ANNUAL BUSINESS REPORT FOR 2015

Transcription

1 ANNUAL BUSINESS REPORT FOR

2 Contents Introduction Presentation and assessment of business conditions of the Bank Information on important business events Information on relation with other legal entities Information on the work of the Board of Directors Presentation of organization and staff Presentation and assessment of business and financial standing Presentation of the Balance Sheet as of compared to Presentation of the P&L as of compared to Presentation of development of investment activities in the next investment period 13 2

3 Introduction The Business report of Societe Generale Banka Montenegro (hereinafter referred to as: the Bank) for 2015 has been prepared in order to present to shareholders of the Bank the whole picture of the business operations during the year In this respect, the Report aims to present the accomplished level, scope and dynamic of flow of business activities directed to the realization of primary goals, principles and tasks defined by the Bank for Data presented in this Report are based on the financial statements of the Bank, as well as on other data from records of individual business operations, in comparison with situation as of 31st of December The Business report of the Bank for 2015 contains all requirements of Decision on reports which banks have to submit to the Central Bank of Montenegro (CBM) in accordance with Law on banks ("Official Gazette of Republic of Montenegro", no.64/12), namely: 1. Presentation and assessment of business conditions of the Bank; 2. Information on important business events; 3. Information on relation with other legal entities; 4. Information on work of the Board of Directors; 5. Presentation of organization and staff; 6. Presentation and assessment of business and financial standing; 7. Presentation of development of investment activities in the next investment period. 1. Presentation and assessment of business conditions of the Bank 1 General economic environment After having achieved a growth of 1.8% in 2014, the level of GDP forecasted by the Ministry of Finance for 2015 is limited to 4.3%. This forecast is significantly better compared to the previous year and is primarily the result of the highest achieved growth rates in tourism as well as the intensification of work on first road section of highway Bar Boljare. 1 Data taken from Ministry of Finance 3

4 Another sign of faster economic growth, after recorded deflation of -0.5% in 2014, is the expected inflation of 1.5% in The reason is above all in trends on external market as well as slight increase in residents' consumption. From banking loans perspective, there was an increase of 37 MEUR in total loans in The growth is mostly visible in the retail segment (+27 MEUR), as well as in the private legal entities and public entities (+10 MEUR). According to projections, major drivers of the future growth of the Montenegrin economy remain investments in energy, tourism, agriculture and infrastructure sectors, while priority will also be institutions framework development. Average GDP rate expected in forthcoming period will be around 4%. The below table compares the evolution of major macroeconomic and fiscal indicators for the period 2014 and 2015: Macroeconomic and fiscal overview Macroeconomic indicators Fiscal indicators (in % of GDP) Achieved Estimation Real growth of GDP (in %) Inflation (in %) Employment growth (in %) Current account deficit (in % of GDP) Public income Public expenditure Public deficit/surplus Primary deficit/surplus Public debt Banking sector The total number of banks currently operating in Montenegrin market is 14 with an addition of two new banks in the market in 2015: Zapad (Ukraine) and Ziraat (Turkey). Furthermore, in the beginning of December Azerbaijan company Azmont investments has officially submitted request to CBM to obtain a license for establishing bank. Downward trend of the interest rates on loans continued during 2015 which is driven also by larger banking market. This movement is also made easier by a relative decrease of the constraint of NPL, at a level of 13.3% for the banking sector in 2015 (a decrease from 17% in 2014). However, high level of nonperforming loans remains the main cause of banking sector vulnerability, thus the higher interest rates and lower than possible loans level. The total disbursed loans of the banking sector at end of 2015 amounted to 2,036 MEUR, whereby total deposits amounted to 2,625 MEUR. In comparison to 2014, growing trend is visible in both loans and deposits segment. Total loans have recorded an increase of 37 MEUR (2%) while deposits are higher by 316 MEUR (14%). 4

5 3,000,000 2,500,000 2,000,000 1,500,000 1,000, , * Total Loans Total Deposits * as per new CBM regulation, part of written off loans from off Balance Sheet are included in Balance Sheet figures starting from 1 st of January 2013 Growing trend of the deposits has continued during 2015 and is particularly visible in the second half of the year: 2,700,000 2,600,000 2,500,000 2,400,000 2,300,000 2,200,000 2,100,000 2,000,000 1,900, I II III IV V VI VII VIII IX X XI XII Total Loans Total deposits 5

6 2. Information on important business events In 2015 the Bank presented modified versions of already existing products. Improved version of Le Club package now includes SMS Conto and UNIQA card insurance. The most significant change related to this package is the possibility of cash withdrawal from an ATM in Montenegro with no fee charged. This option is available up to four times a month for Le Club Standard and Le Club Superior package holders and limitless for Le Club Premier package holders, which makes Societe Generale Bank Montenegro the only bank in the Montenegrin market with this offer. Furthermore, at the end of 2015 the Bank introduced the improved version of E-Banking. The main changes are higher level of customers' security (additional authentication step with a SMS One Time Password code) and visual design and functionality of the application (direct payment to SOGE steps and credit cards, creation of standing orders, exchange office, overview of the balance and obligations for all credit cards and loans as well as the option of Virtual financial advisor). Beside above mentioned new products Bank has made modification of almost all existing product which is in line with Bank strategy and market development. In August 2015 Bank has opened VIP office which represents integral part of existing branch in HQ. To be mentioned that the Bank has expended its ATM network. New ATMs have been placed on locations in Budva and Herceg Novi so now total number of ATMs is 25. Finally, Societe Generale Banka Montenegro was declared to be the best bank in Montenegro by two renowned international magazines: The Banker and Euromoney. This is the third time, after 2012 and 2014, for the Bank to be the winner of prestigious award Bank of the Year from the magazine The Banker while the 'Euromoney' awarded the Bank with an 'Award for Excellence' for the second time as first award was in In addition, Societe Generale Banka Montenegro won another important recognition in the award for corporate philanthropy 'ISKRA', which represents the recognition in the area of socially responsible attitude towards the community. 3. Information on relation with other legal entities The Bank does not have any consolidated participation in other legal entities. 4. Information on the work of the Board of Directors The Board of Directors of Societe Generale Banka Montenegro held 12 regular sessions and 1 extraordinary session in There were changes during 2015 in the structure of the members of the Board of Directors. Instead of Mr. Pierre-Yves Demoures, who took over other responsibilities within the Group 6

7 Societe Generale, Mr. Antoine Alexis was appointed member of the Board. At the same time, he holds the position of the Vice-President. The current structure of the Members of the Board of Directors of Societe Generale Banka Montenegro is as follows: Milorad Katnić President; Antoine Alexis Vice-President; Verica Maraš member; Sonja Miladinovski member; Miroslav Hiršl member. It is reminded that the Board of Directors governs and oversees business activities of the Bank. Its main activity is to establish risk management system for all risks the Bank is exposed to in its operations and to ensure that all operations engaged are in compliance with local regulation and internal procedures. In order to adequately manage risks the Bank is exposed to, the Board of Directors established permanent and temporary working bodies, which report to the Board on monthly and quarterly basis. These bodies are presented in the chart below: Temporary bodies regular bodies The Bank continuously follows the changes of the local regulation related to the banking activities and adapts its operations to these changes. The bank has two executive officers, one of whom is the Chief Executive Officer. 7

8 5. Presentation of organization and staff Societe Generale Banka Montenegro has 293 employees, whereof 252 employees have a longterm contract, while 41 employees have a short-term contract. Further on is the currently valid organization chart of the Bank: 8

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10 6. Presentation and assessment of business and financial standing 6.1. Presentation of the Balance Sheet as of compared to BALANCE SHEET From January, 1 st until December 31 st, 2015 (in thousand EUR) ASSETS Cash and deposits accounts with central banks 59,300 55,058 Loans and receivables from banks 17,154 6,703 Loans and receivables from clients 300, ,707 Assets held for sale Investment securities - available for sale 34,969 22,449 - held to maturity 10,377 8,373 Properties, facilities and equipment 10,997 11,346 Intangible assets Deffered tax assets 19 0 Other financial receivables Other business receivables 1,415 1,271 TOTAL ASSETS 436, ,801 LIABILITIES Clients deposits 336, ,612 Borrowings from banks 9,015 8,000 Borrowings from other clients 35,807 24,987 Provisions 2,248 2,003 Current tax liabilities Deffered tax liabilities Other liabilities 2,174 2,342 TOTAL LIABILITIES 386, ,665 CAPITAL Share capital 24,731 24,731 Undistributed profit 13,688 10,222 Current year profit/loss 6,310 5,714 Other reserves 4,807 4,469 TOTAL CAPITAL 49,536 45,136 TOTAL LIABILITIES + CAPITAL 436, ,801 OFF BALANCE 2,253,388 1,943,438 10

11 The total assets per amount to MEUR, which represents an increase of 14.5% comparing to The total net loans amount to MEUR, which corresponds to an increase of 9.5% compared to the same period last year (or MEUR). It is considered as a rather good performance in a business environment still unfavorable, with a market share in progress by 115 bps at 15.5%. This positive development was driven by the Retail segment (+9.1 MEUR) and Public segment loans (+9.7 MEUR). Good performance was also achieved in housing loans (+3.5 MEUR), as well as Corporate segment (+2.3 MEUR) and SME (+2.2 MEUR). Besides continuation of loan placement to retail and corporate, the Bank also continued investment in Government bonds. Bonds portfolio in 2015 has been increased by 12.3 MEUR (amortization of existing stock included). In regards to deposits, the Bank has continued to foster its position during Total deposits amounted to MEUR (+13.0%) at the end of the year. Positive trend is visible in every segment, the highest in Retail and Corporate segments. At the end of the 2015, Societe Generale Banka Montenegro displays a Loan- to-deposit ratio of 89%, while Deposit market share remained on the same level as in the last year i.e. 12.8%. 11

12 6.2. Presentation of the P&L as of compared to INCOME STATEMENT From January, 1 st until December 31 st, 2015 (in thousand EUR) Interest income 24,667 25,337 Interest expenses -5,533-7,870 NET INTEREST INCOME 19,134 17,467 Income from dividends - 2 Allowance for impairment -4,265-3,290 Provision expenses Fee and commission income 7,466 6,931 Fee and commission expense -3,374-3,064 NET FEE AND COMMISSION INCOME 4,092 3,867 Net gains/losses from investment securities - 3 Net gains/losses from FX revaluation Employee expenses -7,229-7,256 Overhead and administrative expenses -3,872-3,635 Depreciation expenses -1,111-1,077 Other expenses Other income OPERATING PROFIT 6,926 6,300 Profit tax NET PROFIT/LOSS 6,310 5,714 The Bank has realized in 2015 a positive net result after tax of 6,310 KEUR, with an increase of 10% compared with last year. This result is considered as excellent bearing in mind that during 2015 there has been a significant pressure from the market towards decreasing interest rates on loans as well as refinancing the existing loan portfolio. This performance is firstly the result of the progress of the banking incomes, and notably of the net interest margin (+10%). Impairment losses are significantly higher in comparison to 2014 (30%) and amount to 4,265 KEUR while provision expenses are slightly lower compared to the previous year (134 KEUR vs. 220 KEUR last year). Finally, the Bank has succeeded to keep under control the evolution of general expenses which progressed by 2% compared to the previous year. 12

13 7. Presentation of development of investment activities in the next investment period Societe Generale Banka Montenegro is present in the country through a network of 20 branches, out of which 7 are located in Podgorica and 13 in other major towns of Montenegro. During 2015 there was no extension of the Bank s network. The following map presents the existing branch network of Societe Generale Banka Montenegro: In regards to commercial development, Societe Generale Banka Montenegro intends to continue its strategy of balanced and profitable growth in all customer segments. Thus, the Bank will continue to develop its offer of products and services. On front-end transformation, the Bank plans to put in place distinctive channels in order to enhance the customer experience and foster the business outcomes. In addition, the Bank will engage focused investments in processes automation, in areas with the greatest return. Examples include workflow systems, business intelligence solution or CRM tool. Finally, the strategy of funding diversification, which aims to develop a self-funded bank, will be continued, with priority given to client deposits. 13