Annual Report: - Gorenjska banka

Review of operations through the financial statements
Income statement
In 2011, the Bank generated a pre-tax profit of EUR 1,672 thousand, down 93.6% on 2010. Return on
equity before taxes was 0.49 percent, whilst return on assets before taxes was 0.09 percent.
Net interest stood at EUR 52,688 thousand, which is 20.2% less as compared to 2010. Interest income
in the amount of EUR 87,717 thousand fell by 7.7% as compared to 2010, whilst income expenses in
the amount of EUR 35,029 thousand were up 20.9% on 2010.
Due to poor credit ratings of clients and clients in insolvency proceedings, the Bank did not include
interest charged in the amount of EUR 15,197 thousand in its results. The major share of EUR 12,050
thousand relates to interest charged to clients that were in the end of 2011 in composition or
bankruptcy proceedings or in the process of lawsuit or execution with the Bank. Should exclusion
of interest not be necessary, the growth in interest income as well as interest margin would be
higher. Interest would be charged at contractual and not default interest rates, with the result being
appropriately better.
Interest margin, calculated as the ratio of net interest to average assets, fell from 3.31% in 2010 to
2.69% in 2011. Interest margin fluctuated between a low of 2.69% and a high of 3.39%.
Net fees and commissions stood at EUR 10,488 thousand, up 0.2 percent on 2010. Fee and
commissions income equalled EUR 11,557 thousand, 1.9% more as compared to 2010, whilst fee
and commissions expense stood at EUR 1,069 thousand, up 21.9% on 2010.
Dividend income totalled EUR 1,908 thousand, which is an increase of 57.6% over the year 2010. The
Bank received dividends on equity investments in six companies, the most from Mercator shares,
which the Bank holds for the purpose of trading (in 2010, this income stood at EUR 1,211 thousand).
The Bank recorded EUR 31,867 thousand gain from financial assets not measured at fair value
through profit and loss, of which EUR 31,659 thousand from disposal of the RS33 bond (in 2010:
EUR 186 thousand gain), EUR 4,488 thousand loss from financial assets held for trading (in 2010:
EUR 2,405 thousand loss) and EUR 746 thousand gain from financial assets recognised at fair value
through P/L (in 2010: EUR 1,710 thousand gain).
Other income included EUR 26 thousand net loss from exchange rate differentials. Foreign exchange
transactions resulted in EUR 243 thousand gain. Other operating profit in the amount of EUR 19
thousand predominantly resulted from rents and collected written-off receivables from previous
periods.
Total operating expenses reached EUR 27,926 thousand, which is 0.7% less as compared to 2010.
Of these, the biggest share of 58.2% is represented by costs of labour, whilst costs of material and
services accounted for 34.2% and costs of depreciation and amortisation for 7.6%. Labour costs
dropped by 0.9% as compared to 2010, costs of materials and services by 0.8%, whilst depreciation
and amortisation increased by 1.1% as compared to the year before.
The ratio of operating expenses to average assets was 1.43%, down 0.02 percentage points on 2010.
The financial and economic crisis as well as instability of individual target markets have increased
operating risks. As part of its conservative risk monitoring, the Bank thus increased portfolio coverage
with provisions and impairments. Impairment and provisioning costs for credit and securities portfolio
in 2011 exceeded revenues from elimination of provisions and impairments by EUR 64,200 thousand.
The share of provisions and impairments in classified assets, which includes loans and related
receivables, increased from 6.56% at the end of 2010 to 7.94% at the end of 2011.
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Gorenjska banka, d. d., Kranj
Annual Report 2011
Management Report