise the
following: the Framework for the Preparation and Presentation of Financial Statements (the “Framework”),
International Accounting Standards (“IAS”), International Financial Reporting Standards (“IFRS”), as well
as the related interpretations issued by the International Financial Reporting Interpretations Committee
(“IFRIC”) and additional related interpretations issued by International Accounting Standards Board
(“IASB”), the translations of which to the Serbian language were approved and issued by the competent
Ministry of Finance and which were in effect as at December 31, 2013.
The amendments to IAS, as well as the newly issued IFRS and the related interpretations issued by the
IASB and the IFRIC, in the period between December 31, 2002 and January 1, 2009, were officially
adopted pursuant to a Decision enacted by the Ministry of Finance of the Republic of Serbia (the “Ministry”)
on October 5, 2010 and published the Official Gazette of the Republic of Serbia no. 77/2010. The Ministry’s
Decision dated March 13, 2014 adopted the translation of the Conceptual Framework for Financial
Reporting and (the “Conceptual Framework,“ adopted by the IASB in September 2010, which supplants the
Framework for Preparation and Presentation of the Financial Statements) and basic texts of IAS and IFRS
(“Decision on Adoption of the Translations of the Conceptual Framework for Financial Reporting and Basic
Texts of International Accounting Standards and International Financial Reporting Standards,” published
the Official Gazette of the Republic of Serbia no. 35 on March 27, 2014 (“Decision on Adoption of the
Translations”), encompassing amendments to IAS and new IFRS and related interpretations. Based on this
Decision on Adoption of the Translations, the Conceptual Framework, IAS, IFRS, IFRIC and related
interpretations that have been translated shall be applied to the financial statements prepared as of
December 31, 2014.
Standards and interpretations issued that came into effect in the current period pursuant to the Decision on
Adoption of the Translations are disclosed in Note 2.2, while standards and interpretations in issue but not
yet in effect are disclosed in Note 2.3.
The accompanying financial statements are presented in the format prescribed under the Decision on the
Forms and Contents of the Items in the Forms of the Financial Statements of Banks (Official Gazette of RS
nos. 71/2014 and 135/2014).
7
December 31, 2014
2.
BASIS OF PREPARATION AND PRESENTATION OF THE FINANCIAL STATEMENTS (Continued)
2.1.
Basis of Preparation and Presentation of Financial Statements (Continued)
These financial statements were prepared at historical cost principle unless otherwise stipulated in the
accounting policies presented hereunder.
In the preparation of the accompanying financial statements, the Bank adhered to the accounting policies
described in Note 3.
The Bank’s financial statements are stated in thousands of dinars (RSD). Dinar is the official reporting
currency in the Republic of Serbia.
2.2.
Standards and Interpretations Issued that Came into Effect in the Current Period Pursuant to the
Decision on Adoption of the Translations of the Ministry
•
Amendments to IFRS 7 “Financial Instruments: Disclosures” – Amendments improving fair value and
liquidity risk disclosures (revised in March 2009, effective for annual periods beginning on or after
January 1, 2009);
•
Amendments to IFRS 1 “First-Time Adoption of IFRS” – Additional Exemptions for First-Time
Adopters. The amendments relate to assets in oil and gas industry and determining whether an
arrangement contains a lease (revised in July 2009, effective for annual periods beginning on or after
January 1, 2010);
•
Amendments to various standards and interpretations resulting from the Annual Quality Improvement
Project of IFRS published on April 16, 2009 (IFRS 5, IFRS 8, IAS 1, IAS 7, IAS 17, IAS 36, IAS 39,
IFRIC 16) primarily with a view to removing inconsistencies and clarifying wording, (amendments are
to be applied for annual periods beginning on or after 1 January 2010, while the amendment to IFRIC
is to become effective as of July 1, 2009);
•
Amendments to IAS 38 “Intangible Assets” (revised in July 2009, effective for annual periods
beginning on or after July 1, 2009);
•
Amendments to IFRS 2 “Share-Based Payment”: Amendments resulting from the Annual Quality
Improvement Project of IFRS (revised in April 2009, effective for annual periods beginning on or after
July 1, 2009) and amendments relating to group cash-settled share-based payment transactions
(revised in June 2009, effective for annual periods beginning on or after January 1, 2010);
•
Amendments IFRIC 9 “Reassessment of Embedded Derivatives” effective for annual periods
beginning on or after July 1, 2009 and IAS 39 “Financial Instruments: Recognition and Measurement”
– Embedded Derivatives (effective for annual periods beginning on or after June 30, 2009);
•
IFRIC 18 “Transfers of Assets from Customers” (effective for annual periods beginning on or after
July 1, 2009);
•
“Conceptual Framework for Financial Reporting 2010” being amendments to “Framework for the
Preparation and Presentation of Financial Statements” (effective for transfer of assets from
customers received on or after September 2010);
•
Amendments to IFRS 1 “First-time Adoption of International Financial Reporting Standards” – Limited
Exemption from Comparative IFRS 7 Disclosures for First-time Adopters (effective for annual periods
beginning on or after July 1, 2010);
•
Amendments to IAS 24 “Related Party Disclosures” – Simplifying the disclosure requirements for
government-related entities and clarifying the definition of a related party (effective for annual periods
beginning on or after January 1, 2011);
8
December 31, 2014
2.
2.2.
Decision on Adoption of the Translations of the Ministry (Continued)
•
Amendments to IAS 32 “Financial Instruments: Presentation” – Accounting for Rights Issues (effective
for annual periods beginning on or after February 1, 2010);
•
Amendments to various standards and interpretations “Improvements to IFRSs (2010)” resulting from
the Annual quality improvement project of IFRS published on May 6, 2010 (IFRS 1, IFRS 3, IFRS 7,
IAS 1, IAS 27, IAS 34, IFRIC 13) primarily with a view to removing inconsistencies and clarifying
wording, (most amendments are to be applied for annual periods beginning on or after January 1,
2011);
•
Amendments to IFRIC 14 “IAS 19 – The Limit on a Defined Benefit Asset, Minimum Funding
Requirements and Their Interaction” – Prepayments of a Minimum Funding Requirement (effective
for annual periods beginning on or after January 1, 2011);
•
IFRIC 19 “Extinguishing Financial Liabilities with Equity Instruments” (effective for annual periods
beginning on or after July 1, 2010).
•
Amendments to IFRS 1 “First-Time Adoption of IFRS” – Severe Hyperinflation and Removal of Fixed
Dates for First-time Adopters (effective for annual periods beginning on or after July 1, 2011);
•
Amendments to IFRS 7 “Financial Instruments: Disclosures” – Transfers of Financial Assets (effective
•
Amendments to IAS 12 “Income Taxes” – Deferred Tax: Recovery of Underlying Assets (effective for
annual periods beginning on or after January 1, 2012);
•
IFRS 10 “Consolidated Financial Statements” (effective for annual periods beginning on or after
January 1, 2013);
•
IFRS 11 “Joint Arrangements” (effective for annual periods beginning on or after January 1, 2013);
•
IFRS 12 “Disclosures of Involvement with Other Entities” (effective for annual periods beginning
on or after January 1, 2013);
•
Amendments to IFRS 10, IFRS 11 and IFRS 12 “Consolidated Financial Statements, Joint
Arrangements and Disclosures of Involvement with Other Entities: Transition Guidance” (effective for
annual periods beginning on or after January 1, 2013);
•
IAS 27 (revised in 2011) “Separate Financial Statements” (effective for annual periods beginning
on or after January 1, 2013);
•
IAS 28 (revised in 2011) “Investments in Associates and Joint Ventures” (effective for annual periods
beginning on or after January 1, 2013);
•
IFRS 13 “Fair Value Measurement” (effective for annual periods beginning on or after January 1,
2013);
•
Amendments to IFRS 1 “First-time Adoption of International Financial Reporting Standards” –
Government Loans with a Below-Market Rate of Interest (effective for annual periods beginning on or
after January 1, 2013);
•
Amendments to IFRS 7 “Financial Instruments: Disclosures” – Offsetting Financial Assets and
Financial Liabilities (effective for annual periods beginning on or after January 1, 2013);
9
December 31, 2014
2.
2.2.
Decision on Adoption of the Translations of the Ministry (Continued)
2.3.
•
Amendments to IAS 1 “Presentation of Financial Statements” – Presentation of Items of Other
Comprehensive Income (effective for annual periods beginning on or after July 1, 2012);
•
Amendments to IAS 19 “Employee Benefits” – Improvements to the Accounting for PostEmployment Benefits (effective for annual periods beginning on or after January 1, 2013);
•
Amendments to various standards “Improvements to IFRSs (2009-2011 Cycle)” issued in May 2012,
resulting from the annual improvement project of IFRS (IFRS 1, IAS 1, IAS 16, IAS 32, IAS 34)
primarily with a view to removing inconsistencies and clarifying wording (amendments are to be
applied for annual periods beginning on or after January 1, 2013);
•
IFRIC 20 “Stripping Costs in the Production Phase of a Surface Mine” (effective for annual periods
beginning on or after January 1, 2013); and
•
Amendments to IAS 32 “Financial Instruments: Presentation” – Offsetting Financial Assets and
Financial Liabilities (effective for annual periods beginning on or after January 1, 2014).
Standards and Interpretations in Issue not yet in Effect
At the date of issuance of these financial statements the following standards, revisions and interpretations
were in issue but not yet effective:
•
IFRS 9 “Financial Instruments” and subsequent amendments, supplanting the requirements of IAS
39 “Financial Instruments: Recognition and Measurement,“ with regard to classification and
measurement of financial assets. This standard eliminates the categories existing under IAS 39 –
assets held to maturity, assets available for sale and loans and receivables. IFRS 9 shall be
effective for annual periods beginning on or after January 1, 2018, with early adoption permitted.
In accordance with IFRS 9, financial assets shall be classified in one of the following two categories upon
initial recognition: financial assets at amortized cost or financial assets at fair value. A financial asset shall
be measured at amortized cost if the following two criteria are met: financial assets relate to the business
model whose objective is to collect the contractual cash flows and the contractual terms provide the basis
for collection at certain future dates of cash flows that are solely payments of principal and interest on the
principal outstanding. All other financial assets shall be measured at fair value. Gains and losses on the
fair value measurement of financial assets shall be recognized in the profit and loss statement, except for
investments in equity instruments which are not traded, where IFRS 9 allows at initial recognition a
subsequently irreversible choice to recognize changes in fair value within other gains and losses in the
statement of comprehensive income. An amount recognized in such a manner within the statement of
comprehensive income cannot subsequently be recognized in profit and loss.
Given the nature of the Bank’s operations, the adoption of the standard is expected to have a significant
impact on the Bank’s financial statements.
•
Amendments to IFRS 11 “Joint Arrangements” – Accounting for Acquisition of an Interest in a Joint
Operation (effective for annual periods beginning on or after January 1, 2016);
•
IFRS 14 “Regulatory Deferral Accounts” (effective for annual periods beginning on or after January
1, 2016);
•
IFRS 15 “Revenue from Contracts with Customers,” defining the framework for revenue recognition.
IFRS 15 supplants IAS 18 “Revenue,” IAS 11 “Construction Contracts,” IFRIC 13 “Customer Loyalty
Programs,” IFRIC 15 “Agreements for the Construction of Real Estate” and IFRIC 18 “Transfers of
Assets from Customers.” IFRS 15 shall be effective for annual periods beginning on or after January
1, 2017, with early adoption permitted.
10
December 31, 2014
2.
2.3.
Standards and Interpretations in Issue not yet in Effect (Continued)
•
Amendments to IAS 16 “Property, Plant and Equipment” and IAS 38 “Intangible Assets” –
Clarification of Acceptable Methods of Depreciation and Amortization (effective for annual periods
beginning on or after January 1, 2016 );
•
Amendments to IAS 16 “Property, Plant and Equipment” and IAS 41 “Agriculture” – Agriculture:
Bearer Plants (effective for annual periods beginning on or after January 1, 2016);
•
IAS 27 “Separate Financial Statements” – Equity Method in Separate Financial Statements (effective
•
Amendments to IFRS 10 “Consolidated Financial Statements” and IAS 28 “Investments in
Associates and Joint Ventures” – Sale or Contribution of Assets between an Investor and its
Associate or Joint Venture (effective for annual periods beginning on or after January 1, 2016 );
•
Amendments to IAS 19 “Employee Benefits” – Defined Benefit Plans: Employee Contributions
(effective for annual periods beginning on or after January 1, 2014);
•
Amendments resulting from Annual Improvements 2010-2012 Cycle issued in December 2013
(IFRS 2, IFRS 3, IFRS 8, IFRS 13, IAS 16, IAS 24 and IAS 38) with a view to removing
inconsistencies and clarifying wording (effective for annual periods beginning on or after July 1,
2014); and
•
Amendments resulting from Annual Improvements 2011-2013 Cycle issued in December 2013
(IFRS 1, IFRS 3, IFRS 13 and IAS 40) with a view to removing inconsistencies and clarifying
wording (effective for annual periods beginning on or after July 1, 2014).
3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
3.1.
Interest Income and Expenses
Interest income and expenses are recognized in the income statement for all interest-bearing financial
instruments following the effective interest method. Interest income and expenses are recorded in the
Bank’s income statement in the period to which they belong by applying the “matching principle” and
following the requirements delineated in the agreement signed between a customer and the Bank.
Loan origination fees are credited to profit and loss account as interest income, i.e., as the adjustment to
the effective return on loans disbursed proportionately to the outstanding loan maturities.
Interest accrued is recorded within the income statements when there is no doubt as to its collectability in
accordance with IAS 18 and the Guidance for Recognition Interest Income and Manner of Interest
Recognition after Unwinding, which is an integral part of the Bank's Accounting Policies.
Up to 2014, in accordance with the Rules on the Layout of Chart of Accounts and Content of Accounts in
the Chart of Accounts for Banks (Official Gazette of RS, nos. 98/2007, 57/2008 and 3/2009), the Bank
suspended interest, i.e., discontinued adding interest to assets with certain degree of recoverability.
Interest suspension was performed in the manner and via account prescribed by the aforecited Rules,
while the collection of suspended interest was recorded in the income accounts under the aforecited Rules.
In 2014 the Bank no longer suspended interest.
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December 31, 2014
3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
3.1.
Interest Income and Expenses (Continued)
Interest income from performing and risk-free loans whose collection is certain is fully recognized. Interest
income from the borrowers/loans subject to individual impairment assessment is recognized in accordance
with IAS 39. When a financial asset or a group of similar financial assets is written off due to impairment
loss, the related interest income is recognized from then on using the interest rate applied in discounting
the future cash flows for the purpose of measuring the impairment loss. For borrowers/loans subject to
group or collective impairment assessment, interest income is recognized in proportion to the net value of
the loan.
The Bank's management is of the opinion that this change to the accounting policy of interest income has
no material effect on the prior years' financial statements of the Bank.
3.2.
Fee and Commission Income and Expenses
Fee and commission income and expenses from banking services (payment transactions, issuance of
guaranties and other sureties, letters of credit, purchase and sale of foreign currencies and other banking
services) when such services are invoiced and rendered.
Fees and commission charged for guarantees, sureties and letters of credit issued are deferred and
recognized as income proportionately over their maturity periods.
The Bank recognizes fee and commission income that is part of the effective interest as interest income.
3.3.
Foreign Exchange Translation
Assets and liabilities denominated in foreign currencies at the balance sheet date are translated into dinars
at official middle exchange rates of the National Bank of Serbia effective as at the reporting date. Gains or
losses arising on the translation of receivables and payables are credited or charged to income statement.
Transactions denominated in foreign currencies are translated into dinars at official exchange rates
effective at the date of each transaction. Net foreign exchange positive or negative effects arising upon the
translation of transactions, and the assets and liabilities denominated in foreign currencies are credited or
charged to the income statement as foreign exchange gains or losses.
Commitment and contingent liabilities in foreign currencies are translated into dinars at official middle
exchange rates of the National Bank of Serbia effective as at the reporting date.
The exchange rates for major currencies used in the translation of balance sheet components into dinars
were as follows:
Currency
USD
CHF
EUR
3.4.
Official middle exchange rate at
December 31, 2014
Official middle exchange rate at
December 31, 2013
99.4641
100.5472
120.9583
83.1282
93.5472
114.6421
impairment of Financial Assets and Credit risk-Weighted Off-Balance Sheet Items
The bank makes impairment allowance for loans and other financial assets as well as credit risk-weighted
off-balance sheet items when recoverability thereof is no longer certain as well as when there is a
probability of incurring losses per credit risk-weighted off-balance sheet items.
Impairment allowance is made under the Bank's Accounting Policy adopted in accordance with IAS 39 and
defined in the Procedure for Assessing Impairment of Balance Sheet Assets and Probable Losses per OffBalance Sheet Items in accordance with IFRS/IAS.
12
December 31, 2014
3.
3.5.
Cash and Cash Funds Held with the Central Bank
Cash and cash funds held with the central bank include cash on hand in local and in foreign currencies,
balances on the current accounts with the National Bank of Serbia, including the obligatory RSD and
foreign currency reserves, gold and other precious metals as well as funds on current accounts held with
other domestic and foreign banks in local and in foreign currencies (Note 17).
Cash equivalents comprise gold and other precious metals initially measured at cost and subsequently
carried at their market value. The market value is determined based on the price of precious metals quoted
on the world market. The increase in the market value is recognized as income while the decrease is
included in expenses on the income statement.
3.6.
Financial Instruments
3.6.1.
Loans and Receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payment that are not
quoted on an active market.
Loans originated by the Bank are recognized within the balance sheet upon the transfer of loan funds to
the borrower. Loans are initially recorded at the price representing the market value of the cash funds
disbursed as loans, including all transaction costs; loans are subsequently measured at amortized cost
using effective interest method. The Bank makes impairment allowance for those loans that are no longer
recoverable in accordance with the Procedure for Assessing Impairment of Balance Sheet Assets and
Probable Losses per Off-Balance Sheet Items in accordance with IFRS/IAS.
In its loan portfolio the Bank has loans agreed upon with a number of borrowers with contractually defined
currency clause as a risk hedge. Income arising from currency clause effects is recorded within the income
statement under net foreign gains and positive currency clause effects (Note 9). Currency clause is a
derivative which is not recorded separately from its host contract given that the economic benefits and
risks of the embedded derivative closely related to the host contract. In its loan portfolio the Bank has loans
linked to the consumer price index (officially published), which were contracted and approved in prior periods.
Income and expenses arising therefrom are recorded as gains and losses on risk hedges (Note 7). Contractual
loan link to the consumer price index represents embedded derivatives which are closely related to the
host contracts yet recorded separately from those host contracts.
3.6.2.
Impairment Allowance of Balance Sheet Assets and Provisions for Losses per Off-Balance Sheet
Items
Impairment allowance of balance sheet assets and provisions for losses per off-balance sheet items are
made based on the estimate of the impairment of balance sheet assets and probable losses per offbalance sheet items in accordance with IFRS/IAS as part of the Bank's accounting policies adopted based
on IAS 39.
Impairment allowance of balance sheet assets is recorded within assets on the impairment allowance
accounts in the income statements while provisions for losses per off-balance sheet items are recorded on
the accounts prescribed for this purpose by NBS, within liabilities.
3.6.3.
Securities and Financial Assets Carried at Fair value through Profit and Loss (Trading Assets)
Trading securities comprise those securities held by the Bank for the purpose of their sale with the
objective of generating a profit from short-term fluctuations in their market prices.
The Bank uses the settlement date calculation upon recording transactions of purchasing securities held
for trading. Transaction costs are not included in the value thereof but presented within the expenses of the
period. Any unrealized gains and losses arising from changes in the market value of such assets are
recognized as from the transaction origination date (trade date) in the profit and loss statement. Following
the trading date, when the transaction is settled (settlement date), the resulting financial assets shall be
recognized within the balance sheet at market value of the consideration paid for acquisition of securities
increased by the changes in the market value of the contract arisen since the trading date.
13
December 31, 2014
3.
3.6.
Financial Instruments (Continued)
3.6.3.
Securities and Financial Assets Carried at Fair value through Profit and Loss (Trading Assets)
(Continued)
Market value is determined based on the valuation techniques, fair value hierarchies and inputs of the
certain fair value hierarchy levels in accordance with the provisions of the relevant IFRS/IAS. All realized
and unrealized gains and losses arising from changes in the market value of trading securities are
recognized in the income statement as gains and losses on the financial assets held for trading (Note 6).
As of December 31, 2014 the Bank had only derivatives held for trading in its portfolio (Note 18).
3.6.4.
Securities and Other Financial Assets Held to Maturity
Securities and other financial assets held to maturity are financial assets with fixed maturities that the Bank
intends to hold up to their maturity dates.
Securities held to maturity are stated at their amortized cost using the effective interest method net of
accumulated impairment. The amortized cost is calculated taking into account all discounts or premiums
earned upon the purchase over the maturity period. Interest accrued as of the balance sheet date is
credited to income in the profit and loss account. Changes in the fair value of these securities are also
included in the profit and loss under gains or losses on the valuation of securities.
This category of securities includes bills of exchange received for discounting and commercial papers (Note
20).
3.6.5.
Securities and Other Financial Assets Available for Sale
Securities and other financial assets available for sale are non-derivative financial assets designated as
available for sale (AFS) and are not classified as: loans and receivables, investments held to maturity or
financial assets ate fair value through profit and loss. AFS financial assets represent financial instruments
intended to be held for and indefinite period, which can nevertheless be sold for liquidity maintenance or
due to changes in interest rates, foreign exchange rates or equity prices.
Securities available for sale are measured at market value. Market value is determined based on the
valuation techniques, fair value hierarchies and inputs of the certain fair value hierarchy levels in
accordance with the provisions of the relevant IFRS/IAS. Unrealized gains and losses arising from
changes in the market value of available-for sale investments are stated as reserves within equity until
such a financial asset is sold, collected or otherwise disposed of or until it is determined to have suffered
impairment. Upon sales or permanent impairment of these securities adequate amounts of previously
formed revaluation reserves are stated in the income statement as net gains or losses on securities.
3.6.6.
Equity Investments
Investments in Subsidiaries
Investments in the Bank’s subsidiary are recorded in the Bank's financial statements using the historical
cost method. The Bank recognizes income from the investment only if the subsidiary has distributed profit,
i.e. if the subsidiary has enacted a decision on profit distribution. Such income is recorded within the
income statement.
As at December 31, 2014 the Bank was the owner of the entire (100%) equity interest in OTP Investments
d.o.o Novi Sad, a financial sector entity.
The Bank prepares consolidated financial statements where the subsidiary OTP Investments d.o.o Novi
Sad is included under full consolidation method, given that this entity is under the Bank's control in
accordance with IFRS 10.
14
December 31, 2014
3.
3.6.
Financial Instruments (Continued)
3.6.6.
Equity Investments (Continued)
Investments in Associates
Investments in associated entities are recorded in the Bank's financial statements using equity method,
i.e., they are initially recorded at cost. As at the balance sheet date the amounts of equity investments are
increased or decreased by the amount of the Bank's percentage share in the profit or loss of the associate.
As of December 31, 2014, the Bank had no equity investments in associates.
All investments are initially recorded at their nominal value.
Dividend income from investments in shares of other legal entities and form equity investments held in
other entities is included within dividend income when the Bank’s entitlement to receive the dividend
payment is established.
3.7.
Intangible Assets, Property, Plant and Equipment
The Bank’s property, plant and equipment and intangible assets are recognized at cost (historical cost)
less any accumulated depreciation and amortization and impairment.
Depreciation and amortization are calculated on a straight-line basis at the following annual rates in order
to write off the cost of assets over their estimated useful lives:
Buildings
Computers
Calculators, typewriters and money handling machines
Passenger vehicles
Communications equipment
Heating equipment
Copying equipment
Furniture
IT equipment
Mobile phones
Other equipment
Leasehold improvements
1% – 6.59%
20%
15.5%
15.5%
10%
16.5%
14.3%
12,5%
10 – 20%
33.33%
11%
In accordance with the relevant
lease agreement terms
Property, plant and equipment are periodically reviewed in order to determine indicators of impairment, if
any.
3.8.
Investment Property
The Bank’s investment property is property held to earn rental income and/or for capital appreciation.
An investment property is measured at fair value which accounts for all movements in the market value
and is recorded in the income statement. The Bank's investment property is not depreciated.
3.9.
Non-Current Assets Held for Sale
Non-current assets held for sale are the assets classified upon acquisition as non-current, which the Bank
decided to dispose of after a certain period of use.
Upon the reclassification of a portion of assets into non-current assets held for sale, assets are measured
at the lower of their carrying value and fair value less costs to sell. In the first case, the asset is stated at its
carrying value whereas in the latter case, revaluation surplus accrued for that particular asset is reversed,
and the amount in excess of such surplus is charged to expenses of the given period as impairment of
assets.
15
December 31, 2014
3.
3.9.
Non-Current Assets Held for Sale (Continued)
Impairment losses are transferred to losses on the sale in case such asset is reclassified into the category
of assets held for sale and sold in the same year. In case of reclassification from investment property
carried at fair value the rules of measurement need not be applied. In order to reclassify and asset from
investment property to non-current assets held for sale, not only a relevant decision on the sale is to be
made but also the capital expenditure of reclassification of such an asset.
Depreciation of non-current assets held for sale is not calculated. Sales of such assets are recorded as net
sales.
The remaining assets classified in this category meet the requirements prescribed by IFRS 5 for continued
recognition of non-current assets held for sale and are available for sale (Note 30).
3.10.
Assets Held for Sale
Tangible assets received in lieu of debt collection, as well as property from joint ventures are classified as
assets held for sale and presented within the line item of inventories. Assets held for sale are measured at
the lower of cost and at fair value less costs to sell.
These assets are not depreciated as long as they are classified as tangible assets received in lieu of debt
collection in the above described manner.
3.11.
Equity
The Bank's equity is comprised of: issued capital, share issue premium, reserves and retained earnings/
accumulated losses.
Issued Capital
The Bank's share capital is formed from the monetary contributions made by the Bank's founders. For
funds invested, shareholders receive a proportionate number of shares or receipts as defined in the Law
on the Capital Market (Official Gazette of RS no. 31/11). Shareholders cannot withdraw funds invested in
the Bank’s share capital. The Bank uses capital to perform banking operations and cover operating risks.
Revaluation Reserves
The surplus determined in the revaluation of property and equipment is credited to revaluation reserves. If
a previously revalued asset with positive revaluation effects credited to revaluation reserves is sold or
disposed of, the respective revaluation surplus credited to revaluation reserves is transferred to retained
earnings (Note 40). Where the fair value of property decreases because the asset’s market value is below
its carrying value, revaluation surplus arising from that particular asset is reversed accordingly to the extent
of the previously formed revaluation reserves.
Unrealized gains and losses arising from remeasurement of securities available for sale to their market
value are recorded as reserves within equity (Note 40).
The structure of and changes in the Bank's equity are disclosed in Note 40.
3.12.
Borrowings and Due Deposits
Liabilities arising from borrowings and due deposits are recognized within the balance sheet when the
respective funds are deposited. Upon initial recognition, borrowings and deposits are measured at fair
value increased by transaction costs which may be added to the respective deposits or presented as
separate financial liabilities. Subsequent to initial recognition, liabilities arising from borrowings and
deposits due are measured at amortized cost by applying the effective interest method.
Foreign currency deposits are stated in RSD as translated by applying the middle exchange rates effective
as of the balance sheet date.
16
December 31, 2014
3.
3.13.
Managed Funds
The Bank manages funds on behalf of and for the account of third parties and charges fees for these
services. These items are not included in the Bank’s balance sheet and are presented within off-balance
sheet items (Note 41).
3.14.
Employee Benefits
The Bank does not have defined benefit plans or share-based remuneration options and there were no
identified liabilities thereof as of December 31, 2014.
The Bank calculated future retirement benefits in accordance with IAS 19, based on the assumptions made
in accordance with the provisions of the aforesaid standard. As of December 31, 2014, the Bank increased
provisions in comparison to December 31, 2013.
3.15.
Taxes and Contributions
3.15.1. Current Income Tax
Current income tax represents an amount that is calculated by applying the prescribed income tax rate of
15% to the taxable base stated in the income tax return, which includes the profit shown in the statutory
statement of income, as adjusted for certain permanent and temporary differences that are specifically
defined under statutory tax rules of the Republic of Serbia.
Current income tax is calculated and paid in accordance with the Corporate Income Tax Law and other
relevant fiscal regulations prevailing in the Republic of Serbia. The monthly advance income tax payment
is paid on monthly basis while the adjustment of the sum of advance payments is made at the year-end,
i.e. upon submission of the tax balance and the annual income tax return to the tax authorities for advance
and final determination of the corporate income tax.
3.15.2. Deferred Income Taxes
Deferred income taxes are provided for temporary differences arising between the tax bases of assets and
liabilities and their carrying values in the Bank's financial statements in accordance with IAS 12.
Deferred tax liabilities are recognized for all taxable temporary differences as at the balance sheet date
between the tax bases of assets and liabilities and their carrying values used for financial reporting
purposes, which will result in taxable amounts in the future periods.
Deferred tax assets are income tax amounts recoverable in the future periods which pertain to all
deductible temporary differences and all unused tax credits and losses available for carryforward.
Deferred tax assets and liabilities are determined at the tax rate expected to be applied in the period of the
relevant asset realization/liability settlement, based on the currently enacted or tax rates expected to be
enacted up to the balance sheet date. As at December 31, 2014, deferred tax assets and liabilities were
provided at the rate of 15%.
In 2014 the Bank recognized deferred tax assets based on the temporary differences between the base of
calculation tax-purpose and financial reporting depreciation and amortization of fixed assets, provisions for
retirement benefits calculated in accordance with IAS 19, impairment of assets and unpaid public duties
payable. The Bank did not recognize deferred tax assets based on the stated tax losses and unused tax
credit in accordance with IAS 12, paragraph 24.
3.15.3. Indirect Taxes and Contributions
Indirect taxes and contributions include property taxes, value added tax, payroll taxes and contributions
and various other taxes and contributions paid pursuant to effective republic and local tax regulations.
These taxes and contributions are included within operating expenses and staff costs. VAT may be
presented within certain balance sheet items if related to procurements that do not represent expenses but
certain balance sheet items according to IAS.
17
December 31, 2014
3.
3.16.
Financial Derivatives
The Bank recognizes financial derivatives at their contractually defined value (cost) within off-balance
sheet items, which represents the fair value of consideration received or receivable where any fair value
adjustment as of the balance sheet date is recorded in the balance sheet and in the income statement.
3.17.
Fair Value
The Bank applies provisions of IFRS 13 to determine the fair values of items that are measured at fair
value according to its adopted accounting policy. It is the policy of the Bank to disclose the fair value
information on those financial assets and financial liabilities for which published market information is
readily and reliably available, and whose fair value is materially different from their recorded amounts. The
Bank records loans at their fair values as the terms at which the Bank extends loans are reconciled with
the market prices through the variable interest rates.
As per the Bank’s management, amounts expressed in the financial statements reflect the fair value which
is most reliable and useful for the needs of the financial reporting in accordance with the International
Financial Reporting Standards as per the Law on Accounting of the Republic of Serbia and regulations of
the National Bank of Serbia governing financial reporting of banks.
3.17.1. Loan Adjustment to Market Prices
The Bank agrees with retail customers on either fixed or variable interest rates. Where a variable interest
rate is agreed in a relevant contract clause, it is subject to reconciliation with variable interest rate elements
which are officially published (key policy rate, consumer price index, etc.). In case such an element
changes, an annex to the agreement regulating the interest rate change is not signed. Instead, before the
changed interest rate is applied, the Bank will inform the customer in writing, or using any other permanent
data carrier, of the changed interest rate, stipulating the date when the changed interest rate will come in
effect along with a new loan repayment schedule. More detailed terms for the change of interest rate are
determined in individual loan agreements. This manner of reconciliations is in accordance with the Law on
the Protection of Users of Financial Services.
The Bank agrees on variable interest rate with corporate customers, which rate is reconciled with the
movements in the key policy rate and amendments to the General Business Terms and formal documents
of the Bank determining the product and service prices.
4.
INTEREST INCOME AND EXPENSES
Year Ended December 31,
2014
2013
Interest income arising from:
Loans
Deposits
Securities
Other investments
Total interest income
Interest expenses arising from:
Loans
Deposits
Other investments
Total interest expenses
Net interest income for the year
2,512,047
65,179
234,637
6,744
2,818,607
(52,206)
(367,343)
(1,636)
(421,185)
2,397,422
2,487,657
93,258
235,595
63,800
2,880,310
(289,627)
(572,310)
(1,636)
(863,573)
2,016,737
Interest expenses from other investments of RSD 1,636 thousand related to dividends per cumulative
preference shares calculated for the year 2014.
18
December 31, 2014
5.
FEE AND COMMISSION INCOME AND EXPENSES
2014
2013
Fee and commission income
Loan origination fees
Payment card transaction fees
Payment transaction fees
Electronic banking fees
Other fees and commissions
Total fee and commission income
Fee and commission expenses
Other financial liabilities
Payment card transaction fees
Other fees and commissions
Loan origination fees
Total fee and commission expenses
Net fee and commission income for the year
6.
7,015
234,463
266,825
19,256
309,234
836,793
12,149
232,836
235,669
18,226
272,039
770,919
(1,222)
(86,385)
(28,791)
(14,906)
(131,304)
705,489
(10,311)
(71,313)
(29,607)
(13,919)
(125,150)
645,769
NET LOSS ON THE FINANCIAL ASSETS HELD FOR TRADING
2014
Gains on the fair value changes of derivatives held for trading
Losses on the fair value changes of derivatives held for trading
57,349
(62,808)
Net loss on the financial assets held for trading for the year
(5,459)
As from November 1, 2014, the Bank started classifying swap transactions as derivatives held for trading.
7.
NET GAINS ON THE HEDGES AGAINST RISKS
2014
2013
Gains on the valuation of loans and receivables – changes in
retail prices
Gains on the valuation of loans and receivables – gains on
changes in the value of gold and other precious metals
Gains on the valuation of derivatives designated for risk hedging
– interest rate swap
Losses on the valuation of loans and receivables – changes in
retail prices
Losses on the valuation of loans and receivables – gains on
changes in the value of gold and other precious metals
Losses on the valuation of derivatives designated for risk hedging
– interest rate swap
Net gains on the hedges against risks for the year
184
1,048
2,831
-
200,554
330,970
(30)
(561)
(7)
(6,475)
(159,475)
(203,327)
44,057
121,655
19
December 31, 2014
8.
NET LOSSES ON THE FINANCIAL ASSETS
AVAILABLE FOR SALE
2014
2013
9.
Gains on the sale of securities and other financial assets
available for sale
Losses on the sale of securities and other financial assets
available for sale
(18,656)
(12,547)
Net losses on the financial assets available for sale
for the year
(18,656)
(11,688)
-
859
NET FOREIGN EXCHANGE GAINS
AND POSITIVE CURRENCY CLAUSE EFFECTS
2014
2013
Foreign exchange gains
Unrealized foreign exchange gains
Realized foreign exchange gains
On valuation of loans, receivables and liabilities
Total foreign exchange gains
Foreign exchange losses
Unrealized foreign exchange losses
Realized foreign exchange losses
On valuation of loans, receivables and liabilities
Total foreign exchange losses
Net foreign exchange gains
and positive currency clause effects for the year
10.
1,119,178
277,279
987,556
2,384,013
2,244,019
259,373
974,671
3,478,063
(1,671,821)
(136,491)
(320,158)
(2,128,470)
(2,295,762)
(113,138)
(902,507)
(3,311,407)
255,543
166,656
OTHER OPERATING INCOME
2014
2013
Gains on the sale of other loans and receivables
Other income from operations
Reversal of unreleased provisions for liabilities
Gains on the sale of property, plant, equipment and
intangible assets
Write-off of liabilities
Dividend income and income from equity investments
Surpluses
Payment card operations
Other income
Total other operating income for the year
2,974
11,665
73
4,264
12,448
27,584
3,483
2,327
753
2,502
19,210
26,908
69,895
6,913
10,862
569
1,458
18,505
82,603
20
December 31, 2014
11.
NET LOSSES FROM IMPAIRMENT OF FINANCIAL ASSETS
AND CREDIT RISK-WEIGHTED OFF-BALANCE SHEET ITEMS
2014
2013
Impairment losses on loans and receivables included in the
balance sheet
Provisions for off-balance sheet items
Write-off of irrecoverable receivables
Reversal of impairment losses on loans and receivables
included in the balance sheet
Reversal of provisions for off-balance sheet items
Collected receivables previously written off
Net losses from impairment of financial assets and
credit risk-weighted off-balance sheet items for the year
12.
(1,767,488)
(58,286)
(6,239)
(1,832,013)
(6,456,235)
(58,033)
(19,104)
(6,533,372)
1,154,728
38,837
2,910
1,196,475
1,538,674
26,386
548
1,565,608
(635,538)
(4,967,764)
STAFF COSTS
2014
2013
Net salaries
Net benefits
Taxes on salaries and benefits
Contributions to salaries and benefits
Temporary and seasonal employees
Other staff costs
Provisions for retirement and other employee benefits
Total staff costs for the year
792,484
8,434
82,845
161,507
1,435
26,113
4,863
795,333
3,466
89,009
158,014
3,048
13,459
2,875
1,077,681
1,065,204
Other staff costs in 2014 mostly relate to the remunerations paid to the members of the Board of Directors
in the amount of RSD 8,518 thousand. Expenses in respect of provisions for retirement benefits amounted
to RSD 3,367 thousand. Other provisions for employee benefits relate to short-term provisions for unused
annual leave (vacation) benefits.
13.
DEPRECIATION AND AMORTIZATION CHARGE
2014
2013
Depreciation charge – property owned by the Bank
Depreciation charge – leasehold improvements
Amortization charge – intangible assets
Depreciation charge – computer equipment
Depreciation charge – office equipment and devices
Depreciation charge – other equipment
Depreciation charge – equipment acquired under finance lease
Total depreciation and amortization charge for the year
15,837
24,046
60,303
44,821
25,792
73,532
-
15,899
21,287
67,552
44,919
22,509
78,840
7
244,331
251,013
21
December 31, 2014
14.
OTHER EXPENSES
2014
2013
Losses on the sale of other loans and receivables
Cost of materials
Cost of production services
Non-material costs
Taxes payable
Contributions payable
Other costs and charges
Provisions for liabilities
Losses on the sale of property, plant, equipment and
intangible assets
Losses on the disposal and write-off of property, plant, equipment
and intangible assets
Shortages and damages
Other expenses
Total other expenses for the year
15.
98,887
470,340
479,566
53,285
167,712
63,593
17,258
20,676
108,342
474,710
422,327
74,127
168,246
30,579
26,386
1,642
1,955
3,914
1,096
27,649
408
5,046
57,314
1,384,942
1,390,116
INCOME TAXES 1 – CURRENT INCOME TAX
2014
2013
Current income tax expense
-
-
Total current income tax expense as at December 31
-
-
In its income tax return for the year 2014 the Bank stated profit for the year amounting to RSD 118,375
thousand. The Bank also reported a capital loss of RSD 2,046 thousand, incurred in sales of property and
securities available for sale (corporate shares).
16.
INCOME TAXES 2 – DEFERRED TAX ASSETS/(LIABILITIES) AND TAX BENEFITS/(EXPENSES)
a)
Movements on Deferred Tax Assets/(Liabilities)
at the reporting date the Bank stated deferred tax assets as totaling RSD 7,264 thousand. Movements on
deferred tax assets are presented in the table below:
2014
2013
Balance of deferred tax assets/liabilities as at January 1
Effect of the temporary tax differences credited/(charged) to
the income statement
5,524
9,768
1,740
(4,244)
Balance of deferred tax assets as at December 31
7,264
5,524
As of December 31, 2014 the Bank recognized deferred tax assets in the amount of RSD 7,264 thousand
(December 31, 2013: RSD 5,524 thousand), on various grounds. Namely, deferred tax assets were
recognized based on the temporary difference between depreciation and amortization recognized for
accounting and for tax purposes of RSD 3,046 thousand, provisions made for employee retirement
benefits in accordance with IAS 19 of RSD 1,637 thousand, based on unpaid public duties of RSD 745
thousand, and deductible temporary differences in allowances for impairment losses of RSD 1,836
thousand.
22
December 31, 2014
16.
INCOME TAXES 2 – DEFERRED TAX ASSETS/(LIABILITIES) AND TAX BENEFITS/(EXPENSES)
(Continued)
b)
Numerical Reconciliation between Total Tax Expense Stated in the Income Statement and the
Product of the Accounting Results Multiplied by the Applicable Tax Rate
2014
2013
Profit/(loss) before taxes
Income tax at the statutory tax rate of 15%
(Prior years ‘ loss as per tax balance up to the amount of taxable
profit) / Unrecognized tax losses
Effects of the expenses not recognized within the tax balance
Deferred tax benefit/(expense)
Total tax benefit/(expense)
Effective tax rate
105,799
(4,652,365)
15,870
(697,855)
(17,756)
1,886
1,740
548,624
149,231
(4,244)
1,740
1.64%
(4,244)
0.09%
c) Gains on the Created Deferred Tax Assets
2014
2013
Gains on the created deferred tax assets and decrease in deferred
tax liabilities
Gains on the created deferred tax assets and decrease in
deferred tax liabilities as at December 31
1,740
(4,244)
1,740
(4,244)
d) Income Tax Benefit/(Expense)
2014
2013
Accounting profit/(loss) before taxes
Expenses not recognized for tax purposes – permanent differences
Taxable income
Capital gains/(losses)
Taxable base
Tax rate
Calculated income tax
Loss decrease by created deferred tax assets
Total tax benefit/(expense)
Net profit
Deferred income tax benefit
105,799
12,576
118,375
2,046
15%
-
(4,652,365)
994,871
(3,657,494)
(20,274)
15%
-
1,740
1,740
(4,244)
(4,244)
107,539
(4,656,609)
1,740
(4,244)
1,740
(4,244)
23
December 31, 2014
17.
CASH AND CASH FUNDS HELD WITH THE CENTRAL BANK
In RSD
Cash funds in RSD
Cash on hand in RSD
Total cash funds in RSD
In foreign currencies
Cash on hand in foreign currencies
Other monetary items in foreign currencies
Obligatory foreign currency reserve held with NBS
Total cash funds in foreign currencies
Gold and other precious metals
Total cash and cash funds held with the central bank,
balance as at December 31
December 31,
2014
December 31,
2013
2,824,806
511,213
3,336,019
2,406,203
558,661
2,964,864
266,058
20,987
2,534,058
2,821,103
18,424
255,669
12,948
2,588,792
2,857,409
15,601
6,175,546
5,837,874
The Bank’s obligatory RSD reserve represents the minimum RSD reserve set aside in accordance with the
NBS Decision on Required Reserves of Banks with the National Bank of Serbia (Official Gazette of RS,
nos. 3/11, 31/12, 57/12, 78/12, 87/12, 107/12, 62/13, 125/14 and 135/14). Pursuant to the aforesaid
Decision, the obligatory reserve is to be calculated at the rate of 5% on the portion of the RSD base
comprised of liabilities maturing within 2 years, i.e. within 730 days, and at the rate of 0% on the portion of
the dinar base comprised of liabilities with maturities of over 2 years, i.e. over 730 days. The RSD base for
the calculation of the obligatory reserve is the amount of average daily balance of RSD liabilities during the
preceding calendar month, except RSD liabilities indexed to a currency clause as follows:
-
non-indexed liabilities arising from RSD deposits, loans, securities and other RSD liabilities to
domestic legal entities and retail bank clients;
non-indexed liabilities arising from RSD deposits, loans and other RSD liabilities to foreign
creditors.
A portion of the obligatory foreign currency reserve was converted into obligatory RSD reserve at the rates
of 36% and 28% for the obligatory reserves of up to and over 2 years, respectively.
The obligatory RSD reserve balance that had to be maintained from December 18, 2014 to January 17,
2015 amounted to RSD 1,892,528 thousand, where the calculated RSD portion of the reserve amounted to
RSD 471,166 thousand, and the RSD equivalent of the reserve portion calculated in EUR and deposited in
RSD amounted to RSD 1,421,362 thousand. The Bank is under obligation to calculate and maintain the
average daily balance of the allocated obligatory RSD reserve on its gyro account over the accounting
period. The calculated obligatory RSD reserve is deposited in RSD on the Bank's gyro account. As at
December 31, 2014 the Bank was in full compliance with the regulations of the National Bank of Serbia
with regard to the calculation and allocation of the obligatory RSD reserve.
The obligatory foreign currency reserve represents the minimum foreign currency reserve set aside in
accordance with the NBS Decision on Required Reserves of Banks with the National Bank of Serbia
(Official Gazette of RS nos. 3/11, 31/12, 57/12, 78/12, 87/12, 107/12, 62/13, 125/14 and 135/14) which
prescribes that banks calculate the obligatory foreign currency reserve at the following rates:
-
-
27% on the portion of the foreign currency reserve comprised of liabilities maturing within 2 years, i.e.
up to 730 days, and exceptionally at the rate of 50% on the portion of the foreign currency reserve
comprised of RSD liabilities indexed to a currency clause maturing within 2 years, i.e. up to 730 days;
20% on the portion of the foreign currency reserve comprised of liabilities with maturities of over 2
years, i.e. over 730 days, and exceptionally at the rate of 50% on the portion of the foreign currency
reserve comprised of RSD liabilities indexed to a currency clause with maturities of over 2 years, i.e.
over 730 days.
24
December 31, 2014
17.
CASH AND CASH FUNDS HELD WITH THE CENTRAL BANK (Continued)
The foreign currency base for the calculation of required reserve is the amount of average daily balance of
foreign currency liabilities during the preceding calendar month and the amount of average daily balance of
RSD liabilities from the preceding calendar month indexed to a currency clause as follows:
-
liabilities arising from deposits, loans, securities and other foreign currency liabilities to foreign
creditors;
liabilities arising from deposits, loans, securities and other foreign currency liabilities to domestic
legal entities and other liabilities;
foreign currency savings deposits with other banks;
indexed liabilities arising from deposits, loans, securities and other RSD liabilities as well as
indexed RSD deposits received through transactions the Bank performs on behalf of and for the
account of third parties if they exceed the amounts of loans the Bank disbursed from these
deposits.
The Bank deposits the obligatory foreign currency reserve onto the foreign currency account with the
National Bank of Serbia. As at December 31, 2014 the Bank was in full compliance with the regulations of
the National Bank of Serbia with regard to the calculation and allocation of the obligatory foreign currency
reserve.
Based on the Decision on the Conditions and Manner of Implementing Open Market Operations (Official
Gazette of RS, nos. 45/2011 and 34/2013), the Bank conducts repurchase transactions with the National
Bank of Serbia. The subject of repo transactions are commercial papers issued by the NBS. The NBS has
the obligation to repurchase commercial papers before their maturity. As of December 31, 2014 the Bank
had no contracted repo transactions; however, during 2014 the Bank had a significant turnover per repo
transactions totaling RSD 41 billion. Total income from interest accrued per repo transactions in 2014
amounted to RSD 52,825 thousand.
In 2014 the Bank had a larger volume of contracted loans based on repurchase transactions in foreign
currencies with OTP Bank Ltd. Budapest as compared to the previous year in the amount of RSD
1,291,800 thousand.
18.
FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT AND LOSS
HELD FOR TRADING
December 31,
2014
Receivables per derivatives held for trading – currency swap
Total financial assets at fair value through profit and loss
held for trading as at December 31
December 31,
2013
1,732
-
1,732
-
The Bank had no securities held for trading in its portfolio. This line item comprises derivatives held for
trading.
19.
FINANCIAL ASSETS AVAILABLE FOR SALE
December 31,
2014
Face value
Departures from the face value
Impairment allowance
Total financial assets available for sale, net
as at December 31
December 31,
2013
4,531,998
(78,187)
(489,590)
2,736,488
(83,909)
(509,315)
3,964,221
2,143,264
25
December 31, 2014
19.
FINANCIAL ASSETS AVAILABLE FOR SALE (Continued)
19.1.
Investments in financial assets available for sale
December 31,
2014
December 31,
2013
Shares of insurance companies - reclassified
Shares of other financial institutions
Shares of holding companies
Shares of other companies
Shares of other companies - reclassified
Treasury bills and public sector bonds
Shares of other customers
Shares of other customers - reclassified
Securities available for sale
Faxe value of securities available for sale
2,243
121,669
97,371
3,953,859
278,592
77
4,453,811
4,531,998
(78,187)
(489,590)
130
2,243
121,670
117,471
3
2,132,769
278,215
77
2,652,578
2,736,488
(83,910)
(509,314)
Securities available for sale, net as at December 31
3,964,221
2,143,264
Increase in securities available for sale was due to the purchases of Treasury bills and bonds of the
Republic of Serbia.
As at December 31, 2014 the Bank had Treasury bills and bonds of the Republic of Serbia totaling RSD
4,012,480 thousand in its portfolio. Treasury bills and bonds of the Republic of Serbia were classified as
securities available for sale.
The following table shows the breakdown of Treasury bills per maturity:
Maturity
Short-term T-bills
Long-term T-bills
Long-term bonds
Book value
1,502,600
2,054,880
455,000
Interest accrued
up to maturity
(22,734)
(69,298)
32,750
4,012,480
(59,282)
Total as at December 31
As at December 31, 2014 the Bank determined the fair value of Treasury bills in accordance with the
provisions of IFRS 13.
Upon determining the fair value of the Treasury bills the Bank used valuation techniques which it deemed
appropriate under the circumstances and for which it had sufficient data available for fair value
measurement, with the maximum use of observable inputs and an effort to minimize the use of
unobservable input data.
Regarding the aforesaid, the Bank decided on the use of combined market and income approaches and
estimated the fair value based on hierarchy Level 2 inputs.
Fair values were determined based on:
•
•
prices available at the principal/secondary market in the observation period which is deemed relevant
for trading these securities (a period of two weeks);
based on prices offered for specific maturities.
Based on the fair value estimate, it was determined that the value of Treasury bills as at December 31,
2014 was impaired by RSD 661 thousand and that it amounted to RSD 3,953,859 thousand.
26
December 31, 2014
20.
FINANCIAL ASSETS HELD TO MATURITY
December 31,
2014
Face value
Total financial assets held to maturity, net
as at December 31
21.
73,173
(86)
(51,478)
December 31,
2013
51,237
241
(51,478)
21,609
-
December 31,
2014
December 31,
2013
Loans per transaction accounts
Overnight loans
Other RSD loans
Other loans
Interest and fees per deposits and off-balance sheet items
Net Bank’s RSD loans and receivables
Foreign currency accounts
Loans per foreign currency repo transactions
Other foreign currency loans
Other general foreign currency deposits
Earmarked foreign currency deposits received in accordance
with the regulations
Other earmarked foreign currency deposits
Other foreign currency receivables
Net Bank’s FX loans and receivables
1,250,312
123,738
507
327
1,374,884
86,551
1,493,248
345,140
53,062
63,614
467
769
17
64,867
154,003
288,455
288,570
4,838
8,467
1,721
70
1,993,097
(345,169)
4,586
1,666
140
737,420
(288,487)
Total Bank’s loans and receivables, net as at December 31
3,022,812
513,800
LOANS AND RECEIVABLES DUE FROM BANKS
AND OTHER FINANCIAL INSTITUTIONS
27
December 31, 2014
22.
LOANS AND RECEIVABLES DUE FROM CUSTOMERS
22.1.
Loans and receivables due from customers – breakdown per product
22.2.
December 31,
2014
December 31,
2013
973,906
79,389
12,357,790
51,488
3,538,180
4,535,222
6,924,341
7,660,840
2,903
1,118,867
107,373
7,787,837
51,488
3,386,331
4,303,909
6,040,263
9,186,471
14,958
Loans per transaction accounts
Consumer loans
RSD loans for liquidity maintenance and working capital
RSD export loans
Investment loans
Housing loans
Cash loans
Other RSD loans
Receivables from factoring with the right to recourse
Receivables for acceptances, bills of exchange and payments
per guarantees called on
Other loans and receivables
Net Bank’s RSD loans and receivables
Foreign currency cheques
Foreign currency loans for payment of imported goods and
services
Other foreign currency loans
Other foreign currency earmarked deposits
Other foreign currency loans and receivables
Net Bank’s foreign currency loans and receivables
961,066
19,095
89,040
37,193,260
-
965,283
22,526
56,350
33,041,656
277
227,459
80,902
109,411
1,578
2,924
422,274
(12,664,660)
303,195
77,072
91,441
1,042
3,177
476,204
(12,859,427)
Total Bank’s loans and receivables, net as at December 31
24,950,874
20,658,433
Loans and receivables due from customers – breakdown per industry
December 31,
2014
December 31,
2013
Public companies
Corporate customers
Entrepreneurs
Public sector
Retail customers
Non-residents
Agricultural producers
Other customers
3,873,796
8,430,876
251,561
40,628
10,714,678
117,764
339,697
1,181,874
1,993,690
6,771,900
170,673
47,916
10,020,402
99,494
171,616
1,382,742
Total Bank’s loans and receivables as at December 31
24,950,874
20,658,433
28
December 31, 2014
23.
RECEIVABLES PER FINANCIAL DERIVATIVES
DESIGNATED AS RISK HEDGING INSTRUMENTS
December 31,
2014
December 31,
2013
2,485
2,497
-
449
2,485
2,946
December 31,
2014
December 31,
2013
Domestic banking and financial sector – a subsidiary
203,783
203,783
Total investments in subsidiaries as at December 31
203,783
203,783
December 31,
2014
December 31,
2013
With contracted risk hedges – consumer price index growth
Receivables per financial derivatives designated as risk hedging
instruments
Currency swap
Total receivables per financial derivatives designated as
risk hedging instruments as at December 31
24.
25.
INVESTMENTS IN SUBSIDIARIES
INTANGIBLE ASSETS
Licenses
Software
Total intangible assets
Impairment of intangible assets
Accumulated amortization of intangible assets
Intangible assets,
net book value as at December 31
26.
153,387
302,589
455,976
(22,558)
(354,466)
116,087
285,812
401,899
(22,558)
(294,163)
78,952
85,178
December 31,
2014
December 31,
2013
PROPERTY, PLANT AND EQUIPMENT
Land
Buildings
Equipment
Equipment in progress
Leasehold improvements
Total property, plant and equipment
Accumulated depreciation of property, plant and equipment
Property, plant and equipment,
139
1,346,648
1,486,474
17,247
303,578
3,154,086
(1,385,820)
139
1,346,063
1,459,838
45,935
260,022
3,111,997
(1,298,147)
1,768,266
1,813,850
29
December 31, 2014
26.
PROPERTY, PLANT AND EQUIPMENT (Continued)
26.1.
Movements on Property, Plant and Equipment, Investment Property and Intangible Assets:
Cost
Balance, January 1, 2014
Additions
Transfers from construction in
progress
Disposals and retirements
Land and
Buildings
Equipment
and Other
Assets
Investment
Property
Construction
in Progress
Intangible
Assets
Total
1,556,075
26,877
1,459,838
10,741
23,997
-
96,084
122,124
401,898
40,629
3,537,892
200,371
(198,758)
(1,218)
13,449
-
23,997
18,232
455,976
3,634,059
-
-
316,721
60,303
-
1,614,868
244,331
(96,355)
83,759
(17,331)
Balance, December 31, 2014
1,649,380
Accumulated depreciation and
amortization
Charge for the year
Net book value
as of December 31, 2014
Cost
Additions
Transfers from construction in
progress
1,486,474
338,289
39,882
(11,275)
959,858
144,146
(85,080)
-
(104,204)
366,896
1,018,924
-
-
377,024
1,762,844
1,282,484
467,550
23,997
18,232
78,952
1,871,215
Land and
Buildings
Equipment
and Other
Assets
Investment
Property
Construction
in Progress
Intangible
Assets
Total
1,518,399
6,633
1,560,716
5,513
23,997
-
33,743
237,663
456,551
33,377
3,593,406
283,186
40,324
(9,281)
1,556,075
Accumulated depreciation and
amortization
Charge for the year
Net book value
as of December 31, 2013
101,550
(85,655)
128,977
(235,368)
1,459,838
-
(175,322)
-
23,997
96,084
6,021
(94,051)
(338,700)
401,898
3,537,892
343,220
67,552
(94,051)
1,696,242
251,013
(332,387)
304,700
37,186
(3,597)
1,048,322
146,275
(234,739)
-
-
338,289
959,858
-
-
316,721
1,614,868
1,217,786
499,980
23,997
96,084
85,178
1,923,025
-
As of December 31, 2014 the Bank had no mortgages instituted over its property and equipment to
securitize loan repayment.
27.
INVESTMENT PROPERTY
Investment property
Investment property,
December 31,
2014
December 31,
2013
23,997
23,997
23,997
23,997
30
December 31, 2014
28.
29.
CURRENT TAX ASSETS
December 31,
2014
December 31,
2013
Current tax assets
-
16,517
Current tax assets as at December 31
-
16,517
December 31,
2014
December 31,
2013
Deferred tax assets
7,264
5,524
Deferred tax assets as at December 31
7,264
5,524
Temporary
difference
amount
Deferred tax
amount
20,305
3,046
10,912
1,637
4,970
745
12,240
1,836
48,427
7,264
December 31,
2014
December 31,
2013
DEFERRED TAX ASSETS
Deductible temporary differences per depreciable assets –
deferred tax assets
Deductible temporary differences per provisions made for
employee retirement benefits in accordance with IAS 19 –
deferred tax assets
Deductible temporary differences per unpaid public duties
– deferred tax assets
Deductible temporary differences per impairment losses –
deferred tax assets
Total as at December 31, 2014
At the year-end total deferred tax assets amounted to RSD 7,264 thousand.
30.
NON-CURRENT ASSETS HELD FOR SALE
AND ASSETS FROM DISCONTINUED OPERATIONS
Non-current assets held for sale
34,034
34,034
Non-current assets held for sale as at December 31
34,034
34,034
Non-current assets held for sale as of December 31, 2014 comprise the following:
Building properties
Apartment for sale, Prote Mateje 66, Beograd
Building in Novi Sad, Bulevar oslobođenja 69
Business premises, Knjaževačka bb., Niš
Area
Amount
151m²
274.60m²
15.16m²
14,877
18,170
987
34,034
31
December 31, 2014
31.
OTHER ASSETS
December 31,
2014
In RSD
RSD fee and commission receivables per other assets
RSD receivables from sales
Interest receivables per other assets
Total receivables for fees, sales, and other assets
Receivables for fees, sales, and other assets, net
Receivables arising from RSD advances for working capital
Receivables arising from advances for property, plant and
equipment
RSD receivables from employees
Receivables arising from prepaid taxes and contributions
Other RSD receivables from operations
RSD suspense and temporary accounts
RSD receivables in settlement
Total other receivables and advances paid
Other receivables and advances paid, net
Inventories
Tangible assets received in lieu of debt collection
Tools and fixtures in use
Total inventories
Inventories, net
Other receivables from regular operations for determining
foreign currency income
Total other receivables
Other receivables, net
Receivables arising from foreign currency advances for
working capital
Foreign currency advances paid
Foreign currency receivables from employees
Other foreign currency receivables from operations
Foreign currency suspense and temporary accounts
Foreign currency receivables in settlement
Total other receivables and advances paid
Other receivables and advances paid, net
Deferred other RSD expenses
Other RSD prepayments
Deferred foreign currency interest expenses
Deferred other foreign currency expenses
Other foreign currency prepayments
Total deferred receivables
Total other assets as at December 31
December 31,
2013
23,597
103,140
20
126,757
(45,741)
81,016
9,241
23,786
55,881
2
79,669
(35,586)
44,083
8,094
16,056
284
14,030
189,485
(1,458)
238,836
466,474
(170,124)
296,350
342
22,310
2,382
25,034
(2,382)
22,652
17,554
148
10,586
182,091
(6,485)
237,099
449,087
(163,120)
285,967
486
13,934
2,932
17,352
(2,932)
14,420
5,480
5,480
(5,472)
8
5,187
5,187
(5,171)
16
429
5,114
2,268
3,077
(609)
15,918
26,197
(4,458)
21,739
22,383
930
216
3,287
173
26,989
-
288
4,452
2,436
2,749
(578)
22,205
31,552
(4,297)
27,255
9,608
1,784
562
1,628
220
13,802
-
448,754
385,543
32
December 31, 2014
32.
PROVISIONS FOR IDENTIFIED LOSSES
PER BALANCE SHEET ITEMS
Provisions for interest, fee and sales receivables and
prepayments
Provisions for loans, deposits and other advances
Provisions for securities
Provisions for other receivables
Total provisions for potential losses per balance sheet
items as at December 31
December 31,
2014
December 31,
2013
232,995
12,828,046
541,069
174,583
129,540
13,059,132
563,289
170,426
13,776,693
13,922,387
Movements on provisions for identified losses per balance sheet items in 2014 were as follows:
Opening
balance
Provisions for interest, fee and
sales receivables and
prepayments
Provisions for loans, deposits
and other advances
Total provisions for potential
losses per balance sheet items
Write-off
Increase
during the
year
Decrease
during the
year
Prior years’
decrease
FX
differences
Closing
balance
129,540
(22,614)
167,192
(25,316)
(16,848)
1,041
232,995
13,059,132
563,289
170,426
(940,667)
(13)
(11,239)
2,324,032
39,603
(836,684)
(9,826)
(1,042,636)
(22,586)
(14,792)
264,869
379
411
12,828,046
541,069
174,583
13,922,387
(974,533)
2,530,827
(871,826)
(1,096,862)
266,700
13,776,693
Movements on provisions for identified losses per balance sheet items in 2013 were as follows:
Opening
balance
Provisions for interest, fee and
sales receivables and
prepayments
Provisions for loans, deposits
and other advances
Total provisions for potential
losses per balance sheet items
Write-off
Increase
during the
year
Decrease
during the
year
Prior years’
decrease
FX
differences
Closing
balance
291
129,539
110,355
(14,109)
98,608
(28,794)
(36,812)
9,604,499
576,662
177,604
(1,401,898)
(11,873)
(29,446)
7,138,177
12,034
79,115
(844,232)
(3,791)
(4,472)
(1,446,418)
(12,169)
(49,853)
9,004
(70)
(25)
13,059,132
560,793
172,923
10,469,120
(1,457,326)
7,327,934
(881,289)
(1,545,252)
9,200
13,922,387
Required Reserve for Estimated Losses
Based on the categorization of loans and receivables in accordance with the regulations of the National
Bank of Serbia, the Bank calculated the reserve for estimated losses based on the total Bank's exposure to
credit risk as of December 31, 2014.
Calculated reserve for estimated losses in accordance with the Decision of the National bank of Serbia per:
Balance sheet assets
Off-balance sheet items
18,452,693
171,294
Total
18,623,987
33
December 31, 2014
32.
PROVISIONS FOR IDENTIFIED LOSSES
PER BALANCE SHEET ITEMS (Continued)
Required Reserve for Estimated Losses (Continued)
Impairment allowance and provisions calculated in accordance with the internally adopted methodology
(IAS 39):
Impairment allowance of balance sheet assets
Provisions for losses per off-balance sheet items
13,776,693
183,736
13,960,429
Pursuant to the NBS Decision on the Classification of Balance Sheet Assets and Off-Balance Sheet Items,
the sum of positive differences between the reserve for estimated losses calculated in accordance with the
aforecited decision and the amount of impairment allowance of balance sheet assets and provisions for
losses per off-balance sheet items in accordance with the internally adopted methodology represents the
amount of the required reserve for estimated losses. If the amount of impairment allowance for balance
sheet assets and off-balance sheet items exceeds the amount of the reserve for potential losses as
calculated for an individual borrower, the Bank is under no obligation to calculate the required special
reserve for potential losses per balance sheet assets and off-balance items.
Required reserve for estimated losses per balance sheet assets and
off-balance sheet items
33.
FINANCIAL LIABILITIES AT FAIR VALUE
THROUGH PROFIT AND LOSS HELD FOR TRADING
Currency swap
Total financial liabilities at fair value through
profit and loss held for trading as at December 31
34.
5,033,414
December 31,
2014
December 31,
2013
10,571
-
10,571
-
December 31,
2014
December 31,
2013
176
176
-
12,505
176
12,681
LIABILITIES PER FINANCIAL DERIVATIVES
DESIGNATED AS RISK HEDGING INSTRUMENTS
With contracted risk hedges – consumer price index growth
Liabilities per financial derivatives designated as risk hedging
instruments
Currency swap
Total liabilities per financial derivatives designated as risk
hedging instruments as at December 31
34
December 31, 2014
35.
DEPOSITS AND OTHER LIABILITIES DUE TO BANKS,
OTHER FINANCIAL INSTITUTIONS AND THE CENTRAL BANK
In RSD
Transaction deposits
Earmarked deposits
Other deposits
Overnight deposits and borrowings
RSD deposits and other liabilities
Earmarked deposits
Other deposits
Foreign currency deposits and other liabilities
Total deposits and other liabilities due to banks, other
financial institutions and the central bank
as at December 31
December 31,
2014
December 31,
2013
345,689
4,392
19,573
10,240
379,894
24,823
5,805
37,223
556,089
6,904
630,844
36,918
79
152,508
1
189,506
54,831
69
187,447
25
242,372
569,400
873,216
36.
DEPOSITS AND OTHER LIABILITIES DUE TO CUSTOMERS
36.1.
Deposits and other liabilities due to customers – breakdown per product
In RSD
Savings deposits
Deposits based on approved loans
Earmarked deposits
Other deposits
Overnight deposits
Borrowings
RSD deposits and other liabilities
Savings deposits
Deposits based on approved loans
Earmarked deposits
Other deposits
Foreign currency deposits and other liabilities
Total deposits and other liabilities due to customers
as at December 31
December 31,
2014
December 31,
2013
6,625,732
417,611
30,748
333,515
2,191,433
1,009,038
2,675
75,176
10,685,928
3,795,285
353,318
2,148
142,554
681,404
600,881
2,675
75,866
5,654,131
3,388,199
9,786,531
481,942
406,247
990,204
188,968
15,242,091
1,831,437
8,189,671
187,186
372,993
554,889
42,562
11,178,738
25,928,019
16,832,869
35
December 31, 2014
36.
DEPOSITS AND OTHER LIABILITIES DUE TO CUSTOMERS (Continued)
36.2.
Deposits and other liabilities due to customers – breakdown per industry
December 31,
2014
December 31,
2013
2,413,843
6,478,136
586,375
2,030,487
12,693,869
956,485
260,734
508,090
9
230,635
3,873,947
492,577
285,619
10,426,249
739,402
202,724
581,707
25,928,019
16,832,869
December 31,
2014
December 31,
2013
Subordinated liabilities in foreign currency
Deferred interest payable per subordinated liabilities
in foreign currency
976,100
3,217,972
1,445
5,674
Total subordinated liabilities as at December 31
977,545
3,223,646
Holding companies
Public companies
Corporate customers
Entrepreneurs
Public sector
Retail customers
Non-residents
Agricultural producers
Other customers
Total deposits and other liabilities due to customers
as at December 31
37.
SUBORDINATED LIABILITIES
Decrease in liabilities for subordinated loans was a result of conversion of subordinated debt into the
Bank's equity in 2014 (Note 46).
38.
PROVISIONS
December 31,
2014
December 31,
2013
Provisions for potential litigation losses
Provisions for retirement benefits
19,131
183,737
10,912
27,597
163,301
10,265
Provisions as at December 31
213,780
201,163
December 31,
2014
December 31,
2013
Movements on provisions are presented in the table below::
Provisions for potential litigation losses
Balance as at January 1
Charge for the year
Reversal of provisions
Balance as at December 31
Charge for the year
Foreign exchange differences
Provisions for retirement benefits
Charge for the year
27,597
17,257
(25,723)
19,131
30,892
26,386
(29,681)
27,597
163,301
58,286
(38,837)
987
183,737
131,599
58,033
(26,386)
55
163,301
10,265
3,639
(2,992)
10,912
10,025
2,875
(2,635)
10,265
36
December 31, 2014
38.
PROVISIONS (Continued)
The Bank calculated and formed provisions for retirement benefits in the amounts of RSD 10,912 thousand
and RSD 10,265 RSD thousand as of December 31, 2014 and December 31, 2013, respectively. The
Bank reported expenses for retirement benefits of RSD 3,639 thousand within the income statement, while
the amount of RSD 273 thousand was stated within equity, as actuarial losses. During the year 2014 the
Bank released the amount of RSD 2,992 thousand of the provisions for retirement benefits.
Upon calculating provisions for retirement benefits, the Bank used the following assumptions:
(1) Discount rate – the Bank used the rate for EUR bonds traded in the principal market. The change in
this assumption as compared to prior years had an effect on the level of provisions in the amount of
RSD +2,434,282;
(2) Estimated annual salary growth rate. The change in this assumption as compared to prior years had
an effect on the level of provisions in the amount of RSD -2,161,327 ; and
(3) Estimated number of employee survivorship up to the retirement with the Bank. There were no
changes in this assumption as compared to prior years.
Changes in the actuarial assumption used in the calculation of provisions had the overall net effect on the
level of reported provisions in the amount of RSD 272,954. The remaining portion of the difference
between the provisions as of December 31, 2014 as compared to those as of December 31, 2013 of RSD
374 thousand pertains to the changes in the number of employees as well as to the change in the amount
of the average salary.
39.
OTHER LIABILITIES
In RSD
Fees and commission payable per other liabilities
Trade payables
Advances received
Dividend payment liabilities
Liabilities per managed funds
Other liabilities from operations
Liabilities in settlement
Total other liabilities
Net salaries
Payroll taxes
Payroll contributions
Other liabilities to employees
Value added tax payable
Other taxes and contributions payable
Total liabilities for salaries, taxes and contributions
Accrued liabilities for other expenses
Deferred interest income
Deferred other income
Other accruals
Total accruals
Fees and commission payable per other liabilities
Trade payables
Advances received
Liabilities per managed funds
Temporary and suspense accounts
Total other liabilities
Accrued liabilities for other expenses
Total accruals
Total other liabilities as at December 31
December 31,
2014
December 31,
2013
8,041
80,848
31,637
198,415
18
28,903
32,691
380,553
68
10
19
1,816
4,117
2,620
8,650
155,278
9,680
10,062
462
175,482
6,514
91,441
31,676
196,779
30,964
27,187
384,561
254
3,124
4,139
7,517
158,995
942
10,129
1,588
171,654
1,604
1,849
21,443
783
1
73
6
25,759
5,568
158
5,726
1,416
1,603
16,650
406
1
29
6
20,111
2,460
1,563
4,023
596,170
587,866
37
December 31, 2014
39.
OTHER LIABILITIES (Continued)
39.1.
Taxes Payable
39.2.
December 31,
2014
December 31,
2013
Payroll taxes charged to the Bank
Payroll contributions charged to the Bank
City development land fees
Other contributions – communal tax for business sign display
Personal income tax payables
Other taxes and contributions payable
4,117
68
85
4
1,277
1,130
56
3,124
65
23
1,584
1,439
972
57
Total taxes payable as at December 31
6,737
7,264
December 31,
2014
December 31,
2013
19,544
15
19,544
15
61
61
14
4,157
4
6,337
7
8,849
47,282
47,282
47,282
7,749
4,924
1,636
1,636
1,636
14
4,157
4
6,337
7
8,849
47,282
47,282
47,282
7,749
4,924
1,636
1,636
-
198,415
196,779
Dividend Payment Liabilities
Payment of dividend – regular shares
Payment of dividend – preferred shares
Payment of dividend – regular shares for prior years
(prior to 2003)
Payment of dividend – preferred shares for prior years
(prior to 2003)
Payment of dividend – regular shares for 2003
Payment of dividend – preferred shares for 2003
Payment of dividend – regular shares for 2004
Total dividend payment liabilities as at December 31
Dividend payables based on preferred shares for 2014 were recognized in the Bank's income statement for
the year 2014 in the amount of RSD 1,636 thousand.
The Bank had no liabilities for current income tax in 2014.
38
December 31, 2014
40.
EQUITY
The Bank's equity is includes issued capital, reserves, share issue premium, retained earnings and
accumulated losses.
The Bank's share capital is comprise of regular (common stock) shares and preferred cumulative and noncumulative shares.
ISSUED CAPITAL
Ordinary shares
Non-cumulative preferred shares
Cumulative preferred shares
Total issued capital
Other capital
Share issue premium
RESERVES
Revaluation reserves from valuation of intangible assets,
property, plant and equipment
Revaluation reserves from changes in fair value of securities
available for sale
Unrealized losses on securities available for sale
Actuarial losses per defined employee contribution plans
Total reserves
RETAINED EARNINGS
Prior years’ retained earnings
Current year’s retained earnings
Total retained earnings
Prior year losses
Equity as at December 31
December 31,
2014
December 31,
2013
9,900,866
6,745,961
54,544
16,701,371
1,543
2,563,562
7,589,230
6,745,961
54,544
14,389,735
1,543
2,563,562
229,089
231,517
1,808
(3,671)
(273)
226,953
3,826
(3,377)
231,966
6,538
107,539
114,077
7,198,838
12,408,668
5,334
5,334
7,198,838
9,993,302
Based on the Decision enacted by the Bank's Assembly as of January 3, 2013 and the Decision of the
Serbian Business Registers Agency no. BD 2422/2013 dated January 17, 2013, the Bank realized the 28th
share issue for the purpose of increasing core capital for the total of RSD 4,525,974 thousand, i.e. 91,360
non-cumulative preferred shares of the individual par value of RSD 49,540. The shares were purchased by
OTP Bank Ltd., Budapest and paid in cash.
Based on the Decision enacted by the Bank's Assembly as of January 15, 2014 and the Decision of the
Serbian Business Registers Agency no. BD 15253/2014 dated February 26, 2014, the Bank realized the
29th share issue for the purpose of increasing core capital for the total of RSD 2,311,635 thousand, i.e.
46.662 regular shares with the individual par value of RSD 49,540. The core capital was increased through
conversion of debt due to OTP Bank Ltd. Budapest into equity (Note 46).
As of December 31, 2014 the Bank had 199,856 ordinary shares with the individual par value of RSD
49,540 as well as 1,101 cumulative preferred shares with the individual par value of RSD 49,540 and
136,172 non-cumulative preferred shares with the individual par value of RSD 49,540.
The Bank recognizes cumulative preferred shares as complex financial instruments in accordance with IAS
32, paragraph 29.
39
December 31, 2014
40.
EQUITY (Continued)
Revaluation reserves from equity investments were formed by determining the market value of securities
available for sale.
Shareholder Structure
As of December 31, 2014, the Bank had the total of 67 shareholders (December 31, 2013: 68
shareholders). The shareholders’ structure as of December 31, 2014 with interest of over 1% and data on
the number of shares as registered in the Central Securities Depository and Clearing House were as
follows:
Ordinary Shares
Book
Value
Share
Count
%
of Interest
OTP ban .Rt. Budapest, Hungary
Home Art & Sales Services a.g.
Total
Other shareholders
9,597,879
265,832
9,863,711
37,155
193,740
5,366
199,106
750
96.93980%
2.68493%
99.62473%
0.37527%
Total ordinary shares
9,900,866
199,856
100.00000%
Book
Value
Share
Count
%
of Interest
Republic of Serbia
AIK Niš d.o.o., Niš
OTP bank. Rt. Budapest, Hungary
FAM a.d., Kruševac
Ambalažno staklo d.o.o, Paraćin
Mladost a.d. Odžaci
Kompanija Vojvodinaput a.d., Novi Sad.
SL Mitros a.d., Sremska Mitrovica
Zastava Promet a.d., Sombor
Total
Other shareholders
27,792
8,521
7,233
2,081
1,139
1,090
1,040
941
793
50,630
3,914
561
172
146
42
23
22
21
19
16
1,022
79
50.95368%
15.62216%
13.26067%
3.81471%
2.08901%
1.99818%
1.90736%
1.72570%
1.45322%
92.82471%
7.17529%
Total preferred cumulative shares
54,544
1,101
100.00000%
Book
Value
Share
Count
%
of Interest
OTP bank Rt. Budapest, Hungary
6,745,960
136,172
100.00000%
Total preferred non-cumulative shares
6,745,960
136,172
100.00000%
Shareholder
Preferred Cumulative Shares
Shareholder
Preferred Non-Cumulative Shares
Shareholder
Earnings per Share
The Bank did not calculate earnings per share given the fact it was deleted from the Register of Public
Companies under Decision of the Securities Commission no. 4/0-31-2040/3-12 dated May 21, 2012.
40
December 31, 2014
41.
42.
MANAGED FUNDS
December 31,
2014
December 31,
2013
Other corporate customers
Public sector
21,992
56,802
23,962
55,240
Total managed funds as at December 31
78,794
79,202
GUARANTEES AND OTHER SURETIES ISSUED, SURETIES TO SECURITIZE LIABILITY
SETTLEMENT, COLLATERALS, IRREVOCABLE COMMITMENTS AND OTHER LIABILITIES
December 31,
2014
December 31,
2013
822,860
1,671,526
14,744
12,214
194
2,521,538
463,364
974,774
14,744
17,460
1,470,342
1,977,551
47,275
341,403
12,165
4,546,364
1,823,910
December 31,
2014
December 31,
2013
Derivatives designated as risk hedging instruments at
contractual price - swaps
Derivatives held for trading at contractual price - swaps
4,291,414
2,675,383
-
Total derivatives as at December 31
4,291,414
2,675,383
Guarantees and other sureties issued
Payment guarantees
Performance bonds
Acceptances
Letters of credit
Letters of intent
Total guarantees and other sureties issued
Commitments for undrawn RSD loans and facilities, irrevocable
without prior notice
Other commitments, irrevocable without prior notice in RSD
Total guarantees and other sureties issued, sureties to
securitize liability settlement, collaterals, irrevocable
commitments and other liabilities as at December 31
43.
DERIVATIVES
As of December 31, 2014, the Bank had contracted swop transactions.
Receivables arising from the fair value changes in derivatives:
December 31, 2014
December 31, 2013
Fair value
Contracted
nominal amount
Derivatives held for trading
Currency swaps
Total
4,291,414
4,291,414
Assets
1,732
1,732
Liabilities
10,571
10,571
Fair value
Contracted
nominal amount
-
Assets
-
Liabilities
-
41
December 31, 2014
44.
OTHER OFF-BALANCE SHEET ASSETS
December 31,
2014
December 31,
2013
Received tangible asset collaterals
Guarantees and other sureties received
Revocable commitments
Savings bonds
Repo transactions
Spot transactions
Previously suspended interest
Other off-balance sheet assets
33,950,094
3,284,828
2,336,187
5,465,668
1,391,020
601,384
9,501,710
33,273
1,539,576
1,577,774
5,946,779
2,500,000
8,388,427
36,672
Other off-balance sheet assets as at December 31
56,564,164
19,989,228
As of December 31, 2014 the Bank recorded received tangible asset collaterals in the amount of RSD
33,950,094 thousand in accordance with the NBS regulations. The assets received include mortgage and
pledge liens instituted over property and movable assets.
45.
STATEMENT OF COMPREHENSIVE INCOME
Through the reclassification of financial assets available for sale, the Bank incurred a loss of RSD 786
thousand in 2014 and a loss of RSD 2,471 thousand in 2013.
46.
CASH AND CASH EQUIVALENTS
In RSD:
Gyro account
Cash on hand
Total RSD
In foreign currencies:
Cash on hand in foreign currencies
Cheques in foreign currencies
Other monetary items in foreign currencies
Total cash funds in foreign currencies
Gold and other precious metals
Total cash and cash equivalents as at December 31
December 31,
2014
December 31,
2013
2,824,806
511,213
3,336,019
2,406,203
558,661
2,964,864
86,551
266,058
20,987
373,596
18,424
154,003
255,669
277
12,947
422,896
15,601
3,728,039
3,403,361
For the purposes of the statement of cash flows, the Bank incudes the above listed items in cash and cash
equivalents.
47.
RELATED PARTY TRANSACTIONS
Transactions with related parties take the form of founder’s contributions, loans and deposits, provision
and purchase of services within regular operating transactions with subsidiaries and associates in which
the Bank holds significant equity interest or where the Bank has relations with the Parent Bank or an entity
related to the Parent Bank.
The following table presents the Bank’s total receivables and payables to and from related parties as of
December 31, 2014:
42
December 31, 2014
47.
RELATED PARTY TRANSACTIONS (Continued)
Receivables
Interest receivables
Receivables per derivatives held for trading
Other receivables
Receivables from payment card transactions
Loans per foreign currency repo transactions
Equity investments
Loans per transaction accounts and revolving loans
Deferred receivables for interest accrued per loans, deposits and other receivables in
foreign currencies
Deferred other foreign currency expenses
Total receivables
Payables
RSD transaction deposits
Earmarked deposits
Other RSD deposits
Overnight liabilities
Interest liabilities
Liabilities per derivatives held for trading
Trade payables
Accrued interest liabilities in RSD
Accrued liabilities for other accrued RSD expenses
Deferred income for receivables stated at amortized cost
Foreign currency transaction deposits
Foreign currency earmarked deposits
Other foreign currency deposits
Foreign currency trade payables
Subordinated liabilities
Accrued liabilities for interest on foreign currency subordinated liabilities
Accrued liabilities for other accrued foreign currency expenses
Accrued liabilities for interest on loans, deposits and other foreign currency liabilities
Deferred other foreign currency income
Total liabilities
OTP
Investments
OTP Factoring
26
203,783
-
1,160
123,210
203,809
484
17,000
13
27
17,526
OTP Bank LTD
Budapest
OTP Financing
Netherlands
R.E.Four
MOL Serbia
1,732
15,181
1,493,191
(247)
-
-
16
91
1
-
124,370
57
173
827
1,510,914
-
107
1
39
97
939
6
1,090
2,172
319,646
4,096
10,571
1,444
6,098
1,596
415
158
344,024
976,100
1,446
977,546
878
1,605
52
1,855
556
299,213
8,456
1,367
509
4
33
239,186
551,179
2
5,153
24,192
18
31,900
43
December 31, 2014
47.
Equity
Issued capital
Total equity
Total liabilities and equity
Total net
RSD guarantees and other sureties issued
Derivatives held for trading at contractual price
Other off-balance sheet assets – in foreign currency - repo transactions
Other off-balance sheet assets – Treasury transactions
Other off-balance sheet liabilities – revocable commitments
Total off-balance sheet items
OTP
Investments
OTP Factoring
OTP Bank LTD
Budapest
OTP Financing
Netherlands
R.E.Four
MOL Serbia
-
-
16,351,074
16,351,074
-
-
-
17,526
186,283
2,172
122,198
16,695,098
(15,184,184)
977,546
(977,546)
31,900
(31,793)
551,179
(551,178)
-
26,790
26,790
4,291,414
1,391,020
149,775
5,832,209
-
3,909
3,909
38,444
21,421
59,865
44
December 31, 2014
47.
The following table presents the Bank’s total receivables and payables to and from related parties as of December 31, 2013:
OTP
Investments
Receivables
Interest receivables
Fee and commission receivables
Receivables per derivatives held for trading
Other receivables
RSD suspense and temporary accounts
Receivables from payment card transactions
Equity investments
Loans per transaction accounts and revolving loans
Other foreign currency deposited funds
Deferred receivables for interest accrued per loans, deposits and other receivables in
foreign currencies
Total receivables
Payables
RSD transaction deposits
Earmarked deposits
Other RSD deposits
Overnight liabilities
Interest liabilities
Liabilities per derivatives held for trading
Trade payables
Accrued interest liabilities in RSD
Deferred income for receivables stated at amortized cost
Foreign currency transaction deposits
Foreign currency earmarked deposits
Other foreign currency deposits
Foreign currency trade payables
Accrued liabilities for interest in foreign currency
Deferred other foreign currency income
Total liabilities
OTP Factoring
OTP Bank LTD
Budapest
25
203,783
-
23
1
54
66,602
-
449
12,406
(566)
229,284
203,808
66,680
1,513
25,000
12
105
26,630
9,500
1,014
1
32
71
1,196
11,819
OTP Financing
Netherlands
R.E.Four
MOL Serbia
-
100
-
1
24
-
11
220
241,804
-
100
25
864
4,096
556,000
12,505
203
89
5,780
1,544
1,563
582,644
3,217,972
5,675
3,223,647
1,614
1,189
1,292
50
2,382
6,532
1,946
290
112,703
9,878
242
569
1
22
1,802
11,464
138,917
45
December 31, 2014
47.
OTP
Investments
Equity
Issued capital
Total equity
Total liabilities and equity
Total net
RSD guarantees and other sureties issued
Receivables/payables per currency derivatives
Commitments for loans per current accounts
Total off-balance sheet items
- - 26,630
177,178
-
OTP Factoring
OTP Bank LTD
Budapest
11,819
54,861
14,039,240
14,039,240
14,621,884
(14,380,080)
53,398
53,398
2,675,383
2,675,383
OTP Financing
Netherlands
- - 3,223,647
(3,223,647)
-
R.E.Four
MOL Serbia
6,532
(6,432)
138,917
(138,892)
-
16,800
16,800
46
December 31, 2014
47.
Foreign currency subordinated liabilities comprise the following amounts:
Contractual amount
EUR 8,069,722
Creditor
Debt balance as at
December 31, 2014
Ultimate
maturity date
Annual interest
rate
OTP Financing
Netherlands
EUR 8,069,722
September 5,
2018
3-month Euribor +
4.02% p.a.
As of January 9, 2013, the Bank repaid the subordinated debt due to OTP Financing Netherlands B.V. in
the amount of EUR 40 million on the maturity date in accordance with the Subordinated Loan Agreement
dated January 4, 2008.
As of April 29, 2013, the Bank repaid the subordinated debt due OTP Financing Netherlands B.V. in the
amount of CHF 24 million in accordance with the Subordinated Loan Agreement dated April 16, 2008.
As of June 10, 2013, the Bank repaid the subordinated debt due OTP Financing Netherlands B.V. in the
amount of EUR 40.2 million as well as the subordinated debt due to OTP Bank Ltd., Budapest in the
amount of EUR 442,663.31 on the maturity date, as in accordance with the Subordinated Loan Agreement
dated June 2, 2008 and the May 17, 2012 Receivable Transfer Agreement entered into by OTP Financing
Netherlands as the Transferor and OTP Bank Ltd., Budapest as the Acquirer.
As of January 9, 2014, OTP Banka Srbija a.d., Novi Sad received Notification on Assignment of
Receivables per Subordinated Debt by the Creditor OTP Financing Netherlands to the Parent Bank OTP
Bank LTD Budapest in the amount of EUR 20,000,000. The Agreement on Assignment of Receivables
(Cession) was entered into by and between OTP Financing Netherlands as the Assignor and OTP Bank
LTD Budapest as the Acquirer on January 6, 2014 relating to the assignment of receivables per Loan
Agreement executed on March 11, 2008 and subsequently amended by Annex to the Agreement dated
February 29, 2012 signed by OTP Bank Srbija a.d., Novi Sad as the Borrower and OTP Financing
Netherlands as the Creditor.
The change of creditor was made for the purpose of converting the subordinated debt into ordinary shares
for capital increase. In accordance with the aforesaid, and based on the Debt to Equity Conversion
Agreement executed on January 24, 2014 by and between OTP Bank Ltd., Budapest and OTP Banka
Srbija a.d., Novi Sad, the Bank's subordinated loan liability was derecognized (Note 40).
47
December 31, 2014
47.
Income and expenses from related party transactions in 2014 were as follows:
Income
Interest income
Fee and commissions income
Other operating income
Other income
Gains on the valuation of loans and receivables
Gains on the changes in fair value of derivatives
Foreign exchange gains - realized
Foreign exchange gains - unrealized
Total income
Expenses
Interest expenses
Fee and commissions expenses
Operating expenses
Losses on the impairment of balance sheet assets
Other expenses
Losses on the valuation of loans and receivables
Losses on the changes in fair value of derivatives
Foreign exchange losses - realized
Foreign exchange losses - unrealized
Total expenses
Total, net
OTP
Investments
OTP
Factoring
OTP Bank
LTD
Budapest
OTP
Financing
Netherlands
25
254
279
12,626
129
437
20
13,212
17,207
1,676
257,903
69,163
197,358
543,307
4,654
4,654
1,048
1,048
(769)
182
10,591
10,773
2,439
20,067
321
12,318
4
222,282
45,491
136,027
436,510
106,797
44,482
64,965
109,447
(104,793)
DSK Bank OTP Banka
Plc Slovensko
R.E. Four
MOL
Serbia
55
59
561
675
16
17
33
85
269
1,022
183
1,306
2,865
12,000
2
10,226
1,902
24,130
9
225
234
441
3
225
228
(195)
941
23,791
88
3,807
28,627
(25,762)
33,835
12,220
1
4,513
50,569
(26,439)
48
December 31, 2014
47.
Income and expenses from related party transactions in 2013 were as follows:
OTP
Investments
OTP
Factoring
OTP Bank
LTD
Budapest
OTP
Financing
Netherlands
11,124
108
537
22
11,791
33,235
1,570
274
331,675
72,856
177,424
617,034
472,761
472,761
1,801
55
11,053
12,909
9,689
20,744
30,433
1,932
374
614
99
1,071
469
2,098
6,657
11,800
1
10,614
1,320
23,735
707
10,299
11,006
785
26,185
203
13,073
203,326
30,588
169,920
443,295
173,739
288,924
366,339
655,263
(182,502)
12
14
8,024
8,050
4,859
54,641
54,641
(24,208)
1,395
40,828
2
6,035
48,260
(41,603)
43,229
11,227
1
291
1,927
56,675
(32,940)
DSK Bank OTP Banka
Plc Slovensko
R.E. Four
MOL
Serbia
Income
Interest income
Fee and commissions income
Gains on the impairment of balance sheet assets
Other income
Gains on the valuation of loans and receivables
Gains on the changes in fair value of derivatives
Foreign exchange gains - realized
Foreign exchange gains - unrealized
Total income
Expenses
Interest expenses
Fee and commissions expenses
Operating expenses
Other expenses
Losses on the valuation of loans and receivables
Losses on the changes in fair value of derivatives
Foreign exchange losses - realized
Foreign exchange losses - unrealized
Total expenses
Total, net
25
344
369
2,246
2,246
(1,877)
49
December 31, 2014
47.
In 2014 and 2013, the members of the Executive Board and Board of Directors were remunerated as
follows:
December 31,
2014
December 31,
2013
78,299
66,493
3,381
2,351
66,792
56,729
4,332
3,084
41
809
11,402
8,518
1,94
627
11,328
8,678
Gross salaries of Executive Board members
Net salaries of Executive Board members
Rental costs for Executive Board members
Use of company automobiles by the Executive Board members
Reimbursement of expenses incurred by the Executive Board
members
Mobile phone costs of Executive Board members
Gross remuneration to the Board of Directors
Net remuneration to the Board of Directors
48.
RISK MANAGEMENT POLICIES
48.1.
Liquidity Risk
Liquidity risk is associated with the adverse effects which the Bank’s inability to settle its liabilities when
due could have on the Bank’s financial result and equity.
The Bank continuously monitors its exposure to liquidity risk and its compliance with the set limits. During
2014 the Bank's liquidity was within the prescribed limits (liquidity and cash liquidity ratios).
Cash liquidity Liquidity ratio
ratio 2014
2014
As of December 31
Period's average
Maximum
Minimum
1.31
1.62
2.24
1.14
1.75
1.98
2.57
1.70
Liquidity ratio
2013
1.93
2.39
4.08
1.26
The Bank maintains the portfolio comprised of highly liquid securities (issued by the National Bank of
Serbia or the Republic of Serbia) and diversified assets that are easily convertible into cash in case of
unforeseen and adverse fluctuations in the Bank's cash flows. The Bank also maintains the required level
of dinar and foreign exchange reserve as required by the National Bank of Serbia.
The Bank may call on liquid assets of its Parent Bank and, therefore, in case of deteriorating liquidity due
to the financial market crisis the Bank may bridge its liquidity gap by borrowing from the Parent Bank.
The Bank's adopted policies and procedures i procedure ensure adequate asset management and
adequate liquidity level planning. In addition to the liquidity indicators prescribed by NBS< the bank uses
the following methods for measuring liquidity risk exposure:
•
•
•
Primary and operating liquidity level (liquid assets maturing up to a month and up to 3 months are
compared to target values covering liabilities maturing in the period under review, corporate sector
requirements and deposit shock, i.e., 99 percentile change in 3-month deposits);
Regular stress testing; and
Testing Contingency Financing Plan in Liquidity Crises.
For the needs of measuring and monitoring liquidity risk, the Bank measures and monitors net cash flows,
by keeping track of assets and liabilities according to their outstanding maturities, by measuring and
comparing cash inflows and outflows, i.e. through the GAP analysis.
Upon categorizing balance sheet items in the GAP report, the Bank observes the outstanding maturity
principle. The Bank compiles a GAP report for dinars (RSD) that make 56% the Bank’s total assets, as
well as for significant currencies that make more than 1% of the Bank’s total assets. Those currencies are
Euro, comprising 36% of the Bank's total assets, Swiss franc (CHF) comprising 5% and American dollar
(USD), comprising 3% of the Bank's total assets.
50
December 31, 2014
48.
RISK MANAGEMENT POLICIES (Continued)
48.1.
Liquidity Risk (Continued)
Total liquidity gap between the outstanding contractual maturities of financial assets and liabilities as of December 31, 2014 was as follows:
Cash and cash funds held with the central bank
Pledged financial assets
Financial assets at fair value through profit and loss, held for trading
Financial assets available for sale
Financial assets held to maturity
Loans and receivables due from banks and other financial institutions
Loans and receivables due from customers
Receivables per financial derivatives designated as risk hedging
instruments
Other assets
Total assets
Financial liabilities at fair value through profit and loss, held for trading
Liabilities per financial derivatives designated as risk hedging instruments
Deposits and other liabilities due to banks, other financial institutions and
the central bank
Deposits and other liabilities due to customers
Other liabilities
Total liabilities
Liquidity gap as of December 31, 2014
Liquidity gap as of December 31, 2013
Matured
Without
Contractually
Defined
Maturity
Total
3,747,298
20,987
17,520
3,805,246
398
108,026
6,175,546
1,732
3,964,221
21,609
3,022,812
24,950,874
9,852,471
-
3,747,298
-
2,485
70,699
3,916,937
-
108,424
10,571
176
2,485
136,376
38,275,655
10,571
176
888,063
977,545
175,126
2,040,734
7,811,737
5,773,313
274,674
274,674
3,472,624
1,603,526
76
107,208
107,285
3,809,652
3,270,027
932
183,867
195,545
(87,121)
(2,190,783)
569,400
25,928,019
977,545
175,126
27,660,837
10,614,818
8,232,142
Up to a
Month
From 1
to 3
Months
From 3
to 12
Months
From 1
to 5
Years
Over 5
Years
6,154,559
1,732
836,618
21,609
2,882,774
300,363
1,452,899
1,387,145
1,664,342
122,120
5,760,687
10,362
9,842,109
10,197,655
-
2,840,044
-
65,677
7,612,826
-
402,375
16,230,796
16,633,171
(6,435,516)
(23,645)
21,837
2,516,469
2,538,306
301,738
(1,333,675)
144,180
5,726,942
5,871,122
1,741,704
1,133,379
51
December 31, 2014
48.
48.1.
Liquidity Risk (Continued)
Liquidity Stress Test
In addition to the liquidity management in the normal course of business, the Bank does periodical stress
testing as well in order to identify and measure its liquidity risk exposure in extraordinary circumstances
and analyze its potential effects on the cash flows.
A stress test model entails a negative scenario based on the assumption that in extraordinary
circumstances five largest depositors (scenario "A") and ten largest depositors (scenario "B") will withdraw
their deposits.
Total outflow of deposits in scenario A would amount to RSD 5,084,838 thousand and in scenario B RSD
6,426,059 thousand.
Up to a
Month
Financial assets
Scenario "A"
Scenario "B"
Financial liabilities
Scenario "A"
Scenario "B"
Gap as at Dec 31, 2014
Scenario "A"
Scenario "B"
10,197,655
5,112,818
3,771,596
16,633,171
12,028,111
10,927,597
(6,435,516)
(6,915,293)
(7,156,001)
From 1 to 3 From 3 to From 1 to 5
12 Months
Months
Years
2,840,044
2,840,044
2,840,044
2,538,306
2,239,037
2,239,037
301,738
601,007
601,007
7,612,826
7,612,826
7,612,826
5,871,121
5,862,778
5,622,070
1,741,705
1,750,048
1,990,756
9,852,471
9,852,471
9,852,471
2,040,735
2,038,028
2,038,028
7,811,736
7,814,443
7,814,443
Over 5
Years
Matured
3,747,298
3,747,298
3,747,298
274,674
105,216
105,216
3,472,624
3,642,082
3,642,082
3,916,937
3,916,937
3,916,937
107,285
107,285
107,285
3,809,652
3,809,652
3,809,652
Without
Contractually
Defined
Maturity
108,424
108,424
108,424
195,545
195,545
195,545
(87,121)
(87,121)
(87,121)
Total
38,275,655
33,190,817
31,849,596
27,660,837
22,576,000
21,234,778
-
Negative gap would arise in the first bucket because this bucket includes the total transaction deposits of
the Bank's customers (RSD 10.3 billion) although their withdrawal could not be expected in the ensuing
month. Given the fact that the Bank has at its disposal RSD 2.8 billion invested in the Interbank Market as
well as RSD 3.95 billion invested in Treasury bills with maximum maturity of up to a year, by way of their
partial sales the Bank could timely pay out early withdrawal of deposits in the assumed stress situations
using a very conservative approach.
On the other hand, when expected maturities are modified using the methodology of regrouping deposits
based on their historical movements over the past 5 years, in the worst case (99% VaR), 24.74% of
transaction deposits could be withdrawn during a month, while 75% comprises stable deposits (with
expected maturities of over 2 years). In such an instance, the first bucket would be positive and the gap
would amount to RSD 1,537,496 thousand. Given the aforesaid, the stress test revealed that, in the event
of withdrawal of deposits by both 5 and 10 largest depositors, the Bank would manage to fulfill its
obligations. If there were to be certain disorders in the ensuing period, i.e. if early warning indicators were
to be exceeded, the Bank would respond in accordance with the Contingency Financing Plan in Liquidity
Crises where both short-term and long-term measures for liquidity improvement are clearly defined.
48.2.
Interest Rate Risk
Interest rate risk reflects the uncertainty with respect to the Bank's revenues and capital due to possible
fluctuations in interest rates. Interest rate risk exposure depends on the Bank's interest-bearing assets
relative to its interest-bearing liabilities.
The basic principle of managing interest rate risk arising from the Banking book is the principle of matching
financial assets and liabilities per interest rate type (fixed or variable) and per maturity, i.e. per date of
interest rate adjustment. The Bank informs the ALCO on the proportion of interest-sensitive assets and
liabilities and on the compliance of the interest rate risk with the internally prescribed limits on a monthly
basis.
For the purpose of measuring interest rate risk exposure, the Bank uses the GAP analysis (mismatch
analysis). The size of mismatch (GAP) for a certain time interval is indicative of the Bank's exposure to
repricing risk.
52
December 31, 2014
48.
48.2.
Interest Rate Risk (Continued)
The following table shows the Bank's exposure to interest rate risk as of December 31, 2014:
Cash and cash funds held with the
central bank
Fixed interest rate
Non-interest bearing
Financial assets at fair value
through profit and loss, held for
trading
Fixed interest rate
Fixed interest rate
Loans and receivables due from
banks and other financial
institutions
Fixed interest rate
Variable interest rate
customers
Fixed interest rate
Receivables per derivatives
designated as risk hedging
instruments
Fixed interest rate
Other assets
TOTAL ASSETS
Financial liabilities at fair value
trading
Fixed interest rate
Liabilities per derivatives
instruments
Fixed interest rate
Deposits and other liabilities due to
banks, other financial institutions
and the central bank
Fixed interest rate
Deposits and other liabilities due to
customers
Fixed interest rate
Other liabilities
Fixed interest rate
Up to 30 Days
From 30 to
90 Days
From 90 to
180 Days
From 180 to
360 Days
From 1 to 2
Years
Over 2
Years
Non-Interest
Bearing
Total
2,824,806
2,824,806
-
-
-
-
-
-
3,350,740
3,350,740
6,175,546
2,824,806
3,350,740
836,618
836,618
21,609
21,609
1,452,899
1,452,899
-
748,879
748,879
-
915,463
915,463
-
-
-
1,732
10,362
10,362
-
1,732
3,964,221
3,953,859
10,362
21,609
21,609
2,934,989
2,811,779
123,210
-
-
-
-
-
87,823
87,753
70
3,022,812
2,899,532
123,280
6,280,107
1,475,013
4,805,094
6,112,679
317,302
5,795,377
8,265,342
496,874
7,768,468
1,074,345
1,043,915
30,430
429,062
429,062
-
1,979,395
1,979,395
-
809,944
648,515
161,429
24,950,874
6,390,076
18,560,798
2,485
2,485
-
-
-
-
-
-
136,376
136,376
2,485
2,485
136,376
136,376
12,900,614
7,565,578
9,014,221
1,989,808
429,062
1,979,395
4,396,978
38,275,655
5,641
5,641
-
-
-
-
-
4,930
4,930
10,571
5,641
4,930
176
176
-
-
-
-
-
-
176
176
410,946
391,946
19,000
-
19,837
19,837
-
127,180
127,180
-
-
-
-
11,437
11,437
569,400
538,963
19,000
-
16,421,107
14,080,608
2,340,499
-
2,301,823
2,301,823
976,100
976,100
-
2,226,763
2,226,763
-
3,020,300
3,020,300
-
462,735
462,735
-
511,211
511,211
-
984,080
984,080
1,445
1,445
175,126
175,126
25,928,019
22,603,441
2,340,499
977,545
976,100
1,445
175,126
175,126
1,177,018
27,660,837
TOTAL LIABILITIES
16,837,870
3,297,760
2,353,943
3,020,300
462,735
511,211
GAP at December 31, 2014
CUMULATIVE GAP
at December 31, 2014
GAP at December 31, 2013
CUMULATIVE GAP
at December 31, 2013
(3,937,256)
4,267,818
6,660,278
(1,030,492)
(33,673)
1,468,184
-
(3,937,256)
(1,950,495)
330,562
1,068,663
6,990,840
3,953,235
5,960,348
(1,273,181)
5,926,675
(478,066)
7,394,859
(887,388)
-
3,071,403
1,798,222
432,768
-
(1,950,495)
(881,832)
1,320,156
As of December 31, 2014, the Bank realized total positive GAP of RSD 7,394,859 thousand.
53
December 31, 2014
48.
48.2.
Overview of the Interest Rates of OTP Bank for 2014
RSD
EUR
Financial assets
1)
2)
3)
5.80%-10.30% ON
1. Deposits due from banks
2. Obligatory reserve – interest-bearing portion
0.10%-1.97% ON
1.53%-1.71% 1W
1.38%-1.56% 1M
2.50%
3. Short-term loans to customers
a) large-sized corporate customers
from DF IR + 3%
b) SME and entrepreneurs – corporate
DF IR +4.80% to DF IR +8.80%
c) small sized entities and entrepreneurs – retail*
DF IR +7.5% to DF IR +15.5%
d) retail clients – private individuals
0% - 28.95%
4. Long-term loans to customers
a) large-sized corporate customers
from DF IR + 3.5%
b) SME and entrepreneurs – corporate
DF IR +5.00% do DF IR +8.80%
c) small sized entities and entrepreneurs – retail*
DF IR +7.5% do DF IR +15.5%
From 3M Euribor + 4.2%
3M Euribor+6.00% to 3M
Euribor+10.00%
Euribor+15%
1% - 18.95%
from 3M Euribor + 4.70%
Euribor+10.80%
Euribor+15%
0% - 35.75%
4.16% - 4.16%
4%-10.50% ON
1) 0.05%-0.35% ON
2) 1.76% 1W
3) 1.82% 3M
1. Deposits due to banks
2. Deposits and liabilities due to customers
a) SME and large-sized entities
b) JLS, AP and RS
c) entrepreneurs
1) from DF IR - – 2.35% to
DF IR - 0.85%
(on term deposits)
2) 0.0% to 2.00%
(on ON deposits)
1) discount NBS rate
(on term deposits)
2) 0.0% to discount NBS rate
(on demand and ON deposits)
from 5% to 7% (on term deposits)
from 0.8% to 2% (on term deposits)
0 -25%
0 -10%
0.80% to 2.00%
(on term deposits)
Based on the GAP report on the interest-sensitive assets and liabilities, ALM and MO Unit calculates he
sensitivity of the economic value of the Bank's equity to the interest rate fluctuations.
The acceptable level of interest rate risk is defined by the limit of the maximum possible sensitivity of the
Bank's net assets to the fluctuations in the market interest rates. The Bank examines several scenarios
involving the parallel shifting of the yield curve as well as scenarios of the changes to the yield curve
slopes (yield curve risk). Sensitivity to changes in interest rate risk is performed for each significant
currency.
54
December 31, 2014
48.
48.2.
Scenario Analysis
In addition to the GAP analyses, interest rate risk is also monitored by way of scenario analysis i.e. by
observing the impact of interest rate fluctuations on the Bank's economic value of equity. The scenario
analysis includes interest bearing items from the banking book.
RSD
FX
Scenario 1
Scenario 1 (+200)
Scenario 2 (-200)
Scenario 3 (+100)
Scenario 4 (-100)
Scenario 5 (200; 150; 100; 0; 100; 200)
Scenario 6 (-100; -75; -50; 0; -50; -100)
Scenario 7 (0; 100; 150; 200)
Scenario 8 (0; -100; -150; -200)
531
-393,199
57,787
-325,486
-115,512
-367,433
-134,742
-396,193
51,032
Promena EVE (najlošiji scenario)
-396,193
Scenario 2
Scenario 3
Scenario 4
Scenario 5
Scenario 6
-520
400;300;200;0;200;300 -400;-300;-200;0;-200;-300 0;200;300;400 0;-200;-300;-400
93,109
-286,114
-22,720
-246,420
-63,606
544,095
164,872
428,267
204,567
387,381
160,822
-218,401
44,993
-178,707
4,107
370,796
-8,427
254,967
31,267
214,081
118,875
-260,348
3,047
-220,653
-37,839
351,566
-27,657
235,737
12,038
194,851
90,115
-289,108
-25,714
-249,414
-66,600
537,340
158,117
421,511
197,811
380,625
Economic value of equity is defined as the net present value of all expected cash flows of the Bank.
The process of the scenario analysis is comprised of two steps:
a)
b)
Defining scenario of the change in interest rate, and
Valuation of interest bearing items under selected scenarios.
Change to the economic value of equity is calculated separately for each major currency. Major currencies
are those that make above 1% of the Bank’s total assets. For each major currency adequate yield curve
was taken into consideration.
The Bank defined the following scenarios of changes to interest rates:
a)
b)
c)
d)
48.3.
Parallel shift of each yield curve by +/- 200 bp,100 bp (except for RSD currency);
Steep yield curve – changes in the slope of the yield curve are assumed for the following periods: up
to 3 months; from 3 months to 3 years; from 3 ears to 10 years; over 10 years:
- for FX: 0; ±100 bp; ±150 bp; ±200 bp
- for RSD: 0; ±200 bp; ±300 bp; ±400 bp
Yield curve with amplitude – changes in the slope of the yield curve are assumed for the following
periods: up to 3 months; from 3 months to year; form 1 year to 3 years; from 3 to 4 years; from 4 to
10 years; over 10 years:
- case 1 for FX: +200 bp; +150 bp; +100 bp; 0; +100 bp; +200 bp.
- case 2 for FX: -100 bp; -75 bp; -50 bp; 0; -50 bp; -100 bp.
- for RSD: ±400 bp; ±300 bp; ±200 bp; 0; ±200 bp; ±300 bp.
1% and 99% percentile of the changes to interest rates under review using changes within the time
frame of one year and minimum 5 years of observations (only for RSD).
Foreign Currency Risk
Foreign currency risk is the risk from adverse effects on the Bank's financial result and its equity caused by
changes in the foreign currency to dinar exchange rate.
The exposure to foreign currency risk based on a certain currency represents potential changes in the
value of receivables and payables of the Bank denominated in the given currency which may be ascribed
to the movements in the exchange rate. Foreign currency risk arising from a certain currency is measured
as the difference between the total amount of receivables and total amount of payables expressed in that
currency (foreign currency gap).
55
December 31, 2014
48.
48.3.
Foreign Currency Risk (Continued)
The foreign currency risk ratio is the ratio of the total net foreign currency gap and the Bank's capital. The
Bank is obligated to ensure that its total net foreign currency gap does not exceed 20% of its regulatory
capital.
Item
ASSETS
Cash and cash funds held with the
central bank
trading
institutions
customers
Receivables per financial
derivatives
instruments
Invesments in subsidiaries
Intangible assets
Property, plant and equipment
Investment property
Deferred tax assets
Non-current assets held for sale
and assets from discontinued
operations
Other assets
TOTAL ASSETS (I)
LIABILITIES
trading
Liabilities per financial derivatives
instruments
Deposits and other liabilities due
to banks, other financial
institutions and the central bank
to customers
Provisions
Other liabilities
TOTAL LIABILITIES (II)
BALANCE GAP (III=I-II)
Net forward position affecting
the
foreign currency risk OFFBALANCE (IV)
NET FOREIGN CURRENCY GAP
(III+IV) as of December 31, 2014
NET FOREIGN CURRENCY GAP
(III+IV) as of December 31, 2013
EUR
Indexed
EUR
CHF
Indexed
CHF
USD
2,589,303
-
11,608
-
-
-
-
-
-
1,575,879
Indexed
USD
Other
RSD
Total
214,665
5,527
3,354,443
6,175,546
-
-
-
1,732
1,732
-
-
-
-
3,964,221
21,609
3,964,221
21,609
-
6,301
-
58,698
7,008
1,374,926
3,022,812
10,502,992 10,323,832
1,875,950
1,875,950
1,104,504
-
11,467,428
24,950,874
-
-
2,485
203,783
78,952
1,768,266
23,997
7,264
2,485
203,783
78,952
1,768,266
23,997
7,264
- 995,093
12,535
34,034
347,485
22,650,625
34,034
448,754
40,704,329
-
-
-
- 97,804
75,846
14,765,978 10,399,678
-
-
- 1,893,859
-
-
-
995,093
-
- - 3,465
1,875,950
1,381,332
-
-
-
-
-
-
-
-
10,571
10,571
-
-
-
-
-
-
-
176
176
187,379
-
390
-
1,614
-
123
379,894
569,400
4
33,943
2,945
36,892
-
199,006
199,396
1,694,463
-
445,038
1,779
448,431
932,901
-
37,527
17
37,667
(25,132)
10,685,924
167,334
561,740
11,805,639
-
25,928,019
977,545
213,780
596,170
28,295,661
-
(1,692,209)
-
(934,203)
-
23,220
-
-
14,560,524
977,545
46,446
32,634
15,804,528
(1,038,550)
800,149
-
(238,401)
-
2,254
-
(1,302)
-
(1,912)
-
(241,615)
(11,557)
-
(2,059)
-
1,798
-
233
-
(13,620)
The process of foreign currency risk management in the Bank is in compliance with the limits set by the
National Bank of Serbia, as well as internally-prescribed limits, which are by far more rigid. The limits of
foreign currency risk are set so that the Bank protects itself against significant losses contingent on the
movements in foreign currency to RSD exchange rates.
The Bank manages foreign currency risk in an effective manner as evidenced by the foreign currency risk
ratio, which in 2014 equaled 0.79%, the average, which is within the limit prescribed by the National Bank
of Serbia.
On the last day of the year 2014, the foreign currency risk ratio equaled 3.46%.
56
December 31, 2014
48.
48.3.
Foreign Currency Risk (Continued)
Sensitivity Analysis
The following table provides details of the assessed effects of the middle exchange rate rise of 3%, 5%
and 10% and their application on the amount of open currency gap for each individual foreign currency
and on net open currency gap and subsequently the isolated effect of the newly obtained net open
currency gaps on the financial result of the Bank, its capital and foreign exchange risk ratio.
In RSD ’000
CAD
CHF
EUR
GBP
SEK
USD
Net currency gap
Gold
December 31, 2014
Stress +3%
Middle
Open
Open
Open Net impact
exchange currency currency currency
on the
rate gap (FX) gap (RSD)
gap
result
85,7495
(2)
(207)
(213)
(6)
100,5472
22
2,254
2,322
68
120,9583
(1,971) (238,401) (245,553)
(7,152)
154,8365
(11)
(1,702)
(1,753)
(51)
12,8395
(3)
(3)
99,4641
(13)
(1,302)
(1,341)
(39)
241,615
248,863
18,282
18,830
Net impact on the financial result
Financial result (cumulative)
% of the profit for the year
Capital
Foreign exchange risk ratio
Stress +5%
Open
Net
currency impact on
gap the result
(217)
(10)
2,367
113
(250,321)
(11,920)
(1,787)
(85)
(3)
(1,367)
(65)
253,696
19,196
Stress +10%
Open
Net
currency impact on
gap the result
(228)
(21)
2,479
225
(262,241)
(23,840)
(1,872)
(170)
(3)
(1,432)
(130)
265,777
20,110
(11,967)
(23,936)
(7,180)
107,539
7,519,138
3.46%
100,359
6.68%
7,511,958
3.56%
95,572
11.13%
7,507,171
3.64%
83,603
22.26%
7,495,202
3.81%
Based on the analysis presented in the table above, even in the instance of increase in exchange rates of
10% , the foreign exchange risk ratio would still remain far below the prescribed limit of 20%.
48.4.
Credit Risk
The Bank is exposed to credit risk when approving loans and that risk represents a possibility that the
borrower shall became incapable to fulfill due obligations, partially or in full. The Bank’s internal acts,
business policies and procedures require identification, measurement and assessment of credit risk
according to debtor’s creditworthiness, profitability and regularity in settlement of obligations toward the
Bank, as well as the quality of collateral.
The Bank assesses the recoverable value, i.e. loss on each loan prior to its approval through analyses that
are in accordance with the prescribed credit analyses, and periodically (monthly) during the business
relationship.
Provisions for risks of potential losses are assessed pursuant to the internal methodology in accordance
with IAS 39, as well as the regulations of the National Bank of Serbia. The amount of provisions against
loan losses carried at amortized cost is computed by discounting future cash flows.
In accordance with its internally adopted procedures, the Bank assesses whether there is objective
evidence of impairment in financial assets at each reporting date. Most common objective evidence
includes: customers' significant financial difficulties, breach of contract, insolvency and liquidation. Should
it be determined that there is objective evidence of impairment in financial assets, the amount of allowance
for impairment is determined as the difference between the asset's carrying value and the present value of
future cash flows calculated applying the effective interest rate of the financial asset. The projections of
expected cash flows to be collected take into account the financial position of a customer, as well as the
agreement achieved with the customer, value, quality and marketability of collaterals provided. The
allowance for impairment of balance sheet assets calculated in this manner and provisions for losses on
off-balance sheet items are charged to the Bank's expenses
The assessment of objective evidence of impairment is carried out on individual basis for individually
significant financial assets. The assets that are individually assessed for impairment with their respective
allowance for impairment recorded are not taken into account in the group assessment. .
57
December 31, 2014
48.
48.4.
Credit Risk (Continued)
The assessment is made on a portfolio basis (group assessment) for all assets that are not individually
significant and for impairments that are likely to be found in the portfolio but for which there is no objective
evidence of individual impairment. Group level assessment is diversified according to criteria based on the
type of debtor, type of asset and its maturity, into subgroups with similar characteristics.
Special reserve for potential losses is determined in accordance with the relevant NBS regulations. Loans,
receivables and other Bank exposures are classified into the categories A, B, V, G and D, in accordance
with the evaluation of their collectability, depending on: the number of days the payments of principal and
interest due are in arrears, evaluation of the debtor financial standing and credit worthiness and quality of
collaterals. The estimated amount of special reserve for potential losses is calculated by applying the
following percentages per loan category: A - 0%, B - 2%, V - 15%, G - 30% and D – 100%.
The amount of the required special reserve for potential losses represents the sum of determined positive
differences between the reserve for estimated losses calculated according to the NBS regulations (Official
Gazette of RS nos. 94/11, 57/12, 123/12, 43/13, 113/13 and 135/14) and the calculated amount of
allowance for impairment of balance sheet assets and provisions for losses per off-balance sheet items
determined in accordance with the Bank’s internal methodology.
48.4.1. Credit Commitments
Guarantees, other forms of sureties and letters of credit issued are irrevocable commitments that the Bank
will make payment in case the customer is unable to settle its liabilities towards third parties when due and
are therefore treated as loan equivalents. Credit commitments also represent unused portions of frame
loans (revolving loans, current account overdrafts, credit cards and the like), which are treated depending
on the cancellability and outstanding maturity.
Given that credit risk is associated with credit commitments, the Bank may incur loss in the amount
equaling total undrawn funds. However, the anticipated amount of loss is below the total undrawn funds.
The Bank makes provisions and includes those within expenses for commitments according to its internal
methodology for loans and receivables.
48.4.1.1. Maximum Credit Risk Exposure before Receiving Collaterals and other Means that Improve
Securities' Credit Rating
The table below represents the maximum credit risk exposure without reference to collaterals or other
means that improve securities' credit rating.
December 31,
2014
December 31,
2013
Loans and receivables due from banks and other financial
institutions
Other assets
4,439,967
73,087
2,736,488
51,478
3,369,071
37,806,125
358,079
810,238
33,479,325
416,555
Maximum gross exposure per balance sheet assets
46,046,329
37,494,084
58
December 31, 2014
48.
48.4.
Credit Risk (Continued)
48.4.1.1. Maximum Credit Risk Exposure before Receiving Collaterals and other Means that Improve
Securities' Credit Rating (Continued)
December 31,
2014
December 31,
2013
Payment guarantees
Performance bonds
Acceptances
Letters of credit
Irrevocable commitments
Receivables from derivatives
Other off-balance sheet assets
822,860
1,581,154
14,745
12,214
2,025,019
2,937,578
463,364
974,774
14,745
17,460
353,567
2,675,383
1,577,775
Maximum gross exposure per off-balance sheet items
7,393,570
6,077,068
48.4.2. Loans
Total provisions for impairment of loans amounted to RSD 13,009,828 thousand (2013: RSD 13,061,124
thousand), out of which RSD 10,203,275 thousand represents provisions for individual impairment of
loans, whereas the remaining balance of RSD 2,806,553 thousand refers to group-level provisions.
Impairment
Allowance
for Loans
Impaired on a
Group Level
Total
Impairment
Allowance
Total Net
Neither Due
nor Impaired
Due
but not
Impaired
Impaired
Impairment
Allowance for
Loans Impaired
Individually
Housing loans
Overdrafts
Cash loans
Credit cards
Consumer loans
Other consumer loans
SME
Corporate
Municipalities
Loans to banks
2,717,669
245,885
5,540,044
454,643
11,596
494,993
628,569
9,387,549
2,933,137
57,944
16,665
1,707
1,422
11
28,047
77,099
62,776
90,763
1,777,166
273,697
1,477,310
501,781
67,023
392,858
2,483,820
11,104,151
1,700
345,171
707,617
213
4,819
143,516
1,384,833
7,617,133
345,144
179,407
262,995
988,549
394,861
65,539
131,688
684,076
97,714
1,700
24
887,024
263,208
988,549
399,680
65,539
275,204
2,068,909
7,714,847
1,700
345,168
3,665,755
273,039
6,030,512
558,166
13,091
640,694
1,120,579
12,839,629
3,023,903
At December 31, 2014
22,414,085
336,434
18,424,677
10,203,275
2,806,553
13,009,828
28,165,368
Impairment
Allowance
for Loans
Impaired on a
Group Level
Total
Impairment
Allowance
Total Net
Neither Due
nor Impaired
Due
but not
Impaired
Impaired
Impairment
Allowance for
Loans Impaired
Individually
Housing loans
Overdrafts
Cash loans
Credit cards
Consumer loans
SME
Corporate
Municipalities
Loans to banks
2,635,003
267,446
4,901,824
543,042
24,458
281,216
426,490
5,946,751
355,203
52,882
4,055
1,560
1,633
33
15,737
100,128
107,997
166,580
1,625,323
258,060
1,162,762
485,556
67,885
353,919
2,528,500
11,685,364
1,700
288,455
612,697
199
4,429
124,172
1,384,011
8,116,388
288,455
173,925
248,789
740,173
366,782
63,855
117,658
678,349
139,542
1,700
-
786,622
248,988
740,173
371,211
63,855
241,830
2,062,360
8,255,930
1,700
288,455
3,526,586
280,573
5,325,973
659,020
28,521
409,042
992,758
9,484,183
521,783
15,381,433
450,605
18,457,525
10,530,351
2,530,773
13,061,124
21,228,439
59
December 31, 2014
48.
48.4.2. Loans (Continued)
48.4.2.1. Loans neither Due nor Impaired
The Bank improved the loan portfolio credit quality in 2014 as compared to 2013 by adequate loan
monitoring, new loan approvals and decisions on write-off. Loans neither due not impaired account for
54.44% of all loans.
Performing
Loans
Special Watch
Loans
Loans below
Average
Doubtful
Loans
Bad Loans
Total
Housing loans
Overdrafts
Cash loans
Credit cards
Consumer loans
SME
Corporate
Loans to banks
2,597,850
245,885
5,539,866
454,528
11,536
480,540
609,334
9,382,552
2,933,137
24,992
124
1,849
2,305
-
14,641
54
115
60
2,929
11,876
4,997
-
17,588
4,645
5,054
-
62,598
5,030
-
2,717,669
245,885
5,540,044
454,643
11,596
494,993
628,569
9,387,549
2,933,137
22,255,228
29,270
34,672
27,287
67,628
22,414,085
Performing
Loans
Special Watch
Loans
Loans below
Average
Doubtful
Loans
Bad Loans
Total
Housing loans
Overdrafts
Cash loans
Credit cards
Consumer loans
SME
Corporate
Loans to banks
2,528,910
267,432
4,901,824
542,929
24,337
268,720
404,999
5,800,296
355,203
11,836
1,157
143,492
-
27,335
14
105
121
207
18,461
2,963
-
25,849
8
3,807
3,030
-
41,073
7,325
-
2,635,003
267,446
4,901,824
543,042
24,458
281,216
426,490
5,946,751
355,203
15,094,650
156,485
49,206
32,694
48,398
15,381,433
48.4.2.2. Loans Due but not Impaired
The gross amount of loans according to customer classes that are in default but are not impaired was as
follows:
Housing loans
Overdrafts
Cash loans
Credit cards
Consumer loans
SME
Corporate
Municipalities
Loans to banks
Collateral fair value
Up to 30 Days
Past Due
31-60 Days
Past Due
61-90 Days
Past Due
91-180 Days
Past Due
180-365 Days
Past Due
1-5 Years
Past Due
Maturing
after 5 Years
Total
1,790
16,665
1,631
1,403
11
6,712
19,902
22,472
88,503
159,089
433
20
505
36,492
12
37,462
687
32
27
4
749
447
44
19
95
517
2
1,124
4,066
944
6,424
16
11,450
36,208
13,552
48,408
3,812
101,980
14,313
6,697
1,340
2,230
24,580
57,944
16,665
1,707
1,422
11
28,047
77,099
62,776
90,763
336,434
18,355
37,450
749
605
6,528
63,506
22,350
149,544
60
December 31, 2014
48.
48.4.2.2. Loans Due but not Impaired (Continued)
Up to 30 Days
Past Due
31-60 Days
Past Due
61-90 Days
Past Due
91-180 Days
Past Due
180-365 Days
Past Due
1-5 Years
Past Due
Maturing
after 5 Years
Total
821
4,053
1,291
1,624
33
59
43,957
63,224
164,449
279,511
697
119
6
197
1,019
251
2,306
40,342
42,899
474
2
42
6
5
44
573
2,829
3
1,275
48,413
52,520
45,549
108
12,086
7,517
4,431
69,691
2,261
2,131
4,392
52,882
4,055
1,560
1,633
33
15,737
100,128
107,997
166,580
450,605
48,876
1,019
42,881
524
5,161
67,886
2,261
168,607
Housing loans
Overdrafts
Cash loans
Credit cards
Consumer loans
SME
Corporate
Loans to banks
Collateral fair value
Collaterals
In accordance with the regulations and the Bank's internally adopted bylaws, the Bank is under obligation
to ensure a timely collateral valuation for realized loans. The fair value of the collaterals held by the Bank
is provided in the table below:
Collateral type
Mortgage liens
Deposits
Pledge liens
Guarantees
Number of collaterals
held by the Bank
Appraised
collateral value
in RSD ‘000
4,050
560
445
11
34,901,010
496,772
13,191,159
3,947,459
Fair value of foreclosed collaterals is provided below:
Year
Fair value
2014
2013
389,602
84,704
48.4.2.3. Restructured Loans
Loan restructuring activities are performed when it is highly unlikely that the debtor will be able to settle the
liability towards the Bank in full and in accordance with the terms stipulated in the relevant loan
agreement. The restructuring activities include redefining debtor-creditor relations by way of replacing all
balance sheet receivables or their larger part, extending repayment dates for principal or interest,
decreasing interest rate or amount receivable. If, after such reschedule, the debtor’s settlement of liabilities
is regular, such a loan is no longer treated as non-performing. The decision on loan rescheduling is enacted
when the Bank, once having reviewed the financial standing of a customer, its program for financial
consolidation and its market potential, determines that the restructuring or rescheduling of the liabilities
could assist the customer in overcoming the current difficulties in operations and resume timely discharge of
its financial liabilities through future business operation and financial results.
In the course of 2014 the Bank restructured/rescheduled loans in the aggregate amount of EUR 31,588
thousand.
48.4.2.4. Risk Concentration in Financial Assets Exposed to Credit Risk
The risk concentrations occur due to financial instruments with similar characteristics which are similarly
influenced by the changes in economic and other conditions.
61
December 31, 2014
48.
48.4.2.4. Risk Concentration in Financial Assets Exposed to Credit Risk (Continued)
a) Concentration per Region
The following tables provide the breakdown of the Bank’s major exposures based on the carrying values,
categorized based on geographic regions at December 31, 2014 and 2013. For the purpose of preparing
these tables, the Bank determined the exposures per regions of the Republic of Serbia.
Loans and receivables due from banks and
other financial institutions
Other assets
Maximum exposure per balance
sheet assets as of December 31, 2014
Other assets
Vojvodina
Belgrade
Serbia
Total
4,218,515
38,805
99,782
6,973
121,670
27,309
4,439,967
73,087
3,368,725
17,848,029
173,207
330
8,307,404
60,890
16
11,650,692
123,982
3,369,071
37,806,125
358,079
25,647,281
8,475,379
11,923,669
46,046,329
Vojvodina
Belgrade
Serbia
Total
2,490,713
38,805
121,955
6,973
123,820
5,700
2,736,488
51,478
810,230
16,312,834
172,407
8
6,740,382
76,224
10,426,109
167,924
810,238
33,479,325
416,555
19,824,989
6,945,542
10,723,553
37,494,084
62
December 31, 2014
48.
48.4.2.4. Risk Concentration in Financial Assets Exposed to Credit Risk (Continued)
b)
Concentration per Industry
The following table presents the values of Bank’s exposures per different industry sectors the Bank’s customers belong to.
Other assets
Other assets
Finance
Sector
1,075
-
Manufacture
209,846
33,609
Real
Estate
1,337
973
Trade
1,158
Public
Sector
3,920,448
-
Other
9,195
-
Entrepreneurs
-
Retail
-
Bankrupt
Clients
298,066
37,347
Total
4,439,967
73,087
3,369,071
9,719
8,441,051
124,715
370,942
12,502
3,287,528
26,924
42,333
4,023
3,424,248
8,659
683,212
22,504
14,060,609
32,647
7,496,202
116,386
3,369,071
37,806,125
358,079
3,379,865
8,809,221
385,754
3,315,610
3,966,804
3,442,102
705,716
14,093,256
7,948,001
46,046,329
Finance
Sector
Manufacture
Real
Estate
Trade
Public
Sector
Other
Entrepreneurs
Retail
Bankrupt
Clients
Total
5,297
-
229,947
12,000
1,360
973
1,158
2,193,000
-
9,195
-
-
-
297,689
37,347
2,736,488
51,478
810,238
11,059
5,551,097
87,539
943,925
19,471
2,749,686
40,872
67,010
4,213
2,270,601
10,956
592,844
31,156
12,682,394
60,044
8,621,768
151,245
810,238
33,479,325
416,555
826,594
5,880,583
965,729
2,791,716
2,264,223
2,290,752
624,000
12,742,438
9,108,049
37,494,084
63
December 31, 2014
48.
48.5.
Operational Risk
Operational risk is the risk from potential adverse effects on the Bank’s financial result and equity due to
(intentional or accidental) omissions or errors in the work of employees, inadequate internal procedures
and processes, inadequate information and other systems in the Bank, as well as due to unforeseen
external events. Operational risk also includes legal risk.
The process of operational risk management in the Bank is on the following 4 pillars:
a)
b)
c)
d)
self-assessment,
collection of information on the operational risk events,
scenario analysis, and
key risk indicators
and is comprised of the following stages:
a.
b.
c.
d.
risk identification,
risk assessment and measuring,
risk monitoring/control, and
risk mitigation.
The main objective of operational risk management in the Bank is to ensure that the level of operational
risk exposure complies with the Bank's risk management strategy and policies, i.e., minimizing losses from
operational risks taking into account the costs and expenses of such minimizing.
The Bank analyzes its exposure to operational risks based on data collected in the database as well as
data collected in the self-assessment process, data obtained through stress testing and key risk indicator
monitoring. Mitigating risks is a planned approach aiming to alleviate influences of exposures to
operational risks which mainly relates to the instruments in the system of risk control.
The Bank’s experience in monitoring operational risk exposure according to the number of events
according to their causes and lines of business, confirms that the greatest frequency of risk-weighted
events is registered in the retail sector characterized by causes such as external factor, human factor,
system and process factors.
According to the number of events according to their causes and lines of business, the main frequency of
risk-weighted events is registered in the retail sector (99.38% of events).
When it comes to the amount of loss contingent on the Bank’s exposure to operational risks, the statistical
records from internal database show that these risks have highest records in retail operations, and the
most frequent cause of loss is external factor (93.81% of all losses or 30.57% of events).
The Bank applies the basic indicator approach for the calculation of capital expenses for operational risks.
The capital requirement for operational risk for 2014 totals RSD 452,680 thousand.
Self-Assessment
Self-assessment of operational risk is performed at least annually. It entails a procedure wherein all the
Bank's organizational units consider the operational risk chart and assess to what extent they are exposed
to certain types of operational risks.
Self-assessment allows the owners of processes to identify and evaluate risks affecting the processes
under their control in a timely manner.
Self-assessment is based on the process approach. Process owners are responsible for coordinating
identification, assessment, monitoring and managing all risks arising from the nature of the processes
within their remit. Furthermore, process owns perform self-assessment based on the methodology
prescribed and supported by the Operational and Other Risk Management Unit.
Self-assessment procedure is initiated by the Operational and Other Risk Management Unit at least
annually.
64
December 31, 2014
48.
48.5.
Operational Risk (Continued)
Self-Assessment (Continued)
Measuring operational risk through self-assessment entails evaluation of the operational risk exposure by
the Bank's organizational units according to the chart of identified operational risks, i.e. a list of risks
created by the Operational and Other Risk Management Unit based on the previous annual period
experience. Self-assessment evaluates possibility, spread and frequency of events that could cause
losses based on operational risks in the forthcoming annual period.
The Operational and Other Risk Management Unit reports on the self-assessment results within its regular
annual unit report.
Scenario Analysis (Stress Test)
Stress test is performed annually to assess exposure to operational risks given the possibility and
frequency of their occurrence as well as their potential impact on the Bank in instances of low probability
for a risk event occurrence yet possible significant losses incurrence on the part of the Bank. Scenarios
are defined at the OTP Group level, adopted by the Operational Risk Management Committee and
executed by the owners of processes and/or personnel appointed responsible for stress testing.
The purpose of scenario analysis is to provide expert estimates with regard to operational risk events with
low frequency and significant financial impact that may occur in the future.
Scenario analysis was performed for the year 2014 including the following scenario groups:
•
•
•
•
•
unauthorized activities in trading;
extreme external events;
attack on the IT system;
unexpected problems in processes; and
problems related to collateral management.
Business Continuity Plan (BCP)
In order to ensure the continuity of operation, the Bank's Board of Directors has adopted the Business
Continuity Plan as well as the Disaster Recovery Plan, which allow unhindered and continuous functioning
of all significant systems and processes and restricting losses in emergencies.
The Bank manages continuity of business operations based on the impact analysis and risk assessment.
Its purpose is to minimize operational, financial, legal, reputational and other material consequences
brought about by interruption of operations as well as to ensure functioning of the critical business
functions and/or their restoration to use within predefined timelines and enable operations for at least a
month afterwards. BCP allows for normal course of operations to be established in a reasonable time
frame in the instances of significant unanticipated partial or full stoppage in business operations.
In 2014 the Bank adopted enhanced and more comprehensive BCP, Rulebook and action plans for all
identified critical processes.
Externalization Risk
The Bank manages externalization risk via assessments and established control mechanisms before
executing contracts with third parties or suppliers of services and undertakes the necessary protective
measures against the adverse effects of externalization risk on its operation and reputation.
The Bank has defined the process of managing externalization risk in more detail in its Externalization
Risk Management Policy and Procedure.
65
December 31, 2014
48.
48.5.
Operational Risk (Continued)
New Product Introduction Risk
The Bank actively manages new product introduction inasmuch as its overall risk management system
includes and actively manages all risks arising from the new product introduction in such a manner that all
relevant organizational units of the Bank must be informed of and familiar with the new product
introduction and must provide their professional opinions within their respective competences related to
the new product/service profile, its impact on the Bank's risk profile and impact on the risk management
system.
A new product is any product/service that requires systemic changes in the Bank's IT system and Bank's
risk profile and calls for new professional knowledge and skills of the Bank's employees.
Information System Risk
The Bank has developed a process of information system risk management which includes risk
identification measurement, assessment, mitigation, monitoring and control. The Bank manages the
information system risk in such a manner that it allows for unhindered managing safety of this system, its
functionality and continuity of the Bank's operations.
Among other matters, the bank pays special attention to the following IT risk areas: IT management, IT
strategy, application, infrastructure, information, safety, support, suppliers, development, SLA and
business connecting.
Due to its significance, the Bank has developed and performs methods of information system risk
measurement.
47.6.
Country Risk
Country risk relates to the country of origin of the Bank’s counterparty i.e. it represents the possibility
of negative effects on the Bank’s financial result and equity due to inability to collect receivables from
abroad caused by political, economic and social conditions in the borrower’s country of origin.
Country risk management within the Bank is based on the general risk management principles.
In order to identify, measure, assess and monitor country risk exposure, the Bank uses methodology and
experiences of the OTP Group, its own assessments, analyses and the best banking practices that are not
contrary to the provisions of the laws and NBS regulations governing country risk.
Basis of measurement, assessment and analysis of the county risk imply the control of the extent to which
the risk limit for certain countries is used. Country limits are monitored on daily, monthly, quarterly and
annual bases by the Operational and Other Risk Management Unit.
Risk of Trading with Counterparties
The Bank operates in the interbank market with the aim to manage available funds as efficiently as
possible in order to provide profitability and diversification of assets. Monitoring treasury operations in the
monetary and capital market and their control by means of limits set comprise a set of activities undertaken
upon assumption of risk toward counterparty in the monetary and capital market. Activities whereby the
bank continuously monitors risks assumed involve determining limits toward the counterparty, monitoring
and limit control, reporting on the limit extent used, etc.
The main objective of monitoring operations in the monetary and capital market and limit control is
preventive risk management, i.e. minimization of risks to counterparty which may have adverse effects on
the Bank’s own operating result.
Trading limits are monitored on daily, monthly, quarterly and annual bases by the Operational and Other
Risk Management Unit.
66
December 31, 2014
48.
48.7.
Investment Risk
The Bank's investment risks encompass risks associated with investing in other legal entities and in fixed
assets. In accordance with the regulations of the National Bank of Serbia, the Risk Management Division
regularly monitors the levels of permanent investments and notifies the Bank's Executive Board thereof. In
this manner it is ensured that the Bank's investment in a single non-financial sector entity shall not exceed
10% of the Bank's capital and that the sum of the Bank's investments non-financial sector entities and the
Bank's fixed assets shall not exceed 60% of the Bank's capital.
48.8.
Concentration Risk
In accordance with the Bank's adopted procedures, the Risk Management Division monitors the limits, i.e.
concentration of investments per certain legal entities or group of related parties and entities related to the
Bank and ensures that such exposures are maintained within the limits defined by the National Bank of
Serbia.
The Bank’s investment risks include the risk of investing in other legal entities and the risk of investing in
fixed assets. In accordance with the regulations of the National Bank of Serbia, the Risk Management
Department regularly monitors the amounts of permanent investments and notifies thereof the Bank’s
Executive Board. In this manner it is ensured that the Bank’s investments in a single non-financial sector
entity do not exceed 10% of the Bank’s equity and that the sum of the Bank’s investments in non-financial
sector entities and its capital expenditures do not exceed 60% of the Bank’s equity.
48.9.
Fair Value of Financial Instruments
The following table provides the carrying amounts and fair values of the financial instruments. The table
below does not include non-financial assets and liabilities.
Financial assets
Cash and cash funds held with
the central bank
trading
institutions
customers
Receivables per financial
derivatives designated as risk
hedging instruments
Other assets
trading
Liabilities per financial derivatives
instruments
institutions and the central bank
to customers
Other liabilities
Carrying
value
2014
Fair
value
Unrecognized
gain/loss
Carrying
value
2013
Fair
value
Unrecognized
gain/loss
38,275,655
38,278,752
3,097
29,247,511
29,248,195
684
6,175,546
6,175,546
-
5,837,874
5,837,874
-
1,732
3,964,221
21,609
1,732
3,964,221
21,609
-
2,143,264
-
2,143,264
-
-
3,022,812
3,022,812
-
513,800
513,800
-
24,950,874
24,953,971
3,097
20,658,433
20,659,117
684
2,485
136,376
27,660,837
2,485
136,376
27,657,380
(3,457)
2,946
91,194
21,123,082
2,946
91,194
21,128,817
5,735
10,571
10,571
-
-
-
-
176
176
-
12,681
12,681
-
569,400
569,400
-
873,216
873,216
-
25,928,019
977,545
175,126
25,924,562
977,545
175,126
16,832,869
3,223,646
180,670
16,838,604
3,223,646
180,670
5,735
-
(3,457)
-
67
December 31, 2014
48.
48.9.
Fair Value of Financial Instruments (Continued)
Methods, Assumptions and Valuation Techniques Used in Determining Fair Value
Given the fact that the market of the Republic of Serbia is underdeveloped, in assessing the fair value of
the financial instruments the Bank used market and income approaches, i.e. information on similar
financial instruments available on the market, such as the effective interest rate, maturity and sector
classification.
Securities available for sale are measured at fair value based on the available market information, i.e. by
using the quoted market prices as at the reporting date. If such information is unavailable, other valuation
techniques are used. As of December 31, 2014 the Bank assessed the fair value of securities available for
sale (Note 19.1.).
For liquid short-term financial assets and liabilities it is assumed that their carrying values approximate
their fair values. This same assumption is applied to demand deposits, savings accounts and financial
assets and liabilities with market-adjusted prices (repricing), which are products with variable interest
rates.
Fair value of long-term financial assets and liabilities with fixed interest rates that are measured at
amortized cost is estimated by comparing market interest rates upon initial recognition to the current
market interest rates applied to the similar financial instruments. The estimated fair value of deposits is
based on discounted cash flows using interest rates prevailing on the monetary market for contracts with
similar characteristics.
The Bank used official and easily verifiable information as input for fair value measurement of those assets
and liabilities that are not measured at fair value yet whose fair value is disclosed where the determined
fair values differ from the carrying values.
The Bank obtained the input, i.e. information on the prevailing interest rates used in contracts with similar
characteristics from the official website of the National Bank of Serbia, using the following:
-
-
interest rates of banks for loans approved to retail customers and non-financial sector customers
per type, maturity and purpose – newly approved loans as of December 31, 2014 – as input for
estimating fair values of loans and receivables from customers (the Bank classified this input in
Level 2);
interest rates of banks for deposits received from retail customers and non-financial sector
customers per maturity – balances per existing deposits as of December 31, 2014 – as input for
estimating fair values of deposits and other liabilities to customers (the Bank classified this input
in Level 2).
In both instances where the Bank determined differences between the fair values and carrying values, the
market approach was applied.
The Bank uses the following hierarchy upon determining and disclosing the fair value of financial
instruments:
Level 1: quoted prices in active markets for identical assets or liabilities (unadjusted);
Level 2: inputs observable for a given asset or liability either directly or indirectly that make use of
information on the similar financial instruments present in active markets, quoted prices for identical or
similar assets that are inactive or other market information from which the value of financial instrument can
be derived (e.g. interest rates and yield curves observable in the usual quoted intervals); and
Level 3: unobservable inputs for financial assets and liabilities used unless relevant observable inputs are
available; the Bank uses mark-to-model approach which deploys other than market information derived
based on a theoretical model adequate for determining the value of financial instruments.
In assessing the fair value of its financial instruments, the Bank used Level 2 inputs.
68
December 31, 2014
48.
48.10.
Maturity Analysis of the Bank's Financial Liabilities
The following table presents analysis of the Bank's liabilities per outstanding maturity as of December 31,
2014, based on the contractual non-discounted cash flows. The financial liabilities are shown per maturity
outstanding with total interest accrued in advance.
Up to 1
month
From 1 to
3 months
From 3 to
12 months
From 1 to
5 years
Over 5
years
Matured
Without
contractually
defined
maturity
-
-
-
-
-
10,571
10,571
-
-
-
-
-
176
176
Total
trading
Liabilities per financial
derivatives designated as risk
hedging instruments
institutions and the central
bank
402,394
to customers
16,244,815
8,268
Other liabilities
-
21,837
144,180
-
-
76
932
569,419
2,527,150
24,802
-
5,793,739
74,407
-
912,476
1,250,373
-
308,176
-
107,209
-
183,895
175,126
26,077,460
1,357,850
175,126
Total liabilities
2,573,789
6,012,326
308,176
107,285
16,655,477
2,162,849
49.
OPERATING SEGMENTS
49.1.
Review of Net Income and Expenses per Sectors
Retail
Net interest income
Net fee and commission income
Net losses on the financial assets
held for trading
Net gains on the hedges against risks
Net losses on the financial assets available
for sale
Net foreign exchange (losses)/gains and
currency clause effects
Net losses from impairment of financial
assets and credit risk-weighted offbalance sheet assets
Staff costs
Depreciation and amortization charge
Other expenses
Deferred tax benefits
Profit/(loss) for the year
2014
Corporate
1,367,986
444,383
676,757
243,340
-
154
-
370,700
Other
Total
352,679
17,766
2,397,422
705,489
(5,459)
43,903
(18,656)
28,190,602
-
(427,761)
20,440
422,543
37,303
260,761
12,152
(295,321)
(212,600)
-
(338,573)
(909,924)
-
(1,644)
(1,077,681)
(244,331)
(262,418)
1,740
897,127
112,944
(902,532)
(5,459)
44,057
(18,656)
255,543
69,895
(635,538)
(1,077,681)
(244,331)
(1,384,942)
1,740
107,539
69
December 31, 2014
49.
OPERATING SEGMENTS (Continued)
49.1.
Review of Net Income and Expenses per Sectors (Continued)
Retail
Net interest income
Net fee and commission income
Net gains on the hedges against risks
Net losses on the financial assets
available for sale
Net foreign exchange gains and positive
currency clause effects
Net losses from impairment of financial
assets and credit risk-weighted offbalance sheet assets
Staff costs
Other expenses
Deferred tax expenses
Profit/(loss) for the year
2013
Corporate
Other
602,934
209,492
127,643
281,305
11,250
(5,988)
1,132,498
425,027
-
(8,841)
78,679
-
(1,090,447)
(200,295)
345,462
(2,847)
4,264
87,977
78,339
Total
2,016,737
645,769
121,655
(11,688)
166,656
82,603
(1,484,024)
(298,367)
-
(2,393,293)
(1,065,204)
(251,013)
(891,454)
(4,244)
(4,967,764)
(1,065,204)
(251,013)
(1,390,116)
(4,244)
(846,899)
(4,155,172)
(4,656,609)
The retail sector includes domestic and foreign private individuals, as well as farmers and entrepreneurs,
while the corporate sector includes public enterprises, other enterprises and non-resident legal entities.
The sector “other” includes all sector structures as well as other income and expenses that are not
encompassed by the former two groups.
49.2
Geographical Breakdown of Income and Non-Current Assets
2014
Income
Income
Non-Current
Assets
1,259,444,554
2,232,171,859
4,075,085,490
201,093,449
429,505,515
1,240,616,154
1,475,602,429
2,216,495,701
5,424,859,873
129,533,660
406,769,206
1,386,721,829
7,566,701,903
1,871,215,118
9,116,958,003
1,923,024,695
Region
Belgrade
Serbia
Vojvodina
Total
50.
2013
Non-Current
Assets
CAPITAL MANAGEMENT
The Law on Banks and relevant NBS decisions stipulate the Bank's obligation to maintain the minimum
amount of capital of EUR 10 million in RSD equivalent at the official middle exchange rate and the capital
adequacy ratio of no less than 12% as well as to maintain the volume and structure of its activities in
compliance with the prescribed performance ratios.
The Bank's actually achieved adequacy/performance indicators as of December 31, 2014 were in
compliance with the ratios prescribed by the National Bank of Serbia.
70
December 31, 2014
50.
CAPITAL MANAGEMENT (Continued)
As of December 31, 2014, according to the calculation made by the Bank, the following adequacy
indicators were achieved:
Capital adequacy ratio
The sum of the Bank's investments
The Bank's investment in non-financial sector entities
The sum of all large Bank’s exposures
Liquidity ratios as at December 31:
cash liquidity ratio
liquidity ratio
Foreign exchange risk ratio
Exposure to a single entity or a group of related entities
Exposure to a single entity related to the Bank
Total exposure to entities related to the Bank
51.
Prescribed
Actual
Minimum 12%
Maximum 60%
Maximum 10%
Maximum 400%
30.77%
23.66%
0.14%
13.65%
Minimum 0.5
Minimum 0.8
Maximum 20%
Maximum 25%
Maximum 5%
Maximum 20%
1.31
1.75
3.46%
13.65%
1.05%
1.15%
DERECOGNITION OF FINANCIAL ASSETS
There were no instances of the Bank ceasing to recognize financial assets due to loss of control over
financial assets.
52.
NON-PERFORMANCE OR VIOLATION OF OBLIGATIONS
There were no instances of the Bank's failure to perform its obligations or instances of the Bank violating
its obligations.
53.
HEDGE ACCOUNTING
The Bank does not use hedge accounting.
54.
COLLATERALS
As of December 31, 2014 the Bank had no collaterals assigned for the purpose of securing
repayment/discharge of its liabilities.
55.
RECONCILIATION OF RECEIVABLES AND PAYABLES
Pursuant to Article 18 of the law on Accounting (Official Gazette of RS no. 62/13), the Bank reconciled the
balances of its receivables and payables with legal entities as of October 31, 2014. Receivables and
payables were reconciled to 99.91% of the aggregate amount according to the replies to independent
balance confirmation requests received from the customers. The amount of the non-reconciled receivables
and payables totaled RSD 25,486 thousand.
56.
EVENTS AFTER THE REPORTING PERIOD
On February 24, 2015 the NBS Executive Board adopted Decision on Measures for Preservation of
Financial System Stability in relation to loans indexed to foreign currency (the “Decision”). The Decision
identifies measures and activities that banks are obligated to apply to housing loans indexed to CHF and
other loans indexed to foreign currency. According to the Decision, banks are obligated to determine the
amount of funds collected based on increase in indefinable elements of variable interest rate in the period
starting from unilateral interest rate increase to the beginning of applying of Law on Protection of Financial
Services Users, and calculate this amount determined as early loan payment, as well to inform the
borrowers of the modified loan repayment schedule. Moreover, banks are obligated to offer the users of
housing loans indexed to CHF 4 prescribed models of annex to the loan agreement under which loan
repayment terms will be changed. The Bank will act in the manner and within deadlines stipulated by the
aforecited Decision.
71
OTP banka Srbija a.d. Novi Sad
2014
Annual Report
February 2015
0
Contents:
1.
Vision and Mission .......................................................................................................................................... 2
2.
OTP Bank Plc. (Parent company) ................................................................................................................... 2
3.
The macroeconomic and financial environment in 2014 ............................................................................. 3
4.
Business Division ............................................................................................................................................ 7
5.
Risk Management ............................................................................................................................................ 8
6.
The Human Resources Directorate .............................................................................................................. 10
7.
The Bank's Management ............................................................................................................................... 11
8.
Corporate Social Responsibility................................................................................................................... 13
9.
The Bank's Financial Indicators ................................................................................................................... 14
10.
The Bank's Future Development ................................................................................................................. 16
1
1.
Vision and Mission
The Vision of OTP banka Srbija
The Bank endeavors to become one of the most reliable universal banks in Serbia by means of ensuring stable
growth, efficient corporate governance and a strong commitment to social responsibility. The Bank builds its
success on three pillars:

staff professionalism,

knowledge on the local and regional markets and

consciously building strong relationships with clients.
The satisfaction of our clients, shareholders and employees is the major goal in the Bank's activities.
The Mission of OTP banka Srbija
The Bank's mission is to provide a comprehensive scope of high-quality financial services to retail and corporate
clients, as well as municipalities. Harmonized and improved practice within the Bank's management enables the
development of existing potentials, transparent and wise business operations and the application of a proactive
approach towards innovations. Continuous profitability growth and value increase for shareholders represent the
underlying measurement criteria for the Bank's success.
The Bank's competitive advantage is based on the quality of its various services and its flexibility. The Bank relies
on its employees' professional qualities and dedicated being, whose success is highly esteemed and prized by
competitive benefits based on individual results and whose professional development is supported by continuous
education.
2.
OTP Bank Plc. (Parent company)
History
The predecessor of OTP Bank, called the National Savings Bank (OTP Bank) was established in 1949 as a nationwide, state-owned banking entity providing retail deposits and loans. In the ensuing years, its activities and the
scope of its authority gradually widened. First, it was authorized to enter into real estate transactions. Later, its role
was extended to provide domestic foreign currency accounts and foreign exchange services; there was a
subsequent diversification into providing banking services for Hungarian municipalities. Since 1989, the bank has
operated as a multi-functional commercial bank.
In addition to continuing its previous retail and municipal activities, the bank has been authorized to solicit corporate
loan accounts and deposits, and to provide commercial loans and banking services for correspondent banking and
export-import transactions.
In 1990, the National Savings Bank became a public company with a share capital of HUF 23 billion. Its name was
changed to the National Savings and Commercial Bank. Subsequently, non-banking activities were separated from
the bank, along with their supporting organizational units.
OTP Bank's privatization began in 1995. As a result of 3 public offers along with the introduction of the bank's
shares into the Budapest Stock Exchange the state's ownership in the bank decreased to a single voting preference
(golden) share. Currently the bank is characterized by dispersed ownership of mostly private and institutional
(financial) investors.
After the realization of its own privatization process, OTP Bank started its international expansion targeting
countries in CEE region, which offer great economic growth potentials similar to that of its domestic (Hungarian)
market. OTP Bank has completed several successful acquisitions in the past years, becoming a key player in the
region. Besides Hungary, OTP Group currently operates in 8 countries of the region via its subsidiaries: in Bulgaria
(DSK Bank), in Croatia (OTP banka Hrvatska), in Romania (OTP Bank Romania), in Serbia (OTP banka Srbija), in
Slovakia (OTP Banka Slovensko), in the Ukraine (CJSC OTP Bank), in Montenegro (Crnogorska komercijalna
banka) and in Russia (OAO OTP Bank).
2008 was milestone in OTP Bank history since it was the first time to sell one of its subsidiaries. The French
Groupama S.A. acquired its insurance business line, and part of the transaction they resolved to collaborate in
strategic points and cross-sell their financial and insurance products. Groupama S.A. has acquired 8% of shares of
OTP Group.
2
OTP Group provides high quality financial solutions to meet the needs of nearly 11,9 million customers through
almost 1500 branches and electronic channels.
Strategy
OTP Group’s business strategy remains focused on the maximization of shareholder value through the
development of the most efficient, retail-focused universal bank in CEE. The objective of the Group is to achieve an
outstanding financial performance in European terms. The OTP Group endeavors to offer customized services,
constantly being improved to meet the needs of its customers, through the further strengthening of its innovative
skills. In order to create value it is essential to rationalize operational processes and to improve operational and
cost efficiency of the Group's members. Synergy effects within the subsidiaries can be achieved by harmonized
developments and integration of several activities within the Hungarian and the international group. Highly qualified
human resource is indispensable to achieve OTP Bank's and the Group's objectives. Therefore the creation and
sustainment of a well-prepared sales-oriented and loyal administrative workforce is of outstanding importance in the
Bank's strategy just as the creation of personalized careers in order to keep talented professionals.
3.
The macroeconomic and financial environment in 2014
During 2014 the Serbian economy entered into the third recession from the beginning of the financial crisis in 2008.
The domestic demand and investments carried on with a tendency of contraction recorded in 2013, along with
certain deterioration in foreign trade trends in the second half of the year.
Namely, after the recovery in 2013 the economic activities in the countries of the Eurozone, being Serbia's major
trade partners, slowed down almost to stagnation as a result of political uncertainties. Apart from the above, the
catastrophic May Floods influenced the dramatic drop of domestic energy production and the production of energy
generating products, thus additionally jeopardizing the domestic export potential in 2014 and in the current year.
Thus a GDP of 2% was achieved in 2014.
The prospects for recovery of domestic economic activities in the coming year seem to be relatively low. Namely,
the uncertainties on international markets, fueled by current political tensions, could influence a continuing trend of
low export demand in the Eurozone and Russia. A potential positive influence to European business activities and
the demand for domestic goods could come from a program of quantitative incentives by the ECB with the aim to
inject around EUR 1,100 billion into the economy by the end of 2016. However, the tendency of decline in the
domestic demand could persist due to the fact that in the last months of 2014 the Government set off the
implementation of certain fiscal consolidation measures. Therefore, we expect by all odds a continuing trend of
recession and economic contraction of around -0.5% in 2015.
The described negative trends in trading led to the recurring tendency of current account deficits. Thus, by means
of a narrowing of above 40% in 2013 and the first 11 months of 2014 this deficit showed a year-on-year growth from
almost 10% (reaching EUR 1.9 billion, i.e. 6% of the GDP). On the other hand, net capital inflows were insufficient
to cover the current account deficit, primarily due to strong net outflows based on the deleveraging process of
banks and the NBS, substantially decreased net inflows of portfolio investments, as well as scarce net inflows from
direct investments.
3
The described external imbalance during the previous and at the beginning of the current year contributed by all
means to the devaluation of the Dinar at around 6.5% in the above period. Owing to the fact that the weak
fundaments of the domestic economy are going to persist in the ensuing period, it is possible that the Dinar shall
continue to devaluate in the medium-term.
However, the inflationary pressures due to the depreciation of the Dinar were neutralized in 2014 by the very low
domestic demand, a drop in the world raw material prices and the effects of a solid agricultural season in 2013 and
2014.
Thus the annual inflation rate was below the lower band of the NBS target corridor (4+1.5%), while the year was
ended at only 1.7%. Despite the fact that the low base effect is going to be more expressed in 2015, while the
depreciation could continue with possible price increases, the above mentioned inflationary pressures shall to a
large extent be mitigated by low domestic demand and prospectively stable low world raw material prices. Thusly
the inflation could potentially return to the targeted corridor bands during the first half of the year and remain at that
level during the remainder of 2015.
Despite the fact that inflation was at a low level, external pressures and the gradual depreciation of the Dinar
decreased the possibility of a monetary easing by the NBS. Thus, despite of the almost deflationary circumstances,
the central bank lowered the base rate for 1.5% total to a level of 8% during 2014. In the coming year there will be
room for the gradual easing of monetary restrictiveness but the NBS will most likely maintain a reserved approach,
taking into account the uncertainties regarding potential interest rate increases in the US, as well as the scope and
mechanisms of ECB quantitative incentives.
According to the Fiscal Council, the fiscal deficit most probably reached during the previous year a level of around
RSD 180-200 billion (around 5% of the GDP), amounting to even RSD 250-270 billion (around 7% of the GDP) with
the inclusion of non-budget transactions. The potential growth of budget inflows shall in 2015 be relatively limited,
taking into account the likely continuation of the economic contraction spurred by the declining domestic demand. In
addition, despite the fact that certain savings are planned in the current year, primarily based on the reduction of
certain pension categories and public sector salaries, due to the circumstance that certain non-budget expenses
are to be recorded from 2015, this year's deficit plan of around RSD 191 billion seems somewhat narrow.
Bearing in mind the depicted deficit level, as well as the maturity of earlier debt issues, the state's total financing
needs shall in 2015 reach the level of around EUR 5.7 billion. According to the Law on the 2015 Budget, the largest
portion from this will be financed by debt issues on the domestic market (around EUR 3.6 billion), on the foreign
market (around EUR 1.5 billion) and through bilateral agreements with foreign governments and institutions (around
EUR 0.6 billion). Due to the fact that the state still plans to cover its needs through borrowing, it is likely that the
trend of public debt growth is going to continue. Thus, having in mind the public debt growth from around EUR 2.2
billion to EUR 22.3 billion (around 67% of the GDP) in the first 11 months of 2014, a growth of around 74-75% of
the GDP is possible until the end of next year.
In accordance with the mentioned national and global risk aversion, as well as the Dinar's depreciation, the interest
of investors in the domestic debt market has somewhat dropped in the last few months in comparison with 2014.
Despite of the above, the stock of treasury bills and bonds is on a constant increase, so that in 2014 a growth of
around EUR 1.5 billion was recorded, while the returns remained relatively stable.
The Banking Sector
Serbia is a bank-centered financial market, meaning that the analysis of concentration and competition is of utter
importance. The banking market is currently weakly to moderately concentrated or mildly oligopolistic. We can
expect a consolidation of the banking market in the future in terms of reducing the number of banks and
strengthening the market power of the largest banks.
Possible channels of consolidation are the sale of the remaining state owned banking package, takeovers between
banks and the disappearance of some banks as a result of competitive selection.
According to the latest available data, at the end of the third quarter in 2014 the Serbian banking sector comprised
29 banks employing 25,414 people. The assets and capital of the banking sector amounted to RSD 2,956 billion
and RSD 616 billion, respectively.
21 of the banks are in foreign, while 8 in domestic ownership, six of which are state-owned (the state either being a
majority shareholder or having controlling interest), while two are owned by private individuals.
4
Banks in foreign ownership still have a dominant share in the banking sector of around 75% of the assets and
capital. The largest share have the banks from Italy (with a small share drop in the assets and a slight increase in
the banking sector capital), followed by banks from Austria and Greece. Banks in domestic ownership (primarily
due to the contribution of state-owned banks) have a somewhat larger share in the organizational network and the
number of employees in the banking sector compared with their share in the banking sector's assets and capital.
The entire banking network consists of 1,839 business units, branches, outlets and counters, which is 150 less
compared to the end of 2013.
The number of banks and their
ownership structure
Total number of banks
2008
2009
1)
2010
2011
2012
2013
2014
2)
34
34
33
33
32
30
29
Number of employees
32,342
31,182
29,887
29,228
28,394
26.380
25.414
Number of organizational units
2,711
2,635
2,487
2,383
2,243
1,989
1.839
foreign
20
20
21
21
21
21
21
domestic
14
14
12
12
11
9
8
private
6
4
4
4
3
3
2
state-owned
8
10
8
8
8
6
6
The banks' ownership structure
Source: NBS
1) Banks where the Republic of Serbia is directly or indirectly a majority individual shareholder. From 14 July 2009
Metals Banka AD Novi Sad was recapitalized by AP Vojvodina and "DDOR Novi Sad" rendering it a state-controlled
bank.
2) end of the third quarter
At the end of the third quarter of 2014 the banking sector's total net assets amounted to RSD 2,956 billion,
representing an increase of 110,1 billion (3,9%) compared with the end of the previous year.
Graph: Asset structure of the Serbian banking sector.
Source: NBS
Serbian banks are confronted with the increase of non-performing loans from 21.4% at the end of 2013 to 23% at
the end of the third quarter in 2014. Such an increase was primarily sparked by the growth of non-performing loans
given to corporate clients, making 60% of all non-performing loans. Sectors with the largest absolute amounts of
non-performing loans are the processing industry, trade and the construction industry.
The banking sector is adequately capitalized as regards the fulfillment of regulatory requirements pertaining to
capital adequacy indicators. At the end of the second quarter of 2014 the banking sector capital adequacy ratio was
at 19.4% in Serbia, being far above the regulatory minimum, both according to domestic legislation (12%) and
according to the Basel Accords (8%).
5
Graph: Capital adequacy indicators of the Serbian banking sector
Source: NBS
The profit before taxation of the banking sector in the first six months of 2014 amounted to RSD 20,95 billion, and is
higher than the level of last year's same period. The increase in net credit losses in the third quarter of 2014
compared with last year's same quarter in the amount of RSD 2.0 billion contributed substantially to the lower profit
of the Serbian banking sector in the given period. Net interest incomes are still on the increase and are higher
compared to last year's same period by RSD 1.3 billion, while fee and commission incomes are lower by RSD 0.1
billion.
From total number of banks, 20 of them had a positive result in the total amount of RSD 26,5 billion, while 9 banks
generated a loss in the total amount of RSD 5,5 billion.
The profitability indicators calculated for the third quarter of 2014 the best represent the achieved results in 2014.
Graph: Profitability indicators of the banking sector
Source: NBS
6
4.
Business Division
1.
Retail Banking
As in the previous years, the market share in retail banking continued with the increasing trend. The focus to meet
our customer's needs, the improvement of customer relationships and the development of long-term relationships
remain our main directions of development. The improvement of operational efficiency to the satisfaction of our
clients was the Business Division's main focus in 2014.
In spite of a decreasing credit demand on the market, by its diverse offer OTP Bank managed to maintain an
increasing trend in its market share in retail credit products. The sale of cash credits and the introduction of new
products supported by appropriate media campaigns contributed substantially to the market share increase of this
sector in the Bank's overall results.
From September 2014 OTP Bank was one of the 6 banks that included the contactless MasterCard PayPass card
linked to the customer's current account in their offer.
The introduction of new products, the maturity prolongation of lending categories, monitoring of market trends and
the recognition of the role that small enterprises and entrepreneurs have for the development of the domestic
economic development, had certain positive results related to this market segment. By participating in the program
of the Serbian Development Fund, OTP Bank additionally increased sales in this segment by the state aided
lending for current assets.
Taking into account the market specificities, OTP Bank paid special attention to the agricultural sector in 2014. By a
combination of credit and deposit products, as well as by adjusting its offer to the market demands the Bank
managed to attract a large number of new customers in 2014.
During 2014 OTP banka Srbija remained committed to the strategy of collecting deposits, and recorded a
substantial increase thanks to the policy of moderate deposit interest rates, which thus enabled interest rates on
loans to remain at competitive level.
In 2014 OTP Bank's focus in the area of network development was on the search for appropriate locations in key
markets, opening new branch offices and the relocation of existing ones. The Bank ended 2014 with a business
network of 48 branches.
2.
Corporate Banking
The previous year may be described as specific, followed by a decrease in lending activities on the domestic
market, a nominal drop in corporate lending with further increase of uncollectible receivables, as well as the
growing problem of liquidity in the real sector.
In spite of the unfavorable macroeconomic environment, business transactions with corporate clients continued with
the development of proactive and planned sales approach which is reflected in structured and systematic sales
strategy. Thanks to the intensive commercial activities we recorded a substantial growth in the corporate banking
portfolio (RSD 2,809 million) compared with the previous year.
Parallel to this active sales approach, additional measures in the area of lending process improvement were among
our main focus points in 2014. Several projects were launched for the purpose of promoting organizational structure
efficiency, further automation of all processes in order to substantially speed up the lending process and shorten
the client request response time, as well as the improvement of cross-selling. The implemented innovations
resulted in a more efficient organization in the corporate banking sector simultaneously improving service quality
and speed.
The exceeded business plans in the area of documentary operations in 2014 demonstrate that the Bank
successfully met its clients' needs offering a wide scope of lending and other products and services endeavoring to
continuously provide its clients with the necessary support for achieving their business goals and activities.
The improvement of functionality in the area of foreign currency purchases is reflected in the possibility for legal
entities that are not the Bank's clients to also use these services, which offers them the possibility to pay their
foreign obligations from accounts opened with other domestic banks. This innovation is going to assure the Bank's
competitiveness in the ensuing period.
7
The main indicator of our clients' trust and loyalty is the increase in deposits of 219% in 2014, as well as a growth in
the area of domestic payment operations. The growing trend in domestic payment operations in 2014 was followed
by a substantial increase in lending activities in comparison with the previous year.
2014 was characterized by the development of operating activities of the Treasury Directorate and the fulfillment of
all operative predispositions necessary for the beginning of active trade. The developed product scope and services
pertaining to the Treasury Directorate's activities are aimed at extending the cooperation with corporate clients and
improving the profitability of this sector.
5.
Risk Management
The Bank implemented and constantly improves a risk management system in order to appropriately identify,
assess, measure, prevent, monitor and communicate risk exposure in its business operations. Within its risk
management system the Bank defined its goals and principles, as well as its pertaining policies, methods and
procedures.
The Bank's risk management, i.e. the identification, measurement, assessment, monitoring and adoption of
measures aimed at risk mitigation is performed systematically in accordance with the pertaining statutory
regulations.
The Bank's risk management covers the following areas:
•
Setting of proper principles, internal rules, procedures and limits for risk management;
•
Actions in compliance with risk management principles, effective reporting in a timely manner;
•
Proactive identification of risks, their monitoring, management of risks;
•
Allocation of necessary resources, knowledge, management and control processes;
•
Creating and keeping adequate reserves connected with risks assumed;
•
Acceptance of tolerated risks only;
•
Compliance with internal and external capital requirements;
•
Supervision of legal and regulatory requirements within risk field.
In order to achieve the targets in the area of risk management the bank implemented:
•
Effective internal management and control system;
•
Organizational structure that clearly defines responsibilities and authorities of organizational units,
employees and committees;
•
Effective information systems enabling reliable distribution of information, as well as sufficient security
functions.
The Bank manages the whole area of risks in relation with its business operations, namely:
•
Credit risk (settlement risk; counterparty risk, dilution risk, residual risk)
•
Liquidity risk;
•
Interest rate risk, Foreign Exchange risk and Other Market risks;
•
Operational risk including Legal risk as well as information system management risk;
•
Country risk related to origin of entities toward which the Bank is exposed;
•
Exposure risks toward one entity or related parties;
•
Investment risks toward other legal entities and fixed assets.
OTP banka Srbija formed the following committees participating in risk management: The main duties of each
committee is as follows:
•
Credit Committee: decides on approval of exposures in compliance with the Bank’s internal enactments
and performs other duties as provided by the Bank enactments. Approves limits by sectors and other
limits, client limits according to its authorizations and adopts decisions concerning their management. The
Committee proposes to the Board of Directors acquisition of stocks, shares, enterprises, real estate and
other assets serving as collateral.
•
Asset-Liability Management Committee: monitors the Bank’s exposure to risks arising from the
structure of its balance sheet liabilities and assets and off-balance sheet items, recommends measures for
interest risk and liquidity risk management and performs such duties as provided by the Bank’s
enactments.
•
Monitoring Committee: is responsible for portfolio analysis of the Bank and decision making concerning
necessary activities in order to protect the interest of the Bank, decides about excluding corporate clients
from regular collection procedure based on provided action plans from the responsible business centers,
decides about the transfer of corporate clients from business to Collection Directorate, decides about
8
•
•
excluding retail clients from regular collection procedure based on provided action plans from the branches
in charge, if due to constraints arising from internal legislation of the Bank other instances are not capable
of making that decision, and execution of other activities defined by the general acts of the Bank.
Work Out Committee: is responsible for decision making on issues in the area of the NPL portfolio
management in compliance with the general acts of the Bank, analysis of the non-performing loan portfolio
and providing instructions to competent organizational units of the Bank aiming to maintain acceptable
NPL portfolio level, supervision of receivables collection results and execution of other activities defined by
the general acts of the Bank.
Operational Risk Committee has following responsibilities: monitoring of the operational risk
management system performance at the Bank, monitoring of the operational risk exposure level through
analysis of Operational and Other Risks Management Unit reports that include the result of the selfassessment process, giving opinions and comments on the Operational and Other Risks Management
Unit reports, making decisions related to reduction of operational risks within competence of the Head of
Risk Management Division, proposing corrective measures to the Bank’s Board of Directors and Executive
Board related to operational risk management activities.
Credit Risk
Credit risk is risk that the client will not be able to fulfill partially or completely obligations towards the Bank in
contracted deadline. Bank’s business policy demands and assumes maximal protection for the Bank from credit risk
exposure.
Credit risk management policy defines in detail the process of credit risk management which includes organization
of credit risk management process, identification and measurement, mitigation and monitoring. This policy also
includes the process of concentration risk management and the internal control system of the credit risk
management process, as well as establishing of limits to monitor credit risk exposure. Credit Policy is adopted
annually and represents reference for credit risk management as the unified risk management system in the Bank.
Reporting to the Executive Board and Board of Directors is performed quarterly, specially bearing in mind the
portfolio quality, harmonization with limits, realization of the Bank’s plans, concentration risk, etc.
Within credit risk management special attention is given to concentration risks. Bank adheres to objectivity
principles, independence and timeliness during identification, assessment, monitoring and reporting on
concentration risk.
Bank actively manages concentration risk and establishes limits within legally prescribed limits and observes the
principle of immediate undertaking of mitigation measures, transformation, transfer and/or elimination of excess
risk.
The Bank conducts stress testing in compliance with its risk portfolio and portfolio structure, and includes them at
least annually in reports to the Board of Directors.
A detailed overview and analysis of credit risk management is given in the Notes to the Financial Statements 2014.
Liquidity risk
Liquidity risk is a possibility of occurrence of negative effects to financial result and bank capital due to the inability
of the Bank to meet its financial obligations.
Liquidity risk The Bank continuously monitors liquidity risk exposure and its compliance with established limits.
During 2013 the Bank maintained liquidity level within prescribed limits (regular and narrow liquidity ratio).
The Bank maintains portfolio comprised of highly liquid securities and diversified assets that can be easily
converted into cash in case of unpredictable and negative oscillations within the Bank’s cash flows (securities
issued by National Bank of Serbia or Republic of Serbia). Furthermore, the Bank maintains the required level of
dinar and foreign currency mandatory reserve, in compliance with requirements of the National Bank of Serbia.
The Bank is able to rely on liquid funds of the parent bank, thus in case of liquidity deterioration due to disturbances
on financial market to bridge it through indebtedness at the parent bank.
Adopted policies and procedures ensure an adequate asset management and planning of adequate liquidity level.
Beside liquidity ratio prescribed by NBS, Bank uses the following methods for measuring liquidity risk exposure:
9
-
-
Primary and operative liquidity level (liquid assets up to one month and three months are compared to
target values that include liabilities which are due in the same period, business needs, as well as deposit
withdrawal shock, i.e. 99th percentile of three month deposit changes);
Regular stress testing;
Testing of Contingency Funding Plan
For the purpose of liquidity risk measurement and monitoring, the Bank performs measurement and monitoring of
net cash flows by analyzing assets and liabilities based on period remaining until maturity, by measuring and
comparing cash inflows and outflows, i.e. GAP analysis. The Bank performs a liquidity projection on a daily basis
taking into account all available information on the expected inflows and outflows gathered from the Business
Division and other Bank departments, the activities of which have an influence to this type of risk.
Foreign Exchange Risk
Foreign exchange risk is the risk from negative effects on the financial result and capital of the Bank due to
changes of exchange rates. Foreign Exchange Risk Management policy of OTP Bank, including the one hand,
compliance with all legal requirements for taking a risk of exposure to possible loss of the Bank's profitability will not
deteriorate or affect its business and on the other hand the realization of profit on the basis of the favorable
exchange rate movements.
Acceptable exposure to currency risk is defined by setting system of limits. Foreign exchange risk is the main
indicator of the state and structure of foreign currency receivables and liabilities in relation to capital. The Bank
manages foreign exchange risk efficiently confirmed by average FX Risk Ratio of 0.86% in 2013 and it is far below
allowed maximum 20% prescribed by National Bank of Serbia.
A detailed overview and analysis of foreign exchange risk management is given in the Notes to the Financial
Statements 2014.
Interest Rate Risk
Interest rate risk is a risk of possible adverse effects on the financial result and capital of the Bank arising from
positions in the banking book due to changes in interest. Interest rate risk exposure depends on the ratio between
interest bearing assets and liabilities.
Bank is exposed to interest rate risk in cases of mismatch between new establishment of passive interest rates or
maturity of the bank’s obligations and new establishment of active interest rates or maturity of the bank’s
receivables. In order to measure interest rate risk exposure, Bank uses Gap analysis. Size of gap for a certain time
interval indicates repricing risk exposure.
Interest rate risk management implies activities related to identification, measurement and assessment of interest
rate risk toward which the Bank is exposed during its business operations. For the measurement of the exposure to
interest rate risk, the Bank uses methods prescribed by NBS in compliance with provisions of Basel II.
Differences (GAP) between interest-bearing assets and liabilities are presented according to time intervals and
cumulatively (cumulative GAP). In case when GAP is positive, interest-bearing assets (IA) exceed interest-bearing
liabilities (IL) in a given interval. Assets are more sensitive to interest rate change, i.e. to decrease of interest rate.
This implies that the bank’s net interest income would decrease as a result of interest rate decrease and vice
versus, net interest income would increase due to increase of interest rates. In case of negative GAP, interestbearing assets are lower than interest-bearing liabilities in given time interval. Thus, liabilities are more sensitive to
changes of interest rate, i.e. to interest rate increase. Interest rate increase would in such case cause decrease of
net interest income, while decrease of interest rates would result in increase of net interest income. Cumulative
GAP indicates direction of exposure movement, exposure range, where the bank expects additional income – from
increase or decrease of interest rates.
A detailed overview and analysis of interest rate risk management is given in the Notes to the Financial Statements
2014.
6.
The Human Resources Directorate
OTP banka Srbija a.d. Novi Sad ended 2014 with 670 employees. The Bank's focus in 2014 was on the
improvement of organizational efficiency and the realization of business operations through innovations. One of the
organizational innovations implemented in 2014 was the enhancement and improvement of treasury operations, as
well as strengthening the ALM Middle Office functionality in line with the planned growth of OTP banka on the
Serbian market.
10
In 2014 the Bank continued to strengthen its human resources management through further development of the
performance monitoring and employee bonus system, the new employees training system, as well as the
improvement of systemic IT solutions for human resources management. The Bank furthermore continued its
professional development programs through employee training, talent monitoring and internal improvements.
As in the previous years, OTP Bank continued with supporting youth, pupils and students through its professional
training program organized in cooperation with faculties and high schools. Our most important partners in this were
the Faculty of Economics in Novi Sad and Niš, the Faculty of Technical Sciences in Novi Sad, the First High School
of Economics in Belgrade, the High School of Economics in Niš and Subotica.
7.
The Bank's Management
BOARD OF DIRECTORS
Laszlo Wolf – President of the Board of Directors
Mr. Laszlo Wolf (1960) is the President of the Board of Directors of OTP banka Srbija a.d. Novi Sad since 2010.
From 1994 he is the Deputy CEO, Member of the Board of Directors of OTP Bank Plc. Hungary. In 1993 Mr. Wolf
was the Managing Director of OTP Bank Plc. Hungary. In period from 1991 to 1993 he was the Managing Director
of BNP - KH - Dresdner Bank, Budapest. From 1984 to 1991 he was working at the National Bank of Hungary as
Senior Manager of International Relations. Mr. Laszlo Wolf graduated at University of Economics in Budapest. He is
fluent in English and German and has knowledge of Russian at medium level. He is member of the Presidium of the
Joint Venture Association, and of the Hungarian Economic Association and Vice President of the Confederation of
Hungarian Employers and Industrialists.
Peter Krizsanovich – Member of the Board of Directors
Mr. Peter Krizsanovich (1979) is a Member of the Board of Directors of OTP banka Srbija a.d. Novi Sad since 2010.
He is working as director in the Strategy and Finance Division of OTP Bank Hungary, managing the Group
Controlling and Planning Department consisting of the following main areas, departments: Subsidiary Strategy and
Controlling, Risk Controlling, Controlling and Planning Consolidation, Group Data Management, Management
Information Systems and Controlling methodologies. Currently he is a participant of the Asset and Liability
Committee and the International Product Development and Pricing Committee of OTP Group. Between 2009 and
2012 he was senior manager of Strategy and Finance Division, in charge for Subsidiary Strategy and Analysis and
Capital Allocation. Before that he was head of Capital Allocation, previously Head of Operational Risk Management.
From 2003 to 2005 he worked as a Consultant of IFUA Horvath & Partners Ltd. Mr. Peter Krizsanovich graduated
at Budapest University of Economic Sciences, Faculty of Business Administration. He is fluent in English and
German and has basic knowledge of French.
Tibor Kovacs – Member of the Board of Directors
Mr. Tibor Kovacs (1970) is a Member of the Board of Directors of OTP banka Srbija a.d. Novi Sad since 2010. Mr.
Kovacs has over 15 years of the experience in the banking and legal sector. From 2008 he is the Deputy Managing
Director at the Legal Directorate at OTP Bank Plc., Budapest. From 2005 to 2008 he was the Chief Legal Counsel,
Legal and Compliance Department Manager of Volksbank Hungary Ltd, Budapest. From 2001 to 2005 Mr. Kovacs
was the Deputy Legal and Compliance Department Manager of Central European International Bank Ltd, Budapest
(Intesa Group). In 2000 and 2001 Prior to it he was an Associate at Allen & Overy Law Firm. Mr. Tibor Kovacs
earned his degree in law at the Law Faculty of University of Miskolc. He also has two Master degrees, one - Master
in Banking law (Budapest), and second – Master in European and international affairs and management
(Amsterdam). He is fluent in English and German.
Dušan Dobromirov - Member of the Board of Directors
Dr. Dušan Dobromirov (1964) is a Member of the Board of Directors of OTP banka Srbija a.d. Novi Sad since 2007.
In the period from 2002 to 2004 he was a Member of the Board of Directors of Continental Banka a.d. Novi Sad,
and from 2006 to 2007 of Niška Banka a.d. Niš. Since 2006 he works at the Faculty of Technical Sciences in Novi
Sad, where as a docent manages Department of Investment management, on the undergraduate, master and
doctoral studies. He was Member of the NBS Council from 2004 to 2006, and also Director of “Produktna berza d.d.
Novi Sad, and in period from 2001 to 2004 he was Director of National Commodity Exchange. Mr. Dušan
Dobromirov graduated from Webster University St. Louis Missouri – Campus Vienna, major in Financial
Management, while he defended his postgraduate thesis at the Faculty of Technical Sciences in Novi Sad in 2006.
He became Doctor of Sciences in 2010 by defending his thesis: “Development of models for signal processing in
financial engineering”. During his career, he participated in more than several proposals drafting of law in area of
finance market. He is member of the Association of Court Experts and the Association of Economists of Vojvodina.
He is specialized in financial markets, securities and financial derivatives. Beside Serbian, he speaks English.
11
Mr Vlatko Sekulović - Member of the Board of Directors
Mr. Vlatko Sekulović (1969) is a lawyer in Belgrade and a Member of Board of Directors of OTP banka Srbija a.d.
Novi Sad since 2007. From April 2004 to May 2007 he was appointed State Secretary for International Economic
Relations. He was the Head of the Negotiation Team of the Republic of Serbia for CEFTA Agreement and CoChairman of the OECD Investment Compact Committee. He was awarded with the title of the Commander by the
President of the Republic of Italy. From 2001 to 2004 he practiced law. Mr. Vlatko Sekulović was Member of
Parliament of the National Assembly of Republic of Serbia in two mandates, in 1993 and from 2001 to 2004. In the
period from 2001 to 2004 he was Deputy President of the Committee for Development and International Economic
Relations at the National Assembly of the Republic of Serbia. From 1996 to 2001 he worked at the Italian Institute
for Foreign Trade in Belgrade. He also worked as Assistant Lecturer at the Queen Mary College in London in 1995.
Mr. Vlatko Sekulović graduated 1994, at the Faculty of Law in Belgrade, Criminal - court Department, and defended
his postgraduate thesis on subject of Banking and Financial Law at the London University Queen Mary and
Westfield College. He speaks Serbian, Italian, French, Spanish and Slovak.
Života Mihajlović – Member of the Board of Directors
Mr. Života Mihajlović (1939) is a Member of the Board of Directors of OTP banka Srbija a.d. Novi Sad since 2012.
He has very distinguished career and noteworthy banking experience, mostly gained in area of corporate
governance and finance management within national and international economy. As Bank’s chairman, he
successfully managed of Vojvođanska banka for 12 years. In that period, Vojvođanska banka was proclaimed three
times as the best bank of Southeastern Europe by the International Finance Corporation from London. Before that,
he was responsible for finance management in Naftagas, Novi Sad. As Advisor of Chairman he worked for 4 years
in Novosadska banka. As other professional activities, there can be highlighted his engagement as Chairman of
Association of Economists of Vojvodina, position of President of Board of Directors of Association of Yugoslav
Banks, President of the Committee for banking, finance and insurance and Member of Board of Directors of mixed
banks in London, Frankfurt, Paris and Moscow. Beside his business career within national economy, Mr. Mihajlović
has significant academic accomplishment – PhD title, gained at Megatrend University, Belgrade. He is author of
more than 20 published scientific papers and Professor at several at several Universities.
12
EXECUTIVE BOARD
Imre Bertalan – President of the Executive Board
Mr. Imre Bertalan (1965) is the President of the Executive Board of OTP banka Srbija a.d. Novi Sad since
September, 2010. During 2009 he worked as a self-employed teacher and held various courses (securities, bank
management, financial derivatives, corporate finance etc.) and also at Corvinus University in Budapest and at
International Training Center for Bankers. Between 2002 and 2009 he held position as Managing Director of CIB
Bank Ltd., in charge of risk and controlling business area and later on as Deputy CEO and Member of the Board of
Directors. From 1999 to 2002 he was Managing Director in charge of Operations and IT area of Euroleasing Ltd.
From 1998 to 1999 he was Managing Director of Budapest Bank Ltd.. During 1997 he worked as Manager and was
a Member of Strategic Planning & Business Development Team of GE Capital Financial Planning and Analysis
Stamford CT, USA. Between 1992 and 1996 he was engaged at Budapest Bank Ltd., first as Deputy Managing
Director and later on as Managing Director of Strategic Planning Division. From 1990 to 1992 he was Head of Sales
at Lupis Brokerage House. From 1989 to 1990 he was Manager at Budapest Stock Exchange. Mr. Imre Bertalan
has BA in Economics, from the Karl Marx University of Economic Sciences, Budapest. He is fluent in English and
has knowledge of German at medium level.
Ivan Radojčić - Member of the Executive Board
Ivan Radojčić (1975) is the Head of Business Division of OTP banka Srbija a.d. Novi Sad from October 2011, and
Member of the Executive Board with the status of the Deputy to the President of the Executive Board. His career
includes engagements in different companies, primarily financial institutions. During 2011 he was a member of the
Executive Board of the “AXA” company, with responsibility for distribution and marketing area. In the period from
2009 to 2011, he was a member of the management Board of the ATF bank in Kazakhstan, a member of UniCredit
Group, with responsibility for retail banking, and in the period from 2006, to 2009 he had the same position within
the UniCredit Bank Serbia. His professional development includes a significant experience in retail banking, branch
network management, product development, as well as in communications and advertising. Mr. Radojčić had
membership at Supervisory Board at UniCredit Bank Kyrgyzstan, at Council of Faculty of Economics in Subotica, at
Supervisory Board of UniCredit Leasing, Serbia and at Credit Bureau of Serbian Banks. He graduated from the
Braća Karić University, Faculty of Trade and Banking and gained title graduated economist. He is fluent in English.
Attila Hornok - Member of the Executive Board
Mr. Attila Hornok (1969) is a Member of Executive Board and Head of Risk Management Division of OTP banka
Srbija, a.d. Novi Sad since July, 2011. He has noteworthy banking experience, primarily in risk management area.
In the period from 2007 to 2011 Mr. Attila held position of Head of Department – Subsidiary’s Credit Risk Analysis
Department, at OTP Bank Hungary Plc. In period from 2003 to 2007, he worked within HPC Ltd Company and held
a position of Senior Corporate Risk Manager. In period from 1999 to 2003, he was employed within Erste Bank
Investment Hungary Ltd and gained experience in market risk area. Mr. Attila has PH.D. diploma, gained at the
Economics University in Budapest where he worked 9 years as an assistant professor, first at the Department of
Mathematics, and later at the Department of Mathematical Economics and Econometrics, which is his immediate
scientific and professional area. He is fluent in English.
Csaba Gabor Fenyvesi – member of the Executive Board
Mr. Csaba Fenyvesi (1979) is a Member of Executive Board of OTP banka Srbija, a.d. Novi Sad since August,
2012, Head of Finance Division since July, 2012 and Chairman of the ALCO. He has distinguished banking career
and noteworthy experience gained mostly in the area of Corporate Finance and commercial banking. As Associate
Director, from 2007 to 2012 he had responsibility for Corporate Finance in KPMG in Budapest and in Vancouver,
where he managed several large M&A transactions in the financial services sector as well as led numerous
financial projects with significant importance and supervised a team of experienced people. He worked as senior
project Manager for bank Acquisitions In OTP bank Nyrt. Budapest, from April 2006 to March 2007, where one of
his concluded projects was the acquisition of the Serbian Kulska banka a.d. Novi Sad (one of the predeccesors of
OTP Banka Srbija a.d. Novi Sad). His banking career started in September 2004 in Raiffeisen bank Zrt (Hungary)
where he gained his first experience in credit risk and financial analysis and since then his career constantly sees
progress. Mr. Csaba graduated at Corvinus University, Budapest and gained MA diploma in Economics. He is
fluent in English.
8.
Corporate Social Responsibility
OTP banka Srbija is part of one of the most successful groups in Central and South East Europe with a long
tradition in business. The OTP Group currently serves around 11 million customers in nine countries with around 33
thousand employees and 1500 branches. The principles of social responsibility are accepted at the OTP Bank, so
that as a member of the international OTP Group, OTP banka Srbija has the obligation and pleasure to observe the
13
principles of social responsibility and implement them in the course of its operations through a number of activities
contributing to the life of the entire society it is active in and has become a part of.
Through socially responsible projects OTP Bank endeavors to recognize the needs of the society it operates in and
support socially important initiatives, such as cultural and sport events, healthcare advancement, environmental
protection and numerous other projects. By such involvements it actively participates in the solution of critical social
problems.
The unprecedented floods striking our country in May 2014 caused vast damages and problems. OTP banka Srbija
was among the first to react by purchasing water and canned food for the people living in the flooded areas. In the
next few weeks the Bank organized a humanitarian collection of shoes, clothes, toiletries, baby equipment and
transferred an amount of aid for the affected people.
By donating computer equipment we facilitated better working conditions at the Neonatology and Intensive Care
Department of the Pediatric Clinic in Novi Sad, the General Hospital in Subotica, the Home for Developmentally
Disabled Children "Kolevka" from Subotica, the Pre-School Institution "Radosno Detinjstvo" from Novi Sad, the High
School in Leskovac, the Humanitarian Roma Children's Center "Vlaški Romi" from Belgrade, the Elementary School
"Filip Višnjić" from Morović, the Center "Živeti uspravno" from Novi Sad, the Domiciliary Care Department of the
Health Center Novi Sad, the Municipality Zvezdara - Belgrade, the Association for the Disabled "Lagator" from
Loznica and numerous others.
OTP banka Srbija furthermore supported the following cultural projects: it traditionally participated in the Night of
Museums in Novi Sad, the chore drama "The Day we Met", the Vine Harvesting Event in Oplenac and in Župa, the
Project "Schools without Violence", the high school quiz "How well do we know each other", and provided
scholarships for 15 students, thus contributing to investment in young people and their development.
OTP Bank had during of 2014 numerous activities showing a high level of social responsibility. OTP banka Srbija
shall in the future also participate in various projects with the goal to build a responsible society facilitating human
relationships, protecting the environment and creating equal chances for all.
9.
The Bank's Financial Indicators
OTP banka Srbija, despite all of the challenges and turbulences at the end of 2013 and the beginning of 2014
influencing the decrease in the number of banks on the market, managed to maintain its position of a stable market
participant and even increase its market share.
The Bank's business transactions in 2014 are characterized by its orientation towards medium-term sustainable
development as a strategic commitment, along with all the barriers originating from the characters of covered
markets and the pertaining risks. The Bank simultaneously managed to improve its operations with clients and
expand the scope of offered services.
In line with its strategy, the Bank continued its engagement in activities contributing to the growth of its reputation
on the local market and to the satisfaction of clients.
The Bank managed to successfully battle the changed market circumstances in 2014 and have a positive result
(RSD 105.8 million) simultaneously maintaining a high level of capitalization (its capital adequacy ratio being at
30.8%). Liquidity and capital position are at a satisfactory level representing a base for utilizing future market
possibilities.
Thanks to strong focus on the acquisition of new creditworthy clients, the Bank substantially increased its client
base both in the area of corporate and retail banking.
14
Table:
Statutary
2013
2014
Profit and Loss Account (RSD 000)
Interest income
2,880,310
2,818,607
Interest expense
(863,573)
(421,185)
Net interest income
2,016,737
2,397,422
Net provisions on loans and placements
(4,917,561)
(612,760)
Net interest income after provisioning
(2,900,824)
1,784,662
Fee income
770,919
836,793
Fee expense
(125,150)
(131,304)
Net fees and commissions income
645,769
705,489
Net profit from sale of securities
(11,688)
(18,656)
Net income from foreign exchange differentials
166,656
255,543
204,258
108,494
Net provisions on other assets and off-balance items
(50,203)
(22,778)
Staff costs
(1,065,204) (1,077,682)
(251,013)
(244,331)
Other expenses
(1,390,116) (1,384,942)
Other operating expenses
(2,706,333) (2,706,955)
Profit before tax
(4,652,365)
105,799
Profit after tax
(4,652,365)
105,799
Balance Sheet (RSD 000)
Total assets
31,724,743 40,704,329
Interbank placements
513,800
3,022,812
Loans to customers
20,658,433 24,950,874
Due to banks
873,216
569,400
Deposits from customers
16,832,869 25,928,019
Subordinated loan
3,223,646
977,545
Shareholders' equity
9,993,302 12,408,668
Change
(in RSD 000) (in %)
(61,703)
442,388
380,685
4,304,801
4,685,486
65,874
(6,154)
59,720
(6,968)
88,887
(95,764)
27,425
(12,478)
6,682
5,174
(622)
4,758,164
4,758,164
-2.1%
-51.2%
18.9%
-87.5%
-161.5%
8.5%
4.9%
9.2%
59.6%
53.3%
-46.9%
-54.6%
1.2%
-2.7%
-0.4%
0.0%
-102.3%
-102.3%
8,979,586
2,509,012
4,292,441
-303,816
9,095,150
-2,246,101
2,415,366
28.3%
488.3%
20.8%
-34.8%
54.0%
-69.7%
24.2%
Graph: The OTP Bank's asset movements
48,000
total assets
46,000
44,000
42,000
41,580
42,653
40,704
40,000
38,000
38,975
39,235
35,724
36,000
34,000
32,974
32,000
30,000
Dec 10 Mar 11 Jun 11 Sep 11 Dec 11 Mar 12 Jun 12 Sep 12 Dec 12 Mar 13 Jun 13 Sep 13 Dec 13 Mar 14 Jun 14 Sep 14 Dec 14
15
Graph: Market share of total loans and deposits
2.0%
1.8%
1.65%
1.85%
1.77%
1.6%
1.90%
1.45%
1.4%
1.2%
1.0%
1.08%
0.99%
0.91%
0.8%
Dec 11 Mar 12 Jun 12
Sep 12 Dec 12 Mar 13 Jun 13
Total deposits
Sep 13 Dec 13 Mar 14 Jun 14
Sep 14 Nov 14
Total loans
10. The Bank's Future Development
The Bank defined its major business goals in 2015 as follows:
•
Organic growth – maintenance of existing and development of new profitable banking activities through
the existing product scope, readiness to exploit the possibilities for external territorial growth;
•
Market share increase – with a focus on maintaining a profitable and stable model;
•
Improvement of operational efficiency – with a focus on the improvement of the quality of services
provided to clients;
A dynamic growth is expected in the retail banking segment with a special emphasis on the acquisition of new
clients through existing sales channels and the introduction of innovative products, primarily in the area of
electronic banking, as well as improving the business procedure efficiency and the quality of services.
Additional results are expected in the area of small enterprises and entrepreneurs.
A growth is expected in the corporate banking area with an emphasis on the acquisition of clients using our
developed product scope and services, as well as the possibilities of cross-selling.
16

OTP BANKA SRBIJA A.D., NOVI SAD Financial Statements Year

Transcription

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