Sberbank Banka D.D
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Annual Report 2018 Sberbank banka d.d. SBERBANK SI | ANNUAL REPORT 2018 1 Dunajska cesta 128 a SI-1000 Ljubljana T +386 (1) 5307 400 F +386 (1) 5307 555 SBERBANK BANKA, d.d. [email protected] www.sberbank.si www.e-obresti.si 080 22 65 2 SBERBANK SI | ANNUAL REPORT 2018 Contents Report of the management board 4 The bank in numbers 6 International network 7 Governing bodies 9 Sberbank banka group 10 Organisational structure 11 General business environment 12 Strategy in 2019 13 Core business 15 Statement of financial position 21 Results from operations 24 Risk exposure 25 Equity and shareholders 26 Development milestones 27 Key facts 31 Report of the supervisory board 33 Internal governance statement 35 Financial statements 38 Statement of responsibility 39 Independent auditor‘s report 40 Statement of financial position 44 Income statement 46 Statement of comprehensive income 47 Statement of changes in equity for 2018 48 Statement of changes in equity for 2017 49 Statement of cash flows 50 Notes to the financial statements 52 Our network 133 SBERBANK SI | ANNUAL REPORT 2018 3 Report of the management board Dear Ladies and Gentlemen, The deposit side saw an increase of 4.8% or EUR 59 mil- lion. Total deposits due to clients amounted to EUR 1,271 Slovenian macroeconomic indicators continued their favour- million. Growth was more significant in the private individu- able development in 2018. GDP growth was maintained at als segment (6.44%) than in the legal entities segment a high level and based on currently available forecasts we (4.22%). As with the rest of the banking sector, Sberbank can expect that positive macroeconomic environment will banka also saw a shift from term to sight deposits. The rea- continue also in 2019, although at a slightly lower level. son for this are low interest rates on term deposits, which GDP growth in 2019 is expected to reach 3.4%. Taking do not stimulate clients to bind their funds. Consequently, into consideration the economic structure, GDP is highly the bank introduced a number of new term deposit products dependent on trends in international markets and develop- already in 2016, therefore considerably mitigating this trend ments in export markets. This is why we need to pay close over the past two years and succeeding to maintain the ratio attention to trends at the international level, as they can of term to sight deposits high above the banking average. change rather quickly. Positive dynamic was also observed At the same time, the bank endeavoured to improve the in domestic consumption and tourism growth, which was deposit structure (deposits due to private individuals com- marked by record-high in 2018, both in terms of overnight pared to deposits due to legal entities), which is still domi- stays and tourist arrivals. nated by legal entities: at the end of 2018, the percentage of deposits due to private individuals represented 28.6% of These economic trends positively impacted the banking total deposits. sector, which was at the same time affected by low interest rates and fierce competition among players in the banking To refinance, the bank used primary sources of finance market, mainly with regard to lending interest rates. At this (deposits), but also relied – and will continue to rely – on point, the monetary policy of the ECB must be mentioned, the programmes offered by the SID Bank (Slovenia’s ex- which continues to negatively affect the interest income port and development bank) and, to a limited extent, by the earned by banks. Nevertheless, this policy contributes to ECB (the so-called TLTROs), although the latter decreased an increased investment dynamics and demand for new significantly in 2018, when reduced from EUR 130.1 million project financing on one hand and successful resolution to EUR 66.5 million. of non-performing assets or sale of loan collaterals on the other. In the 2018 income statement, the bank shows a net interest income of a similar size as in 2017, despite the strong pres- Similarly as in previous years, the bank planned a steady sure on interest margins and the negative interest rate envi- lending growth also in 2018, but at a different rate for ronment. Net interest income amounted to EUR 33.4 million, particular segments. If lending growth was planned to be which is 0.19% (EUR 63,000) more than in 2017. Net non- moderate in the SME and large corporates segments, it interest income amounted to EUR 8.59 million, which is was planned to be considerably higher in the micro and 6.50% or EUR 524,000 more than in 2017. retail segment, mainly consumer lending, and slightly less housing lending. On the deposit side, the same objectives Staff costs and administrative expenses grew by 6.3% were pursued. compared to last year, and reached EUR 27.8 million. Consequently, the cost-to-income ratio (CIR) increased Compared to 2017, the volume of loans to customers de- to 66.3%. This unfavourable development of the ratio can creased slightly and amounted to EUR 1.28 billion at year- be attributed to cost dynamics, in particular the increased end 2018 or 2.2% less. The decrease was mostly due to number of employees in various departments partially due the successful resolving of non-performing loans (NPLs). to the increased legislative requirements. Because of strong These dropped from EUR 166.5 million to EUR 120.9 mil- competition in the market, the bank was able to only partially lion, which represents a remarkable decrease of 27%. Giv- compensate for the additional costs with net commission en that the largest part of NPLs falls in the SME segment, income. The result of other operating activities was mainly gross loans to legal entities declined by 7.12%. On the con- affected by the contributions to the Resolution Fund and to trary, gross loans to private individuals grew by 8%. the Deposit Guarantee Scheme. In 2019, we will continue to carefully monitor cost management and CIR developments. 4 SBERBANK SI | ANNUAL REPORT 2018 The activities to reduce non-performing loans continued also in courses held by internal trainers. The catalogue of internal 2018 and resulted in their decrease from EUR 166.5 million to courses is being constantly expanded. We are aware of the EUR 120.9 million. The reduction can be attributable to the importance of employee training and knowledge spreading, successful restructuring and collection activities, as well as as we believe that qualified employees provide the required low inflow of new NPL cases. The solving of non-performing foundations for stable and safe operations and customer loans in the beginning of 2019 points to continued positive service. developments in this area. We would like to emphasise that successful resolution and reduction of non-performing Last year, the bank invested in technology and new exposures are of key importance for the bank. However, we product development. Special attention was given to the are not willing or able to neglect the potential income earned digitalisation of processes, especially those related to out of sale of collaterals or sale of claims. The average consumer loans. The main focus of the IT development was achieved recovery rate for roughly 280 NPL cases which on building and implementing a new, service-oriented IT have been solved in the segment of medium and large architecture (SOA), which will very positively affect further companies since 2015 exceeds 72%. development of banking services. Developments in the NPL area positively impacted NPL and Looking ahead to 2019, we expect GDP growth to continue, NPE ratios. NPL ratio dropped from 12% to 9% and NPE although at a slightly lower rate. This notwithstanding, we ratio from 8.5% to 6.2%, while LLP coverage ratio increased need to be prepared for possible negative developments in from 42.1% to 50%. Net provisions were also favourably af- certain indicators, which might negatively impact the eco- fected. Booked risk provisions amounted to EUR 4.14 million. nomic situation. One of the most important achievements in the first quarter of 2019 was a very successful reduction of Overall, the bank achieved a profit before taxes of EUR 10.02 NPEs, which plummeted from EUR 120.9 million (YE2018) million or a profit after taxes of EUR 8.18 million in 2018. to EUR 86 million. (NPL ratio dropped to 6.4% and NPE ratio to 4.5%). Capital adequacy ratio (CAR) was kept at a high level, while TIER1 or CET1 ratio stood at 14.27%, which gives the bank At Sberbank bank we are aware of the importance of social sufficient room for manoeuvre in view of the minimum capi- responsibility and our integration in the wider and narrower tal requirements imposed by the regulator. We would also social environment. Without doubt, our primary responsibil- like to mention the impact of IFRS 9 implementation and its ity is towards the stability of the banking system, as well as impact in the total amount of EUR 9.4 million (EUR 7.6 million towards all stakeholders, in particular in terms of assuring after taxes), which slightly decreased the bank’s capital ad- occupational health and professional development of our equacy ratios in the 2018 opening balance sheet. employees. In previous years, we have become recognised as sponsors of Slovenian ski jumpers and Nordic team. The In 2018, the bank had 367 employees on average com- common objective of our sponsorships is and will be to sup- pared to 348 in 2017, which represents a 5.4% increase. As port projects involving the young. at 31 December 2018, the number of employees was 8.5% higher than a year ago owing to new employments mainly in Finally yet importantly, we would like to extend our apprecia- the last quarter of 2018.