Annual Report 2008 - ProCredit Bank

Management Business Review 23
The growth in interest income largely offset this
increase in interest expenses.
Net fee and commission income totalled EUR
2.3 million. The growth here was greater than
expected, reflecting a strong increase in the
number and volume of payment transactions and
the excellent development of the documentary
and card businesses. Provisioning for loan impairment
losses rose from BAM 4.5 million (EUR
2.3 million) to BAM 6.8 million (EUR 3.5 million),
a modest increase, given the higher credit risk
which the bank faced in the market.
To ensure the continuing growth of our institution,
ProCredit Bank made substantial investments
in personnel and fixed assets. We hired
166 employees, increasing the number of staff to
888. The bank established seven new branches,
and many existing offices were extended and
renovated. Thanks to rigorous cost controls, we
were able to keep administrative expenses at the
same level as in 2007.
With a total operating income amounting to EUR
19.3 million, the cost-income ratio (the ratio of
operating expenses to operating income before
provisioning) increased to 86.3% (2007: 81.9%).
The bank posted a net loss of EUR 383,865, resulting
in a return on equity of -1.8%, compared
to 8.1% in 2007.
Dividends amounting to BAM 2 million (EUR 1 million)
were paid to the shareholders in December
2008.
In 2008 we carried out a capital increase in the
amount of EUR 5 million, boosting total shareholders’
funds to EUR 18.1 million. The bank’s
capital adequacy ratio (total Tier 1 plus Tier 2 capital/risk-weighted
assets) was 18.4% at year-end.
Outlook
During the first half of the year, some progress
was made in terms of implementing much-needed
reforms, which created a more favourable environment
for potential economic growth. As the effects
of the financial crisis begin to be felt on an increasing
scale in the real economy, however, banks are
applying more stringent credit standards and loans
are more expensive. The overall economic outlook
could therefore worsen significantly.
Even in a significantly more challenging economic
environment, ProCredit Bank will continue to provide
loans to small and medium enterprises in order
to support economic growth. In line with our
mission, we will contribute further to the creation
of a transparent and efficient banking sector in
BiH. However, we will sharpen our focus on the
accurate assessment of our customers’ ability to
meet their obligations to our bank, taking into account
their overall debt capacity and cumulative
financial obligations.
Ensuring that we carry out a sound analysis of our
clients’ overall financial situation is of course a
mark of prudence on our part as lenders. Moreover,
it is one of our most important responsibilities,
as our target groups are usually highly vulnerable
to the adverse effects of changes in the
economic environment.