2016 financial results
The Tatra banka Group ended 2016 with a consolidated profit of EUR 126 million. Loans to customers grew by 5 per cent, and there was a decreasing percentage of non-performing loans. Deposits from customers also grew by almost 3 per cent.
“Thanks to our shared enthusiasm and ceaseless efforts to drive banking forward, we have surpassed our achievements from previous years in many respects. We recorded the highest sales of mortgage and consumer loans in 2016. The bank concluded the largest corporate transaction in the history of Slovakia. Risk costs related to provisions for non-performing loans were at record lows. In addition, the bank received one-off income of EUR 30 million from a transaction with VISA, and as a result we posted the second best results in the history of Tatra banka. I would like to take this opportunity to emphasize that this success was achieved thanks to the performance and efficiency of both our brands – Tatra banka and Raiffeisen Bank,” said Michal Liday, CEO and Chairman of the Management Board of Tatra banka.
“The high standard of Tatra banka services is confirmed by awards received from a number of renowned Slovak and international institutions. The British financial magazine, Euromoney, awarded Tatra banka the Best Bank in Slovakia title for the twelfth time. Tatra banka also won the title of the best bank from the magazines EMEA Finance and The Banker. My colleagues in private banking confirmed their leading position in Slovakia by winning the title of Best Private Bank from The Banker and Global Finance. Global Finance magazine evaluated our online banking as the best in Slovakia for the fourteenth time. The magazine also recognized our website design and our social media strategy as the best in the CEE region,” added CEO of Tatra banka.
Key financial ratios
The consolidated after-tax profit of the Tatra banka Group increased 4.5 per cent year-on-year, from EUR 120.6 million in 2015 to EUR 126.0 million. The higher profit was largely due to lower provisions for loans to customers and one-off income related to the purchase of shares of Visa Europe Ltd. by Visa Inc. Tatra banka earned income of EUR 30.3 million on the transaction, of which EUR 24.3 million was in cash and EUR 6.0 million was in shares. A decrease in net fee and commission income is primarily due to legislative changes. A decrease in operating income and growth in operating expenses led to an increase in the cost-income ratio to 60.3 per cent from last year's 52.8 per cent. At the end of December 2016, Moody’s rated Tatra banka Baa1, and improved its outlook to positive.
Development of income and expenses
Despite significant growth in the bank’s loan portfolio, net interest income decreased due to low interest rates, the highly-competitive environment and legislative changes. Since 21 March 2016, banks have been allowed to charge an early repayment charge on mortgage loans capped at 1 per cent of the amount repaid early, which is below costs. This measure caused significant changes on the market and transfers of customers between banks. This change was one of the causes of a decrease in interest rates on mortgage loans, and average interest rates in Slovakia are amongst the lowest in the EU. Most Slovak bonds generate negative income for banks and banks often deposit available liquidity with the National Bank of Slovakia at a negative interest rate (–0.4 per cent p.a.). The decrease in interest expense on term deposits and mortgage bonds was not sufficient to compensate for the lack of interest income, which was reflected in a 5.1 per cent drop in net interest income to EUR 274.6 million.
Net fee and commission income was down 9.3 per cent year-on-year to EUR 119.4 million, largely due to legislative changes. Changes related, for example, to the introduction of a cap on the early mortgage repayment charge and a cap on interchange fees on payment cards in December 2015.
Net trading results decreased slightly by 1.8 per cent to EUR 22.8 million.
General administrative expenses increased slightly year-on-year by 6.6 per cent to EUR 249.2 million, despite further significant increase in the bank's business.
Development of assets
The consolidated assets of the Tatra banka Group increased 1.4 per cent to EUR 11.37 billion. Loans to customers grew 5.0 per cent to a total of EUR 8.55 billion and were a significant contributor to this growth. The share of non-performing loans in the total portfolio decreased from 4.2 per cent to 3.5 per cent, which is considerably better than the figures for the rest of the banking sector and confirms the very good quality of the bank’s loan portfolio. The growth in loans to customers was mainly due to housing loans. The value of government securities and funds with the central bank decreased.
Development of liabilities and equity
Deposits from customers increased to EUR 8.97 billion. This growth was primarily in current accounts in all client segments. There was a decrease in term deposits and loans received from other banks. The consolidated ratio of loans to deposits was 95.4 per cent as of 31 December 2016. As of 31 December 2016, the consolidated capital adequacy ratio was 19.72 per cent, which is substantially more than required by the National Bank of Slovakia and the European Central Bank.
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