AIK Banka AD (AIKB)’s 2012 pretax profit fell 28 percent below the Serbian bank’s own target as the Balkan nation’s recession ate into the financial industry, a board member said before official publication of earnings.
The company, which is 20 percent-owned by Greece’s Piraeus Bank SA (TPEIR) and accounts for a fifth of the main stock market’s weighting, had a 4 billion-dinar ($46.4 million) pretax profit in 2012, up from 3.3 billion dinars in 2011, board member Djordje Djukic said in a phone interview today in Belgrade.
The earlier projection “was ambitiously set,” said Djukic. “We have sacrificed profit for greater liquidity in a very difficult business environment and a strong capital base protects us from the deteriorating economic situation.”
Serb industries are struggling to emerge from a recession partly blamed on the sovereign debt crisis in the European Union, which Serbia wants to eventually join. The economy shrank 1.5 percent in the fourth quarter from a year earlier after a 2.5 percent drop in the previous three-month period.
AIK Banka was the eighth-biggest in the former Yugoslav republic by assets and the fifth-biggest by profit at the end of September, according to central bank data. It has a 20 percent weighting in the Belgrade Stock Exchange’s BELEX 15 index.
To lessen the effect of non-performing loans, which stood at 29 percent of total loans last year and are the industry’s main fallout from the debt crisis, the company transferred “a great deal of profit to reserves,” Djukic said.
To protect itself, the bank raised its capital adequacy ratio to 34 percent from 27 percent, increased loan-loss provisions to 33.8 billion dinars from 30.9 billion dinars over the past year and kept its cost-to-income ratio at 26.6 percent, or 12 percentage points below the average for the industry, Djukic said.
Its return on assets totaled 2.6 percent, compared with an average of 1 percent for the industry, according to central bank, while the return on equity rose to 7.98 percent from 6.34 percent.
Shares traded 0.43 percent lower at 1,620 dinars at 11:55 a.m. in Belgrade, according to data compiled by Bloomberg. The share price advance of 3.4 percent for the year so far is lagging the gain in the entire BELEX15, which grew 9.3 percent.
AIK Banka will consider asking the European Bank for Reconstruction and Development for a credit line “so we can offer cheaper loans to corporate clients,” who account for 35 percent of the total credit portfolio, and the largest public companies, including power monopoly Elektroprivreda Srbije, which take up another 7.5 percent of the portfolio, Djukic said.
The bank will continue with “organic growth, rather than acquisitions, while profit may increase with a sale or lease of collateralized assets if the dinar weakens in 2013 to reflect the difference between inflation rates in Serbia and the euro area, Djukic said.
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