SC Citadele banka Public financial report for the 3 rd quarter of 2011

Transcription

1 1

2 Citadele Bank has Finished the 3 rd Quarter of 2011 with Profit Citadele Bank was founded on 30 June The new Bank launched its independent activities on 1 August 2010 after the successful completion of the restructuring of Parex banka. The aim of Citadele Bank is to become the most valuable financial group in the Baltic States, inspire people and companies to growth in order to facilitate regional development. Citadele Bank has finished the 3 rd quarter of 2011 with profit and has achieved better results than anticipated in the Bank s restructuring plan. The Bank Develops Services for Clients During the 3 rd quarter of 2011 Citadele Bank has continued working in three main segments: services for retail customers and small and medium enterprises in our branch office network, services for large enterprises and private wealth management. During the 3 rd quarter of 2011 Citadele Bank expanded the advantages of its Citadele payment cards by adding the Astarte-Nafta petrol station network in Zemgale to the benefit programme. Citadele started to provide a new cash payout service at stores as well - clients who use Citadele payment cards can receive cash from the till when they make payments there with their Citadele payment cards. Citadele has also expanded its mortgage lending programme to a considerable degree issued loans during the 3 rd quarter of 2011 amount to 3 million Lats. During the 3 rd quarter of 2011 Citadele carried out active corporate lending. In this quarter the Bank signed loan agreements with small and medium companies worth 4.7 million Euros, under the European Investment Bank s lending programme. Citadele has also developed a new design for its online banking to improve client services and to make the online banking system more convenient for clients. Citadele and its Lithuanian subsidiary, Citadele bankas, have received an award from one of the largest banks in the world, Deutsche Bank, for outstanding quality of international Euro currency transfers. During the 3 rd quarter of 2011, more than 3,800 new clients have chosen Citadele Bank s services: Citadele has acquired over 3,260 new clients in retail customer and small and medium enterprises segment; more than 60 new clients in corporate services sector in Latvia, over 120 new clients in Estonia; and in private wealth management sector over 360 new clients. Business Results of the Bank and Its Group in 3 rd Quarter of 2011 Citadele Bank has finished the 9 month period ended 30 September 2011 with profit before impairment charges and tax of 9.8 million Lats (Group million Lats). This resulted in net profit of 3.4 million Lats (Group million Lats) after taxes and better operating results than anticipated in the Bank s restructuring plan. These results were achieved despite slower general economic growth in Latvia than previously anticipated and prudent provisioning. Quality of Citadele s loan portfolio is above Latvia average. Banking sector s average problem loan ratio stands at 18%, while Citadele Bank betters this with 6.2% problem loan ratio. As at 30 September 2011, Citadele s total assets amount to 1.2 billion Lats (Group 1.4 billion Lats). The Bank s loan portfolio is 621 million Lats (Group 713 million Lats) and the amount of capital and reserves is 85.3 million Lats (Group 83.0 million Lats). The total amount of deposits with Citadele Bank at the end of the 3 rd quarter of 2011 reached 980 million Lats (Group 1.2 billion Lats). 2

3 The bank s capital asset ratio is 13.2% (Group 11.0%) and its liquidity ratio is a healthy 62.8%, which matches market average. As at 31 August 2011, Citadele is the third largest bank in Latvia in terms of attracted deposits (9.4% market share), the sixth largest bank according to the amount of assets (6.4% market share) and the fifth largest by the total amount of loans issued (5.2% market share). Repayment of State-invested Funds and the Bank s Investment in Latvia s Economy During the 3 rd quarter of 2011 Citadele Bank repaid 48.7 million Euros (34.2 million Lats) to the Ministry of Finance million Euros (32.8 million Lats) of the repaid amount is principal of the funding that the State had invested as term deposits, and 2.1 million Euros (1.5 million Lats) is the interest for the third quarter. This was the third payment over the course of the last year which Citadele made to the Latvian government. Citadele has invested funds in Latvia s economy in the shape of loans issued to enterprises. In addition it has supported acquisition of resources from EU structural funds in Latvia a significant part of enterprises to whom Citadele issued loans are companies which needed this funding for implementing projects co-funded by the European Union. Events After the Balance Sheet Date On 16 November 2011, The Board of the Bank of Lithuania ruled out to appoint a temporary administrator of AB bankas SNORAS and apply temporary preventive measures to ensure protection of the bank s assets. On 17 November 2011, The Board of the Financial and Capital Market Commission (FCMC) made a decision on applying the restrictions to the AS Latvijas Krājbanka on the fulfilment of obligations by the bank, such as debit transactions in any currency, including through online banking, ATMs and by cash, with clients both natural and legal persons in the amount that exceeds 100,000 Euros per calendar month. On 21 November 2011 meeting, FCMC decided to suspend provision of all financial services by AS Latvijas Krājbanka. The decision was made based on the established deficiency of funds in the bank, and the Prosecutor General Office has been notified of above shortcoming. There is no direct adverse impact on the Citadele Bank and the Citadele Group as a result of the above events. The Bank is Working to Drive Profitability Citadele Bank expects to maintain its profitability during 2011, despite tough conditions still being experienced in the marketplace. In order to facilitate economic growth of Latvia, Citadele Bank plans to issue substantial funding to Latvian companies and retail customers in 2011, paying special attention to Latvian companies with local capital. The report has been approved by the Executive Board of the Bank on 22 November

4 Balance sheets as at 30 September 2011 and 31 December 2010 LVL 000 s Audited* Audited* Group Group Bank Bank Cash and demand deposits with central banks 135, , , ,348 Demand deposits with credit institutions 120,326 92, ,178 97,087 Financial assets held for trading 2,330 2,844 2,298 2,720 Financial assets designated at fair value through profit and loss 4,827 3, Available-for-sale financial assets 181, , , ,927 Loans and receivables to customers: Loans to credit institutions 14, ,042 24, ,521 Loans to companies and private individuals 712, , , ,098 Held-to-maturity investments 128, , , ,280 Change in the fair value of the portfolio hedged against interest rate risk Prepayments and accrued income 1,549 1, Fixed assets 34,484 38,072 2,819 3,910 Investment property Intangible assets 1,725 2,060 1,215 1,256 Investments in subsidiaries ,697 43,839 Income tax assets 29,393 30,295 29,027 29,980 Other assets 18,279 7,728 15,270 3,184 Total assets 1,386,000 1,612,509 1,219,315 1,435,902 Due to central banks Demand liabilities to credit institutions 19,097 58,665 24,966 66,647 Financial liabilities held for trading 1, , Financial liabilities designated at fair value through profit and loss 3,984 1, Financial liabilities measured at amortised cost: Loans from credit institutions 15,211 4,863 30,543 8,497 Deposits from customers 1,158,039 1,294, ,131 1,117,274 Issued debt securities 20,665 91,485 20,736 91,557 Subordinated liabilities 50,820 51,235 50,820 51,235 Other financial liabilities 22,867 7,333 17,676 - Amounts payable under repurchase agreements - 7,028-7,028 Change in the fair value of the portfolio hedged against interest rate risk Accrued expenses and deferred income 6,504 6,828 5,505 5,529 Provisions Income tax liabilities Other liabilities 4,331 5,900 2,201 3,390 Total liabilities 1,303,048 1,530,482 1,134,033 1,351,862 Shareholders equity 82,952 82,027 85,282 84,040 Total liabilities and shareholders equity 1,386,000 1,612,509 1,219,315 1,435,902 Memorandum items Contingent liabilities 19,663 10,128 16,632 6,724 Financial commitments 114,567 91, , ,049 * Auditors: SIA PricewaterhouseCoopers 4

5 Statements of income for 9 months period ended 30 September 2011 and 3 months period ended 30 September 2010* LVL 000 s * * Group Group Bank Bank Interest income 44,912 10,423 39,276 9,071 Interest expense (25,377) (11,219) (23,769) (10,549) Dividends received 3-1,503 - Commission and fee income 18,865 4,460 14,220 3,322 Commission and fee expense (5,184) (1,104) (4,224) (1,068) Net gain/ (loss) on financial assets and financial liabilities measured at amortised cost Net gain/ (loss) on available for sale financial assets and financial liabilities (74) - Net gain/ (loss) on held for trading financial assets and financial liabilities (931) (370) (441) (306) Net gain/ (loss) on financial assets or financial liabilities designated at fair value though profit and loss (16) Fair value change in the hedge accounting Gain/ (loss) from foreign exchange trading and revaluation of open positions 5,153 2,062 4,144 1,852 Net financial profit 38,049 4,288 30,635 2,322 Net gain/ (loss) on disposal of property, plant and equipment, investment property and intangible assets (93) (54) - - Other income 4,799 1,388 3,316 1,019 Other expense (635) (118) (556) (58) Administrative expense (28,994) (7,181) (22,180) (5,506) Amortisation and depreciation charge (4,105) (1,425) (1,455) (594) Profit before impairment charges and tax 9,021 (3,102) 9,760 (2,817) Impairment charge and reversals, net (5,387) (4,547) (5,000) (5,915) Corporate income tax (965) 970 (1,348) 983 Profit for the reporting period 2,669 (6,679) 3,412 (7,749) Statements of Comprehensive Income: LVL 000 s * * Group Group Bank Bank Net change in fair value revaluation reserve of securities and other reserves (1,744) (4,276) (2,170) (1,229) Other comprehensive income for the period (1,744) (4,276) (2,170) (1,229) Total comprehensive income for the period 925 (10,955) 1,242 (8,978) * The Bank was registered as a joint stock company on 30 June 2010 and commenced its operations on 1 August

6 Performance ratios of the group and the bank Group Group Bank Bank Return on equity (ROE) (%)* 4.31 (42.72) 5.37 (48.16) Return on assets (ROA) (%)* 0.24 (2.51) 0.34 (3.27) * Average value is calculated as the arithmetic mean of the balance sheet assets or residual capital and reserves at the beginning of the reporting period and at the end of the reporting period. Ratings assigned by rating agencies Long-term rating Short-term rating Moody's Investors Service Ba3 Not Prime E+ Financial strength rating Rating s outlook Under Review Detailed information about ratings can be found on the web site of the rating agency: Investments in securities by issuer s country Group Government Audited Group bonds Other securities Government bonds Other securities Latvia 174,288 6, ,205 7,693 Lithuania 23, , Germany 579 7,774 18,873 6,944 United States - 26,481-29,891 Russia - 15, ,110 France - 2,506 10,140 1,309 Other countries* 13,037 45,389 20,097 29,357 Total securities, net 211, , ,724 89,331 Bank Government Audited Bank bonds Other securities Government bonds Other securities Latvia 173,727 4, ,704 5,088 United States - 16,079-18,556 Russia - 7,685-8,443 Germany - 3,519 17,913 3,448 France ,140 - Other countries* 6,587 27,996 16,062 18,857 Total securities, net 180,314 59, ,819 54,392 * Each country s issuers total exposure is less than 10% from the eligible capital used for capital adequacy calculation purposes. As at the period end the Bank and the Group has not recognized any impairment allowance for held-to-maturity investments (2010: nil). Market value of the total Bank s and Group s held-to-maturity securities as at 30 September 2011 is LVL 123,266 thousand (2010: LVL 119,152 thousand) and LVL 133,153 thousand (2010: LVL 130,207 thousand), respectively. During the reporting period the Bank and the Group has charged to the income statement provisions for available for sale securities in the amount of LVL 18 thousand; total recognized impairment for available for sale securities as at the period end is LVL 3,353 thousand (2010: LVL 3,370 thousand). 6

7 Consolidation group No. Name of company Registration number Registration address Country of domicile 1 AS "Citadele banka" LV Latvia, Riga LV-1010, Republikas laukums 2A LV BNK MAS 2 IPAS "Citadele Asset Management" LV Latvia, Riga LV-1010, Republikas laukums 2A LV IPS MS 3 AB "Citadele bankas" LT Lithuania, Vilnius LT-03107, K. Kalinausko 13 LT BNK MS 4 SIA "Citadele Express Kredīts" LV Latvia, Riga LV-1010, Republikas laukums 2A LV CFI MS 5 AS "Citadele atklātais pensiju fonds" LV Latvia, Riga LV-1010, Republikas laukums 2A LV PFO MS 6 AAS "Citadele Life" LV Latvia, Riga LV-1010, Republikas laukums 2A LV APS MMS 7 OU "Citadele Leasing & Factoring" EE Estonia, Tallinn 10119, Roosikrantsi 2 EE LIZ MS 8 ZAO "Parex Asset Management" RU Russia, Moscow , Donskaja 4-2 RU IBS MMS 9 OOO Citadele Asset Management Ukraina UA Ukraine, Kiev 03150, Gorkovo 172 UA IBS MMS 10 SIA "E & P Baltic Properties" LV Latvia, Riga LV-1010, Republikas laukums 2A LV IPS MMS 11 UAB "Citadele faktoringas ir lizingas" LT Lithuania, Vilnius LT03107, K.Kalinausko 13 LT LIZ MMS 12 UAB "Citadele investiciju valdymas" LT Lithuania, Vilnius LT01109, Gyneju 16 LT IBS MMS 13 AP Anlage & Privatbank AG CH Switzerland, Freienbach 8807, Kantonsstrasse 1 CH BNK MS 14 Calenia Investments Limited CY-HE Cyprus, Nicosia 1075, 58 Arch. Makarios 3 Avenue, Iris Tower, 6th floor, office 602 Company type* % of total paid-in share capital % of total voting rights CY PLS MS 15 SIA "Citadele līzings un faktorings" LV Latvia, Riga LV-1010, Republikas laukums 2A LV LIZ MS 16 SIA "Rīgas pirmā garāža" LV Latvia, Riga LV-1010, Republikas laukums 2A LV PLS MS 17 SIA "RPG interjers" LV Latvia, Riga LV-1010, Republikas laukums 1 LV PLS MMS 18 SIA "PR Speciālie projekti" LV Latvia, Riga LV-1010, Republikas laukums 2A LV PLS MMS 19 OOO "Citadele Investments Ukraina" UA Ukraine, Kiev 03150, Gorkovo 172 UA IBS MMS 20 OAO "Parex Ukrainian Equity Fund" UA Ukraine, Kiev 03150, Gorkovo 172 UA IBS MMS 21 SIA "Hortus Commercial" LV Latvia, Riga LV-1010, Republikas laukums 2A LV PLS MS 22 SIA "Hortus Land" LV Latvia, Riga LV-1010, Republikas laukums 2A LV PLS MS 23 SIA "Hortus TC" LV Latvia, Riga LV-1010, Republikas laukums 2A LV PLS MS 24 SIA "Hortus Residental" LV Latvia, Riga LV-1010, Republikas laukums 2A LV PLS MS *BNK bank, IBS investment brokerage company, IPS investment management company, PFO pension fund, CFI other financial institution, LIZ leasing company, PLS company providing various support services, APS insurance company. ** MS subsidiary company, MMS subsidiary of the subsidiary company, MAS parent company. Basis for inclusion in the group** 7

8 Information about Citadele banka s branches As at 30 June 2011 the Bank was operating a total of 22 branches, including 3 foreign branches, 25 mid-size client service centres and 3 representative offices. Issued share capital as at 30 September 2011 Shareholders Nominal value (LVL) Number of shares Paid-in share capital (LVL) Voting rights VAS "Privatizācijas Aăentūra" 1 77,249,999 77,249,999 77,249,999 EBRD 1 25,750,001 25,750,001 25,750,001 Paid-in share capital (%) 75% minus 1 share 25% plus 1 share Total 103,000, ,000, ,000, % Management of the bank as at 30 September 2011 Council of the Bank Name Klāvs Vasks Juris Vaskāns Ăirts Freibergs Laurence Philip Adams Geoffrey Dunn Position Chairman of the Council Deputy chairman of the Council Member of the Council Member of the Council Member of the Council Management of the Bank Name Juris Jākobsons Guntis BeĜavskis Valters Ābele Kaspars Cikmačs Philip Nigel Allard Position Chairman of the Executive Board, p.p. Member of the Executive Board, p.p. Member of the Executive Board Member of the Executive Board Member of the Executive Board There were no changes in the Management of the Bank in the 9 month period ended 30 September

9 Risk management Risk management principles are set out in Group s Risk and Capital Management Policy. The Group adheres to the following key risk management principles: The Group aims to ensure low risk exposure, diversified asset portfolio, limited risks in financial markets and low level of operational risk; The Group aims to ensure an acceptable risk level in all operations. Risks are always assessed in relation to the expected return. Risk exposures that are not acceptable for the Group are avoided, limited or hedged; The Group does not assume high or uncontrollable risks irrespective of the return they provide. Risks should be diversified and those risks that are quantifiable should be limited or hedged; The Group pursues prudent risk management policy, that is aligned with the Group business and ensures effective total risk mitigation; Risk management is based on awareness of each and every Group s employee about the nature of transactions he/she carries out and related risks; Risk limit system and strict controls are essential risk management elements. Control of risk level and compliance with limits is ensured by structured risk limit systems for all material risks. Risk management is an essential element of the Group s management process. Risk management within the Group is controlled by independent units - Risk and Compliance Sector. The Group is exposed to the following main risks: credit risk, market risk, interest rate risk, liquidity risk, currency risk and operational risk. The Group has approved risk management policies for each of these risks, which are briefly summarised below. Credit risk Credit risk is the risk that the Group will incur a loss from debtor s non-performance or default. The group is exposed to credit risk in to its lending, investing and trading activities, as well as in respect to the guarantees issued to third parties and other off-balance sheet commitments to third parties. Credit risk management is based on adequate risk assessment and decision-making. For material risks, risk analysis is conducted by independent units of Risk and Compliance Sector. The analysis of credit risk comprises evaluation of customer s creditworthiness and collateral and its liquidity. The analysis of creditworthiness of a legal entity includes analysis of the industry, the company, and its current and forecasted financial position. The analysis of creditworthiness of an individual includes the analysis of the customer s credit history, income and debt-toincome ratio analysis, as well as the analysis of social and demographic factors. In the event of material risks, lending decision is made by the Credit Committee, and further reviewed by the Bank s Executive Board. After the loan is issued, customer s financial position is monitored on a regular basis in order to timely identify potential credit losses. To limit its credit risk, the Group has set the following concentration limits: individual counterparty limit, limit for group of mutually related customers, limit for large risk exposures, limit for the Group s related parties, an industry limit, limit by customer type, loan product, and collateral type. The Group reviews its loan portfolio on a regular basis to assess its quality and concentrations, as well as to evaluate the portfolio trends. Credit risk identification, monitoring and reporting is the responsibility of Risk and Compliance Sector. Market risk Market risk is the risk that the Group will incur a loss as a result of the mark-to-market revaluation of balance sheet and off-balance sheet items caused by changes in market values of financial instruments due to changes in foreign exchange rates, interest rates and other factors. Position risk of financial instruments is assessed and limits are set by the Financial Market and Counterparty Committee (FMCC). The decisions of FMCC are approved by the Bank s Executive Board. Market risk is managed by the Group s business units and subsidiaries which can accept market risk in line with the set limits and investment restrictions of the respective portfolio. Market risk is measured, monitored and risk levels are reported by Risk and Compliance Sector. 9

10 To manage market risk, the Group sets individual limits to issuers and financial instruments, as well as products exposed to market risk. To assess position risk the Group also uses scenario analysis, which identifies and quantifies negative impact of adverse events on portfolio of the Group taking into consideration regional and sector profile. Interest rate risk Interest rate risk is related to the negative impact of interest rate changes on the Group s income and economic value. Interest rate risk management in the Group is carried out in accordance with the Group s Interest rate Risk Management Policy. Interest rate risk is assessed and decisions are made by Assets and Liabilities Management Committee (ALCO). The decisions of ALCO are approved by the Bank s Executive Board. ALCO sets the acceptable interest rate risk level and the Group s internal limit system, monitors the compliance with the approved limits and use of the instruments for the management of interest rate risk. Interest rate risk measurement, management and reporting are responsibilities of Treasury Sector. Interest rate risk management in the Group is coordinated by the Risk and Compliance Sector. The Group manages interest rate risk by using the gap analysis of the risk sensitive assets and liabilities, duration analysis and sensitivity analysis of assets and liabilities as well as stress testing of interest rate risk. Based on the market analysis and the Group s financing structure, ALCO sets customer deposit interest rates. Liquidity risk Liquidity risk is the risk that the Group will be unable to meet its legal payment obligations. The purpose of liquidity risk management is to ensure the availability of liquid assets sufficient to meet potential obligations. The Group manages its liquidity risk in accordance with the Group s Liquidity Risk Management Policy. Liquidity risk is assessed and decisions are made by ALCO. The decisions of ALCO are approved by the Bank s Executive Board. ALCO sets the acceptable liquidity risk level, the Group s internal limit system and defines instruments for the management of liquidity risk, as well as monitors the compliance with the set limits. Daily liquidity management, as well as control is ensured by the Treasury department. Liquidity risk management and reporting in the Group is coordinated by the Risk and Compliance Sector. The Bank evaluates liquidity risk by using scenario analysis. For this purpose several scenarios of Bank s operations under a variety of conditions are developed: gentle crisis (base case scenario), bank's crisis, general market crisis and a combined scenario. The Bank evaluates its liquidity position for each of the scenarios for variety of periods (ranging from 1 to 3 months). In the Bank a liquidity risk limit and early warning indicator system has been implemented. Bank also estimates costs it could suffer under conditions of prolonged liquidity crisis. In addition to scenarios analysis, the Bank also prepares yearly cash flows, which heed assumptions about the most likely flows of funds. For general assessment of asset and liability gaps the Bank regularly prepares and analyses liquidity term structure. In the reporting period the Bank is in compliance with liquidity ratio requirements and meets mandatory reserve requirements in the Bank of Latvia. Currency risk Currency risk is a risk of loss arising from fluctuations in currency exchange rates. Currency risk management in the Group is carried out in accordance with the Group s Currency Risk Management Policy. Currency risk is assessed and decisions on limits set are made by the Financial Market and Counterparty Committee (FMCC). The decisions of FMCC are approved by the Bank s Executive Board. FMCC defines the acceptable currency risk level and the Group s internal limit system, as well as monitors compliance with these limits. Day-to-day currency risk management is the responsibility of Treasury Sector, while risk monitoring and reporting is the responsibility of Risk and Compliance Sector. The Group has set a limit for open currency positions in each currency at 10% of its equity, and the limit for the total open currency position at 20% of its equity. The limits are equal to the requirements by Latvian legislation. In assessing its currency risk the Group also makes use of two widely applied methodologies: value at risk and scenario analysis. 10

11 Operational risk The Group defines operational risk as the risk of losses resulting from processes that are deficient or non-compliant with requirements of external and internal regulations, losses resulting from actions of employees and system malfunctioning, as well as losses resulting from actions of third parties or from other external conditions, including legal risk (risk of penalty fees, sanctions applied by external institutions, losses resulting from litigation and other similar events), but excluding strategic risk and reputation risk. The Group further divides operational risk into the following categories: personnel risk, process risk, IT and systems risk, external risk. The Group does not accept operational risks with potential impact exceeding 10% of the Group s net annual revenues, as well as unmanageable risks or risks with unquantifiable impact, irrespective of the financial gains this could bring (i.e., the Group does not perform business activities incurring such operational risks). The Group applies following approaches for operational risk management: Self-assessment of operational risk the business-owners of the products and processes perform identification and evaluation of potential operational risk events, assessment of the existing control systems and the analysis of the required risk mitigation measures using self-assessment questionnaires and brainstorming sessions with the experts of the respective process; Defining operational risk indicators use of statistical, financial and other indicators that reflect the level of various operational risk types and its changes within the Group; Defining the limits of the acceptable losses; Operational risk measurement by recording and analysing operational risk events, the extent of the respective damage incurred, causes and other related information (data base of operational risk losses and incidents); Four-eye-principle and segregation of duties; Business continuity planning; Risk assessment within product development; Insurance; Investments in appropriate data processing and information protection technologies. 11