INTERNATIONAL COMMERCIAL BANK sh.a Street Ded Gjo Luli, No 3 Tirana-ALBANIA

Transcription

1 Street Ded Gjo Luli, No 3 TiranaALBANIA INDEPENDENT AUDITOR S REPORT AND FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED ON DECEMBER 31,

2 C O N T E N T S PAGES INDEPENDENT AUDITORS REPORT FINANCIAL STATEMENTS: BALANCE SHEET 5 INCOME STATEMENT 6 STATEMENT OF CHANGES IN EQUITY 7 CASH FLOW STATEMENT 8 STATEMENT OF OFF BALANCE SHEET ACCOUNTS

3 INDEPENDENT AUDITOR S REPORT To the Management and Shareholder of International Commercial Bank sh.a Report on the Financial Statements We have audited the accompanying financial statements of International Commercial Bank sh.a. ( the Bank ), which comprise the balance sheet as at and the income statement, statement of changes in equity and cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory notes. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with Article 47 of the Banking Law of the Republic of Albania (Law No.9662, dated 18 December, 2006) and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.. Auditor s responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit involves performing procedures to obtaining audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risk of material misstatement, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate for the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating of the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis of our audit opinion.

4 Opinion In our opinion, the financial statements give a true and fair view of the financial position of the Bank as of, and of its operations, and its cash flow and its capital changes for the year then ended in accordance with the Article 47 of the Banking Law of the Republic of Albania (Law No. 9662, dated 18 December 2006). BDO ALBANIA Shpk, February 26 th 2014 BLVD Deshmoret e Kombit Twin Towers, Tower 2,7/4 Tirana, Albania

5 BALANCE SHEET For the year ended 31 December Notes December 31 ASSETS Cash in hand and Balances with Central Bank 3 1,061,209 1,126,409 Investment securities held to maturity 4 945, ,282 Investment securities Available For Sale 128,307 Due from Banks 5 845, ,019 Government Bonds 6 2,997,271 2,941,866 Loans and advances to customers 7 2,578,725 2,594,955 Tangible and intangible fixed assets 8 295, ,449 Property taken through legal procedures 9 190,793 Other assets 10 27,431 32,614 TOTAL ASSETS 8,941,226 8,292,901 LIABILITIES AND EQUITY Liabilities Due to banks , ,791 Deposits to customers 12 6,820,555 6,679,881 Reserve fund for Loan 13 41,001 34,832 Other liabilities 14 52,649 37,602 Total liabilities 7,671,350 7,147,106 Equity Registered Paidup capital 15 1,307,523 1,307,523 Capital Reserve 159,933 91,643 Translation reserves (140,417) (121,265) Accumulated profit/loss (132,106) 28,703 Net income for the year 74,944 (160,809) Total equity 1,269,877 1,145,795 TOTAL LIABILITIES AND EQUITY 8,941,226 8,292,901 The notes set out on pages form an integral part of these financial statements. 5

6 INCOME STATEMENT For the year ended 31 December Notes, Interest income , ,033 Interest expense 17 (306,768) (307,940) Net interest income 288, ,093 Fee and commission income, net 18 64,259 45,997 Other income /(expenses), net Foreign exchange gains, net 20 10,378 14,219 OPERATING INCOME 363, ,445 Personnel expenses 21 (134,276) (122,118) Taxes (1,594) (1,627) Other operating expenses 21 (145,573 (158,628) OPERATING EXPENSE (281,443) (282,373) INCOME FROM OPERATIONS BEFORE PROVISIONS 81,684 56,072 Amortization and depreciation expenses (23,475) (22,235) Recovery for loan losses 7, 13 25,967 (189,694) PROFIT BEFORE TAXATION 84,176 (155,857) Current income tax 22 (9,232) (4,952) NET PROFIT/ (LOSS) 74,944 (160,809) The notes set out on pages form an integral part of these financial statements. 6

7 STATEMENT OF CHANGES IN EQUITY For the year ended 31 December Paid in capital Capital Reserve Translation reserve Accumulated profit/losses Total Balance at 1 January 1,307,523 91,643 (113,153) 28,703 1,314,716 Changes in translation reserve (8,112) (8,112) Changes in capital reserve Net profit for the period (160,809) (160,809) Dividends paid Balance at 1,307,523 91,643 (121,265) (132,106) 1,145,795 Changes in translation reserve (19,152) (19,152) Changes in capital reserve 68,290 68,290 Net profit for the period 74,944 74,944 Dividends paid Balance at 1,307, ,933 (140,417) (57,162) 1,269,877 The notes set out on pages form an integral part of these financial statements. 7

8 STATEMENT OF CASH FLOW For the year ending Cash flows from operating activities Net profit before income taxes 84,177 (155,857) Adjustments for: Interest expense 306, ,940 Interest income (595,035) (583,033) Changes in translation reserve (19,152) (8,112) Exchange rate differences Depreciation and amortization 23,475 22,234 Provision for loan losses 42, ,395 Operating cash flows before changes in working capital: (137,314) (192,166) Decrease\(Increase) due from banks (262,862) 284,117 Decrease/(Increase) in loans to customers 38,335 (539,387) Increase in other assets and receivables (180,900) 53,123 Decrease/(Increase) in due to banks 352,583 (687,855) Increase in customers deposits 137, ,268 Increase\(Decrease) in other liabilities 14,917 3,539 Interest paid (303,428) (290,859) Interest received 600, ,426 Income taxes paid (4,815) (8,522) (244,147) (252,316) Net cash flows from operating activities Cash flows from investing activities Purchase of fixed assets, net (81,810) (9,025) Purchase of investments held to maturity (227, ,242 Net cash flows (used in) investing activities (309,347) 416,217 Cash flows from financing activities Dividends paid Net cash flows from financing activities Net increase in cash and cash equivalents (65,200) 163,901 Cash and cash equivalents at 1 January 1,126, ,508 Cash and cash equivalents at 31 December 1,061,209 1,126,409 The notes set out on pages form an integral part of these financial statements. 8

9 STATEMENT OF OFF BALANCE SHEET ACCOUNTS For the year ended Off balance sheet liabilities 213, ,329 Commitments to extend credit 63,734 38,811 Lease commitments 149, ,518 Off balance sheet assets 10,112,240 10,597,591 Blocked accounts as cash collateral for loans and guarantees given 9,475 6,370 Collateral received 10,102,765 10,591,221 The financial statements on page 5 to 33 were signed and approved on behalf of the Board of Directors on February 26 th, 2014 by: Gideon van den Broek Chief Executive Officer Lindita Elezi Head of Finance Department 9

10 For the year ended 1. General information International Commercial Bank Sh.a. (the Bank ) was established in 1996 as a joint stock company with the sole shareholder Mr. Daim Zainuddin. On 28 September 2004, 100% of the shares were transferred to ICB Financial Group Holdings A.G. The Bank s head offices are located on St. Ded Gjo Luli, No.3, Tirana, Albania. The Bank is licensed on 20 February 1997 to perform payment transfers, credit and deposit activities, and other banking activities according to the Banking Law (# 8365 dated July 2, 1998) and the Law on the Bank of Albania (# 8269 dated December 23, 1997). The Bank operates through a head office and seven branches, where five branches are located in Tirana and the other two branches are operating in the cities of Fier and Durres. During as part of the strategic review process management decided to close the location in Lushnja. At the Bank had 85 employees ( : 97 employees). The financial statements of the Bank for the year ended were approved by the Board of Directors on February 26 th, Summary of significant accounting Policies a. Basis of preparation of financial statements The financial statements of the Bank have been prepared in all material respects in accordance with Article 47 of the Banking Law of the Republic of Albania (Law No.9662, dated 18 December 2006). The principle accounting policies adopted in the preparation of these financial statements are set out below. The financial statements have been prepared on the historical cost basis, except for revaluation of capital denominated in foreign currency at closing exchange rates. Current and comparative data are expressed in thousands of Albanian Lek ( LEK ), unless otherwise stated. b. Foreign exchange transactions Foreign exchange transactions are recorded at the rate ruling at the day of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the balance sheet date. All differences are taken to the income statement. Official exchange rates for major currencies used in the translation of the balance sheet items denominated in foreign currencies were as follows (in LEK): 1 EUR USD Nonmonetary assets and liabilities, except for the paid in capital and reserves, denominated in foreign currencies, are stated at historical cost and are translated at the foreign exchange rate ruling at the date of the transaction. The paid in capital denominated in foreign currencies is initially recorded at the foreign exchange rate ruling at the date of the transaction. At yearend it is converted at the exchange rate ruling at the balance sheet date. Resulting exchange differences are taken to the translation reserve forming part of the Bank s equity with a corresponding entry in the income statement. 10

11 For the year ended 2. Summary of significant accounting policies (Continued) c. Investment securities held to maturity All financial instruments are initially recognized at cost, being the fair value of the consideration given including acquisition charges associated with the financial instrument. All related realized and unrealized gains or losses are included in net income. Investment securities, which have fixed or determinable payments and which are intended to be held to maturity include treasury bills and government bond. After initial recognition, investment securities held to maturity are carried at amortized cost, less provision for impairment in value. The annual amortization of any discount or premium on the acquisition of held to maturity securities is aggregated with other investment income receivable over the term of the instrument so that the revenue recognized in each period represents a constant yield on the investment security. d. Provision for loan losses and reserve fund The provision for loan losses is the amount estimated by management to be adequate to absorb possible future losses on existing loans that may become uncollectable due to current economic conditions, quality and inherent risks in the loan portfolio and other relevant factors, which warrant current recognition. The level of the required provision is determined by the risk classification in five categories based on the legislation in force (Law No. 8365, July 1998 and Bank of Albania Regulation No. 52, July 2004). Once the risk category is set, the required reserves are computed using the following percentages according to the risk classification category: Risk category Days in arrears Loss provision Standard 030 1% Special mention % Substandard % Doubtful % Loss Over % The risk classification is carried out on the customer level. The Bank has no power to vary the above provisioning percentages. i) Provision for loan losses The amount of losses specifically identified (i.e. loans classified in risk categories substandard, doubtful and loss), is recognized as an expense and deducted from the total carrying amount of loans as a provision for losses on loans and advances. ii) Reserve fund The amount of potential losses not specifically identified (i.e. loans classified in risk categories standard and special mention), but which experience indicates are present in the portfolio of loans and advances is recognized as an expense and is shown as a reserve fund in the balance sheet. 11

12 For the year ended 2. Summary of significant accounting policies (Continued) e. Fixed assets Fixed assets denominated in LEK are stated at cost less accumulated depreciation. Depreciation is charged on a written down method for all the assets to allocate the cost of fixed assets over their estimated useful lives. Depreciation is charged commencing from the month following the month of acquisition. During the bank decided to reassess the market value of all bank properties. The independent valuator Encon Sh.p.k. carried out the revaluation. The base of the valuation of owned properties was the open market value, so the price at which in interest might be reasonably expected to be sold by private treaty at the date of valuation assuming willing sellers and buyers The annual depreciation rates applied are the following: Description Annual Rate Buildings 5% Machinery & equipment 20% Electronic equipment 25% Furniture & fixtures 20% f. Leasehold improvement Leasehold improvements are stated at cost less accumulated amortization. Amortization is calculated on a straightline basis over the period of the lease. According to the regulations of the Bank of Albania, the carrying value of leasehold improvements is included in other assets. g. Intangible assets Intangible assets are measured at cost less accumulated amortization. Intangible assets are entirely comprised of computer software which is amortized using the written down method over an estimated useful life. Amortization is charged commencing from the month following the month of acquisition. h. Revenue recognition Revenue is recognized to the extent that it is probable that future economic benefits will flow to the Bank and these benefits can be measured reliably. Interest income that is considered an integral part of the effective yield of a loan is recognized on an accrual basis using the effective yield method, except for the interest on substandard, doubtful and loss loans, which is recognized on a cash basis. Fee and commission income arises on financial services provided by the Bank including cash management services, brokerage services and investment advice. Fee and commission income is recognized when the related service is performed. i. Cash and cash equivalents Cash and cash equivalents comprise LEK and foreign currency cash in hand and LEK and foreign currency cash held at the Central bank of Albania. For the purpose of the Cash Flow Statement, cash and cash equivalents consist of cash and cash equivalents as defined above. 12

13 For the year ended 2. Summary of significant accounting policies (Continued) j. Loans Loans to customers and other banks originated by the Bank by providing cash loans to borrowers are classified as originated loans and are carried at amortized cost by applying year end interest rate which approximates the effective interest rate, less any amounts writtenoff and specific provisions. A writeoff is made when all or part of a loan is deemed uncollectable. Writeoffs are charged against previously established allowances and reduce the principal amount of a loan. Recoveries of loans writtenoff in an earlier period are included as income from recoveries. k. Income tax Income taxes are calculated in accordance with the provisions of the Albanian Income Tax Legislation. In, tax on profit is calculated as 10% (: 10%) of taxable income. Taxable income is calculated by adjusting the statutory profit before taxes for certain income and expenditure items as required under Albanian legislation. The income tax expense comprises entirely the charge for the current year income tax. l. Off balance sheet commitments and contingencies In the ordinary course of its business, the Bank enters into credit related commitments, which are recorded to offbalance sheet accounts and primarily include guarantees, letters of credit and undrawn loan commitments. Such financial commitments are recorded in the Bank s balance sheet if and when they become payable. 3. Cash on hand and balances with the Central Bank Cash in hand: 389, ,711 in LEK 73,186 49,855 in foreign currency 316, ,855 Balances with the Central Bank: 671, ,698 Current accounts 18,084 31,592 Statutory reserves 653, ,106 Total 1,061,209 1,126,409 Included in balances with the Central Bank is the statutory reserve for liquidity purposes, which represents a minimum reserve deposit, required by the Central Bank of Albania. Such reserves are calculated as a percentage of 10% of the amount of deposits at the end of each month owed to banks and customers, and is held both in LEK and in foreign currency (USD and EUR). Interest rates charged on the reserve for liquidity purposes are calculated below but with effect from July 2011 Bank of Albania decided not to pay remuneration on Statutory Reserve in foreign currency EUR and USD: 13

14 For the year ended Interest rates charged on the reserve for liquidity purposes are calculated as follows: Currency Minimum Maximum Calculation method LEK 3.00% 4.00% 70% of yield in REPO USD Nil Nil 70% of monthly interest of USD LIBOR EUR Nil Nil 70% of monthly interest of EUR LIBOR Current accounts with the Central Bank are noninterest bearing. 4. Investment Securities held to maturity Treasury bills held to maturity Nominal amount 961, ,000 Unamortized discount (16,533) (9,718) Total 945, ,282 Treasury bills available for sale Nominal amount 132,882 Unamortized discount (4,575) Total 128,307 This year primary focus of Bank of Albania was to increase the liquidity with the aim of increasing investments and credit. Bank of Albania reduced sharply the base interest rate of REPO from 4.00 % to 3.00% and as result even the interest rates of Treasury Bills came down. In comparison with year where the maximum interest rate of Treasury Bills was 7.26%, in the maximum was 6.53% In order to maximize the profit from investing in foreign currency and especially in EUR the bank has continued keeping the Albania s Eurobond of amount 2 mil EUR and Montenegro s Eurobond of 700,000 EUR. The remaining maturities of the Treasury Bills in LEK held to maturity are as follows: Maturity Nominal Unamortized Book Nominal Discount value discount Value value Book Value 1 month 149, , ,168 3 months 361,296 3, , ,000 2, ,171 6 months 520,305 10, , ,000 6, , months 80,000 2,301 Total 961,601 16, , ,000 9, ,282 14

15 For the year ended The remaining maturities of the Treasury bills in LEK available for sale are as follows: Maturity Nominal value Unamortized discount Book Value Nominal value Discount Book Value 1 month 3 months 6 months 100,000 3,062 96, months 32,882 1,513 31,369 Total 132,882 4, , Due from banks Current accounts: 601, ,706 Resident Nonresident 601, ,706 Term placements with banks: 244, ,313 in foreign currency (Resident Banks) 140,200 in foreign currency (Nonresident Banks) 101, ,700 Accrued interest 2,188 4,613 Loans to banks: in local currency (Resident Banks) Accrued interest Total 845, ,019 The bank has reinvested the term placements with banks denominated in USD for a longer period (6 months time deposits) that bear annual interest rates has been 5.5% per annum same as in previous year (: 5.5% to 5.75% ). Term deposits denominated in EUR bear annual interest rates ranging between 0.20% to 0.70 % per annum (: from 0.30% to 0.70%). 6. Government Bonds Nominal amount 2,938,540 2,881,536 Accrued Interest 60,922 64,506 Non amortized discount/premium (2,191) (4,176) Total 2,997,271 2,941,866 15

16 For the year ended The remaining maturities for Treasury Bonds held to maturity are as follows: Remaining maturity (months) 1 month 3 months 6months Nominal Value 50, , ,000 Accrued Interest 2,132 3,180 5,459 Unamortized discount Book Value 52, , ,459 12months 730,000 11, , months 730,000 20, , months 150,000 2, , months 100,000 2, , months 350,000 3, ,520 Total 2,560,000 52,357 1,459 2,613,816 Remaining maturity (months) Nominal Value Accrued Interest Unamortized discount Book Value 1 month 3 months 6months 12 months 100, , ,000 2,470 3,180 5, , , , months 1,230,000 22,449 1,508 1,253, months 530,000 19, , months 150,000 3, , months Total 2,504,643 55,979 1,508 2,562,129 The remaining maturities for Euro Bonds held to maturity are as follows: Remaining maturity (months) Nominal Value Accrued Interest Unamortized discount Book Value 1 month 3 months 12 months 1224 months 280,400 3,341 (4,400) 279, months 98,140 5, , months 6072 months Total 378,540 8,565 (3,650) 383,455 Remaining maturity (months) Nominal Value Accrued Interest Unamortized discount Book Value 1 month 3 months 12 months 1224 months 2436 months 279,180 3,326 (6,760) 275, months 97,713 5,201 1, , months Total 376,893 8,825 (5,684) 379,736 16

17 For the year ended 7. Loans to customers, net Loans to customers at and are extended to legal entities and private individuals. Overdrafts 537, ,339 Loans 2,371,619 2,629,417 Accrued interest 37,814 37,065 Provision for loan losses (409,283) (436,757) Total 2,537,724 2,560,124 The balance of loans to customers amounting to 2,537,724 (December ) is net off statistical provisions amounting to ALL 41,001. Provision for the loan losses have been raised against the Bank s loan portfolio as follows: 7. Loans to customers, net (continued) Loans Provisions Loans, net Loans Provisions Loans, net Standard 2,090,431 2,090,431 2,233,001 2,233,001 Special mention 380, , , ,950 Substandard 57,020 (12,429) 44, ,324 (30,073) 106,251 Doubtful 130,802 (67,236) 63,567 36,678 (18,924) 17,753 Loss 288,617 (288,617) 352,928 (352,928) Total 2,947,007 (368,282) 2,578,725 2,996,881 (401,926) 2,594,955 Standard and special mention loans are presented gross of provisions in assets. Related provisions are presented under liabilities and are detailed in Note 12. Loans and overdrafts bear the following annual interest rates: Currency Interest Rate Default Interest Rate LEK 6.5% 26.0% 13.73% USD 6.0% 10.5% 9.00% EUR 5.0% 10.5% 7.65% 17

18 For the year ended Movements in the provision for loan losses on substandard, doubtful and loss loans are as follows: Balance at beginning of the year 401, ,587 Charge / (Recovery) for the year, net (32,672) 194,586 Foreign exchange differences effect (2,803) (247) Balance at end of period 368, ,926 Movements in the statistical provision for standard and special mention loans are as follows: Balance at beginning of the year 34,832 39,874 Charge / (Recovery) for the year, net 6,703 (5,022) Foreign exchange differences effect (534) (20) Balance at end of period 41,001 34,832 18

19 . For the year ended 8. Fixed assets Buildings Computers and Office equipment Vehicles Construction Intangibles Total other equipment And Furniture in progress Assets COST LEK '000 LEK '000 LEK '000 LEK '000 LEK '000 LEK '000 LEK ' January 196,783 46,459 70,071 6,898 35,107 54, ,936 Additions 3, ,096 1,508 13,517 Disposals/Write offs Transfers 33,109 (33,109) Revaluation increase/(decrease) 121, , ,575 49,634 70,809 14,994 1,998 56, ,136 DEPRECIATION 01 January 47,271 37,408 45,647 5,494 39, ,486 Charge for the period 8,269 2,533 5,005 1,303 3,874 20,984 Disposals/Write offs Eliminated on revaluation 53,393 53, ,933 39,941 50,652 6,797 43, ,863 NET BOOK VALUE 01 January 149,512 9,051 24,424 1,403 35,107 14, , ,642 9,693 20,157 8,197 1,998 12, ,273 19

20 . For the year ended 9. Properties taken through legal procedures In their efforts to tackle the long term Non Performance Loan portfolio the bank has decided to resolve four existing cases through appropriation of collateral. The seized properties value has offset the complete or part of the outstanding loan balance. Properties are classified as Other Assets under category of Properties taken through Legal Procedures. Property taken through legal procedures 190,793 Balance at end of period 190, Other assets and receivables Prepaid income taxes 11,394 15,682 Leasehold improvements, net 5,500 7,992 Prepaid expenses 8,441 8,265 Payment in Transit Other receivables 2, Total 27,431 32,614 Payments in transit related to outgoing and incoming transfers have been settled by 3rd January Due to banks Borrowing from resident banks 550, ,144 Due to Central Bank 181,221 Deposits from nonresident banks 108,118 Deposits from resident banks 25,652 26,529 Total 757, ,791 20

21 . For the year ended 12. Customers Deposits Current accounts in LEK 202, ,612 in foreign currency 398, , , ,259 Savings accounts in LEK 59,451 73,785 in foreign currency 97, , , ,927 Time deposits in LEK 3,848,716 3,693,588 in foreign currency 2,214,328 2,220,107 6,063,044 5,913,695 Total 6,820,555 6,679, Customer s deposits (continued) The annual interest rates paid by the Bank on saving accounts and time deposits of legal entities and citizens for the years ended and are as follows: Description Interest Rate Interest Rate Saving accounts: in LEK 0.50% to 1.00% 0.50% to 1.00% in foreign currency 0.25% 0.25% Time deposits: in LEK 1.80% to 5.10% 3.25% to 7.45% in foreign currency 0.75% to 4.05% 1.25% to 4.05% Current accounts bear no interest. 13. Reserve fund The reserve fund at and comprise the following: Standard loans 20,715 21,179 Special mention 20,286 13,653 Total 41,001 34,832 21

22 . For the year ended 14. Other liabilities Accrued expenses 29,592 27,282 Taxes payable Payment in transit 18,812 7,886 Sundry creditors 2,968 2,434 Provision for Fixed assets written off 1,277 Total 52,649 37, Equity The Bank s authorized, issued and fully paidin capital comprises of a 100% stake holding percent by ICB Financial Group Holdings A.G. Total Equity Ownership % Paid in capital Accumulated profits/loss ICB Financial Group Holding A.G. 1,307, % 1,307,523 (57,162) Total 1,307,523 (57,162) Total Equity Ownership % Paid in capital Accumulated profits ICB Financial Group Holding A.G. 1,307, % 1,307,523 (132,106) Total 1,307,523 (132,106) The subscribed paid in capital of the Bank amounts to USD 4,800,000 and LEK 678,178,000 equivalent to LEK 1,307,523 thousand at the historical rate. 22

23 For the year ended 16. Interest income Interest income from customer operation 271, ,426 Interest income from Treasury Bonds 246, ,819 Interest income from Treasury Bills 56,847 64,563 Interest income from interbank operations 10,123 12,705 Interest income from Central Bank 9,989 9,520 Interest income 595, , Interest expense Interest expense from interbank operations (12,336) (25,806) Interest expense from customer operations (294,432) (282,134) Interest expense (306,768) (307,940) 18. Fee and commission income, net Income: Commissions from transfers and payments 36,661 31,440 Commissions on loans and advances 7,930 12,942 Account Maintenance fee 17,557 5,129 Others 5,621 1,377 Expenses: Interbank transactions (2,174) (2,899) Banking services (1,336) (1,712) Fee and commission income, net 64,259 46,277 23

24 . For the year ended 19. Other income, net Other income Other expenses Other income, net Foreign exchange gains / (losses), net Foreign exchange gains from dealings 10,378 14,219 Foreign exchange gains, net 10,378 14, Personnel expenses Salary wages 108,818 99,318 Social insurance 11,762 10,256 Bonus 9,795 9,373 Other personal exp 3,901 3,171 Total 134, ,118 24

25 For the year ended 22. Other operating expense Maintenance and repair 16,324 15,552 Lease payments 28,417 25,176 IBM Management Fee 14,020 14,344 Security 13,612 13,488 Other 12,216 21,647 Telephone and electricity 7,207 8,200 Advertisement 14,510 17,605 Travel and business trips 715 1,320 Reuter and Swift 7,548 5,787 Office supplies 2,052 3,233 Consulting and Legal fees 1,787 5,677 Other external services 27,165 26,599 Other operating expenses 145, , Income tax A reconciliation of income tax expense applicable to profit from operating activities before income tax at the statutory income tax rate to income tax expense at the Bank s effective income tax rate for the years ended and were as follows: Profit before income tax 84,176 (155,857) Tax at statutory income tax rate of 10% (: 10%) Expenditure not allowable for income tax purposes 1,839 1,109 Effect of profit from translation of capital Income tax for the year 9,232 4,952 25

26 . For the year ended 24. Related party transactions In the course of conducting its banking business, the Bank entered into various business transactions with related parties. These transactions were carried out on commercial terms and at market rates. The related parties with whom the Bank entered into business transactions are: 1 Gideon van den Broek Chief Executive Officer 2 Andin Jakova Chief Administrative Officer 3 Sreejan Kumar PS Chief Operational Officer 4Zinaida Cako Internal Auditor The Affiliated Companies with whom the Bank entered into business transactions are: 1ICB Laos Related party transaction with: Affiliated companies Due from banks 104, ,312 Due to banks 104,118 Bank Administrators Loans 8,714 9,611 Deposits 8,556 7,629 Bank Administrators Interest income Interest expense Wages, salaries and bonuses 29,440 30, Fair values The fair value of cash and cash equivalents, deposits and loans originated by the bank, other receivables, customers deposits, borrowings and other current liabilities approximates their carrying value. Management regards the carrying value of the treasury bills held to maturity to be the best estimate of their fair value. 26. Liquidity risk Liquidity risk is the risk that an entity will be unable to meet its net funding requirements as they arise. Liquidity risk can be caused by market disruptions or credit downgrades which may cause certain sources of funding to become unavailable. To mitigate liquidity risk, the Bank diversifies funding sources and assets are managed with liquidity in mind, maintaining a balance of cash and cash equivalents. The table below summarizes the maturity profile of the Bank s major assets and liabilities. The contractual maturities of assets and liabilities have been determined on the basis of the remaining period at the balance sheet date to the contractual maturity date. The maturity profile is monitored by the Bank to ensure that adequate liquidity is maintained. 26

27 . For the year ended 25. Liquidity risk (continued) ASSETS Less than From 1 to From 3 to From 1 to Over 5 one month 3 months 12 months 5 years years Total Cash and balances with the Central Bank 1,061,209 1,061,209 Investment securities held to maturity 144, ,749 1,648,596 1,354, ,732 3,942,339 Investment securities AFS Due from banks 743, , ,456 Loans to customers, net 108, , ,605 1,030, ,995 2,578,725 Fixed assets 295, ,273 Other assets and receivables 135 2,097 6,463 13, , ,224 Total assets 2,057, ,113 2,337,664 2,398,578 1,385,293 8,941,226 LIABILITIES Due to banks 757, ,145 Customers deposits 1,743, ,898 3,170, ,720 6,820,555 Reserve fund 2,231 2,807 11,717 15,894 8,351 41,001 Other liabilities 33,143 8,289 11,217 52,649 Equity 1,269,877 1,269,877 Total liabilities and equity 2,535, ,994 3,193, ,614 1,278,228 8,941,226 Net liquidity gap (478,291) (173,881) (855,857) 1,400, ,065 27

28 . For the year ended 25. Liquidity risk (continued) ASSETS Less than From 1 to From 3 to From 1 to Over 5 one month 3 months 12 months 5 years years Total Cash and balances with the Central Bank 1,126,409 1,126,409 Investment securities held to maturity 149, , ,311 2,336,028 3,592,148 Investment securities AFS 128, ,307 Due from banks 367, ,171 54, ,019 Loans to customers, net 87, , ,801 1,181, ,606 2,594,955 Fixed assets 234, ,449 Other assets and receivables 205 1,092 15,683 15,634 32,614 Total assets 1,730, ,067 1,661,244 3,532, ,055 8,292,901 LIABILITIES Due to banks 286, , ,791 Customers deposits 1,956, ,693 3,279, ,794 6,679,881 Reserve fund 34,832 34,832 Other liabilities 16,284 10,209 11,109 37,602 Equity 1,145,795 1,145,795 Total liabilities and equity 2,288, ,902 3,398, ,794 1,145,795 8,292,901 Net liquidity gap (563,500) (264,835) (1,737,000) 3,050,075 (484,740) 28

29 . For the year ended 26. Interest rate risk position The Bank is exposed to various risks associated with the effects of fluctuations in the prevailing levels of market interest rates on its financial position and cash flows. The tables below summarize the Bank s exposure to interest rate risks. Included in the tables are the Bank s assets and liabilities at carrying amounts, categorized by the earlier of contractual repricing or maturity dates as of. ASSETS one month 3 months 12 months 1 year bearing Cash and balances with the Central Bank 653, ,613 1,061,209 Investment securities held to maturity 50, ,749 1,648,596 1,705,622 94,372 3,942,339 Investment securities AFS Due from banks 741, , , ,456 Loans to customers, net 108, , ,605 1,573, ,578,725 Fixed assets , ,273 Other assets and receivables , ,224 Total assets 1,553, ,016 2,331,201 3,279,068 1,017,671 8,941,226 LIABILITIES 756, ,145 Due to banks Customers deposits 1,010, ,898 3,170, , ,214 6,820,555 Reserve fund ,001 41,001 Other liabilities ,649 52,649 Equity ,269,877 1,269,877 Total liabilities 1,766, ,898 3,170, ,720 2,097,316 8,941,226 Interest sensitivity gap (213,435) (164,882) (839,386) 2,297,348 (1,079,645) 29

30 26. Interest rate risk position (continued) INTERNATIONAL COMMERCIAL BANK sh.a. For the year ended ASSETS Less than From 1 to From 3 to Over NonInterest Total one month 3 months 12 months 1 year bearing Cash and balances with the Central Bank 625, ,302 1,126,408 Investment securities held to maturity 140, , ,789 2,482,717 95,603 3,592,148 Investment securities AFS 123,884 4, ,307 Due from banks 367, ,775 52,925 4, ,019 Loans to customers, net 85, , ,802 1,607,812 1,545 2,594,955 Fixed assets 234, ,450 Other assets and receivables 32,614 32,614 Total assets 1,218, ,960 1,423,400 4,090, ,550 8,292,901 LIABILITIES Due to banks 286, ,850 2, ,791 Customers deposits 1,308, ,692 3,279, , ,181 6,679,881 Reserve fund 34,831 34,831 Other liabilities 37,602 37,602 Equity 1,145,795 1,145,795 Total liabilities 1,594, ,692 3,384, ,794 1,868,825 8,292,901 Interest sensitivity gap (376,260) (275,732) (1,961,467) 3,607,735 (994,275) 30

31 . For the year ended 27. Currency risk Currency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates. The Bank monitors limits on positions by currency as determined by the Bank of Albania. The Bank had the following net exposure denominated in foreign currency as of : USD EUR Local Currency Total ASSETS Cash and balances with the Central Bank 189, , ,823 1,061,209 Investment securities held to maturity 383,455 3,558,884 3,942,339 Investment securities AFS Due from banks 386, , ,456 Loans to customers, net 596, ,965 1,002,399 2,578,725 Fixed assets 295, ,273 Other assets 7, , ,224 TOTAL ASSETS 1,171,685 2,235,614 5,533,927 8,941,226 LIABILITIES Due to banks 25, , ,145 Customers' deposits 574,435 2,135,419 4,110,700 6,820,555 Reserve fund 13,906 14,123 12,973 41,001 Other liabilities 53 3,569 49,027 52,649 Equity 1,269,877 1,269,877 TOTAL LIABILITIES AND EQUITY 614,047 2,153,111 6,174,069 8,941,226 Net currency position 557,639 82,503 (640,142) 31

32 . For the year ended 27. Currency risk (continued) USD EUR Local Currency Total ASSETS Cash and balances with the Central Bank 160, , ,025 1,126,409 Investment securities held to maturity 379,736 3,212,412 3,592,148 Investment securities AFS 128, ,307 Due from banks 436, , ,019 Loans to customers, net 629,078 1,157, ,871 2,594,955 Fixed assets 234, ,449 Other assets 130 7,643 24,841 32,614 TOTAL ASSETS 1,226,876 2,241,120 4,824,905 8,292,901 LIABILITIES Due to banks 134, , ,791 Customers' deposits 533,561 2,244,336 3,901,984 6,679,881 Reserve fund 7,554 14,925 12,353 34,832 Other liabilities 286 4,399 32,917 37,602 Equity 1,145,795 1,145,795 TOTAL LIABILITIES AND EQUITY 676,015 2,263,660 5,353,226 8,292,901 Net currency position 550,861 (22,540) (528,321) 32

33 28. Capital adequacy INTERNATIONAL COMMERCIAL BANK sh.a. For the year ended The capital adequacy rules require a minimum amount of capital to cover credit and market risk exposures. For the calculation of the capital required for credit risk, assets are weighted according to broad categories of notional credit risk, being assigned risk weighting according to the amount of capital deemed to be necessary to support them. The Bank s Risk Based Capital Adequacy Ratio was computed based on the Bank s financial statements and in accordance with the relevant guidelines issued by the Bank of Albania. The minimum required Capital Adequacy Ratio is 12%. As of, the Bank s Risk Based Adequacy Ratio was 30.79% (: 31.08%). 29. Post balance sheet events There are no events after the balance sheet date that would require either adjustments or additional disclosures in the financial statements. 33