financial stability report - Banka Qendrore e Republikës së Kosovës

Number 3
Financial Stability Report
of the previous year. Cost to income ratio reached 58.1 percent, 3 percentage points higher than in
June 2011. However, consolidated net profit increased. In June 2012 the profit amounted to euro 701
million, 14 percent higher than in June 2011. The CAR increased as well, reaching at 14.8 percent
compared with 13.5 percent in June 2011. In June of 2012, Raiffeisen Bank in Kosovo constituted 0.4
percent of total assets of Raiffeisen Bank International.
NLB Group (Slovenia)
The economic decline and the instability of the financial markets in Europe in 2011 reflected
negatively on the financial performance of NLB Group, which recorded a decline in most of the
financial indicators for the period. Total assets of the group marked a decline of 8.1 percent, dropping
at euro 16.4 billion. Loans to non-financial sector in 2011 decreased by 5.7 percent (total amount of
euro 12.3 billion in December 2011) as a result of the more conservative credit policy that NLB Group
implemented in response to the crisis, whereas deposits declined by 1.8 percent (total amount of euro
10.2 billion in december 2011). NLB Group managed to increase operating efficiency in 2011.
Operating income decreased by 0.5 percent compared with the previous year, while expenditures
marked a decrease of 3.3 percent. Consequently, the cost to income ratio fell to 59.8 percent, which
represents a decrease of 1.75 pp in comparison to 2010 (Figure 3). Despite of the increased operating
efficiency, consolidated net profit declined by 18 percent compared with the previous year, dropping to
euro -239 million (-202 million in 2010). The profit deterioration is mainly attributed to the
deterioration of loan portfolio quality, which led to increased provisions for loan losses. Return on
Equity (ROE) ratio also dropped to -22.2 percent, compared to -17.5 percent in 2010 (Figure 4). As a
result of the Bank of Slovenia requirements for improvement in CAR, NLB Group increased its
capital in 2011, thereby leading to the increase in CAR to 11.1 percent compared to 10.2 percent
recorded in 2010 (Figure 5).
The decline of profitability indicators
lead to the downgrade of NLB Group’s
credit rating (Fitch Agency) to BBB,
compared to the A credit rating it had
in 2010. In the first half of 2012, NLB
Group continued with the declining
asset trend, where the total assets
amounted to euro 16.3 billion in June
2012, marking a 6.5 percent decline
compared to June 2011. However, the
cost to income ratio marked a
significant improvement, dropping to
45 percent from 59.8 percent in June
2010. Consolidated net profit
increased significantly over this
Figure 5. Capital Adequacy Ratio indicator, in
percent
18%
16%
14%
12%
10%
8%
2008 2009 2010 2011
ProCredit Holding Raiffeisen International NLB Group
Source: Annual Reports of appropriate banking groups
period. From euro 0.9 milion in June 2011, the consolidated net profit increased to euro 32.3 million
by June 2012. The profit improvement was mainly due to a one-off positive effect of the purchase of
subordintaed capital instruments. At the end of June 2012, the ROE improved to 6.5 percent from 0.2
percent recorded in June 2011. The CAR of the NLB group remained unchanged, standing at 12.1. At
the end of June 2012, NLB Bank in Kosovo comprised 2.4 percent of NLB Group’s total assets.
Lending activity in most of the developed countries continues to remain at low levels,
especially in countries that are facing budget crisis. This is because budget crisis has
increased the uncertainty of banks to issue loans.
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