Annual report 2004 (PDF, 4141 kB) - Unicredit Bank

32 CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprise the following balances with less than 90 days maturity at
balance sheet date:
31 December 2004 31 December 2003
CZK m
CZK m
Cash and balances with central bank (Note 12) 551 438
Treasury bills (Note 13) 160 560
Due from other banks (Note 14) 11 991 16 427
Trading securities (Note 15) 491 284
13 193 17 709
33 USE OF FINANCIAL INSTRUMENTS
(a)
Strategy in using financial instruments
By its nature the Group’s activities are principally related to the use of financial instruments
including derivatives. The Group accepts deposits from customers at both fixed and floating
rates and for various periods and seeks to earn above average interest margins by investing
these funds in high quality assets. The Group seeks to increase these margins by consolidating
short-term funds and lending for longer periods at higher rates whilst maintaining sufficient
liquidity to meet all claims that might fall due.
The Group also seeks to raise its interest margins by obtaining above average margins, net of
provisions, through lending to commercial and retail borrowers with a range of credit
standing. Such exposures involve not just on-balance sheet loans and advances but the Group
also enters into guarantees and other commitments such as acceptances and letters of credit.
The Group also trades in financial instruments where it takes positions in traded and over the
counter instruments including derivatives to take advantage of short-term market movements
in bond markets and in currency and interest rate. The Board places trading limits on the level
of exposure that can be taken in relation to both overnight and intra-day market positions.
With the exception of specific hedging arrangements, foreign exchange and interest rate
exposures associated with these derivatives are normally offset by entering into
counterbalancing positions, thereby controlling the variability in the net cash amounts
required to liquidate market positions.
Fair value hedges
The Group hedges part of its existing interest rate risk resulting from any potential decrease in
the fair value of fixed rate assets using interest rate swaps (Note 16).
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