Annual Report - VÚB banka

y 16%, assets under management of our asset
management arm by 21% and assets under management
of our joint pension fund venture with Generali
Poisťovňa by 91%, respectively.
Next to the traditionally strong commercial results
of our retail franchise, I am pleased to say that we
have achieved a spectacular turnaround in our SME
and Corporate banking division. In particular, we
grew SME loan book by rapid 34%, capitalizing on
improvements and consolidation of our new SME
business model. Last year, we also rapidly expanded
loan book to big corporate clients, leveraging
in particular the boom in the project and real estate
fi nance. Overall, we grew total loans to customers
on consolidated basis by 41%, which was
the highest growth rate from among the competitors
and a dramatic change from our 8% growth
in 2006. Importantly, acceleration in lending growth
came hand in hand with further improvement in
asset quality, with nonperforming loans accounting
for 1.73% of gross loans.
Strong business growth results have been refl ected
in our fi nancial performance. On consolidated basis,
VUB has generated revenues of Sk 12.9 billion,
up 10% over a year ago. Thanks to project Optimum
and other initiatives focused on cost savings,
we have been able to keep control over our expenses,
allowing them to rise only 6% on the group
level. As result, our cost to income ratio improved
to 50% from 55% in 2006 and operating profi t increased
15% over a year ago, to Sk 6.1 billions. After
adjustments for provisions, impairment losses,
and income tax, the Group posted a net profi t of
Sk 4.1 billion, up 9% over the previous year.
Ahead, it will be very diffi cult to sustain the business
growth dynamics of 2007. Externally, the environment
for the banking business has turned less
favorable. Globally, there is the haunt of the US
sub-prime mortgage crisis, which subsequently impaired
broader credit markets and tilted the world’s
largest economy close to recession. Europe is fundamentally
healthier, but impacted by tighter global
credit conditions. Slovakia is to some extent shielded
from the global developments thanks to its fast
converging economy and still nascent credit and
property markets. Yet, signs of economic growth
moderation are present as the year 2008 opened,
with business confi dence slipping on softer demand
and consumer confi dence on worries about
ability of households to continue amass fi nancial
savings, respectively.
Besides, performance of VUB and the banking
sector in general will in the near term be adversely
affected by Slovakia’s EMU convergence. Preparations
for the introduction of the single European
currency in 2009 already require signifi cant
investments in IT infrastructure, communications
and training. Moreover, the actual euro changeover
will deprive the banks of substantial revenue from
currency conversions and other sources. A sizable
chunk of the lost revenue will weigh on our fi nancial
performance already in the second half of 2008.
Against this external backdrop, we have to concentrate
more than ever on our clients. Be it a big corporation
or a private individual. Indeed, excellence
in customer service is the key strategic guideline
we need to follow going further, to our new vision of
becoming the best bank in Slovakia as perceived by
our customers. In service quality management, in
cooperation with Intesa Sanpaolo we started a project
to design and implement customer satisfaction
measurement system. Next we must implement
it into monitoring and decision-making processes
and by focusing on customer complaints resolution
and reduction we must improve client retention.
To better serve our clients, we need to get closer
to them also geographically. Indeed, we realize that
majority of our network has been created before
the year 2000, long before the country’s economic
takeoff, which fundamentally changed urban and
population distribution in the country. Although
we tried to keep pace with the changing economic
environment by opening new branches in the fast-
-growing metropolitan areas, we could not match
the changed GDP and wealth distribution completely.
A thorough reassessment of our network coverage
- the project Proximum - is therefore a key
priority going forward. To improve customer service,
we must go beyond the upgrade of the branch
network and simultaneously work on a thorough
review and redesign of our call centre and internet
banking utilities. The aim is to improve quality, client
accessibility and effi ciency of services.
Commercially, despite the strong growth of our lending
volumes in 2007, we still have the lowest share
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VUB, a bank of Intesa Sanpaolo group