Annual Report 2008 - ProCredit Bank

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Annual Report 2008
Geographic risk concentrations
Bosnia and OECD Non-OECD Total
Herzegovina countries countries
Loans and advances to banks – 28,741 13 28,754
Loans and advances to customers
– Overdrafts 911 – – 911
– Housing 16,014 – – 16,014
– Consumer 11,573 – – 11,573
– Very small business 138,121 – – 138,121
– Small and medium size enterprises (SMEs) 122,364 – – 122,364
– Business overdrafts 18,769 – – 18,769
Financial investments available for sale – – 196 196
Other assets 2,949 – – 2,949
As at 31 December 2008 310,701 28,741 209 339,651
As at 31 December 2007 310,449 5,573 449 316,471
In addition, the structure of the loan portfolio is regularly reviewed
within the Risk Department and Credit Risk Committee in order to
identify potential events which could have an impact on large areas
of the loan portfolio (common risk factors) and if necessary limit the
exposure toward certain sectors of the economy.
3.2 Market risk
The Bank takes on exposure to market risks, which is the risk that
the fair value or future cash flows of a financial instrument will
fluctuate because of changes in market prices. Market risks arise
from open positions in interest rate, foreign currency and equity
products, all of which are exposed to general and specific market
movements and changes in the level of volatility of market rates
or prices such as interest rates, credit spreads, foreign exchange
rates and equity prices.
The Management Board sets limits and guidelines for monitoring
and mitigating of market risks, which is regularly monitored by Risk
Committees of the Bank.
3.3 Foreign exchange risk
The Bank is exposed to currency risk through transactions in foreign
currencies. Foreign currency exposure arises from credit, deposit-taking
and trading activities. The Management sets limits on
the level of exposure by currency and in total for overnight position,
which are monitored daily. The table below summarizes the Bank’s
exposure to foreign currency exchange rate risk at 31 December
2008. Included in the table are the Bank’s assets and liabilities at
carrying amounts categorized by currency.
Concentrations of currency risk of on- and off-balance sheet assets
and liabilities
The Bank had the following significant currency positions:
As at 31 December 2008 EUR USD BAM Other Total
Assets
Cash and balances with the Central bank 11,612 2,441 97,107 963 112,123
Loans and advances to banks 28,754 – – – 28,754
Loans and advances to customers 246,549 – 61,203 – 307,752
Financial investments available for sale 196 – – – 196
Property and equipment – – 11,333 – 11,333
Intangible assets – – 992 – 992
Deferred tax assets – – 47 – 47
Other assets 669 39 2,241 – 2,949
Total assets 287,780 2,480 172,923 963 464,146
Liabilities
Deposits from customers 176,364 2,463 156,764 – 335,591
Borrowings 63,110 – 2,552 – 65,662
Subordinated debt 16,081 – – – 16,081
Provisions – – 322 – 322
Other liabilities 689 – 1,011 – 1,700
Current income tax payable – – 155 – 155
Total liabilities 256,244 2,463 160,804 – 419,511
Net balance sheet position 31,536 17 12,119 963 44,635
Contingencies and commitments 1,782 884 18,637 – 21,303
The local currency (BAM) is pegged to EUR under a currency board
arrangement.
A 10% fall in currencies (other than EUR) against BAM, with other
variables held constant would result with a decrease of the result of
the year by BAM 96 thousand (2007: BAM 63 thousand).
A 10% rise in such currencies would result with an increase of the
result of the year of BAM 96 thousand (2007: BAM 63 thousand).