Letno poročilo 2007 - UniCredit Banka Slovenija dd

Business ReportFinancial ResultsIn 2007, UniCredit Banka Slovenija d.d.achieved the best results in its history withpre-tax profits of 19.71 million euros. Thismeans an increase of 4.96 million euros, or33.6 %, which is remarkable, consideringthat 2007 was the first business yearfollowing the euro’s introduction. It wasa major challenge, in 2007, to offset theincome losses from the euro’s introduction(international payment fees as well as FXconversions and Central Bank arbitrage) withadditional, preferable non-risk income.In 2007, the net financial and operatingincome rose by 7.42 million euros, or 15.3%, to 56.03 million euros with improvedresults in all business segments. Fortunately,the growth of the income componentsalso was in line with the strategy: risk-freefee and commission income showed theabsolute highest growth (3.94 million euros);additionally, the risk-free deposit marginsgrew in absolute terms by 3.75 million euros,supported by the yield curve development.At the same time, administration costs anddepreciation increased by 3.56 million euros,or 12.5 %, to 32.01 million euros with themajor increase in staff expenses stemmingfrom the increase in number of employees.Improved credit risk management andgeneral sound economic situation led toslightly lower loan impairment and provisionswhich were 4.65 million euros, compared to4.76 million euros in 2006.In line with the principles of valuebasedmanagement, the Bank focusedon a structural improvement of its result.Consequently, the Bank avoided enteringinto transactions below the economicminimum margin and had a special focuson low capital consuming business. Theseefforts were rewarded by achieving an EVA*(calculated based on UniCredit Group’smethodology) of 7.2 million euros. Thereturn on post-tax equity improved from7.67 % in 2006 to 9.77 % in 2007.* EVA (economic value added) is the key measureof UniCredit Banka Slovenija’s value creationcapabilities. It covers the absolute contribution toresults by the entire bank, the business segments orthe subordinated levels, which exceed or fall shortof the cost of capital (excess corporate profit). Thecost of capital, pursuant to the capital asset pricingmodel (CAPM), is the (minimum) return whicha shareholder can expect from UniCredit BankaSlovenija d.d. by virtue of its specific business andrisk profile (as opposed to the fully diversified marketportfolio).10.0%9.5%9.0%8.5%8.0%7.5%7.67 %The Income statementfor 2007The interest net income increased year onyear from 32.90 million euros to 35.75million euros, which is an 8.7 % growth rate.In the customer business the margins on theasset side were further under pressure andEVA generating business was difficult to findin segments such as key accounts.Increased business volumes and goodmargin contributions on the assets sideare deriving from business with retail andAnnual return on post-tax equityYear 2006 Year 20079.77 %mid-market clients. However, the upwardshifts of the euro yield curve supported anincrease of the margins on the liability side.The flatness of the euro yield curve gaveonly limited potential to create a mismatchresult out of yield curve positioning in theAsset/Liability management. However, ALMhad good net interest income contributionsout of the liquidity positions of the bank.The fee and commission net income grewin 2007 by 30 % and reached 17.08 millioneuros (2006: 13.15 million euros).Tailor-made solutions as well as the Bank’sinnovative approaches, resulted in theincrease of attractive products and servicecompetence. Security and custody fees arestrongly above the previous year and in totalamount to 3.61 million euros (2006: 2.57million). Especially the inbound custodybusiness (assets under custody amountedto 1,218 million euros) and the equitybrokerage turned out to be a good sourceof income for the bank. Also the investmentfund fees (assets under management: 63.51million euros) contributed with upfrontand trailer fees. In 2007, the Bank enteredinto a new business field - it originatedtwo bond issues. Loan and lending relatedfees increased from 3.24 million euros in120 2007 Annual Report · UniCredit Bank