ГОДИШЕН ОТЧЕТ ОБЩИНСКА БАНКА АД

Transcription

1 ГОДИШЕН ОТЧЕТ ОБЩИНСКА БАНКА АД 2006

2 CONTENTS STATEMENT TO THE SHAREHOLDERS AND BUSINESS PARTNERS 1 SHORT OVERVIEW OF THE MACROECONOMIC CONDITIONS IN BULGARIA 2 MUNICIPAL BANK PLC MAIN HIGHLIGHTS 6 SUPERVISORY AND MANAGEMENT BOARDS 8 BANKING PRODUCTS AND SERVICES 9 REVIEW OF MUNICIPAL BANK'S ACTIVITY 11 BALANCE SHEET INDICATORS AND FINANCIAL RESULTS 11 ATTRACTED FUNDS, RETAIL AND CORPORATE BANKING 12 ASSET SIDE OPERATIONS 13 INTERNATIONAL ACTIVITY AND CREDIT RATING 15 BRANCH NETWORK 16 CONTACT DETAILS HEAD OFFICE 17

3 STATEMENT TO THE SHAREHOLDERS AND BUSINESS PARTNERS Ladies and Gentlemen, It is my honour and pleasure to present before you the results from the activity of Municipal Bank PLC in The Bank conducted business in a favourable macroeconomic environment. The Bulgarian economy continued its progress in 2006 and again achieved a high real GDP growth. The banking sector developed consistently. The total assets of commercial banks increased by 28.4% against the end of The measures of the BNB for limiting internal loan growth brought results and there was outstripping growth in deposits against the growth in loans to NFI s throughout the year. The interest rates under long-term loans continued decreasing as a result of the macroeconomic stability and the competition among commercial banks. The increasing interests on the international markets (Europe and the USA) counteracted the decrease in Bulgaria. In a highly competitive environment Municipal Bank PLC managed to expand. Its assets increased at a rate surpassing that of the country s banking sector with a simultaneous improvement of the quality of the loan portfolio, allowing reversed provisions to exceed the accrued throughout the year. The Bank successfully adapted to the dynamic market environment with structural changes having been made and having included new saving products and card services. An even process of balancing between funds attracted from retail and corporate banking could be observed in the structure of deposits attracted from retail and corporate banking. The stable composition of the liabilities was supplemented by long-term borrowings amounting to BGN 46 million, mainly in foreign banks. Municipal Bank PLC continued its development as a universal commercial bank and established itself as a proven and preferred professional partner in the sector of public finance. The year to have passed marked the tenth anniversary since the Bank s establishment. The results achieved were the fruit of the active policy oriented towards the customers needs, the successful cooperation with the business partners and the good team work. Our expectations for the future activity are focused at widening the market presence, opening new financial centres for providing a stable customer base and making additional efforts for taking full advantage of the advantages and opportunities stemming from our EU membership. The Bank has always identified partnering with its customers a main priority and we are therefore grateful for their trust, and thank all colleagues for their involvement and the shareholders for their cooperation and support! Dimitar Kolev Chairman of the Supervisory Board

4 SHORT OVERVIEW OF THE MACRO- ECONOMIC CONDITIONS IN BULGARIA The development of the Bulgarian economy in 2006 has been characterized by stable growth in the Gross Domestic Product (GDP), with the real increase on an annual basis being 6.5%. The high consumer and investment activity have been the leading growth factors, and the balance of trade maintained its traditional negative values. The higher oil prices and the accelerated development in 2006 determining the increase in the share of energy sources in the import have been the reasons for the negative balance of trade. The deficit at the current account of the balance of trade amounted to EUR 3,977.9 million in 2006 (15.8% of the GDP) increasing against the preceding year at a relatively unchanged geographical structure of the foreign trade. Improvement in the labour market ran parallel to the positive data on the GDP. Unemployment steadily decreased, with the level registered in December being 9.1%, and the average wage rising (partly due to the increased share of official incomes), stimulating consumption. The 2006 Consumer Price Index remained for a second consecutive year at the relatively high level of 6.5%. Among the main proinflation factors were the effects of external factors inflation, caused by the dynamics of oil prices on the international markets and internal factors the administrative decisions for increase of the excise on tobacco products and fuels, as well as the adjustment of electricity and heating prices.

5 The Consolidated Fiscal Program recorded overexecution of the revenues for The surplus results from restrictive execution of the expenditures program and improved tax revenues, especially from indirect taxes. The stable fiscal position allowed premature external state debt repayment to the amount of about BGN 685 million and the state debt to GDP ratio dropped the record low of 25.6%. The actions of the Ministry of Finance are focused on gradually balancing the amounts of internal and external debt. The money supply (М3) and the cash reserves increased rapidly during the year. There was an increase in the money supply by 26.9%, and in the cash reserves by 25.5% against At a declining growth rate, bank reserves remained at relatively high absolute levels. The accelerated monetary increase owes to the economic activity and the inflow of foreign capital. The dynamics of the money multiplier was also defined by the decisions of the central bank (BNB) with regard to the additional mandatory minimal reserves of banks. BNB s measures for limiting credit expansion led to a decrease in the growth of loans to the non-governmental sector and households. The annual change rate registered was 24.6%, and 30.6%, respectively, against 32% and 58%, respectively, for At the year end the BNB has taken a decision revoking the administrative limitations to credit growth, in force as of 1 January The environment for business development in Bulgaria was favourable. Inflation remained comparatively higher, one of the reasons for this being the accelerated synchronization of excise duties with those in the EU, and the increase in some administratively regulated prices. The capital inflow maintained its high rates and entirely covered the current account deficit.

6 THE BULGARIAN BANKING SECTOR IN 2006 The financial institutions carrying out banking activity in the country as at 31 December were 28 commercial banks and 4 foreign banks branches. The following events are worth mentioning in relation to the change in ownership: The Hungarian MKB Bank (part of the Bayerische Landesbank Group) bought 60% of Unionbank renaming it to МКB Unionbank; There was a change in the ownership of D Commerce Bank; Eurobank EFG Group acquired 90% of the shares of DZI Bank AD from local and international institutional investors. The Group owns a subsidiary Bulgarian Post Bank AD and intends to merge them in The accelerated development of the banking system continued in The total assets of commercial banks increased by 28.4% (against 31.8% in 2005) on an annual basis reaching BGN 42,194.9 million, with the growth for December only being by 5.5%. The net loans to non-financial institutions (NFI s) amounted to 22,100.6 million. The decline in the growth rate registered (24.6%) was a result of BNB s actions, taken in These measures were supplemented in 2006, and following the satisfactory results on the credit growth, a decision was taken to revoke them. Stabilization can be noticed in the development of the banking sector expressed in an overtaking growth in the deposits of NFI s against that of loans to NFI s.

7 Unlike 2005, when the increase of EUR loans was faster, in 2006 the growth in BGN loans (30%) overtook that of EUR loans (25%). Naturally, in view of the currency composition of the incomes and the foreign trade, the absolute amount of loans in other currencies decreased, their share being insignificant below 2%. The past period could be distinguished by the increase in the profitability under term deposits. The impossibility of the interest differential between deposits and loans to remain unchanged led the banks to turn to improving efficiency and rising competition with respect to fees and commissions. The stable economic environment was a stimulus for increasing the attracted deposits. Banks offered a greater variety and covered a wider range in terms of tenors, yield, and currency characteristics of the deposit products. The deposits of NFI s reached BGN 27, million, with the registered growth by 35% being much higher than in The entry of foreign investors has to a large degree determined the considerable EUR deposits growth, while the BGN deposits growth was maintained. As with the loans, we saw a standstill in the foreign currency deposits as well. The tendency remained of a gradual change to the maturity structure, with the share of term deposits increasing and almost equaling that of demand deposits 1. This process was manifested at banks in two ways: on the one hand the attracted resources become more expensive, but on the other the maturity structure of the liabilities was improved. Despite the good results in attracting long-term resources from depositors, local banks experienced the more and more intensifying competition of the nonbanking financial institutions, offering alternative investment and saving forms. 1 The demand deposits include the savings deposits.

8 MUNICIPAL BANK PLC MAIN HIGHLIGHTS Established in April 1996 as a universal commercial bank. Registered Share Capital: BGN 25,000,000 divided into 2,500,000 registered, ordinary voting shares, of BGN 10 par value each. Shareholders: Sofia Municipality 67.0% 21 municipal and private companies 30.1% 18 other municipalities 2.9% Banking License: Full banking license by the Bulgarian National Bank for domestic and worldwide banking and financial operations. Memberships: Association of Commercial Banks in Bulgaria Bulgarian Stock Exchange AD Central Depository AD S.W.I.F.T. MasterCard Incorporated Licenses: Licensed primary dealer of government securities Licensed investment intermediary for corporate securities trading Licensed local and international electronic debit and credit cards operator Service agent of local budgets Licensed custodian bank under the Social Security Code Rating: As at the Long-Term Counterparty Credit Rating of Municipal Bank PLC awarded by Standard & Poor s international rating agency was BB.

9 INTERNATIONAL OPERATIONS AND COOPERATION The Bank utilizes numerous: medium- and long-term export, project, and general purpose finance credit facilities from first-class foreign financial institutions; credit concessions for commercial and forex transactions, provided by traditional partners like the Bank of New York, New York, USA; Fortis Bank, Brussels, Belgium; Raiffeisen Zentralbank Österreich AG, Vienna, Austria; Bank Austria AG, Vienna, Austria; Depfa Investment Bank Limited, Nicosia, Cyprus; Ceskoslovenska Obhodni Banka, Prague, Czech Republic; ING Bank NV, Amsterdam, Netherlands; Unicredito Italiano SpA, Genoa, Italy; UBS AG, Zürich, Switzerland. Municipal Bank PLC has established correspondent relations with over 250 banks from all over the world. The Bank participates as agent, leading financial consultant, and servicing unit in big investment projects: First Eurobond Issue in Bulgaria; Extension of the Sofia Underground Project; Sofia Transport Investment Programme; Sofia Water System Concession; Municipality of Sofia Project for Rehabilitating the Heating System; Project for Building the Bistritza Water Purification System in Sofia. Branch Network: Forty-six financial centres and 17 remote workplaces in the country.

10 SUPERVISORY AND MANAGEMENT BOARDS The Supervisory Board consists of three members: Dimitar Kolev Chairman Nikifor Vangelov Board Member Spas Dimitrov Board Member The Management Board consists of five members: Vassil Vassilev Chairman Aleksandar Lichev Board Member and Executive Director Georgi Belovski Board Member and Executive Director Vassil Piralkov Board Member and Executive Director (Until ) Vassil Trenev Board Member and Executive Director (As of ) Violeta Stefanova Board Member

11 Municipal Bank PLC offers the following BANKING PRODUCTS AND SERVICES Term Deposits in BGN and foreign currency Demand Deposits in BGN and foreign currency: - Savings account deposits - Savings account deposits in favour of children - Savings account deposits under condition Current Account Deposits in BGN and foreign currency Payments in BGN and foreign currency Documentary Business - Opening and processing of documentary letters of credit - Issuance and processing of bank guarantees - Processing of documentary collections - Discounting on letter of credit receivables Cheques - Issuance and cashing-in of cheques Lending Corporate - Loans in BGN and foreign currency - Issuance of bank guarantees - Management of international project and export finance credit facilities - Direct investment lending - Lending to customers with approved SAPARD program projects - Arrangement, structuring, and participation in syndicated finance, including intermediation and agency under contracted external finance Retail - Consumer and housing loans - Debit and credit cards overdraft Financial Markets Operations - Foreign exchange - Arbitrage - Treasury bills and bonds operations - Corporate securities operations and compensatory instruments - Depository and custody services Financial Advisory Services to Corporate Customers and Municipalities - Investment projects - Bond issues - Advisory services under credit rating assignment - Other specific services Internet Banking - Payments from the customers offices or homes - Receiving up-to-date banking information Bank Cards - Domestic and international Cirrus/Maestro debit cards and MasterCard credit cards; - Rendering of general and supplementary services: payment from card account of payroll, pensions, scholarships, etc. payment of goods and services through POS-terminals payment of public utilities and other bills via Internet, ATM s, by phone, etc. insurance of gold and business credit cardholders when traveling abroad Safe Boxes - Public - 24-hour service Wholesale Distribution of Available Funds Cash Collection - Cash and Valuables Collection from customers offices or homes via specialized transportation and security officers Central and Local Budgets Servicing

12 FINANCIAL HIGHLIGHTS* (BGN '000 unless otherwise stated) Balance Sheet Total Assets Loans to Non-Financial Customers Funds Attracted from Non-Financial Customers Total Shareholders Equity Net Profit Resources (Number of) Financial Centres 63 Customers Personnel 746 Subsidiaries 0 10 * In accordance with the International Accounting Standards

13 REVIEW OF MUNICIPAL BANK S ACTIVITY BALANCE SHEET INDICATORS AND FINANCIAL RESULTS The passed year is marked by the Bank s actively extending its scope. As a result, the assets at the end of the period increased at rates surpassing those of the banking system as a whole. The total assets as at were BGN 644,330 thousand, or 38.6% more against At the end of 2006 the Bank s equity increased by BGN 636 thousand against 2005 amounting to BGN 41,902 thousand. There was no change in the Bank s core capital BGN 25,000,000. The Bank improved its results from interest related operations by 37.1% and the reported annual interest income amounted to net BGN 14,826 thousand. The interest and similar income increased by 31.8% in 2006 on an annual basis and amounted to BGN 24,416 thousand. The lending growth reached by the Bank was higher than the average for the banking system, the interest income increasing in parallel, also influenced by the movement of interest rates in the past year. Changes have occurred to the currency composition of the loan portfolio, with the BGN component increasing to 81% (65% in 2005), and the share of interests on BGN loans reached 73% (59% in 2005). The incomes from interests and securities at fair value have dropped considerably (by 36%) due to the sales of Government Securities in conformity to the market conditions. The strategy of the Bank is focused on protection from loss as a result of increasing the yield on Government Securities. The shortage of own securities for collateralizing the budget amounts was compensated by repo deals. The interest incomes from repurchase agreements increased, respectively. Expanding the deposit base logically led to an increase in the interest expenses, amounting to BGN 9,590 thousand at the end of They increased by 24% for the period, with the Bank managing to attract resources at lower interest levels due to a large degree to the budget amounts. The successful lending led to a very high growth in the revenues from servicing customers 69%. The increase in the incomes from fees for off-balance sheet commitments and for servicing deposits was by 10%. The total growth in the fee and commission income was 14.9%, improving against The net gains on dealings in foreign currency was BGN 564 thousand. The improved quality of the loan portfolio allowed the reintegrated to exceed the allocated provisions by BGN 3,119 thousand. The profit after tax amounted to BGN 3,636 thousand, which is 2% more than the reported 2005 figure. The Bank s management made efforts to expand the branch network and gain new customers. The expenses in this respect have limited the profit growth for the accounting period but have established a sound basis for growth. 11

14 ATTRACTED FUNDS, RETAIL AND CORPORATE BANKING The fast development of the financial sector in Bulgaria and the stable condition of the banking system stimulated the increase in the deposit base. The Bank provided its funding in 2006 by adapting to the dynamic market environment and the investment possibilities, including the regulatory ones. The structural changes carried out and the expansion of the branch network effectively helped the attraction of new customers from all business segments. The product range was enriched by the addition of new savings products and card services, offering versatile terms with regard to tenors, currencies, and interest rates. The deposits of NFI s and other customers (BGN 509,661 thousand) marked a high growth of 46%, maintaining the trend of primary increase in the term deposits by 61% against 39% for the demand deposits. Despite the fact that Municipal Bank PLC followed the same direction in the development of the relative shares of the term deposits as that of the other banks, the maturity structure differs considerably. For the time being, the ratio optimal for the price of resources, is being maintained with the demand deposits having a dominant position in the Liabilities 66.7%, against 51% for the system as a whole. With the deposits of financial institutions there is a considerable growth of the term deposits of banks. The maturity structure of the liabilities is further balanced by the utilization of long-term borrowing, primarily from foreign banks, amounting to BGN 45,976 thousand at the end of the period. The short-term borrowings from banks amounted to BGN 7,856 thousand, representing a 14% increase against The structure of the funding by business segment has changed mainly due to the double increase in the budget amounts. They prevailed in the deposits 39.1%, at the expense of the decreased shares of the retail (30.3%) and corporate (30.6%) banking, against 26.9%, 35.5%, and 37.6% for Very good results can be seen in the retail banking, with the total amount of deposits increasing by 24.3% and amounting to BGN 154,315 thousand at the end of the year. A gradual process of balancing the funding from retail and corporate banking can be observed. The growth in the corporate deposits was by 19% on an annual basis. The currency structure remained almost unchanged, with a definite preference for BGN deposits (80%) in the past two years. 12

15 ASSET SIDE OPERATIONS The positive development of the Bank throughout the year has been achieved via maintaining an optimal assets structure. The changes against 2005 have been grounded in the fluctuations in the internal and external factors in view of maintaining profitability and for protection against additional risk. Along with the general increase in the liabilities and the assets, the cash on hand and the placements at the current account with the Central Bank have increased. The Bank maintained the necessary level of liquidity, covering the requirements for mandatory minimum reserves and carrying out payment transactions. The effective liquidity management includes active participation on the interbank deposit market, with the highest share belonging to the overnight deposits. Municipal Bank PLC continued the process initiated during the preceding year of reducing its own Government Securities in its portfolio, with the main reason being the continuing trend towards decrease in the prices, following the rise in the interest levels. The Government Securities have been distributed in a trading and investment portfolios, and at the year-end 2006 they amounted to BGN 136,207 thousand, decreasing by BGN 14,482 thousand against the preceding year. There was a respective significant increase in the receivables under repurchase agreements, the amount varying depending on the commitment for securing the budget deposits. Bulgaria s economic progress and the improved financial perspectives before the individuals (with the labour market flourishing and unemployment being continually curbed) stimulated lending. As is the case with the transactions on the Liabilities side, a higher activity was registered in the retail banking, where the growth of Municipal Bank PLC was 36%, exceeding the general growth. After the desired lending growth rates were achieved, the restrictive measures were gradually revoked, keeping the potential for moderate sustainable development. The corporate customers occupied 81% in the loan portfolio, at an annual growth level of 20.4%, and the retail banking and the budget sector increased by a little more than one percentage point, to 14.2% and 4.6%, respectively. The Bank is about to focus on the intensive development of lending in these two segments. 13

16 7.4% 3.2% 76.4% 13.0% The economic branch cross section underwent some changes, keeping the leading place of Trade, with a very strong increase in the share to 30.6% at the expense of the Services economic branch. A decrease in the loans at absolute values was recorded with the Agricultural, Transport, and Services branches 14

17 INTERNATIONAL ACTIVITY AND CREDIT RATING The size of the correspondent network is being optimised, corresponding to the commercial relations of the Bank s customers. The correspondent network is tightly bound to the processes of integration in the EU and allows performing settlement in short terms and with minimum expenses. Due to its traditionally good positions the Bank managed to attract non-collateralised credit lines from first-rate foreign banks. This is aided to a considerable degree by the very good assessment of the Bank s operation by Standard & Poor s international rating agency. The counterparty rating assigned by Standard & Poor s to Municipal Bank PLC has been reconfirmed to BB. 15

18 BRANCH NETWORK The structure of the Bank includes a head office and branch network. The head office of Municipal Bank PLC is located at 6, Vrabcha Str., 1000 Sofia. It concludes commercial transactions with banks and other financial institutions, deals on the stock exchange, carries out international payments, and other specific transactions. Structural changes took place within the organization of the branch network, and new outlets were opened. At the year-end 2006 the Bank serviced its customers in 63 outlets, 46 of which financial centres, and 17 remote workplaces. The financial centres (FC) and remote workplaces (RW) were located in: Sofia (7 FC s and 4 RW s), Assenovgrad, Blagoevgrad, Botevgrad, Bourgas (1 FC and 1 RW), Varna (1 FC and 1 RW), Veliko Tarnovo (1 FC and 1 RW), Vratza, Gorna Oryahovitza (RW), Goulyantzi (RW), Galabovo (RW), Devnya, Dobrich, Kazanlak, Kirkovo, Kotel, Kyustendil, Kardzhali, Lovech, Nedelino, Pazardzhik (1 FC and 1 RW), Pernik, Petrich, Peshtera, Pleven (1 FC and 2 RW s), Plovdiv (1 FC and 2 RW s), Pomorie, Rousse (1 FC and 2 RW s), Sandanski, Svishtov, Svoge, Sevlievo, Sliven, Smolyan, Sozopol, Stara Zagora, Tvarditza, Troyan, Haskovo, Chepelare, Chirpan, Shoumen and Yambol. 16

19 CONTACT DETAILS HEAD OFFICE Municipal Bank PLC 6, Vrabcha Street 1000 Sofia, Bulgaria Switchboard: (+359 2) Fax: (+359 2) Website: SWIFT: SOMBBGSF Reuters: SMBK Treasury Nikolay Kolev Tel.: (+359 2) Corporate Banking Jordanka Chausheva Tel.: (+359 2) International Banking and Financial Institutions Mariana Strahinova Tel.: (+359 2) Bank Cards Mincho Minchev Tel.: (+359 2) Lending Plamen Todorov Tel.: (+359 2) Retail Banking Rayko Karagiozov Tel.: (+359 2)

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