For the year ended 31 December 2014, Nova KBM reported a net profit from continuing operations of €35.9 million, according to the first set of unaudited data. The net interest income generated by the Bank last year was €93.6 million; more than 50% higher than the previous year, while the net fee and commission income reached €42.1 million; approximately the same as a year previously. Other non-interest income amounted to €15.5 million in 2014. Operating costs incurred by the Bank in 2014 totalled €74.0 million; a year-on-year decline of just over 10%. Net provisioning charges set aside by the Bank last year were €46.4 million, a considerable reduction from 2013 when these charges reached €703.0 million.
The year-on-year increase in the net interest income was the result of a 49.4% drop in interest expenses, partially offset by a decrease in interest income, which fell by only 6.3% last year. Lower interest expenses were mainly the result of a conversion of state deposits into equity, and the write-off of subordinated liabilities, both of which took place in December 2013. The interest margin, calculated on the average total assets, stood at 2.48%, against 1.44% recorded a year previously.
Net fees and commissions earned by the Bank in 2014 were sufficient to cover 56.9% of its operating costs. The year-on-year decrease of 10% in operating costs was attributable to a decline in material and service costs as well as staff costs, with the latter falling by 11.1%. The reduction in operating costs was in line with the commitments set out in the restructuring programme. During a one-year period, the number of staff working at Nova KBM was reduced by 77, to reach 1,124 at the end of 2014.
As of 31 December 2014, Nova KBM´s total assets amounted to €3,608.2 million, down €301.8 million, or 7.7%, on the 2013 year-end figure. The decrease in business volume was largely the result of Nova KBM repaying a portion of its financial liabilities to its creditor banks, including the central bank. This reduction was partially offset by an increase in deposits from the non-banking sector.
In 2013 and 2014, the Bank took a number of measures to raise the quality of its loan portfolio. After it had transferred most of its bad assets to BAMC, the Bank focused on strengthening the management of the NPLs that remained on its books, in addition to improving its risk management processes. The positive results delivered by the Bank suggest that appropriate measures have been put in place to achieve the key objectives of the restructuring programme: to return both the Bank and the Nova KBM Group to viability and to restore their profitability.
The restructuring of the Nova KBM Group is being carried out in accordance with the commitments given to the European Commission. The Nova KBM Group is gradually concentrating on its core business, banking, while at the same time making efforts to divest and dispose of its non-strategic assets. In addition, work is in progress to partially integrate the operations of PBS into those of Nova KBM, and to restructure the Nova KBM Group´s leasing companies, while the liquidation of KBM Fineko has been completed.
The Nova KBM Group will continue pursuing its restructuring programme in 2015, accomplishing most of the work related to its consolidation by the end of the year. In this regard, Adria Bank is expected to cease its operations and to return its licence for providing banking services, while the liquidation proceedings against KBM Leasing and Gorica Leasing, and the transfer of assets of these two companies to Nova KBM, are planned to be completed during the year.
The total assets of the Nova KBM Group are expected to be €4,308 million at the end of 2015. The reduction in the business volume relative to last year will derive mainly from the repayment of funds to the creditor banks. The net profit delivered by the Nova KBM Group is expected to amount to €28 million. The largest proportion of income earned by the Nova KBM Group in 2015 will come from the net interest income and the net fee and commission income, which are estimated to be €118 million and €59 million, respectively. The interest margin, expressed as a ratio between net interest income and the average total assets, is projected to be 2.72%. The Nova KBM Group will further reduce its operating costs, and plans to bring them down to approximately €103 million in 2015. Net provisioning charges are planned to be €45 million in 2015.
A reduction in total assets is also planned by the parent company of the Nova KBM Group, Nova KBM. While it is estimated that its balance sheet total will be €3,536 million at the end of 2015, the year-on-year reduction in this category will derive mainly from the repayment of funds to the creditor banks, the maturing of certificates of deposits issued by the Bank, and a decline in investments in the equity of subsidiaries and associates.
The net interest income earned by Nova KBM in 2015 is expected to be €93 million. Due to lower average interest rates, the Bank expects to see a decline in both interest income and interest expenses. The interest margin of the Bank is projected to be 2.62% in 2015. According to the financial plan, net fees and commissions earned by the Bank in 2015 will amount to €43 million, approximately the same as in 2014.
Nova KBM will continue taking measures to reduce its operating costs. These costs are expected to be approximately €72 million in 2015, providing a cost-to-income ratio (CIR) of 51.56%. Net provisioning charges incurred by the Bank in 2015 will be about €30 million.
Nova KBM expects to end the financial year of 2015 with a net profit of €35 million.
In accordance with the applicable legislation and good business practice, Nova KBM hereby gives the following notice:
