Komercijalna banka Beograd : Despite Impairment of the Loan Portfolio, Komercijalna Banka is Highly Capitalized and Stable

What affected the result of Komercijalna Banka in the first six month of 2016, apart from the policy of minimizing risk in operation and the goals the Bank has set to protect its operation from pronounced credit risk and ensure safe operation and stable growth in the future, was also poor management of the Bank's loan portfolio by the previous managers, particularly in the period between 2013 and 2015. This was best seen in the absence of NPL strategy.

Given these facts, after a new credit risk analysis, the Bank had to additionally impair its NPL portfolio in June this year, which resulted in increase in expenses for impairment of financial assets and credit risk bearing off-balance-sheet items, and posted total net expenses for this in the amount of RSD 6.25 billion.

Due to this additional impairment of balance-sheet assets and provisions for potential losses, which resulted primarily from a series of poor business decisions made by the previous management, who were replaced as a result of that, Komercijalna Banka recorded an operating loss of EUR 2.65 bn in the period between 1 January and 30 June 2016.

Despite this loss, thanks to the firm commitment of the new management and the measures undertaken to stabilize the business results, Komercijalna Banka is a highly capitalized and stable bank with capital adequacy ratio of 23.04 %, which is significantly above the regulatory limit set by the NBS of 12%.

This data is the key indicator of the Bank's stability and safety and the additional protection against credit risk in the first six month this year is a measure for eliminating any adverse consequences on the Bank's operation in the future.

Komercijalna Banka currently has reserves from profit in the amount of RSD 18.8 bn, which is RSD 4.9bn higher than the total calculated reserves according to the regulations of the National Bank of Serbia.

After covering the loss from the first six months this year, the Bank now has solid grounds for achieving the targets set in the Business Plan for the period 2016-2018. As a result of the measures that the new management has taken, the Bank has now met preconditions for safe and stable operation, with the credit risk reduced to acceptable level, as well as conditions for maintaining the capital adequacy ratio substantially above the set minimum i.e. within the range of 18% to 20% and stable dinar and foreign currency liquidity.

This year the Bank has met all the operating ratios set by the Law on Banks and has fulfilled all the obligations, which is a reliable indicator of stable and safe operation.

Drawing on its reputation of a safe and stable bank, Komercijalna Banka has managed to additionally raise retail FX savings in the observed period by EUR 19.9 million or 1.3% and has reached an amount of EUR 1.59bn euros of FX savings.

Depositor's trust has enabled Komercijalna Banka to preserve its leading position in the Serbian banking sector in terms of the volume of collected FX savings, image and recognition.