OREANDA-NEWS. Additions made: ABLV Bank, AS Interim condensed consolidated annual report for the year ended 31 December 2012 in Latvian and English (in LVL and EUR) was added, as well as Statement of Corporate Governance in English was included.

The year 2012 was marked by success and growth of ABLV Bank, AS and the group. The business volume continued to increase in all major lines of business, and the bank and its affiliate companies ended the year with great results.

Relatively favourable economic situation in Latvia furthered establishment of regional financial centre in our country, alongside development of foreign customer service, investment and asset management, and international trade finance. Export of financial services is an important part of Latvian national economy, likewise other exportable sectors – woodworking, pharmaceutical industry, metalworking, and logistics. There are new jobs created in this segment and related services developed. Deposits of foreign customers ensure additional financing opportunities for business development in Latvia. Now the total direct effect of exporting financial services on GDP amounts to almost 1%. Given overall development in the financial sector, ABLV Bank strengthened its position of the largest private bank in Latvia and major market player in the field of export of financial services. There were 59 jobs created within the group during the year, most of which in Latvia. As at the end of 2012, there were 608 people working at ABLV Group. The bank expanded geography of its operations, gradually becoming a notable financial market player internationally. An important contribution to this was ensured by establishing subsidiary bank in Luxembourg and obtaining the licence for banking operations.

Audited financial indicators as at 31 December 2012

ABLV Bank, AS gained profit equal to LVL 16.5 million (EUR 23.4 million). The bank’s profit for 2012 is LVL 2.6 million (EUR 3.8 million) less than that for 2011, because considerable part of the profit in 2011 was constituted by extraordinary income generated by sale of securities.

Due to implementation of business strategy and all planned measures, the bank improved financial indicators even more and strengthened its position in Latvian financial sector in 2012.

In 2012, the bank’s operating income before allowances for credit losses amounted to LVL 66.1 million (EUR 94.0 million).

During 2012, the amount of deposits with the bank has increased – by 16.6% to reach LVL 1.87 billion (EUR 2.66 billion).

As at 31 December 2012, the amount of the bank’s assets equalled LVL 2.14 billion (EUR 3.04 billion); ABLV Bank, AS ranked fourth among commercial banks operating in Latvia in terms of the amount of assets.

The bank’s loan portfolio amounted to LVL 503.6 million, i.e., EUR 716.6 million (as at 31 December 2011, it was equal to LVL 470.6 million, i.e., EUR 669.6 million). As at 31 December 2012, the loan portfolio constituted 23.5% of the bank’s total assets. The loan portfolio quality continued to improve. In 2012, allowances made for credit losses amounted to LVL 12.0 million, i.e., EUR 17.1 million (in 2011 – LVL 16.5 million, i.e., EUR 23.5 million).

The bank’s capital and reserves amounted to LVL 106.8 million, i.e., EUR 152.0 million (LVL 90.2 million, i.e., EUR 128.3 million, as at 31 December 2011).

As at 31 December 2012, the bank’s capital adequacy ratio was 16.04%, whereas liquidity equalled 62.51%.

ROE reached 16.64%, and ROA – 0.82%, as at the end of the year.

Among products and services offered by the bank, the payment card segment was especially successful. The number of issued premium credit cards increased considerably. The bank’s revenues under payment cards grew by 39.5%, reaching LVL 5.6 million EUR 8.0 million).

Other lines of business were improved as well. Starting from June 2012, our customers can obtain financing secured not just by securities, but also by balances of precious metals accounts.

Our open-end mutual bond funds also demonstrated great results last year. Currently, we offer 4 bond funds and 2 stock funds. The latest one is bond fund in RUB, which was made available to the customers from 17 January 2012.

As at the end of 2012, ABLV Asset Management, IPAS total assets under management amounted to LVL 38.2 million (EUR 54.4 million), of which LVL 35.9 million (EUR 51.1 million) were customers’ investments in mutual funds managed by the company and LVL 2.3 million (EUR 3.3 million) were customers’ funds invested in individual investment programmes. The said growth was also facilitated by increasing number of customers. More and more our customers wish to diversify their investment portfolios by acquiring shares of ABLV mutual funds.

In 2012, liquidation process of bankrupt company MF Global UK was performed. MF Global UK was one of the custodians of our customers’ securities and cooperation partner in securities trading. Taking care of our customers’ assets, we made a significant decision that will facilitate development of the bank’s investment business: the bank assumed the customers’–securities holders’ risks and possible losses related to their assets with MF Global UK, as well as covered administrative expenses under getting the funds and securities back from MF Global UK. The bank used its own funds to acquire securities worth LVL 7.4 million (EUR 10.5 million) to substitute the customers’ securities held with MF Global UK. The bank’s direct expenses and allowances under assuming the customers’ risk equalled LVL 1.5 million (EUR 2.1 million) in the reporting period. Therefore, the bank’s profit indicator for the first half of the year was decreased, but this paid off by growing customers’ loyalty and investment business development already in the second half of the year. This was also a valuable experience, which will be useful in future.

Due to this, 2012 was a record year for the bank’s affiliate company ABLV Capital Markets, IBAS. Business of ABLV Capital Markets, IBAS has been growing rapidly, and the customers’ assets increased by 67.0%, amounting to historical maximum of LVL 425.5 million (EUR 605.4 million), thus allowing the company to end 2012 with profit of LVL 1.5 million (EUR 2.1 million).

In 2012, the bank continued gradual replacement of long-term deposits with bonds, which was initiated at the end of 2011. We have already performed 9 public bond issues earlier. Under the First Bond Offer Programme, there were 3 bond issues performed in 2011, their face value amounting to EUR 25 million and USD 30 million. Whereas under the Second Bond Offer Programme, there were 6 issues performed in 2012, their face value amounting to EUR 20 million and USD 145 million. The issued bonds have been included in NASDAQ OMX Riga list of debt securities.

The last year was also important for our real estate development and trading group. The real estate line of business was launched to ensure completion, maintenance, and sale of taken over properties that were used as collateral under loans before crisis. In 2012, the real estate line of business acquired new brand – Pillar. The number of properties sold in 2012 has doubled compared with 2011, amounting to 254 real estate units. 125 of those were apartments in existing homes, but 101 – in new projects. The total value of properties sold by Pillar in 2012 was LVL 11.0 million (EUR 15.7 million).

In the reporting period, the Luxembourg Ministry of Finance issued banking licence to ABLV Bank Luxembourg, S.A. ABLV Bank Luxembourg, S.A. is an independent company, the founder and sole shareholder of which is ABLV Bank, AS. ABLV Bank, AS invested EUR 20.0 million in capital of Luxembourg subsidiary bank.

The subsidiary bank in Luxembourg was established in order to develop the existing customer base and strengthen their loyalty, providing larger range of investment and fiduciary services, as well as to attract new customers. ABLV Bank is the first bank from the Baltic countries to establish subsidiary bank in Luxembourg.

“We are satisfied both with development of our bank and general trends in Latvian financial sector. In 2013 we expect the bank and affiliate companies rendering investment services to grow faster than on average within the sector, retaining leading positions in the field of export of financial services, as well as the status of the largest private bank. We will continue working on increasing the number of active customers and services used by them, and we are going to implement some new investment products. Therefore we plan operating income of ABLV Group to rise by at least 19% in 2013. We will considerably increase the amount of granted commercial loans, mainly focusing on Latvian and Russian markets. In 2013, we will substantially enhance investments in Latvian government securities. To ensure business growth in 2013, we plan considerable staff increase – there will be more than 90 jobs created,” said the bank’s Chief Executive Officer, CEO, Ernests Bernis, outlining plans of ABLV Group for this year.