Total Assets (million of pesos)

Transcription

1 BANCO NACIONAL DEL EJÉRCITO, FUERZA AÉREA Y ARMADA S.NC Development Bank Institution OPERATIONS RESULTS AND FINANCIAL SITUATION AS OF DECEMBER 31ST, 2009 (Figures in million of pesos) (1) Financial Situation Statement as of December 2009 Assets As of December 31 st 2009, total assets of Banco Nacional del Ejército, Fuerza Aérea y Armada, S.N.C (Banjercito) reached to $31,544 showing an annual increase of 32.4%. Total Assets (million of pesos) 19,382 23,818 31,544 That increase mainly was motivated by the growth of 38.8% reported on the current performing portfolio, which was 10,845, as consequence of a higher placement of consumer and mortgage loans. In the first case, the increase was due to the placement of personal loans to the military sector, meanwhile the mortgage loans increase mainly comes from the mortgage products targeted for the troopers and sailors of the Armed Forces, with subsidy of the Federal Government. Regarding the securities investments, these showed up an increase of 35.4%, mainly from the increase in the traditional fund gathering of Trust Funds. The Bank s past due portfolio increased by $12 to reach $38; nevertheless, the past due portfolio index was 0.35% at the closing of fiscal year (1) According with the dispositions of NIF B-10 Inflation effects, the financial statements as of December 31 st 2007 are expressed in monetary units of purchasing power as of December 31 st 2007 and those for the fiscal year 2008 and 2009 were not subject to restatement. For comparison purposes, the financial statements finished as of December 31 st 2007 and 2008, were reformulated in conformity to the accounting principles applicable to Credit Institutions, published in the Official Federation s Daily on April 27 th Página 1

2 Past due Portfolio Index 0.31% 0.33% 0.35% As a result of the new methodology for grading the credit card portfolio, the reserves increased in $3, the institution decided to apply the 100% of the requirement affecting the fiscal year profits. Liabilities Total liabilities were $26,909 with an annual increase of 37.0%, mainly reflected in the increase of traditional deposits which increased 22.2%. The item on demand deposits, term deposits from the general public and balances of the Savings Management and work Funds of the Armed Forces, had increases of 15.6%, 37.2% and 10.4% respectively. Additionally, in repo transactions where the Institution acts as reported had an important increase regarding the previous year of $3,345, from the increase in repo transactions with other dealers. Total Liabilities (million of pesos) 15,776 19,639 26,909 Long term liabilities are resources discounted in previous years with financial intermediaries for granting mortgage loans. Such coverage had a balance of $49 with an annual decrease of 9.3% from the amortization of monthly payments. The item other payable accounts showed an annual grow of 5.5%.The above due to the increase of the income tax (97%) and payable profit sharing (30%). Página 2

3 Stockholders equity The stockholders equity was $4,635, with an annual increase of $456 equivalent to 10.9%. The increase of the stockholders equity is mainly because of the net results achieved in the fiscal year. At the closing of fiscal year 2009 the yield over the stockholders equity was 24.04% (**), higher in 7.69 points compared with the same period of the previous year (16.35%). Stockholder's Equity (million of pesos) 3,607 4,179 4,635 It is importantly that during 2009 the Institution delivered to the Federal Government $250 for profiting capital recovery, according to the Article 10 fifth paragraph of the Federation Income Law for the fiscal year Income Statement 2009 The net income reached in fiscal year 2009 was $706 (23.2% higher than in fiscal year 2008), representing a Return on Assets (ROA) of 3.42% (**). The increase in the net income comes mainly from the following: a) The interest s income grew up $305 from the increase in the loan granted volume, meanwhile the paid interests only increased in $162. b) The item Fees and Commissions collected increased in $103 equivalent to 25.8%, highlighting the increase in the collected commissions for the management of trust funds and mandates ($40), border banking services ($19), management of funds not claimed and tax collection ($24). (**) Calculated according to the Annex 34 methodology of the General Character Dispositions for Credit Institutions. Página 3

4 1. Loans portfolio yield was $1,381, representing 14.03% of the total performing portfolio (including commissions affecting the margin and the adjustment for valuation of loans in minimum wage salaries), which increased in 33.6% for the increase in granting the consumer and mortgage loans. Regarding the interests for securities portfolio were $699, representing a yield of 5.99%. 1,400 1,300 1,200 1,100 1, Interest Income (millions of pesos) 1, , Loan s portfolio yield Securities Porftolio yield On the other hand prizes earned for repos at the closing of fiscal year 2009 were $155 which increased 158% regarding those of the fiscal year 2008 ($60). Opening commissions for loans had an increase of $12 regarding those collected in 2008, because of the higher volume of loans granted during fiscal year Opening Loans Commissions (millions of pesos) Total interests paid for on demand and term deposits during fiscal year 2009 increased in $89 (14.9%) regarding those paid in the immediate previous fiscal year, due to the increase in funds gathering; on the other hand, interests and prizes debited for repo transactions reflected an increase of $75 originated mainly for the increase in repo transactions performed with other dealers and funds raised from public Trust funds. Página 4

5 Paid Interests (millions of pesos) On deman and term Repo Others 3. The Institution during the fiscal year 2009 did not performed transactions related with debt allocation. 4. The revenue for services had an annual flow of $491, conformed as follows: Income for Services, 2009 Border banking Services 323 Trust funds and Banking 150 Trading Results 18 Total 491 As shown, the main income source for services keeps coming from the Border Banking Services, particularly for the issuance of permits for the Import and Temporary Entry of Vehicles (IITV). That income increased in 6% regarding the income of fiscal year It is important to highlight the commissions for the management of Trust Funds and Mandates increased $40 regarding those collected in the previous fiscal year. 340 Border Banking Services (millions of pesos) During the fiscal year 2009 it was recognized an increased value of $3 from the valuation to reasonable value of securities in position and repo, Página 5

6 which decreased regarding the increase value of $9 recognized in fiscal year Which had its source in the valuation effects on the securities transfer, from the category to negotiate to held at maturity performed in October On the other hand, the result of the valuation from the purchase-sale of currencies and coined metals increased in $4 regarding the previous year. 6. The Institution did not perform securities loans operations. 7. The Institution did not recognized in the net income of fiscal year 2009 penalties for the decrease in securities value. 8. The increase of the financial margin for $143 represented an increase of 10.4% regarding the closing of the fiscal year 2008, caused mainly for the higher granting of loans to the target sector, with the consequent increase of the interests collected. 9. The other expenses item decreased $7 regarding those reported in the fiscal year 2008, representing a balance of $2 at the closing of 2009; on the other hand, the item other products had a reduction of $13, being $24 located at the closing of At the closing of 2009 fiscal net income was $926, generating an income tax at the rate of 28% representing $259. The income tax during fiscal year 2009 increased regarding the income of tax of 2008, mainly for the increase in collected interests and commissions, due to the important increase of the credit portfolio, as well as the increase in commissions collected for border, trust funds and banking services. Página 6

7 11. Regarding the deferred profit sharing and income tax, these showed an increase of $18 arises mainly from the fees charged and profit sharing caused. a) Financial Situation, Liquidity and Capital Funds 1. Liquidity and Funds Sources. The Institution s external sources for liquidity are mainly the traditional funding, classified as demand deposits, saving accounts, term deposits and the Savings and Work Management Funds of the Armed Forces members. 2. Policies for dividends payment. The Corporate Governance of the Institution approved in April of 2009 the project for the application of fiscal year 2008 profits, where it was not included the payment of dividends. 3. Policies ruling the Bank Treasury. Regarding the policies for the Treasury management, it is reported that the mentioned area has the responsibility of defining the strategy regarding the excess funds distribution, looking to maximize the yields on them, within the guidelines and faculties authorized by the Treasury Committee. The Treasury mainly keeps liquidity in national currency and the main currencies needed to face the Institution s obligations, and optimizes the use of funds in the different systems for electronic payments, with Banco de México and Indeval. All the Treasury transactions are within the risk limits established by the Board of Managing Directors through the Total Risk Management Committee. The risk profile for the institution determined by the board of managing directors is conservative. On the other hand, inside the Institution there is an Assets and Liabilities Management Committee, which responsibility is to evaluate the behavior of the financial structure of the Bank, having a profitability index on each one of the branches and of the products and services offered to the customers. Also, an important part of the Committee task is the follow up of the established goals in the Operative and Financial Program of the Institution. 4. Loans and Fiscal debt. At this date the Institution does not have fiscal debt; nevertheless, there are fiscal contingencies identified from the notes made by the fiscal authorities in the fiscal year Even though there are favorable expectations to solve such remarks, the Board of Management Directors, acting in a conservative way authorized to create provisions for such effect, which accumulated balance is $87.5 at the closing of Investments committed in Capital. The Institution does not have investments committed in capital. Página 7

8 Institution s Evolution At the closing of 2009 total assets increased 62.7% regarding the closing of 2007, highlighting the increase in the securities investments (57.4%) and the net loans portfolio (89.1%) which has tripled in 3 years. The balance structure during the last three years has remained constant. The assets integration at the closing of 2009 is 45.2% for securities portfolio and 34.5% for the performing portfolio; the variation observed regarding the performing portfolio posted in the fiscal year 2007 and 2008, mainly from the increase in the resources for granting loans. Total Assets 2007 Total Assets 2009 Other Assets Performing 3% Loan portfolio 30% Availabillities 14% Other Assets 3% Performing Loans portfolio 34% Availabilities 18% Securities Portfolio 45% Securities Portfolio 53% Total Assets 2008 Performing Loan portfolio 34% Other Assets 4% Availabilities 16% Securities Portfolio 46% The Financial Margin covers the operation s cost, avoiding the dependency of other income for services for profit s generation. At the closing of 2009 the Financial Margin was 40.74% above the operative cost. 150% Financial Margin / Operative Cost (millions of pesos) 125% % % 100% 75% % Página 8

9 The stockholders equity of the Institution continues it s upward trend, because basically of generating profits. Stockholder's Equity (million of pesos) 3,607 4,180 4,635 Main Financial indexes at the closing of 2007,2008 and 2009 are the following: FINANCIAL INDEXES ARREARS INDEX 0.31% 0.33% 0.35% PAST-DUE LOAN PORTFOLIO COVERAGE INDEX % % % OPERATING EFFICIENCY 5.62% 5.02% 3.61% ROE 25.20% 16.35% 24.04% ROA 4.77% 3.06% 3.42% CAPITALIZATION INDEX (1) 53.29% 45.03% 34.67% CAPITALIZATION INDEX (2) 33.59% 25.65% 20.02% LIQUIDITY MIN 5.76% 6.90% 5.89% (1) = Net Capital / Assets subject to credit risk (2) = Net Capital / Assets subject to credit,operational and market risk As shown above, the ROE and ROA have suitable levels; the capitalization index has been reduced as consequence of the higher granting of loans and reserves coverage built for past due portfolio is considered high. b) Description of the Internal Control System of Banjercito The objectives of the Internal Control System were confirmed by the Board of Managing Directors in the meeting 2,290 held in April 27 th Such goals were designed by the Chairman and are the following: Establish the functions of each one of the Institution s employees and of the several Decision Committees, avoiding duplicity, identifying the responsibilities of each one of them, and guaranteeing the independence between different management units that requires it. Provide a Regulation Framework for acting according to the transactions performed under its competency for the corporate Página 9

10 building, network of branches and modules for the Import and Temporary Entry of vehicles (IITV). Also, design communication channels and information flows between the different areas of the Bank, for generating financial, economic, accounting, law and management reports, in a timely manner and updated, and that these reports are provided to the staff according to their faculties and responsibilities. For such effect, it has to use security mechanisms that allow access to the information by authorized personnel only. Get the timely and permanent performance of the laws, dispositions and diverse regulations on which the institution is bonded. Assure legal protection for the Institution and for the customers in all the operations performed, including those set through the equipment, electronic media, optical or any other technology, automatic data processing systems and telecommunications networks. The accounting posting of the assets, liabilities, services and net income transactions, following the applicable accounting regulations for Credit Institutions. Safeguard the Bank s assets in case of losses, robbery, fraud or mistakes. Keep the continuity of the Bank s operation in front of unexpected important changes, between the management members. Establish the policies for the proper use of the human and material resources of the Institution; in this last case, all the recommendations made by the Board of Managing Directors, Human Resources Committee and Institutional Development will be attended. Establish measures for preventing the release of any project related to information technology without the approval of the Information Technology and Security Area. The Board of Managing Directors will review, at least annually, the goals of the Internal Control System and the implementation guidelines, and will evaluate the functions performed by the Audit Committee and the Chairman. The Chairman will report to the Board of Managing Directors the actions implemented in order to correct deviations, detected to the Internal Control System. The implementation of the Goals of the Internal Control System follows the next guidelines: Look for the correct reporting of the financial information, as well as its delivery to the financial authorities and, inclusive, inside the Institution. Specifically, following the regulation in matter of Financial Information and Regulation reports, referred in the Titles III and IV of the General Character Dispositions applicable for Credit Institutions. Have a physical, human and information technology infrastructure that allows performing all the operations of the Institution with own resources, avoiding the dependency of external suppliers. The hiring of external suppliers will have to be completely justified and authorized by the Chairman, following the cost benefit and cost efficiency aspects. Página 10

11 The Bank s structure of the Internal Control will be integrated by each one of the Policies and Procedures Handbooks of the products and services of the Institution and that meet the social goal written in the Organic Law. Particularly, the employee s functions are detailed in the Organization s General Handbook. The updates to the Policy and Procedures Handbook will be reviewed by the Policy and Regulations Committee, reporting to the Audit Committee of the important updates. The Policies and Procedures Handbook will be spread between the Institution s employees through the internal network of Communication named Intranet, assure the opportunity and permanent update of such information. The amendments if any required to the organic structure of the Bank will be proposed by the Chairman to the Board of Managing Directors, previous favorable recommendation by the Human Resources Committee and the Institutional Development. The contracts through which will be the Institution s transactions are formalized with the customer clear and transparent and will have to follow the dispositions of the Article 52 of the Credit Institutions Law (transactions and services hired, user identification means and its responsibilities, means for the creation, transmission, amendment or extinction of rights and obligations, etc.) The posting of the Institution s transactions are performed through interfaces of several operative systems, for the centralized posting, which has audit prints that allows to check the transactions and identify the employees responsible of the accounting and operative records. The Institution has contingency plans and information technology security that protect the integrity of the data bases and guarantees the continuity of the banking transactions. The high Management of the Institution has taken as a fundamental premise to guarantee the Bank operability in case of any disaster. An example of this, is the backup Site of the Bank that today guarantees the banking operations is 100% backed up and available in the required moment. Attend that the recommendations regarding Internal Control are performed by the Board of Managing Directors, the Audit Committee, the Internal Control System, and several Decision Making Units inside the Bank or by the financial and regulation authorities. The Audit Committee performs the functions designated by the Articles 154 to 158 of the Dispositions previously mentioned. In the annual reports for the fiscal year 2009, the Chairman and the Audit Committee mentioned that the performance of the Internal Control System in its entirety is reasonable, and Página 11

12 the Institution continues reflecting a suitable control environment, which is reflected in the favorable financial and operative results. In the meeting held on April 21 st 2009, the Institution s Audit Committee recommended to the Board of Managing Directors to keep valid the current Objectives and Guidelines of the Internal Control System. In the Bank there is an Internal Control unit, which functionally depends from the Public Function Ministry that performs, among other activities, the internal audit activities under Articles 159 to 163 of the General Character Dispositions for Credit Institutions. The internal control environment of the Institution has been strengthen by the activities performed by other bank s committees, such as the Treasury Committee, Internal Credit Committee, Human Resources Committee and Institutional Development, the Total Risk management Committee (where is proved that the operation of the Bank attends the authorized risk levels), and the Assets and Liabilities Management Committee (which gives follow up to the profitability levels for each business unit and each product). All of these with the clear goal to continue providing the banking and credit services with high levels of efficiency and opportunity. During fiscal year 2009, the Audit Committee held 4 ordinary meetings and 2 extraordinary meetings, in which the key issues addressed were: It was acknowledged the annual Chairman report, regarding the activities referred in the last paragraph of Article 164 of the General Character Dispositions for Credit Institutions, as well as the function of the Internal Control System for the fiscal year It was recognized the result of the audits of Total Risk Management, made by the Internal Control unit, for the fiscal year Issued a favorable opinion regarding the Annual Audit Program and Internal Control Unit for the fiscal year It was acknowledged the Internal Control unit report regarding the corresponding evaluations to the performance of the Institutional Internal Control, during fiscal year Authorized the update of policies of the Customer Identification and Knowledge, the users identification and the Criteria, Measurements and Procedures, in order to meet the Dispositions, which are included in the Control of the Policies, Criteria, Measures and Minimum Identification procedures and knowledge of customers and users in the handbook. It was acknowledged the Annual Report of the Institutional Internal Control for the fiscal year The Institution has an Ethics and Conduct Code made by the Chairman and approved by the Board of Managing Directors. Such code is spread to the Bank s staff and has the fundamental precepts that rule the daily behavior of our Human Capital. In the meeting held on October 20 th 2009, the Audit Página 12

13 Committee recommended to the Board of Managing Directors to keep valid the current Ethics and Behavior Code of the Institution. It is important to point out that the Public Function Ministry designated to Leal, Adame and Associates, S.C., as the external auditor in charge for rule the financial statements of fiscal year 2009, the same firm ruled favorably the financial statements of the previous fiscal year. The Audit Committee issued a favorable opinion regarding the financial statements as of December 31 st 2009, based on the favorable opinion issued by the external auditor. Also, the Board of Managing Directors approved the financial statements of 2009 in the meeting held on February 22 nd Finally, regarding the pension, retirement funds or similar, there is a Trust Fund for Pensions and Retirement of Banjercito Employees, with a balance of $343 at the closing of the fiscal year 2009, where all senior management and employees of the Institution are included. We the under signers mentioned below manifest under oath to say the true that, within our respective work functions, prepared the institution s information presented in this annual report, which, to our knowledge and understanding, reasonably reflects its situation. The head of the Internal audit department signs this financial information based in the results of the audits performed to date, which permitted to confirm the sufficiency of the financial reporting generation process established by the Institution s management and its capacity to generate trustable information. Página 13

14 Chairman Executive VicePresident, Internal Controller General Accounting VicePresident Internal Control Area Página 14