TIRANA BANK ANNUAL REPORT 2016

Transcription

1 TIRANA BANK ANNUAL REPORT 2016

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3 TABLE OF CONTENT 1. CEO S FOREWORD 2. PIRAEUS BANK GROUP 3. CORPORATE GOVERNANCE 4. ECONOMIC OUTLOOK 5. TIRANA BANK MAIN INDICATORS A. RETAIL BANKING ACTIVITY B. SME BANKING C. CORPORATE BANKING DIVISION D. BRANCH NETWORK E. TREASURY DIVISION F. IT AND ORGANISATION G. RISK MANAGEMENT H. COMPLIANCE DEPARTMENT I. FUNDS TRANSFER 6. CORPORATE SOCIAL RESPONSIBILITY J. SOCIAL ACTIVITIES K. CULTURE L. INNOVATION 7. HUMAN RESOURCES 8. FINANCIAL STATEMENTS A. CONTENTS OF THE FINANCIAL STATEMENTS B. INDEPENDENT AUDITOR REPORT C. INCOME STATEMENT D. BALANCE SHEET E. STATEMENT OF CHANGES IN EQUITY F. CASH FLOW STATEMENT G. NOTES TO THE FINANCIAL STATEMENTS TIRANA BANK COMMITTEES

4 TIRANA BANK ANNUAL REPORT 2016 CEO S FOREWORD Dear Shareholders, Dear Customers, Dear Partners, Dear Employees and Colleagues, 2016 was a good year for Tirana Bank in terms of achievements, fully complied with the objectives set forth key stakeholders, along with the turnover in certain key indicators. It also marked the stability of our Bank, being among the leading financial institutions in Albania. At a business level, we managed to maintain the relationship with our key and loyal customers in all clients segments, paying due attention to business and being fully committed to new business opportunities. This year was characterised by the sustainable performance of Loans and Deposits portfolios, substantial reduction of Non-performing Assets, as well as the further optimization of our resources, leading to adequate Operating Results for the Bank. We hold stability in the Liquidity and Capital indicators, which remain far above the statutory levels, rendering us one of the safest banks in the local market. It is my great pleasure to state that the fulfilment of key objectives and the healthy return to business 4

5 TIRANA BANK ANNUAL REPORT 2016 Our Bank is heading toward 2017 with a clear strategy in expanding our business prudently, taking into consideration the actual political landscape and the challenging business/ economic developments in the country and in the Region, aiming to serve better to our esteemed customers and to increase stakeholders profitability were accomplished through the significant efforts and great commitments of our Staff for the performance, whilst the strong support from our parent bank remains pivotal for our sound presence in the market. The year marked also the stabilization in the Piraeus Bank performance, especially during the second half of the year, with the improvement market situation. Liquidity and asset quality was improved, along with net results performance. Piraeus Bank has acted in compliance with its restructuring plan in 2016, supporting the economic recovery in Greece, as the largest bank in the country. An important factor for the Bank s successful turnover is, certainly, a stable political and economic environment, which will contribute to the restoration of clients confidence. Our Bank is heading toward 2017 with a clear strategy in expanding our business prudently, taking into consideration the actual political landscape and the challenging business/economic developments in the country and in the Region, aiming to serve better to our esteemed customers and to increase stakeholders profitability. Dritan Mustafa Chief Executive Officer 5

6 TIRANA BANK ANNUAL REPORT 2016 PIRAEUS BANK GROUP With its headquarters in Athens, Greece, and with approximately 18.1 thousand employees in 8 countries, Piraeus Bank Group offers a full range of financial products and services to approximately 5.6 million customers. Total assets of the Group amounted to 81.5 billion, net loans to 49.7 billion and customer deposits to 42.4 billion on December 31, 2016 Founded in 1916, Piraeus Bank operated as a private credit institution for many decades, although during the period it became a state property, until it was privatized in December Since then, it has rapidly grown in size and expanded its activities, representing today the leading Bank in Greece with 31% market share in terms of loans and 29% of deposits. OUR PROGRESS Along with its organic growth during the decades of 1990 and 2000, Piraeus Bank has made a series of strategic acquisitions and mergers aiming to establish a strong presence in the domestic market. Thus, in 1998, the Bank absorbed the activities of Chase Manhattan in Greece, took 6

7 TIRANA BANK ANNUAL REPORT 2016 over the interest control in Macedonia-Thrace Bank and acquired the specialized bank Credit Lyonnais Hellas. On the onset of 1999, the Bank acquired Xiosbank and absorbed the activities of National Westminster Bank Plc in Greece. In June 2000, Piraeus Bank absorbed its two commercial banks in Greece (Macedonia -Thrace Bank and Xiosbank). In 2002, Piraeus Bank acquired the Hellenic Industrial Development Bank (ETBA bank), which was absorbed in December Piraeus Bank Group, in the context of implementing its strategy for expansion in South-eastern Europe and Eastern Mediterranean markets, initially reached an agreement on the acquisition of Pater Credit Bank in Romania (integrated into the Group in April 2000 as Piraeus Bank Romania SA). In 2005, it acquired the Bulgarian Eurobank (renamed into Piraeus Bank Bulgaria), strengthening its 12- year presence in Bulgaria. Furthermore, in 2005, Piraeus entered the Serbian market by acquiring Atlas Bank (renamed into Piraeus Bank Beograd). Finally, in 2007, Piraeus Group expanded its international presence in Ukraine by acquiring the International Commerce Bank (renamed into Piraeus Bank ICB) and in Cyprus by establishing Piraeus Bank Cyprus through the acquisition of the Arab Bank Cypriot network. In 2012, Piraeus Bank acquired the sound part of Agricultural Bank (selected assets and liabilities) and Geniki Bank, a former subsidiary of Societe Generale. In March 2013, Piraeus Bank acquired the Greek banking operations of Bank of Cyprus, 7

8 TIRANA BANK ANNUAL REPORT 2016 Piraeus Bank Group December 2016 Assets 81.5bn Net Loans 49.7bn Deposits 42.4bn UNITED KINGDOM LONDON GERMANY Branches 921 Employees Customers CET-1 ratio 17,0% 8

9 TIRANA BANK ANNUAL REPORT 2016 UKRAINE ROMANIA ROMANIA NI A SERBIA A BULGARIA BULGARIA ALBANIA GREECE I 9

10 TIRANA BANK ANNUAL REPORT 2016 Cyprus Popular Bank and Hellenic Bank. In June 2013, Piraeus Bank acquired Millennium Bank Greece, a subsidiary of BCP. In April 2015, Piraeus Bank acquired the carve-out part of Panellinia Bank healthy assets. These transactions mark some important steps towards the restructuring of the Greek banking system, in which Piraeus Bank has been part of since the very beginning as a main pillar. Piraeus Bank has successfully completed the integration of all the aforementioned banking acquisitions to its systems providing to all its customers a unique banking experience. In December 2015, Piraeus Bank announced the full coverage of the share capital increase by an amount reaching to 2.6 bn. Furthermore, the Bank issued Contingent Convertible Bonds under the provisions of the Law in favour of the HFSF and the CA 36 / for an amount of 2.0 bn. The Group s total equity amounted to 9.8 bn at end of December The Group s Common Equity Tier-1 ratio (Proforma of non-continuing operations of Pireus Bank and ATE Insurance) reached 17.0% at the same period, while the fully loaded Basel III Common Equity Tier-1 ratio reached 16.2%. Accordingly, the current capital ratios render Piraeus Bank as one of the strongest capitalized banks in Europe. WHAT WE DO Piraeus Bank today leads a group of companies covering all financial activities in the Greek market (universal bank). Piraeus Bank has acquired particular know-how in the areas of medium-sized and small enterprises, in agricultural banking, in consumer and mortgage credit and green banking, capital markets and investment banking, as well as in leasing and factoring. These services are provided through a nation-wide network of 660 branches and 1,880 ATMs, and also through its innovative electronic banking network of winbank. Piraeus Bank Group has an international presence consisting of 261 branches centred in Southeastern Europe and Eastern Mediterranean. In particular, the Group operates in Romania through Piraeus Bank Romania with 101 branches, in Bulgaria through Piraeus Bank Bulgaria with 75 branches, in Albania through Tirana Bank with 39 branches, in Serbia with 26 branches of Piraeus Bank Beograd, in Ukraine with 18 branches of Piraeus Bank ICB, in London and Frankfurt with 10

11 TIRANA BANK ANNUAL REPORT 2016 each operating a branch of Piraeus Bank. WHAT WE STAND FOR Piraeus Bank Group possesses a well-trained and experienced workforce. The Group s vision is the continuous development of a humane and responsible organisation, where each employee, with competencies and personal inspiration works collectively and with dedication, capitalizing on diversity and generating value through every action. In the selection and utilization process of human resources, objective criteria and methodology are incorporated with specific emphasis on equal opportunities and respect for people. The Group invests in the continuous training and development of its 18,075 people, based on innovative measures and methods. At the same time, the Group created a work environment where innovation, the exchange of ideas and creativity are supported and team spirit is promoted. Through concrete evaluation systems, the Group ensures that the performance of its staff are in line with the Group s objectives and it has created the necessary framework for recognition and reward both at an individual and team level. Open communication and the necessary support of the people are enhanced, in many different areas and in different aspects of life, ensuring an organisation that is both human and dynamic. Piraeus Bank Group, combining business development and social responsibility, systematically endorses its relations with its social partners through specific actions; while special emphasis is put on the protection of the natural environment and preservation of cultural heritage. Piraeus Bank has built significant expertise and market share in the field of green banking with committed branches and products, addressing both business and individual needs. At the same time, the Piraeus Bank Group Cultural Foundation carries out culture-related activities, which are part of the Piraeus Bank Group s corporate social responsibility and operates a series of thematic museums in Greece, which are constantly growing and have the possibility to convey to the Greek rural regions cultural activities of high standards with effective and efficient manner. As one of the systemic banks in Greece, Piraeus Bank takes initiatives that support sound business plans and the evolution of the Greek economy, and its transformation in a new model of sustainable development. 11

12 TIRANA BANK ANNUAL REPORT 2016 CORPORATE GOVERNANCE The Board of Directors consists of an odd number, five (5) minimum and nine (9) maximum, executive and non-executive members. Executive members shall be those engaged in the daily management issues of the Bank; non-executive members shall be those entrusted with the promotion of corporate affairs. SENIOR MANAGEMENT BODIES The supreme body of Tirana Bank is the General Assembly of Shareholders, which elects the Bank s Board of Directors as a decision making and supervisory body. The Bank s Articles of Association stipulate the operation mode of its bodies and the management of the Bank. This document makes special reference to the composition of the Board of Directors as well as to the obligations/duties of its members according to Law No. 9901/ On entrepreneurs and commercial Companies and Law 9662/ On banks in the Republic of Albania. BOARD OF DIRECTORS The Board of Directors consists of an odd number, five (5) minimum and nine (9) maximum, executive 12

13 TIRANA BANK ANNUAL REPORT 2016 (From left to right) Dritan Mustafa, CEO & Board of Directors Member, Athanasios Paloudis, Executive Committee Member, Bedri Çollaku, Vice Chairman of the Board of Directors, Manjola Capo, Executive Committee Member, Christos Bougiouklis, Board of Directors Member, Elona Gjipali, Executive Committee Member, Agkop Mardikian, Board of Directors Member, Eralda Tafaj, Executive Committee Member, Konstantinos Tsigaras, Executive Committee Member and non-executive members. Executive members shall be those engaged in the daily management issues of the Bank; non-executive members shall be those entrusted with the promotion of corporate affairs. The total number of executive members shall not constitute the majority of the total number of Board members. The majority of Board members shall be independent. The Board of the Directors shall define the capacity of the Board s members, i.e. executive or non-executive. If the Board provisionally elects a member, until the next General Assembly meeting, to fill in for a resigned, deceased or otherwise forfeited independent member, such elected member shall also be independent. Board of Directors Composition Constantinos Loizides* Bedri Çollaku (V/Chairman) Dritan Mustafa Agkop Mardikian Christos Bougiouklis *Under perocedure for Bank of Albania approval. Executive Committee Dritan Mustafa (Chairman) Konstantinos Tsigaras Eralda Tafaj Gurga Elona Gjipali Athanasios Paloudis Manjola Capo 13

14 TIRANA BANK ANNUAL REPORT 2016 ECONOMIC OUTLOOK The banking sector continues to be the main segment of financial intermediation in Albania. Overall, positive developments in the real economy and the banking sector have contributed to the strengthening of financial stability. Banking sector s solvency, liquidity and reserve for specific risks are within regulatory levels. WORLD ECONOMY The year 2016 is considered as the year of unexpected events that had a major impact on the international financial markets, of which we will mention the most important ones: Losses on world capital markets and sharp drop in oil prices as a result of concerns over China s economic growth slowdown and its currency de valuation during the first months of the year. The negative interest policy of the Bank of Japan at the end of January, come as another surprise to the markets. The consequences were imminent. Japanese investors began investing in the highest interest rates of the Eurozone, the United Kingdom 14

15 TIRANA BANK ANNUAL REPORT 2016 and the United States, contributing to lowering the interests of the developed markets. Brexit! In June, the United Kingdom voted to withdraw from European Union in a shocking referendum, causing mass confusion about the future of European markets, the British pound value and British financial institutions. In August, the Bank of England announced that the key interest rate cut by 25 percentage points and further monetary expansion. Oil price rise in the last quarter of the year was a result of the OPEC s decision, in order to cut world oil production in November, which was soon followed by overseas OPEC countries, e.g. Russia. Trump s Presidential Election Victory! Markets came once again to a sudden halt, when Republican Donald Trump s office unexpectedly won the United States presidential elections. However, the events mentioned did not have a full impact on the global economy for Their impact is expected to emerge in the upcoming years. The global economy has experienced a higher growth during the second half of the year. Developed countries have shown a higher economic growth compared to developing ones. Among the developed countries, the US economy had a considerable growth during the second half of the year, and the economy is approaching full employment. The expansion of economic 15

16 TIRANA BANK ANNUAL REPORT 2016 GROWTH 3.5% BASED ON PRELIMINARY ESTIMATION, THE ALBANIAN ECONOMY HAS INCREASED BY 3.5% IN THIS GROWTH IS HIGHER COMPARED TO THE FIGURES OF THE REGION, WHICH ACCORDING TO THE WORLD BANK IS 2.8% activity is supported by the increase of foreign and domestic demand. At the end of the year, the Federal Reserve increased its key interest rate by 25 percentage points. There has been an increase in the inflation rate, but yet its level has not reached the Federal Reserve target. Meanwhile in many other developed countries, mainly in the Eurozone ones, the final product remains below potential. The euro area economy has continued a moderate growth during This growth has come mainly from the revival of domestic demand. Unemployment rate has declined during Employment growth has had an impact on disposable household income, thus giving support to private consumption. The continued ease of monetary policy and its transmission to the financial markets has provided favourable financing conditions, which have led to the growth of private investment. Credit activity has had a gradual recovery, which has been noted since the beginning of Reviews on Japan s economic growth have always shown that economic growth has exceeded expectations. We may state the same about China s economic growth, owing to the government s stimulating measures that have supported growth. Economic activity has been weaker in Turkey, which faced a reduction in tourism revenues. Economic growth in Russia seemed slower during the second half of the year, partly due to higher oil prices. Inflation has risen in the fourth quarter of 2016 in developed economies due to rising oil prices, but core inflation has been almost unchanged. Albanian economy The Albanian economy has been estimated to increase by 3.5% in This growth is higher than that of the region, which according to the World Bank is 2.8%. Economic growth came as a result of expanding consumption and private investment, as well as increasing tourism revenues. Stimulating monetary conditions, improving confidence, increasing employment and expanding foreign 16

17 TIRANA BANK ANNUAL REPORT 2016 reduction 18.2% THE RATIO OF NONPERFORMING LOANS DROPPED TO 18.2% IN DECEMBER. THIS REDUCTION IS GENERALLY ATTRIBUTED TO THE RESTRUCTURING OF LOANS AND THE ISSUANCE OF LOANS LOST FROM THE BALANCE SHEET direct investment during 2016 have made the revival of domestic demand possible. Goods exports continue to show weak performance as a result of low prices in international markets, while services exports have increased as a result of rising foreign demand. The unemployment rate declined sharply in the last quarter of the year. Inflation has increased during the second half of the year following a sharp decline in the first months of the year, however, the annual average stood below that of 2015 and also below the Bank of Albania target. Fiscal policy has been oriented towards fiscal consolidation, keeping the direct contribution of public spending to aggregate demand low. Banking Sector The banking sector continues to be the main segment of financial intermediation in Albania. Over all, positive developments in the real economy and the banking sector have contributed to strengthening of financial stability. Banking sector s solvency, liquidity and reserve for specific risks are within regulatory levels. The ratio of non-performing loans dropped to 18.2% in December. This reduction is, generally, attributed to the restructuring of loans and the issuance of loans lost from the balance sheet. Excluding the effect of extracting loans lost from the balance sheet, the loan portfolio for the private sector has increased by approximately 3.3% in 2016 compared to the previous year. Credit expansion has been largely based on high rates of credit growth for individuals. Interest rates on deposits and loans are at historical minimums. Bank deposits are estimated to have increased by 3% compared to the previous year. This increase was due to the rise in foreign currency deposits, which expanded at an annual rate of 6.6%, but their structure reflects shifting to current accounts and demand deposits due to low interest rates. Sources: Bank of Albania, IMF, ECB, Federal Reserve. 17

18 TIRANA BANK ANNUAL REPORT 2016 Main Indicators The bank has continued to further develop action plans and schemes for increasing cross-selling ratio per customer. Thus, improving customer satisfaction, by providing them complete banking products with rapid processes and preferential terms and prices. RETAIL BANKING ACTIVITY The year 2016 has been characterized as a positive year in the economic and political developments in the country; for TB it has been a particularly challenging year. Tirana Bank is a strong actor in the Albanian banking market and it continues to succeed serving its customers with dedication, improving in every step the quality of service, aiming at strengthening of a productive and long-term relationship. It continues to have a proactive approach to market development, focusing on providing professional service paired with a large variety of products and services, which make our customers recognise Tirana Bank as a reliable and stable partner. Since the beginning of the year, we revised the Terms and Conditions applied for Individual 18

19 TIRANA BANK ANNUAL REPORT 2016 customers, based on a detailed analysis of the banking market evolution, the competition trends and the performance of our own products and services during the year aiming to: Increase our individual customer base Increase active customers ratio Increase the cross-selling ratio Improve the service offering Improve customer satisfaction Increase bank revenues The bank has continued to further develop action plans and schemes for increasing of crossselling per customer, thus, increasing customer satisfaction by providing them complete banking products with rapid processes and preferential terms and prices. Hence, different promotional offers have been introduced during the year, aiming to promote and boost different payment services/ channels ( Payments campaign ), cross sell a basket of packages 0ffering several combinations of different products and services which gave to different customer categories the opportunity to choose the most appropriate offer fitting better to their needs ( Cross selling summer offer for depositors ) or housing / consumer campaigns, etc. In regard to Retail business line, lending activity has been very proactive during the year, increasing significantly the disbursement volumes com- pared to previous years (2014 and 2015). It was oriented towards financing the needs of our payroll and standard customers, the quality of existing lending and optimization of the portfolio. 19

20 TIRANA BANK ANNUAL REPORT 2016 Main Indicators - December 2016 (Amounts in 000 LEK) assets Branches 39 NET LOANS Employees 432 Cards Cards marked a stable performance, whilst maintaining their position in the market. One of the main priorities of 2016 was to stimulate the use of cards and their activation by encouraging the customers to perform more cards transactions in their daily purchases. The results show a significant average increase mainly during the last 3 years, by 44% in terms of card transactions number and 58% in terms of volume purchases at points of sale (POS), by increasing the profitability of cards business. Tirana Bank continues to be in a great competitive advantage in the market with the Debit Card On the Spot, considering it a significant service provided to our customers by offering the debit card immediately when the client applies in the branch. Additionally, in the framework of increasing cards usage and customers satisfaction, Tirana Bank has successfully launched promotional campaigns in the market, aiming at the customers training and boost of purchases by awarding them incentives for their loyalty. Tirana Bank always cares about the cards safety, therefore during 2016 stayed vigilant for customer s data protection by ensuring more security. winbank In order to keep pace with the development of technology, our bank continues to devote itself to innovation and continuous market transformation, aiming at the further development of the modern electronic banking platform. The electronic platform, winbank, which offers: the possibility to carry out internet banking services, view the account 24 hours a day and 7 days a week, the evidence of account transactions and the possibility to make different payment types, is one of the strong milestones of Tirana Bank s services. It enables customers to perform transactions online from any device connected to the Internet, and at any time. The number of users for all banking services of the Bank is increasing, positively affecting the number and the value of transactions performed online. During 2016, the number of new users of winbank increased by 36%, while the monthly average of active users increased by 32.47%. 20

21 TIRANA BANK ANNUAL REPORT 2016 DEPOsits Loan/Deposit Ratio % CAR ratio % Cost/Income Ratio % ATM The main goal for 2016 was to increase the quality and the availability of our entire ATM network in order to enhance customer service. We believe we have achieved our goal, maintaining a high availability standard 95%, in all of our ATMs throughout the year. By the end of 2016, Tirana Bank had 71 ATMs (38 in its premises 33 out of its premises). The ATM network is certified as it has the capacity to read EMV Chip for VISA cards, offering card holders the highest levels of transaction security. In addition to withdrawing money, our customers are able to change their PIN codes and receive a mini-statement of their account. In the meantime, the bank is working to add new functions to ATMs. POS Our POS network offers to VISA card holders (debit and credit) the possibility to make purchases at POS and make cash advance withdrawals in our branches. By the end of 2016, Tirana Bank had a total of 188 terminals. Our POS network is present in more than 30 cities, providing this service to more than 30 different business categories, such as hotels, tourist agencies, shops, restaurants, gas stations, supermarkets and shopping malls. During 2016, the bank s aim was to improve the POS service and increase the volume of payments on these terminals. Call CentrE The activity of Call Centre is focused on two main directions: reviewing customer requests through incoming calls and monitoring of card transactions. Agents provide information on bank products and services, according to the needs of customers, identified through incoming calls as well as ongoing assistance, 24 hours a day, 7 days a week, and 365 days a year (24/7/365). Paying due attention to our customer needs, this team is dedicated to all inbound queries providing information on bank products and services as per each customer needs. In addition, in the context of security of card transactions performed by clients, agents monitor and if deemed necessary, contact and confirm the authentication of the actions, thus helping to prevent fraud cases. 21

22 TIRANA BANK ANNUAL REPORT 2016 b. SME BANKING The SME segment remains the bank s focus, as the main employment contributor to t economy. The main goal this year was the consolidation of existing customers and the expansion of the customer base. Our vision was the careful financing of manufacturing businesses, services and trade. Through funding, we have offered our customers complete packages of products and services, aiming at the combination of business products & services with retail ones. SME support has been spread across the country, based on the characteristics and potentials of each region or city. Banking products and services costs satisfied the customers demands and have coped quite well with the pressure of competitors, while maintaining a reasonable level of profitability for the bank. During this year, many staff training sessions were conducted, bringing about sales force growth and improving the performance of this segment. Further improvements in product diversification, flexibility, and the quality of services, performed an important role in increasing revenue and strengthening customer relationships has been a year of continuance of reactivation and reassessment of our corporate clients for Business Lines. Bank has continued paying attention to strengthening relations with existing corporate clients by supporting them with new financing, offering new competitive services and enriching the relationships from all aspects. On the other hand, Corporate has given a great importance to the enlargement of corporate customers pool by financially supporting new corporate customers. Our aim was not only to increase credit portfolio, but also to diversify our investments on different market sectors economy. Supported by experienced staff and in a spirit of teamwork, Corporate Banking achieved a great deal of our ambitious targets of the bank in this sector. The fruitful combination of corporate customer advisors and product specialists enables Tirana Bank to act as a reliable and trustworthy partner to its customers. The total new disbursements for 2016 reached EUR 13 million, being in line with the bank s strategy and budgeted figures for corporate clients. The bank extended its customer base with new corporate clients who are leading companies in their respective sectors. c. CORPORATE BANKING DIVISION Tirana Bank has been and continues to be an entrusted principal bank for corporate customers providing customized, effective solutions to each problem by virtue of its comprehensive service approach and understanding of its customers. In addition to competitive and attractive financing terms, our aim is to provide full support to our customers in all segments and cycles of their business by continually improving service quality and our offer of products and services through new benefits, operating under the demanding conditions of the market. Through our long-term 22

23 TIRANA BANK ANNUAL REPORT 2016 successful cooperation with local and international financial institutions, in 2016 we made available more attractive funding terms to our customers, resulting in new credit lines. Total Corporate Banking at year-end 2016 reached EUR 64 Million. Total Assets (000 Lek) 101,379,321 97,485,381 90,558,535 93,623, ,708,499 81,461,806 81,364,756 d. BRANCH NETWORK Our promise to deliver services anytime and anywhere also implies a commitment to make them accessible to all sections of society. Tirana Bank offers a significant network coverage and easy accessibility to all its clients. The branch network of 39 branches and 71 ATMs continues Loans to Customer (000 Lek) to be the basic executive component of the bank s multi-channel sales model. 60,404,366 54,785,214 50,659,319 38,700,399 39,252,338 Through our branch network we offer financial advisory and professional service for all 28,796,615 25,273,650 segments of the bank: Individuals, SMEs, private entrepreneurs and Corporate Customers. The branch network continues to be the basic stable executive component of the Bank s multi-channel sales mode and the importance of its consulting role has been increasing. Employees As part of its effort to optimize regional coverage by the branch network, Tirana Bank closely monitors branch operation and analyses usage patterns. Based on these analyses, the bank makes changes to the network to ensure that branches are available to clients of different segments wherever and whenever they actually need them and that the Bank achieves maximum operating efficiency

24 TIRANA BANK ANNUAL REPORT 2016 During this challenging year we have managed to centralize our core processes and procedures with the aim of increasing our customer in-branch experience, and the efficiency of our Branch Network, as well. Optimizing the functionality of the branch structure will be one of our priorities for next year as well as to continue supporting the economy, businesses and individuals, with innovative products and services. e. TREASURY DIVISION One of the main functions of the Treasury division is to control and manage the liquidity surplus and to ensure that all bank business lines have access to the liquidity they may need for their business activity. In this way, this division ensures that the bank remains financially secure, stable and capable of functioning efficiently. Among other functions we may mention: maximizing profits at a predetermined level, safeguarding the risk arising from interest rate movements and foreign exchange rates. During 2016, a year characterized by a very low level of interest rates both in local and foreign currency; the Treasury Division has actively participated in the management of deposit balances, ensuring stability in the funds. Setting on the previous year, the cost of bank funds reached a very low level. As a key contributor to ALCO and also the Bank s core pricing centre, we continuously monitor and analyse major global economies, macroeconomic trends, Bank of Albania monetary policy indices and assess the impacts that may have on our economy and in particular in the banking sector. The activities of Treasury focus on providing financial and investment products tailored to customer requirements, as well as consultancy services related to the products offered. Mediation in securities markets has continued, adding value to bank activities and further enhancing customer relations with the bank. Treasury activities continued to provide significant benefits to the bank and as at December 31, 2016, treasury transactions accounted for 66.54% of total bank assets. Treasury and Financial Markets Division is an important factor in the foreign exchange market and financial markets as a result of its trading and sales activity. Foreign exchange operations have continued to benefit the bank, reflecting careful exchanges and sales. Our financial results were consistent with the objectives and were achieved owing to efficient work. f. INFORMATION TECHNOLOGY AND ORGANISATION In the context of following and harmonizing the priorities in accordance with the business plans of the Bank for 2016 and regulatory requirements, the Information Technology and Organisation Units have been focused on the following projects and activities: Institutional obligations as per regulatory changes. Preservation of the technological advantage through upgrade of infrastructure, equipment and applications. 24

25 TIRANA BANK ANNUAL REPORT 2016 Improvement of the operating quality of the Bank with the utilization of cutting edge technology. Review and upgrade procedures and operations. Integration of the information systems. Mitigation of Risks in IT systems infrastructure. Customer Deposits (000 Lek) 78,648,027 78,083,284 72,869,393 68,580,659 69,902,068 63,746,983 63,585,400 DEVELOPMENT & IMPROVEMENT OF IT SYSTEMS The drivers for the development and improvement i of the information systems for 2016, have been the optimization as well as the integration of infrastructure, procedures and systems that are in demand by the constantly changing business, economic and technological environment with the main goal of achieving economies of scale, increased security, functionality, and integrated management Profit or Loss before Tax (000lek) 1,668, , , ,241-1,302, ,405 Payment processing transaction A new payments package solution has been put forward and implemented as Payments of several Organisations and Public Utilities. The range of services was expanded to enhance the current branch payments systems, to allow real time data communication and co-operations with selected collaborators (Payment Institutions and Utilities Companies). Branches Network ,315, System upgrades and changes implemented in the banking systems, in order to comply with regulatory requirements As per new regulatory changes and directions,

26 TIRANA BANK ANNUAL REPORT 2016 Focus for 2016 The focus has been put on promoting Housing and Consumer loans aiming to: Increase the retail performing portfolio; Continuous monitoring and management of non-performing portfolio, working hard in returning it to a performing one; Further penetration of our existing customer base; Creating and developing new opportunities in attracting new customers. the bank has the need to do several development and changes in Money Laundering systems, Loan management systems and Deposit assurance system. Moreover, starting as per an Albanian Deposit Insurance Agency requirement, the bank has launched a project for implementation of a Document Management System. This system will cover the regulatory request, but also will help the bank as it will facilitate the organisation of documentary information in electronic format. Upgrades in the banking systems to facilitate Bank Business needs Following the business needs and technological changes, during 2016 the Bank has performed several upgrades like Upgrade and centralization of Payroll Application, Upgrade of In-House Application platform, Upgrade of Retail Loan Origination System, Upgrade of HR Systems, etc. OPERATION & TECHNOLOGICAL INFRASTRUCTURES To both pieces of infrastructure, a series of interventions have been undertaken, the most important of which are as follows: Upgrade of networking equipment During 2016, Tirana Bank has done a full renovation and upgrade of Core Networking Infrastructure. The renovation consisted in replacing the existing Equipment with new ones that will give an impetus to better performing, more advanced functionalities and more secure data and telephone networking. 26

27 TIRANA BANK ANNUAL REPORT 2016 Application and desktop virtualization solutions implementation The main scope of this project has been the upgrade of bank desktop computers OS from Windows XP to Windows 8.1. This project required also upgrading all related applications to a compatible version. This project included also: Upgrade and Centralization of Cashier systems, Upgrade of all Windows Servers to 2008R2 or above, Upgrade of all SQL DB Servers, Exchange Server, CRS Signature, and any other common application, etc. ORGANISATIONAL INTERVENTIONS & CENTRAL SUPPORT During last year, the Organisation has given a special focus to the improvement of basic procedures related to operational systems of the Bank. Special emphasis was given also to the detection and correction of malfunctions and problems in the Bank system in the previous years. IT SYSTEM SECURITY In 2016, a series of projects and system installations have been completed, aiming at maximum shielding of the security of the Bank s IT system infrastructure and the protection of the Bank s customers. We may mention here the implementation of new and Web Security solution, Firewall upgrades, network data encryption upgrade, several network security enhancements, etc. g. RISK MANAGEMENT The Board of Directors and the Senior Management acknowledge that the Bank is exposed to different types of risks deriving from its operations. Under the current economic, financial and market environment, the Bank focuses on the effectiveness of its risk management practices aiming to mitigate the risks, hence maximize return to the shareholders. An efficient risk management is considered vital for the Bank in order to achieve its strategic objectives and to ensure quality returns to its shareholders, on an ongoing basis. The mission of the Risk Management Department function is defined as below: Create added value for shareholders by utilising risk management best practices towards the optimization of the Bank s risk-return profile, while ensuring the compliance with regulatory requirements. The Bank places particular emphasis on the effective monitoring and management of risks, with a view to maintaining stability, financial soundness and continuity of its operations. The general objectives of the Risk Management Function are linked to the Bank s strategic objectives: Strong liquidity base, maintenance of capital adequacy and NPLs resolution are key objectives in this context. 27

28 TIRANA BANK ANNUAL REPORT 2016 Financing to selective sectors with environmental and social added value and the deployment of risk based assessments to ensure adequate returns on lending activities. Constant enhancement of the Risk Management Framework and monitoring of control implementation and effectiveness. Developing and maintaining the risk awareness and culture across all levels (strategic, tactical, and operational) of the Bank. Compliance with the current regulatory frame- work, supervisory requirements on risk management and adherence to the best international practices. Establishment of limits that maintain risks within acceptable levels according to the risk appetite of the Bank. Implementation of best practices in risk management that correspond to the size, the risk profile, the business strategy of the Bank and the continuous alignment and compliance with the regulatory requirements. Contribution to the improvement of the Bank s Internal Control System and Corporate Governance models. Constant monitoring and improvement of control mechanisms of the Bank s operations, in terms of risk management. The purpose of the Risk Management Governance Framework is to promote an effective and prudent management of all risks, ensuring appropriate allocation of responsibilities and accountability based on risk origination aiming at aligning the risk taking process with the Bank s risk appetite. A robust communication of risk information is essential across the Bank with focus on maintaining risk awareness at all levels and in particular the BoD and Senior Management levels. For the implementation of the adopted principles, the risk management governance framework is organised in two main dimensions. The first dimension classifies the risk management operations in four lines of defence, while the second one ad- dresses the hierarchy levels in which the above- mentioned activities take place. The first governance dimension is composed of 4 lines of defense as described below: The first line of defence is comprised by the units which are closest to the origin of risk. The second line of defence is responsible for the ex-ante risk management, since it is engaged in risk management activities that take place prior to risk taking (credit scoring, new product risk assessment). The third line of defence is responsible both 28

29 TIRANA BANK ANNUAL REPORT 2016 for the ex-ante monitoring (e.g. participation in evaluation of products) as well as the ex-post control and monitoring of risks. The fourth line of defence is responsible for the independent review of the overall risk management framework of the Bank. The fourth line checks the adequacy and effectiveness of risk management and control mechanisms in the first three lines of defence. The second governance dimension constitutes of three levels: strategy, tactic, and operation. Strategic level Includes the risk management functions that are executed at a BoD level. Tactical level Includes the risk management functions that are executed at a high level of authority both by individuals as well as specialized committees. Operational level Includes the risk management functions that are executed at the relevant units of the Bank. The overall Tirana Bank risk appetite targets a prudent risk profile. In the medium term, the Bank gives priority to: (a) the maintenance of a strong capital base, (b) the maintenance of adequate liquidity and dispersion of financing sources, (c) the strengthening of the balance sheet, (d) the safe- guarding of the quality of assets and loan portfolio diversification and (e) the cost effective management of operating expenses (f) the enhancement of environmental and social profile. The Bank must have sufficient liquidity and capital resources, to maintain stable and recurring profitability. It aims to maintain an independent risk management culture with active involvement of top management. The Bank aims to maintain a culture of continuous improvement of processes, policies, models and tools for measuring and monitoring risk exposures. Throughout year 2017, Tirana Bank has continued paying particular attention to the risks to which the banking system is exposed. In this regards, it has further strengthened the organisational structure and the control functions, aiming at enhancing its risk management practices, without harming its business operations. The main focus remains to be the improvement of the quality of assets, especially the recoverability of the non-performing portfolio. It has maintained its liquidity l levels under careful monitoring, to ensure they remain above the regulatory minimums. Market risk continued being very limited, while operational risk has 29

30 TIRANA BANK ANNUAL REPORT 2016 received special attention, through reviewing of the Bank s operations, aiming at identifying possible improvements for the purpose of reducing operational losses and other negative impacts (being those reputational, regulatory, etc.). Careful monitoring of the operational losses, key risk indicators and annual performance of the risk control self assessment exercise remained the main sources of operational risk management framework while the Bank successfully implemented a Fraud Risk Management Framework under the Ongoing Control Platform. Tirana Bank wishes to avoid operational risk events/losses, which are due to the inadequacy and ineffectiveness of the internal control system (internal control environment) or in non-compliance with the principles and objectives of this sys- tem. It wishes to completely avoid losses generated from internal fraud as well as completely avoid incidents having significant negative impact on its reputation and corporate image. h. COMPLIANCE DEPARTMENT Regulatory Compliance Department is responsible for the establishment and implementation of appropriate procedures that ensure the timely, complete and continuous compliance of the institution with the applicable legal and regulatory framework as well as the internal regulations of Tirana Bank. The Compliance Department identifies, evaluates and manages risks it may be exposed to due to failure to comply with the regulatory framework. For this purpose, it continuously monitors forthcoming changes and records avoidance of demands and obligations to the Bank, so as to evaluate promptly their repercussions, implement suitable measures and safeguards both the Bank s interest and reputation. In this context, Regulatory Compliance Department of Tirana Bank during 2016: Ensured the Bank s adherence to Anti-Money Laundering and Terrorism Financing legislation by updating relevant internal procedures and IT systems for a more effective compliance with the local regulatory framework and Group s standards; Effectively addressed a large number of requests from regulatory and tax authorities; Completed the actions required for, e.g. 30

31 TIRANA BANK ANNUAL REPORT 2016 compliance with the Foreign Account Tax Compliance Act (FATCA); Ensured customer protection through the compliance of Bank s products, services and transaction terms with the regulatory framework in force. For 2017, the main objective of Compliance is to help ensure that Tirana Bank remains a trustworthy Bank, by ensuring the security of the Bank and its business lines, which implies adapting to the growing demands of regulators, customers and public opinion. i. FUNDS TRANSFER Funds transfer of is one of the main services provided by the banking system. Security, sustainability and efficiency of the payment system are key elements for a smooth functioning of the financial system. Considering that the payment systems, as a set of instruments, procedures and rules, perform the transfer of funds, general expenses and liquidity of the participants, the performance, commitment and professionalism of the Payments Department is of particular importance. Among the strategies of this department to be mentioned are: fast and secure operation for customers, favourable prices, interactive communication, transparency and personalised services to support individuals and businesses has marked a satisfactory level of achievements regarding the volume of transfers, thus maintaining a market share of 8%. LIST OF CORRESPONDENT banks CORRESPONDENT bank SWIFT CODE PIRAEUS BANK GREECE PIRBGRAA RAIFFEISEN ZENTRALBANK RZBAATWW BANK OF ALBANIA STANALTR DEUTSCHE BANK F.F.T. DEUTDEFF DEUTSCHE BANKERS TRUST N.Y.U.S.A BKTRUS33 SLA Banca Popolare BAPPIT22 31

32 TIRANA BANK ANNUAL REPORT 2016 CORPORATE SOCIAL RESPONSIBILITY On its 20th anniversary, Tirana Bank continued to reinforce the belief that Corporate Social Responsibility constitutes a key factor that enables the conditions for a logical connection and match between profit and people, both within and outside the business environment. Commitment to sustainably support social, cultural and educational activities, to help the community, has been the spirit that characterized corporate social responsibility during Social Activities Tirana Bank has organised numerous activities and donations for one of the most vulnerable groups in Albania, children. In this framework, Tirana Bank has continued to support SOS Families, which provide sustainable, safe and loving care in a family environment for children who have lost their parents or who cannot live with their biological family. Showing our continuous commitment to social issues, and our assistance in solving current social problems, Tirana Bank is committed to continuing the adoption of three 32

33 TIRANA BANK ANNUAL REPORT 2016 children from the SOS Village. The 1st of June notes the International Children s Day, and certainly, children should celebrate and be happy on that day. They deserve to be so every day of the year, but on this day they need a special treatment. On this festive day Tirana Bank visited children with Down syndrome. In collaboration with Down Syndrome Albania, Tirana Bank supported the organisation of the party, as well as the 2nd Anniversary of the Performance and Development Centre of Down Syndrome Foundation Albania. Tirana Bank supported also the Municipality of Korça for the arrangements of the 1st June festivities. During that day children were put at the centre of the world and numerous activities were dedicated to them. Various activities were organised in parks and on main Boulevard of Korça. Tirana Bank staff of Gjirokastra paid visits to children in need, preparing them food pack ages to help children of families in need in this town. Our gifts for this end-of-year were handed to orphan children in the community, in cooperation with the Albanian Red Cross. On December 22nd, 100 orphans who live in the community received gifts provided by Tirana Bank, at the end of a concert organised by them. Tirana Bank has joined the initiative of the Municipality of Tirana Adopt a kindergarten. In this framework the Bank has contributed to supplying furniture to the nursery in Komuna e Parisit. Tirana Bank was also a sponsor of the event, Cook one more dish on December 25th. This event was 33

34 TIRANA BANK ANNUAL REPORT 2016 considered a great holiday for all persons who cannot celebrate the end-of-year festivities. The guests of honour at this table were homeless, poor and lonely people. Tirana Bank employees demonstrated a very nice example of humanity by volunteering in serving the dishes. For the eighth consecutive year, on October 14th 2016, Tirana Bank in cooperation with the Albanian Red Cross organised the human activity of blood donation. Like for the previous years, the activity was not only organised in the premises of the Bank s Headquarters, but also in all branches where Tirana Bank operates. Through internal and external communication, Tirana Bank aimed to raise awareness by inviting family members, customers and partners to participate in this act of humanity. Tirana Bank has supported the General Directorate of State Police and the Police Academy, by equipping them with laptops and computers. Thus, Tirana Bank continues its effort to establish law and order in the community, as well as gibe its contribution to the State Police. Culture The Badminton Federation organised during 25th and 30th of June the training camp and Memorial Badminton Tournament in Korça. Participants included 27 players aged 10 to 17 years old from Albania, Greece, Macedonia and Serbia. Considering the enthusiasm, physical and technical preparation of the Albanian players, Tirana Bank decided to support this Memorial Tour and facilitate the training of young Albanian players as well as in-crease interest for this special sport in our country. 34

35 TIRANA BANK ANNUAL REPORT 2016 In the joyful new-year atmosphere, one of its most important events, the Wines Festival 2016 was organised in the city of Pogradec. For two successive days, on 17 and 18 December, domestic wine producers introduced their products before a wide audience. Everyone with delight and curiosity attended the celebration, combined with artistic performance. Even this year, Tirana Bank gave its sincere support to this activity with the aim of presenting the tradition and supporting local entrepreneurs who promote the local wine production. Innovation Tirana Bank in cooperation with its partners, on 9 May, on the occasion of Europe Day, organised the EU TRANSIT activity at Mother Teresa square. The Prime Minister of Albania, Mr. Edi Rama, the Minister of European Integration, Ms. Klajda Gjosha, ambassadors of the European Union in Albania, Business representatives and hundreds of youth attended this event. The activity was conceived as an airport, with 4 terminals, in particular: Agro-Tourism, Art-Culture, Technology- Innovation, Communication and Perception, and the square became the place where ideas were shared, by promoting the potentials and the best values of Albania. The Business Incubator was placed at the centre of the square, where 10 young people presented their ideas as entrepreneurs. Five of these projects were the winners and will be supported financially, as integration pioneers, business pioneers. 35

36 TIRANA BANK ANNUAL REPORT 2016 HUMAN RESOURCES Tirana Bank acknowledges that its human resources constitute a key success factor in achieving the Bank s strategic goals and objectives. Our vision for human resources management is based on a wide range of actions and operations undertaken in order to acquire, retain and utilize professional employees who successfully and productively execute their tasks. Excellent staffs in line with business needs and the creation of strong relations with employees are both key points of the Bank s philosophy. Special emphasis is placed on issues of ethics, confidence, commitment, team spirit and acceptance of diversity in the workplace; these issues ensure equal opportunities in continual employee development as well as non-discriminatory practices in the recruitment process, through specific candidate selection systems. 36

37 TIRANA BANK ANNUAL REPORT 2016 During 2016, the Bank reaffirmed its commitment towards support and strengthening of human re- sources through innovative training, and developmental and supportive programs. Commitment to safeguarding Human Rights Tirana Bank is committed to the protection of human rights, thus applies equal opportunity principles to all its actions and objects to any form of discrimination, inequality and all forms of harassment in the workplace. All policies, procedures and human resource management practices of the Bank are regulated conform to human rights, ensuring equal opportunities and a working environment that accepts and embraces diversity. During November 2016, Tirana Bank was among the first 11 companies, which were engaged voluntarily in the improvement and integration of the Global Principles for Women Empowerment in their work practices. Global Principles for Women Empowerment depict seven steps on how empowerment can be attained in the workplace, in the market, in the economy and in our community. They are related to the promotion of gender equality, equal opportunities and equal treatment for all women regarding health and safety issues at work. 37