Annual Report 2009 - ProCredit

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Annual Report 2009
Capitalisation and liquidity levels remained
sound despite the impact of the global financial
crisis. However, the expansion of financial intermediation
slowed down, and the profitability of
most banks suffered considerably, with some
institutions recording a marked loss for the year.
In response to a sharp drop in customer deposits
in October 2008, the Deposit Insurance Agency of
BiH raised its coverage to BAM 20,000. This and
the ability of banks to meet withdrawal requests
reassured savers that their money was safe, and
the volume of deposits remained stable in 2009,
growing by 2.1% to BAM 12.2 billion (EUR 6.2 billion).
Deposits from private individuals accounted
for around 52% of the total volume.
After overheated credit growth in recent years, total
assets decreased by 1.6% to BAM 20.7 billion
(EUR 10.6 billion). The consolidated loan portfolio
contracted due to lower demand as well as stricter
lending conditions, both of which were caused by
rising levels of indebtedness. Total loans declined
by 3.1% to BAM 14.1 billion (EUR 7.2 billion), representing
58.8% of GDP (2008: 59.1%).
In response to the slowdown in lending, the Central
Bank of BiH (CBBH) lowered the reserve requirement
for deposits with a maturity above 12
months from 10% to 7%. It also excluded government
deposits intended for development projects
from the calculation base.
The percentage of non-performing loans rose
from 3.1% at the end of 2008 to 5.9%. According
to CBBH, interest rates for local currency loans
to private companies increased from 7.42% in
December 2008 to 9.14% in December 2009 for
short-term maturities, while decreasing from
8.10% to 7.78% for long-term financing.
Some banks also raised the interest on outstanding
variable-rate loans, justifying their actions
by referring to the worsening economic environment
and increased credit risk. This was met with
a high degree of public anger, and the media accused
guilty banks of inconsistent and non-transparent
behaviour.
While the negative sentiment towards banks also
affected our operations to a certain extent, we
continued to emphasise the importance of open
and honest communication, positioning ourselves
as a reliable, long-term partner for SMEs
and small savers.
ProCredit Performance
Against the background of an economic crisis and
a highly competitive banking sector, ProCredit
Bank BiH stayed true to its mission to provide socially
responsible financial services to its core client
groups. Aggressive and irresponsible lending
practices have been all too evident in recent times,
plunging a significant number of companies and
individuals into excessive debt. In order to avoid
exacerbating this problem, we raised our credit
eligibility criteria, resulting in an overall decrease
in the loan portfolio.
Although the negative economic environment
increased the default risk, the bank managed to
maintain the proportion of non-performing loans
in its portfolio in line with the sector average.
We have always placed strong emphasis on individual
credit analyses and rigorous risk management.
Moreover, if it becomes too difficult for our
clients to meet their scheduled repayments, we
strive to find mutually beneficial solutions at an
early stage. As a result, the portfolio at risk (PAR
– loans overdue by more than 30 days) was 5.6%
at the end of December.
In line with our ongoing goal to increase the bank’s
range of services for enterprise clients, we opened
our first Business Center, located in Tuzla. Additional
branches of this type will open in Sarajevo,
Mostar and Banja Luka in early 2010, providing a
dedicated service to customers in the SME sector.
On the retail side, we continued to offer attractive
and straightforward deposit accounts and other
services. Our staff receive continuous training so
that they are in a position to offer professional
advice and build deep client relationships founded
on mutual respect and trust. We welcome
customers from all social backgrounds and of all
ages, and at the end of the year we were serving
more than 107,900 people in BiH.
Despite a challenging operational environment,
ProCredit Bank established a sound basis for its
future development. This would not have been pos-