Annual Report 2018 Table of Contents 001 2
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ANNUAL REPORT ’18 SBERBANK CZ, A.S. 1. TABLE OF CONTENTS 1. TABLE OF CONTENTS 001 2. BANK PROFILE 002 3. INTRODUCTION BY THE MANAGEMENT BOARD 003 4. KEY FIGURES IN SUMMARY 004 5. MOST IMPORTANT EVENTS OF THE YEAR 005 6. SBERBANK GROUP 008 7. BANK BODIES 010 8. ORGANISATIONAL CHART 022 9. ECONOMIC CONDITIONS 023 10. REPORT OF THE MANAGEMENT BOARD 024 11. PRODUCTS AND SERVICES 034 12. RISK MANAGEMENT 036 13. CORPORATE GOVERNANCE 040 14. REMUNERATION 050 15. CORPORATE SOCIAL RESPONSIBILITY 053 16. ADDITIONAL INFORMATION 056 17. ALTERNATIVE PERFORMANCE INDICATORS 060 18. FINANCIAL STATEMENTS 062 19. QUANTITATIVE INDICATORS 162 20. CAPITAL REQUIREMENTS 163 21. REPORT ON RELATIONSHIPS 164 22. AFFIDAVIT 174 23. INDEPENDENT AUDITOR’S REPORT 175 24. OUR NETWORK 180 This annual report provides a true and accurate picture of the financial position, business activities and profit and loss of the Bank for the previous fiscal period and of the outlook for the future financial situation, business activities and profit and loss. Unless otherwise stated, the data and information in this report are always reported as of 31 December 2018. SBERBANK CZ | ANNUAL REPORT 2018 TABLE OF CONTENTS 001 2. BANK PROFILE Corporate name Sberbank CZ, a.s. Company identification number 25083325 Tax identification number CZ25083325 Registered office U Trezorky 921/2, Jinonice, 158 00 Prague 5, Czech Republic Legal form Joint-stock company File No. in the Commercial Register B 4353 maintained by the Municipal Court in Prague, Section B, Insert 4353 Date of incorporation 31 October 1996 Subject of enterprise Banking transactions and financial services of all types in accordance with Sections 1(1) a), 1(1) b) and 1(3) a) – o) of Act No. 21/1992 Coll., on Banks, as amended, which are listed in the banking licence issued under the above Act. Bank code 6800 BIC/SWIFT VBOECZ2XXXX Data box identifier f94gyc6 LEI 31570010000000029583 Phone +420 800 133 444 Fax +420 221 969 951 E-mail [email protected] Website www.sberbank.cz Banking supervisory authority Czech National Bank Law Czech Republic SBERBANK CZ | ANNUAL REPORT 2018 002 SBERBANK CZ, A.S., PROFILE 3. INTRODUCTION BY THE MANAGEMENT BOARD Despite strong competition in the banking market, low interest rates and pressure on interest income, the Bank achieved a profit after tax of CZK 377 million, which was reduced by higher operating costs associated with ongoing changes and regulatory requirements. The Bank recorded increased interest in consumer loans and also achieved solid results in insurance and investment revenue, where the range of investment products expanded. In the segment of corporate banking, the good result was supported by new volumes for corporations and small and medium enterprises, as well as by significant syndicated loans in which the Bank participated. Profit from financial operations before the creation of reserves and loss provisions amounted to CZK 2.398 billion, i.e. 7.6% more on a year-on-year basis. Total assets amounted to CZK 79.76 billion and the number of active clients increased to 117,056. The total volume of client deposits grew slightly to CZK 66.1 billion, while the total volume of client loans increased by 4% to CZK 62.9 billion. Despite the growth in business results, total operating costs increased by 8.5% to CZK 1.577 billion. Ladies and gentlemen, Thanks to prudent risk management, the Bank maintained dear clients, partners and shareholders, a low share of non-performing loans (NPL) last year, which decreased to 2.63%. The capital adequacy ratio reached The year 2018 was marked by transformations, including the level of 16.18%, i.e. well above the threshold required in the composition of the Management Board. Despite by the regulator, which allows further development of 1 this, the Bank managed to achieve solid sales volumes. the Bank . Concentration risk decreased significantly as well. In general, the Czech banking market is highly competitive and well regulated, which was reflected In particular, I would like to thank our clients, who have in low interest margins and influenced the parameters allowed the Bank to develop and move further by their and price terms of retail products. Costs grew and the decision to choose our products or services. We want regulatory requirements increased, too. The Czech to surprise and please clients, the focus of our activities, banking client is knowledgeable and has high expectations with the quality of our services. We are building a bank – products or services regarded as premium yesterday that exceeds their expectations. However, thanks also are now standard. Therefore, all banks have started to go to all employees of the Bank – for everything they invest heavily in the future and this trend will continue achieved and did in 2018. Their work is a manifestation in 2019 as well. of the highest level of professionalism, team spirit and commitment to the success of the entire Bank. The Bank completed a successful year and is launching preparations for the future. Almost the entire Management Board was changed, the branch network underwent a reorganisation, the organisational structure was simplified, internal synergies were activated to address the increased fluctuation, key projects were strengthened and the General Data Protection Regulation (GDPR) was successfully implemented. At the same Edin Karabeg time, the Bank continued to develop business activities Chairman of the Management Board in all target segments, with an emphasis on helpful and top-quality client service and an attractive product offering, complemented by new products and online services. These changes, which will also continue in 2019, will produce a lean and modern bank with a healthy asset structure and which is able to fulfil its clients’ financial ambitions. 1 See Alternative Performance Indicators, Chapter 17. SBERBANK CZ | ANNUAL REPORT 2018 INTRODUCTION BY THE MANAGEMENT BOARD 003 4. KEY FIGURES IN SUMMARY in millions CZK 2018 2017 2016 2015 2014 Total assets 79,755 81,464 71,965 76,609 66,860 Capital Adequacy Ratio 16.18% 16.44% 16.55% 17.49% 16.18% Liabilities to clients, including debt securities in issue 67,101 66,043 59,049 61,537 50,417 Receivables from clients 62,902 60,483 55,613 50,781 54,147 Profit from financial operations before the creation of reserves and loss provisions 2,398 2,228 2,028 1,888 2,133 Administrative expenses 1,577 1,454 1,398 1,379 1,274 Profit on ordinary activities before tax 478 531 336 37 481 Profit for the year 377 424 272 23 383 Number of clients 117,056 112,559 108,310 100,116 76,137 Number of employees* 840 924 851 846 825 Number of points of sale 25 28 28 29 26 Share of non-performing loans (NPL) 2.63% 5.43% 5.74% 5.19% 5.95% * registered number of employees as at 31 December TOTAL ASSETS PROFIT FROM FINANCIAL OPERATIONS BEFORE THE CZK billion CREATION OF RESERVES AND LOSS PROVISIONS 81.5 76.6 79.6 CZK billion 72.0 66.9 2.40 2.23 2.13 2.03 1.89 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 NUMBER OF CLIENTS SHARE OF NON-PERFORMING LOANS (NPL) thousand in % 117.1 108.3 112.6 100.1 76.1 5.95 5.19 5.74 5.43 2.63 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 SBERBANK CZ | ANNUAL REPORT 2018 004 KEY FIGURES IN SUMMARY 5. MOST IMPORTANT EVENTS OF THE YEAR In January... At the end of the month, the annual New Year’s party was held for all the employees of the Bank. Among other things, the best individuals and teams of employees were announced and awarded at the event. On 29 January 2018, Mr Vladimír Šolc resigned from his position as a member and chairman of the Management Board with effect from 31 January 2018, which was acknowledged by the Bank’s Supervisory Board by its decision. The Bank’s FAIR Savings PLUS savings account was placed third in the Savings Accounts category of the Financial Product 2017 competition announced by the On 30 March 2018, the Bank raised interest rates on CZK renowned financial portal Finparáda.cz. term deposits and improved rates for clients by up to 0.30% p.a. In February... The Bank supported the entry of eToro, the world’s On 11 February 2018, the Bank launched a campaign leading social business network with more than 9 million to support the FAIR Loan with the lowest rate of 4.8% registered investors from 170 countries, to the Czech and a guarantee of a better rate. The Bank guaranteed Republic. a reduction in the interest rate by 1% to a minimum o 4.8% to clients who received a better offer from our In April… competitors during the repayment period of a FAIR Loan or FAIR Consolidation. On 18 April 2018, a regular meeting of the Audit Committee and the Supervisory Board was held, where, among other things, the Bank’s financial results for 2017 In March… were discussed. On 23 March 2018, the Supervisory Board decided on the election of Mr Edin Karabeg as a member of the The Bank’s Annual Report and Financial Statements for Management Board and CEO for a regular term of 2017 were prepared and subsequently approved by the office of three years with effect from 26 March 2018 sole shareholder of the Bank, published on the Bank’s in accordance with Article 16 (2) of the Articles of website and sent to the Czech National Bank. Association. The Bank celebrated the grand opening of the Jihlava On 26 March 2018, the Supervisory Board decided to branch at a new address in the historic city centre with acknowledge the resignation of Mr Karel Soukeník from the aim to further improve the services the branch the position as a member of the Management Board with provides to citizens and businesses.