WorldReginfo - c87496be-ab81-4976-a2d1-9f12b7517f27 Annual REPORT 2009 I TABLE OF CONTENTS Table of Contents: Message from the Managing board ....................................2 Distribution Channels .........................................................41 Managing Board ..................................................................5 Branch Network ............................................................41 Contact Centre – *bank (*2265), 0800 11 011 ............. 42 Marcoeconomic Development .............................................6 Corporate Blog ............................................................. 43 Banking System .................................................................10 Sales ............................................................................. 43 Mission ...............................................................................13 Virtual Banking Branch ................................................. 43 Proven Business Model .....................................................14 Information Technologies .................................................. 44 Bank Profile ........................................................................15 Corporate Governance ...................................................... 44 Corporate Status ...........................................................15 Human Capital ................................................................... 46 Participations and Memberships ...................................15 Subsidiaries ...................................................................15 Charity ................................................................................47 Market Position .............................................................16 Business Structure ............................................................ 48 Market Share .................................................................16 Supervisory Board ........................................................ 49 Correspondent Relations ...............................................17 Managing Board ........................................................... 49 Branch Network ............................................................17 Business Overview ........................................................... 50 Awards 2009 .................................................................17 Retail Banking ............................................................... 50 First Investment Bank: Dates and Facts ............................18 Deposits................................................................... 50 Highlights 2009 ................................................................. 20 Loans ........................................................................51 Corporate Development .....................................................24 Card Payments .........................................................51 Key Performance Indicators ..........................................24 Gold and Commemorative Coins ............................ 52 Ratings .......................................................................... 25 Private Banking ........................................................ 54 Financial Results ............................................................... 25 Corporate Banking ........................................................ 54 Balance Sheet ................................................................... 27 Deposits................................................................... 54 Loans ...................................................................... 54 Loan Portfolio .................................................................... 28 Payment Transactions .................................................. 57 Loans ............................................................................ 28 International Payments ................................................. 58 Related Party Transactions ........................................... 30 Capital Markets ............................................................ 59 Commitments and Contingent Liabilities ......................31 Attracted Funds ................................................................. 32 Consolidated Financial Statements as at 31 December 2009 with Capital ............................................................................... 34 Independent Auditor’s Report Thereon ............................ 60 Risk Management ............................................................. 37 Fullfilment of the Strategic Goals for 2009 ..................... 104 Collective risk management bodies ............................. 37 Strategic Goals for 2010 .................................................. 106 Credit Risk .................................................................... 38 Other Information .............................................................107 Market Risk .................................................................. 38 Liquidity Risk ................................................................ 39 Members of the Supervisory Board ............................107 Operational Risk ........................................................... 39 Members of the Managing Board .............................. 109 Risk-weighted Assets ................................................... 40 Contacts ........................................................................... 111 WorldReginfo - c87496be-ab81-4976-a2d1-9f12b7517f27 1 Annual REPORT 2009 I MESSAGE from THE MANAGING BoarD Message from the Managing board Dear shareholders, clients and colleagues, During 2009 the global financial crisis reached all sectors of economic life in Bulgaria and set new challenges to the financial system, the real economy and people’s lives. Since the second half of 2008, when the first symptoms of recession took effect in Bulgaria, the whole of 2009 passed in the context of turbulence on the international financial markets. We started to prepare our business for these changes in the external environment in time. The restrictive and anti-cyclic policy pursued by the Central Bank, together with high European standards and the management experience we have gained during the restructuring of the economy during the last 20 years helped us find a reasonable balance between risk and return, so as to achieve good financial results and positioning. First Investment Bank retained its position among the leading banks in Bulgaria – sixth place in terms of assets and a positive financial result for 2009 (BGN 29.8 million after tax). It improved its market position to seventh place and its market share from 3.7% to 4.1%. Thanks to the on-time measures undertaken for heightening risk assumption and risk management criteria, for improving system integrity and control, FIBank imcreased its capital adequacy (tier 1 ratio 10.39%, total capital adequacy ratio 13.83%), while maintaining good profitability and asset quality. With the support of its shareholders FIBank’s total equity was increased by BGN 34.3 million through profit capitalization and reached BGN 403 million. During the reporting period FIBank succeeded in retaining and improving the market positions of most of its products and services – sixth place in loans and in deposits, a 15.9% market share for VISA credit cards, 8.2% for MasterCard credit cards, 12.5% of ATMs and 19% of POS terminals in the country. A contributor to this was our client-oriented strategy and flexible business model which quickly adapted to changing conditions and demands. In times of financial uncertainty FIBank faced its customers’ problems and help them by developing a special program for optimizing their personal finances. We invested in our future by introducing new technologies and programs – a new platform for our Virtual banking branch, a program for automated management accounting, new products and services – the loan “Friend”, “BG loan”, “My FIBank” – for e-statements on customers’ accounts (a part of the Bank’s ecological program), a new V PAY international debit card based on chip and PIN technology, etc. Activity of the corporate blog on FIBank’s website grew as well, which made the Bank closer and more accessible to all who have questions, want to share or learn about its latest products, services, corporate events or initiatives. Despite the slow-down in business activity within the country FIBank succeeded in reasonably expanding its customer base and welcomed its 1-millionth customer. The Bank won the prize “Bank of the client” for the forth time. Of course FIBank’s potential is greater than the results achieved in 2009. The stagnation on international markets and decreased trade activity within Bulgaria led to a slow-down in total income from banking operations of BGN 23.7 million to BGN 190 million. Net interest income totaled BGN 128 million (against BGN 148 million in 2008), while net fee and commission income was BGN 51 million against BGN 63 million for the previous year. Despite the recession and unstable business environment FIBank continued to finance long-term customers and sound projects, as corporate lending increased by nearly BGN 35 million. At the same time retail lending registered a drop of BGN 33 million (or 4.3% compared to 2008). This reflected the heightened risk assessment criteria, as well as a slow-down in demand resulting from increased unemployment and insecurity, which reoriented people to look for banking products with savings characteristics.