Serbian Banking & Financial Sector 2010 by CorD Magazine

The Guide

Serbian Banking & Financial Sector 2010

Issue No. 6 / Volume 6 / June 2010

Banking & Financial Sector in Serbia 2010

Guide to the

FOREWORD 2009 - A Year of Challenge and Risk by Mira Erić, Vice – Governor of the National Bank of Serbia

A STRONG VISION Mr Neoclis Neocleous, Piraeus Bank Beograd, Chairman of the Executive Board

16 18

EDITOR IN CHIEF Tatjana Ostojić, t.ostojic@cma.rs ASSISTANT EDITORS Philomena O’Brien, p.obrien@aim.rs Vesna Milinković, v.milinkovic@aim.rs

CONTENTS 26 INVESTMENT FUNDS A Challenge for Real

Players

TOP THREATS TO BANKS Survey

(IN) FLEXIBLE BUDGET Bogdan Lissovolik, IMF Resident Representative in Serbia

ART DIRECTOR Tamara Ivljanin, t.ivljanin@cma.rs ART DIRECTOR’S ASSISTANT Ilija Petrović, i.petrovic@aim.rs EDITORIAL CONTRIBUTORS Ana Stojanović, Marica Vuković, Danijela Jovanović PHOTOS Slobodan Jotić, Darko Cvetanović TRANSLATORS Snežana Bjelotomić ADVERTISING SALES Vesna Vukajlović, v.vukajlovic@aim.rs; Marija Savić, m.savic@aim.rs; S.Terzić, s.terzic@aim.rs

COMMENT Investment Funds Surviving the Crisis

BANKING SYSTEM RESISTS THE CRISIS Slobodan Ilić, State Secretary in the Ministry of Finance

PENSION FUNDS Safety Before Profit

CRISIS REDUCES PROFIT Banking Sector Operations in 2009

GENERAL MANAGER Ivan Novčić, i.novcic@cma.rs

SAFETY OVER RISK GfK Survey

FINANCIAL DIRECTOR Ana Besedić, a.besedic@cma.rs EDITORIAL MANAGER Tanja Banković, t.bankovic@cma.rs PRINTING Rotografika d.o.o. Segedinski put 72, Subotica

Guide to the Banking & Financial Sector in Serbia 2010 published by: alliance international media in Kneginje Zorke 11b, 11000 Belgrade, Serbia Phone: +(381 11) 308 99 77, 308 99 88 Fascimile: +(381 11) 244 81 27 office@allianceinternationalmedia.com www.allianceinternationalmedia.com ISSN no: 1451-7833 All rights reserved alliance international media 2010

LEASING Higher Profit Despite the Crisis

STRONG CAPITAL ADEQUANCY AND SATISFACTORY ASSET QUALITY Piraeus Bank

4 Guide to the Banking & Financial Sector in Serbia 2010

INSURANCE The Struggle Continues in 2010

PRIVATIZATION LEADS TO MARKET LIBERALIZATION Nebojša Divljan, Management Board Chairman and CEO of Delta Generali Osiguranje

BANK’S CORE DATA

FOREWORD

2009 - a Year of Challenge and Risk BY MIRA ERIĆ, VICE-GOVERNOR OF THE NATIONAL BANK OF SERBIA

Last year was riddled with challenges and risks which threatened to jeopardize macro-economic and financial stability. Our banking sector was more than ready to face the global economic downturn and its eventual spill-over into our country in the Q4 of 2008. It remained highly capitalized, with adequate reserves and high solvency. Once the first spill-over indicators were detected, the National Bank of Serbia embarked on a cautious and continuous course of action by relaxing the regulative framework of the monetary and prudential policy, with the aim of stimulating credit activity and increasing liquidity in order to maintain financial stability. The central bank is continuing these actions to this day. We have concluded a stand-by arrangement with the IMF and reached an agreement with the ten biggest banks in Serbia for them to maintain their overall exposure towards legal entities in Serbia by the end of 2010. All the aforementioned activities are geared toward cushioning the effects of the economic crisis, this, in addition to the government’s involvement with insuring bank deposits and providing loan subsidies, has contributed to the preservation of macro-economic and financial stability. To illustrate this it is worth mentioning that the results of the stress tests conducted by the National Bank of Serbia and FSAP mission have shown that our banking sector will remain highly resistant even in the worst-case scenario. Although, in the year of crisis – 2009 - Standard & Poor’s confirmed Serbia’s credit rating, the agency did up the country’s outlook (from “negative” to “stable”). At the beginning of this year, Dun & Bradstreet gave Serbia a better credit rating. In 2009, the Serbian banking sector was profitable, highly solvent and liquid, with substantial accumulated reserves which can be used to cover possible losses. However, bearing in mind the high level of so-called “euroization”, banks behaving in a rather cyclical manner while leaning on state credit subsidies, as well as reputation risk which stems from banks which have headquarters abroad and the fact that reputation risk is closely linked to state aid, accompanying with certain banks going through restructuring, the National Bank of Serbia has decided to direct its activities towards further “de-euroization” and stimulating credit activity (i.e. granting loans primarily in dinars). The bank is also dedicated to maintaining regular communication with the relevant institutions in countries in which the banks that operate in Serbia have their headquarters. The National Bank of Serbia will continue working towards improving transparency, fair business practices of financial institutions, as well as education and protection of these institutions’ clients. All relevant data, projections and stress tests, which are conducted on a regular basis, show that banks will maintain their high solvency and liquidity in the coming period. They also demonstrate that the banking sector has enough strength to resist strong shocks while remaining safe and stable.

Guide to the Banking & Financial Sector in Serbia 2010 7

INTERVIEW SLOBODAN ILIĆ, STATE SECRETARY IN THE MINISTRY OF FINANCE

Banking System

By carefully analyzing the economy’s demands, the Serbian Government came to the conclusion that one of its priorities should be to consider forming the Development Bank of Serbia By Tatjana OSTOJIĆ

he long-awaited Law on Fiscal Responsibility is expected to bring order to the Serbian public ﬁnances and to help the government with better expenditure planning.

Higher public spending is one of the main reasons why the Law on Fiscal Responsibility has been drafted. This is also one of the topics that we discussed with Slobodan Ilić, the State Secretary in the Ministry of Finance.

THE LAW ON PUBLIC PROPERTY

he Law on Public Property, affectionately called ’the little Constitution’ by law experts, is one of the few very important laws that will finally round off the property issues in our country. It is expected to be adopted in 2010. The law will create a basis for faster local economic development, corporatization of public (and utility) companies, public-private partnerships (PPP), and advancing the local capital market via issuing municipal bonds (where the property of local authorities can be used as a collateral). By doing this, Serbia will be taking another step forward on our road toward EU membership. 8 Guide to the Banking & Financial Sector in Serbia 2010

There has been a lot of talk about limiting public spending, and according to the Finance Minister, Diana Dragutinović, the Law on Fiscal Responsibility is supposed to be finished by the end of this year? Serbia simply needs to cut back on its public spending and borrowing which is why the Law on Fiscal Responsibility has been drafted. The law will impose limitations on spending, both at the state level and by individual budget beneficiaries, on one side, as well as restrict planned and warranted annual borrowing. It is the government’s intention to have a balanced budget by 2015, that is. to counterbalance revenue and expenditure by cutting the budget deficit by 0.75% of the national GDP each year. Of course, there are education and health reforms, and everything that will be implemented should result in the state not spending more than it’s earning. Is the adoption of the so-called ’anticrisis laws’ delayed? Contrary to public opinion, these laws are not a response to the Greek crisis possibly spilling over into Serbia. The set of financial laws is just a timely preparation and the state’s response to the system crisis or crises that could possibly emerge in Serbia. Such a response by the state actually entails carefully monitoring existing tendencies in many countries, and is a result of the cause and effect analyses of the global economic downturn. Countries are preparing for the possibility of a new crisis emerging and are devising a quick response to such a crisis. In that respect, we are neither late nor too ahead of time with our reactions. We are just trying to incorporate, in the best possible manner, the experiences of the international financial institutions and other countries in the set of laws that we have been preparing.

Resists the Crisis As you have just mentioned, one of the issues that is on everybody’s lips is the Greek crisis and the possibility of it spilling over into Serbia, especially now when we have quite a few Greek banks operating here. Our banking system is being carefully monitored by the relevant regulatory institutions, primarily the National Bank of Serbia, and has sustained the impact of the global economic crisis. Not a dinar of state money was spent on saving a bank from collapsing. At the same time, Greek banks in Serbia, which have the status of domestic residents, are an integral part of our banking system and, based on the relevant indicators, they are well capitalized, liquid and are meeting their clients’ needs in line with regulations. Bearing in mind the continuous supervision of banks in Serbia, including the ones that are owned by Greek entities, the National Bank of Serbia is in a situation to aptly detect problems and carry out necessary activities in order to protect banking sector and bank clients. Our citizens and companies that are clients of Greek banks in Serbia can feel safe when it comes to their deposits and other business that they have with these banks. The Greek crisis will temporarily affect future investments by Greek companies in Serbia and even the pace at which Serbia will join the EU, since every crisis in an EU state means that the Union has to turn more inwards in order to resolve the crisis, that is, to pay more attention to the member states than candidate countries. This aspect is quite important since it could slow down our country’s development. There have been frequent discussions about a great need for the country to have a development bank. By carefully analyzing the economy’s

Serbia simply needs to cut back on its public spending and borrowing which is why the Law on Fiscal Responsibility has been drafted demands, the Serbian Government came to the conclusion that one of its priorities should be to consider forming the Development Bank of Serbia. In that respect and together with German KfW, we are preparing a feasibility study which will provide answers to all important questions pertaining to realization of this idea. What the Serbian government wants to have, before the year ends, is clear answers to questions like – is the Development Bank of Serbia going to be established, when will that happen, what will it do and where is the initial capital going to come from? At this moment, we can say with certainty that Srpska Banka is not going to be transformed into the Development Bank, as many have speculated. Are you satisﬁed with the operations of the voluntary pension funds and life insurance providers in Serbia? What needs to be changed in Serbia is the people’s attitude towards their own future, particularly when the time comes for them to retire. Unlike the previous period where the only way to have

-a peaceful financial future was to have large savings in the bank (which were often devalued due to occasional economic troubles) or have real estate, today we have a contemporary environment where, in addition to having a chance to buy a life insurance policy, you can also become a member of a voluntary pension fund. Unfortunately, despite great efforts invested by the state in devising a legal framework and creating an atmosphere where relevant financial institutions can freely operate, as well as having appropriate tax incentives, the aforementioned savings format is not progressing as well as expected. There are many reasons for this. We can easily advance in this area bearing in mind Serbia’s potential which is better than in other countries. What we need to do is to have a synchronized action involving all market players, that is, the state, financial institutions and citizens through a combination of activities like continuous education of Serbian citizens, media appearances, a better presentation of modern financial products and state incentives.

THE LAW ON DE-NATIONALIZATION

ne of the most important laws from our EU accession agenda is the Law on Denationalization which is probably going to be adopted in 2010. By taking into consideration experiences of countries which have already embarked on this process, we have prepared a draft law which stipulates two denationalization concepts in Serbia. Before the government makes a final decision on this matter and before the draft law is publicly released, the Constitutional Court needs to rule whether the law is in line with the Constitution, so whether churches and religious communities will be getting their property back. This is an ongoing procedure. Guide to the Banking & Financial Sector in Serbia 2010 9

OVERVIEW BANKING SECTOR OPERATIONS IN 2009

Crisis Reduces Proﬁt By Marica VUKOVIĆ

Last year, a total of 34 banks were operational in the Serbian market, with their pre-tax cumulative proﬁt amounting to 20 billion dinars. This is a 42.3% decline compared to 2008, when banks posted 34.7 billion dinars proﬁt, according to the National Bank of Serbia. 10 Guide to the Banking & Financial Sector in Serbia 2010

he banking sector in Serbia successfully fought the global financial crisis and even managed to generate profit last year. The key to such success lies in winning people’s trust, which was unaffected due to the fact that bank clients could freely withdraw their deposited money at any given moment. In the first half of the year, bank clients re-deposited almost all the savings they had withdrawn in late 2008 - close to a billion euro - while the state provided loan incentives in order to stimulate production and increase the sale of domestically produced goods. Unlike the economy, the banks had a surplus of liquid funds, but there was not a sufficient number of clients to apply for loans. Last year, a total of 34 banks were operational in the Serbian market, with their pre-tax cumulative profit amounting to 20 billion dinars. This is a 42.3% decline compared to 2008, when banks posted 34.7 billion dinar profit, according to the National Bank of Serbia. Fourteen banks posted a loss, with these 14 banks making up 17% of the total balance of assets of the Serbian banking sector. In 2009, the following banks posted the biggest profit – Banca Intesa, AIK Banka, UniCredit Bank, Raiffeisen Bank, Eurobank EFG and Komercijalna Banka, which all had a two billion dinar profit. OTP Bank, Alpha Bank, Credit Agriclole and Privredna Banka Pančevo all posted over a billion dinars worth of losses. The net profit from interest rates stood at 100 billion dinars, which is a 4.8% jump compared to last year. The revenue from bank fees and commissions went up by 5.9% and stood at 31.6 billion dinars. Operational expenses amounted to 93.9 bil-

lion dinars, which is a 7.7% growth. The main reason for banks having a reduced profit in 2009 is found in credit losses which went up by 10 billion dinars, or 38.4% compared to 2008. These losses amounted to a total of 36.1 billion, while the year before they were 26.1 billion dinars. Positive net revenue from exchange rate differences and changes in asset and liabilities to the value of 14.5 billion euro prevented the banks’ profit from declining further in 2009. Last year, banks mostly maintained their market positions, with a single bank – Banca Intesa – having a 10% market share, while 17 banks had a market share of less than 2%. The banking sector’s total balance of assets, at the end of last year, stood at 2,160.40 billion dinars and it was higher by 383.5 billion (or 21.6%) in relation to 2008. Most of the assets, ie, 55.5%, pertained to granted loans and deposits, followed by irrevocable loans and deposits (20.3%), while cash participated with 12%. Securities made 4.2%, which is 362% higher than at the beginning of the year since banks were quite active in purchasing state bonds issued for the purpose of covering the budget deficit, which is a novelty compared to 2008. In 2009, the total capital of banks stood at 447.5 billion dinars, which is 27.6 billion or 66% higher than in late 2008. The total worth of granted loans was 1,278.30 billion dinars, which is an increase of 250 billion dinars or 24.4% over a twelve month period. Most loans were granted in Q4. Loans to the state recorded the biggest growth rate, i.e. 38.2%, with their total worth of 106.7 billion dinars, which was 8.4% of total granted loans. At the end of 2009, companies, entrepreneurs and citizens owed a total of 1,400 billion dinars on the account of granted loans. Out of this amount, businesses owed 959 billion, entrepreneurs 43 billion and citizens 397 billion dinars. The number of granted retail loans went up by 5.2% mostly thanks to mortgage loans, while the number of all granted loans went up by 4.9%. The number of loans granted to non-profit institutions and other financial organizations grew by 5.7%.

Last year, banks mostly maintained their market positions, with a single bank – Banca Intesa – having a 10% market share, while 17 banks had a market share of less than 2% Corporate loans maintained the highest share in overall granted loans at 58.7%, followed by retail loans at 30.9% and public sector loans at 9.2%. Following the state providing 5.5 billion dinars worth of subsidies, banks granted a total of 1.1 billion euro worth of loans in 2009. A total of 936.1 billion euro worth of liquidity loans were granted to businesses, and 2.4 million euro worth of investment loans. The value of total granted consumer loans (spent on purchasing domestically produced goods) stood at 169.4 million euro. In 2010, a total of 3.5 billion dinars worth of subsidies is being provided based on which banks can grant 90 billion dinars worth of loans. In the Q4 of 2009, the banking sector’s total deposits amounted to 1,301.2 billion dinars, which, compared to the same period in 2008, is an increase of 276.5 billion dinars or 27%. Retail savings recorded the biggest growth of 88.9 billion dinars or 93%, and the reason for this is people redepositing their money which they with-

drew out of fear that the global financial crisis would lead to Serbian banks going bankrupt, primarily those owned by foreign banks. The deposit structure shows that citizens, as well as businesses, still have more trust in foreign currency, primarily in the euro, as 75.4% of all deposits are in foreign currency and the rest is in dinars. Hence, banks still have limited options when it comes to granting dinar loans, regardless of the state providing subsidies solely for dinar loans as of 2010. Both retail and corporate loans are still quite expensive, with deposits at sight having the biggest share at 45.8% followed by short term deposits (49.9%) and long term deposits (4.3%). At the end of 2009, overall retail savings stood at around 6.2 billion euro, out of which 92% was in foreign currency. In the last decade, savings deposits in Serbian banks went up by 45 times, and, if we denominate that in dinars, they went up by 577 times which makes Serbia one of the countries with the biggest retail savings growth in the world. Savings continued to grow in 2010 too, regardless of civil servants salaries and pensions not going up since late 2008, while salaries in the Serbian private sector continue to stagnate. At the end of December, domestic banks took a total of 210.5 billion worth of foreign loans, with 39% of them having a five-year-repayment period. Out of 34 banks, 26 of them have foreign entities as majority owners, four are owned by domestic entities, and 10 are still stateowned. Compared to 2008, only Metals Banka from Novi Sad changed its ownership structure, from private to state, and became the first Development Bank of Vojvodina.

LOANS

inar loans, subsidized by the state, are currently the cheapest loans on the Serbian market, with the annual interest rate of up to 8%, but the value of these loans is limited. The interest rates on other commercial loans go up to 30% and these interest rates probably won’t go down in 2010 since, even when the crisis subsides, Serbian banks are not going to be able to extend favourable loans abroad due to a high risk premium, i.e. the country’s low credit rating. On the other hand, the Euro Interbank Offered Rate (EURIBOR) is expected to go up after the crisis - this is the basis for calculating interest rates on loans that have a foreign currency clause. This will mean that the costs of retail and corporate loans will not go down. Guide to the Banking & Financial Sector in Serbia 2010 11

OVERVIEW The Serbian government did plan to merge several banks of which the state is the majority owner, i.e. for Belgradebased bank, Srpska Banka and Privredna Banka Pančevo to merge with Poštanska Štedionica, but these plans were abandoned. Also, the state gave up on the idea of turning Srpska Banka into a development bank. In 2010, Credy Banka from Kragujevac was bought by Nova Kreditna Banka from Maribor, Slovenia. This year, the Serbian government has no plans to sell its share in banks, since it has been estimated that, due to the crisis, there were no interested buyers, and the banks would have been sold at an unrealistically low price. However, the government did commission a feasibility study pertaining to establishment of a development bank that would be founded following a merger between the Development Fund and export credit and insurance agencies. The bank’s operations would be the subject of a special law since the current legislation regulates only the operations of commercial banks which are supervised by the National Bank of Serbia. The study is supposed to be written by the end of the summer, and Serbian businessmen think that it would be really beneﬁcial to have a bank that would provide solely corporate loans, particularly for those companies that are export orientated. As experts say, the uncertainty that banks are facing in 2010 relates solely to the ability of both retail and corporate clients to regularly repay their loans, as well as banks’ readiness to provide more substantial loans. Since the beginning of 2009, the latency in repaying monthly loan instalments went up by 30%. So, at the end of the year, 7.2% of all retail and corporate bank clients were late with repaying their loans. 8.8% of them were companies and 3.2% were

The results of banks’ operations in the Q1 of 2010, shows that the crisis the banks in Greece were experiencing did affect the Serbian banking sector retail bank clients. Since the beginning of 2010, the latency has been growing, so, at the end of March, a total of 12.2% of bank clients were late repaying their loans. “Although this information is still not considered alarming, it is very difﬁcult to predict whether the situation will deteriorate in the future, so citizens are advised to exercise caution when extending loans,” says Secretary General of the Association of Banks in Serbia, Veroljub Dugalić. The results of banks’ operations in the Q1 of 2010, shows that the crisis the banks in

FEWER EMPLOYEES

ue to the crisis, the number of bank employees went down last year by just over 1,000, so, at the beginning of 2010, the banking sector in Serbia had exactly 31,182 employees. It is quite interesting to see that state-owned banks hired more people (533 of them) while privately-owned banks have cut back on the number of their employees by 1,693.

12 Guide to the Banking & Financial Sector in Serbia 2010

Greece were experiencing did affect the Serbian banking sector, including banks that have owners originating from Greece. Retail deposits remained in the banks, and the retail clients believed the central bank claims that banks were liquid and solvent. During the first three months of this year, the profit generated by banks in Serbia stood at 6.94 billion dinars, which is 1.3% higher than the same period last year. 25 banks had positive financial results, and nine posted a loss, compared to eleven in the Q1 of 2009. Banca Intesa, AIK Banka, Unicredit Bank, Komercijalna Banka and Societe Generale Bank had the biggest cumulative profit of 5.7 billion dinars which makes over 80% of the total profit generated by the Serbian banking sector. Two banks alone, Banca Intesa, which is the bank with the highest market share, and AIK Banka, the most profitable bank in Serbia, generated over a half of the overall profit posted by banks in Serbia. Vojvođanska Banka, Credit Agricole, OTP Bank, Alpha Bank and Credy Banka were the biggest ’losers’ with 1.2 billion dinars of loss. When it comes to the balance sheets of 2010, the loss generated by banks mostly pertains to exchange rate differences which are a direct result of unstable foreign currency exchange rates. Also, irregular repayment of loans causes financial problems for the banks in Serbia. Speaking about the market share that banks in Serbia have, analysts say that the banks with the lowest market share were hit the hardest by the global economic downturn. Currently, the seven biggest banks in Serbia have a 60% market share. Also, these are the banks that had the highest profit in the Q1 of 2010. Analysts estimate that, in the following period, no significant changes will happen when it comes to bank operations in Serbia. They say that placements will not go down and, in late 2010 we are going to see the first results of so-called de-euroization, following the Serbian government and the National Bank of Serbia implementing stimulation measures granting loans in dinars.

Strong Capital Adequancy and Satisfactory Asset Quality Piraeus Bank today is one of the four largest banks in Greece. It has diversiﬁed regional presence in seven coutries in South-Eastern Europe and the Eastern Mediterranean, and also in the ﬁnancial centers of London and New York

iraeus Bank, the holding company of Piraeus Banking Group, was founded in 1916. After a period of state-ownership and management (19751991) the bank was privatized in December 1991. Since then, it has continuously grown in size and performance. Piraeus Bank is now one of the four largest banks in Greece. It has diversified its regional presence in seven countries in South-Eastern Europe and the Eastern Mediterranean, and also in the financial centres of London and New York. Nowadays Piraeus Banking Group is one of the most dynamic and proactive financial organizations in both the Greek and international markets. The Group possesses specialised knowledge in the fields of retail banking, small and medium-sized enterprises (SMEs), capital markets and investment banking and leasing. Piraeus Banking Group has a strong presence in the middle-market segment (businesses and individuals) - the most dynamic part of the region’s economy. In addition, it has a strong credit culture coupled with sophisticated risk management systems. The Group also has cross-regional man-

agement teams who can provide proactive and tailor-made banking solutions. These are just some of the reasons why Piraeus Banking Group enjoys the highest customer satisfaction rate in Greece amongst its major peers. During the previous the year the Group has recorded good business results, high liquidity and strong customer conﬁdence. Asset quality, strong capital adequacy and signiﬁcant cost containment were Piraeus Banks’ key priorities during 2009, with the aim of further safeguarding the bank. Furthermore, a strong emphasis was

Asset quality, strong capital adequacy and significant cost containment were Piraeus Banks’ key priorities during 2009 placed on servicing and supporting their customers. At the end of 2009, Piraeus Banking Group recorded a solid capital base and a 10% capital adequacy ratio. Equity capital amounted to €3,616 million. The ratio of tangible equity to tangible assets was 5.4%, which was among the highest in Greece and the European Union. At the end of December 2009, the Group had satisfactory loans – deposits ratio was 123% versus 135% of European banks average. Respectively, deposits increased in Q4 2009, while their composition improved at the same time - there was increase in sight and savings deposits at the expense of time deposits. The Group’s coverage ratio (51%, versus

the 48% of our Hellenic peers) was very satisfactory in addition to their highly collateralised loan portfolio. Piraeus Banking Group was the best in class asset quality (5.1%, December 2009) compared to Greek and regional peers. The Greek State provided Piraeus Bank with a €2.4 billion additional liquidity buffer. At the end of December 2009, the Group employed 13,417 people. The Piraeus Bank Group currently operates through a network of 900 branches in Greece, Serbia, Cyprus, Egypt, Albania, Bulgaria, Romania, the Ukraine, U.K. and U.S.A. The Piraeus Bank Group, combining business development and social responsibility, systematically endorses its relations with its social partners through speciﬁc actions, as well as the broader social environment, while emphasis is placed on the protection of the natural and cultural environment. Piraeus Bank’s prudent management will continue to comprise the major element of its policies and development targets in the broader regional markets where it operates and where medium term prospects remain positive.

Guide to the Banking & Financial Sector in Serbia 2010 13

INTERVIEW MR NEOCLIS NEOCLEOUS, CHAIRMAN OF THE EXECUTIVE BOARD, PIRAEUS BANK BEOGRAD

A Strong Vision After ﬁve years in the Serbian market, Piraeus Bank AD Belgrade has established itself as a stable and constructive partner

Piraeus Bank AD Beograd Head office

iraeus Bank, as one of the four leading banks in Greece, has been building its position in the Serbian market over the past ﬁve years, both strategically and with long-term plans, according to Mr Neoclis Neocleous, Piraeus Bank Beograd Chairman of the Executive Board

You have recently arrived in Serbia. What is your view of the Serbian banking sector? In the short period I have spent at Piraeus Bank AD Beograd, I believe I have acquired a good initial understanding of

the Serbian economy, Piraeus Bank’s goals and the market’s requirements. Piraeus Bank, as one of the four leading banks in Greece, has been building its position in the Serbian market over the past ﬁve years, both strategically and with long-term plans. Although Piraeus Bank has improved its market position from year to year, we are aware of the fact that strategic positioning in a market where the competition is very strong and in which 34 banks are operating, is long-term process that requires continuous adjustment to global trends, creation of innovative products and constant attention to customer needs. That is why our focus is primarily

14 Guide to the Banking & Financial Sector in Serbia 2010

on meeting customer needs and demands. My first impression is that Piraeus Bank has a good synergy with its clients, retail, corporate and SMEs, and we are looking forward to ensuring their satisfaction in the future. We want to make sure that our collaboration with our clients is strong, and to be certain that every experience they have with Piraeus Bank is very pleasing and worth their time. I believe that in the future our clients, as before, will recognize our loyalty and professionalism, our aim to contribute as much as possible to achieving further growth and the development of their plans and businesses. Piraeus Bank has strong vision and determination to become one of the top-tier financial institutions in the Serbian market. We have ambitious, yet conservative, plans for this year in all business sectors, so we are preparing a set of very attractive products and services for our client’s ever changing needs. Is Piraeus Bank satisfied with its financial results in Serbia from last year? After five years of operating in the Serbian market, Piraeus Bank AD Belgrade, has become recognised as a stable and constructive partner that unites business development and social responsibility, constantly reaffirming its commitment toward the so-

cial, cultural and natural environment. In 2009, Piraeus Bank recorded good business results and satisfied the liquidity requirements and confidence of its clients. Its positive action strategy has been confirmed through an increase in total deposits, which in the last quarter of 2009 recorded a growth of 21.46% to 156.4 million euros. An equal focus has also been given to the quality of the credit portfolio that reached 622.9 million euro with total assets at 711 million euro, including loans booked through the London branch on behalf of Piraeus Bank in Serbia. Capital adequacy was at 29.9%. The total invested capital of the Bank in late 2009 amounted to 139 million euros. In 2009, the Bank signed an agreement with the European Investment Bank for the funding of investments in the Serbian economy, and was one of the first to follow the Vienna initiative with the aim of contributing to the maintenance of macro - economic stability in the country and to take part in the Government of the Republic of Serbia’s programme for mitigating the effects of the global financial crisis. Also, at the end of September Piraeus Bank moved its head office into a new and modern building - the Sava Business Centre, Milentija Popovića 5b in Novi Beograd. Inside these new business headquarters, the Bank opened its 27th branch in Belgrade at the end of December 2009. Piraeus Bank currently operates through a network of 47 branches and employs more than 560 employees. I have to point out that I am really proud of what Piraeus Bank has achieved during previous years, despite the challenging times and strong competition.

Piraeus Bank, with a desire to fully meet our clients’ wishes and to make their daily life and activities easier, is constantly working on developing and offering new, unique and technologically innovative services. Also, our goal is to provide favourable payment terms and conditions, extended repayment periods and products that are worth talking about. We believe that only with good and ﬂexible products we can satisfy our customers, and only with them we can increase our market share.

Neoclis Neocleous, Chairman of the Executive Board

In the forthcoming period, Piraeus Bank will offer new services and products from the life insurance group to the market Recently Piraeus Bank has started to offer some quite an appealing banking services such as ’Card to Card’, as well as the consolidation of credit card debt from other banks. Is this primarily geared toward fully meeting the client’s needs or toward raising your market share in Serbia?

FOCUS FOR 2010.

iraeus Bank’s key policy principles for 2009 - liquidity, capital adequacy, asset quality and cost containment - will remain priorities for 2010 as well. At the same time the Bank is working on preparation of the next steps for business growth, as well as on new products in order to meet customer needs. Also, one of Bank’s strategic orientations is to help the SME sector to overcome the consequences of the economic crisis and to support local communities’ through different corporate social activities. We have significantly improved our internal organization and our operations, so we can look ahead to the future with confidence and ambition. My vision for Piraeus Bank Serbia is to position the Bank as one of the top Banks in Serbia.

Have both corporate and retail clients been fulfilling their financial obligations toward the bank in a timely manner, or, to be more precise, what is the collectability of outstanding claims at Piraeus Bank? We do not face serious issues regarding clients fulfilling their financial obligations. At the beginning of May, Piraeus Bank started to sell life insurance policies in its branches in collaboration with the Alico Insurance Company. Do you plan to offer your banking products combined with life insurance? Piraeus Bank in accordance with the increasing market demand for products from the life insurance group, included Risk Insurance as part of its offering. This product is specifically designed to protect the beneficiary and his family, and it is therefore symbolically called “The Protector”. Risk insurance is an exceptionally important life insurance product since it has a strong social dimension as it protects families against financial risks and bankruptcy. In the forthcoming period, Piraeus Bank will offer new services and products from the life insurance group to the market. Piraeus Bank will continue to follow world’s trends in using new technology to improve the banking sector; creating tailor-made products and services in order to best satisfy clients needs, and supporting the local community through different social responsibility activities.

Guide to the Banking & Financial Sector in Serbia 2010 15

SURVEY ‘BANKING BANANA SKINS’

Top Threats to Banks

The G7 Finance Ministers and Central Bank Governors meeting was held at the Istanbul Congress Center in Istanbul City, Istanbul Province on October 3, 2009.

Political interference ‘now the greatest risk facing the global banking industry’

By the CSFI in association with PricewaterhouseCoopers

he greatest risk now facing the banking industry is not financial but political, according to the latest “Banking Banana Skins” survey conducted by the CSFI in association with PricewaterhouseCoopers. The annual poll of banking risk puts “political interference” at the top of a list of the 30 most serious risks to banks during this period of financial crisis. The poll is based on responses from 450 senior authorities from the financial world in 49 countries.

Respondents, who include practising bankers as well as close observers of the ﬁnancial scene and regulators, said that the “politicisation” of banks as a result of bail-outs and takeovers posed a major threat to their ﬁnancial health. This view was shared by all types of respondents in all the major banking regions, though for different reasons. Bankers saw politics distorting their lending decisions. Non-bankers said that political rescues had damaged banks by encouraging reckless

16 Guide to the Banking & Financial Sector in Serbia 2010

attitudes. Regulators worried that governments would withdraw their support from banks before they had time to rebuild their ﬁnancial strength, precipitating another collapse. “Political interference” has never appeared as a risk in 15 years of “Banana Skins” surveys. The top risk is closely linked to the number three risk, “Too much regulation”, and the concern that banks will be further damaged by over-reaction to the crisis. David Lascelles, survey editor, said: “It is

BANKING BANANA SKINS 2010 (2008 ranking in brackets) 1. Political interference (-) 2. Credit risk (2) 3. Too much regulation (8) 4. Macro-economic trends (5) 5. Liquidity (1) 6. Capital availability (-) 7. Derivatives (4) 8. Risk management quality (6) 9. Credit spreads (3) 10. Equities (7) 11. Currencies (13) 12. Corporate governance (16) 13. Commodities (12) 14. Interest rates (9) 15. Fraud (11) 16. Management incentives (17) 17. Emerging markets (18) 18. High dependence on technology (15) 19. Hedge funds (10) 20. Rogue traders (14) 21. Business continuation (23) 22. Retail sales practices (20) 23. Conflicts of interest (21) 24. Back office (19) 25. Environmental risk (25) 26. Payment systems (27) 27. Money laundering (24) 28. Merger mania (28) 29. Too little regulation (29) 30. Competition from new entrants (30) ironic that politics should emerge as a risk when the banks had to be rescued in the first place. But there is clearly a crisis in the relationship between banks and society, and it will take years to rebuild trust. Until it is, banks will operate under a financial handicap.” Nataša Petronijević, senior manager, PricewaterhouseCoopers says “A worrying theme is the question of whether the financial crisis has taken the banking industry’s future out of its own hands. With political interference as the top risk and too much regulation at number three, there is clear sense that change may be forced onto the industry from outside. This year’s survey is a well timed warning that the cumulative effect of current regulatory initiatives may have unintended consequences. The need to rebuild trust between banks and regula-

Bankers saw politics distorting their lending decisions tors is therefore more acute than ever.” Many of the risks identified by the survey – notably “credit risk” at number two – stem from concern about the effects of the recession on the banking industry. The bulk of respondents were gloomy about the outlook, fearing a “double dip” recession with a further wave of bad debts hitting the banks. The mood was particularly dark in the Asia Pacific region where respondents are worried that a new asset bubble may burst, bringing about a collapse of confidence in the credit markets. The poll also reflects concern about the banks’ ability to manage themselves safely.

“Banana Skins” such as the quality of risk management, corporate governance and management incentives all feature prominently as potential sources of risk. However some risks are also seen to be easing as the world pulls out of the crisis. A number of ﬁnancial risks - liquidity, derivatives, credit spreads and equities – are down from the previous poll in 2008. A striking fall is the risk from hedge funds, down from number 10 to number 19, as their threat is seen to diminish. “Financial plumbing” risks such as back ofﬁce, payments systems etc, are also seen to be low. All performed well in the crisis. Environmental risk is at an unchanged number 25 position despite the heat generated by the Copenhagen Summit.

WHO SAID WHAT Bankers, observers and regulators agree on the big risks, but differ on the detail. A breakdown of the top ten responses by type shows different levels of concern. Bankers – practitioners of commercial and investment banking 1 Political interference 2 Too much regulation 3 Credit risk 4 Liquidity 5 Derivatives 6 Macro-economic trends 7 Capital availability 8 Risk management quality 9 Credit spreads 10 Equities

World Bank

Non-bankers said that political rescues had damaged banks by encouraging reckless attitudes

Bankers put political interference at the top of their risk list because of the pressure it creates to override commercial judgment, for example by forcing them to lend in a recession. Concern about a regulatory over-reaction to the financial crisis is closely linked. Bankers’ worries also include a worsening credit outlook as bad debts continue to pile up, and the availability of new capital. Their concern with liquidity risk and the derivatives market, particularly credit default swaps, remains high.

Guide to the Banking & Financial Sector in Serbia 2010 17

INTERVIEW BOGDAN LISSOVOLIK, IMF RESIDENT REPRESENTATIVE IN SERBIA

(In) flexible budget We expect that the National Bank of Serbia (NBS) will continue to meet its inflation targets, so the average annual inflation rate of 4.8 percent is consistent with the 2010 end-target of six percent.

By Tatjana OSTOJIĆ

n early May, there was the question of whether the Serbian government had fulfilled all the requirements of the International Monetary Fund from the previous quarter and if not what more needed to be done. Our interlocutor, Bogdan Lissovolik, the IMF Resident Representative in Serbia, comments that at this moment it is too early to tell, and will be determined during the forthcoming mission of May 13th to 25th. “Preliminary indications suggest that most conditions were fulfilled, but some may not have been fully observed”, says Lissovolik.

statement made by minister Mladjan Dinkić that the salaries of civil servants will go up? We will be discussing those issues, but the budget situation looks quite difficult for any such increases, as fiscal revenues have so far been lower than expected.

The main goal of the International Monetary Fund (IMF) mission for the upcoming negotiations with the Serbian government in May, would be to reach an agreement about pension and public sector policies. Bearing that in mind, could you comment on the

You have also said that, at the upcoming meeting, the latest IMF forecast of the Serbian economy achieving 2% growth this year and 3% in 2011 would be “analyzed and updated“. Are these forecasts for Serbian economic growth for this and next year realistic?

We view the banks as well prepared for dinar lending, regardless of whether it is to public or private enterprises

18 Guide to the Banking & Financial Sector in Serbia 2010

Again, it would be up to the mission to make updated projections. For now, I can only comment that developments in the first quarter of 2010 were somewhat weaker than we previously expected. Also, the IMF has estimated that Serbian economy will record one of the highest growth rates in the region. What are the expected growth rates in other regional countries? Serbia’s projected growth rate is comparable to many countries in the region. We expect growth in Poland to be somewhat higher at 2.7 percent. For Albania

and Macedonia we project growth of around two percent, similar to that of Serbia. In Bosnia and Herzegovina and Romania we expect modest growth of below one percent. Bulgaria, Croatia, and Hungary would see yet weaker output – growth would be broadly flat. In Montenegro, we see output contracting by 1.7 percent. The IMF has estimated that the annual inflation rate in Serbia this year, judging by consumer prices, would be 4.8%, as well as in 2011. Is this realistic? It will be up to the mission to update the exact inflation projections. We expect that the NBS will continue to meet its inflation targets, so the average annual inflation rate of 4.8 percent is consistent with the 2010 end-target of six percent. In March, you said that once the global economy recovers and overcomes the crisis, the privatisation process in Serbian public enterprises should continue. You also said that the State should not wait for market conditions to become ideal to carry out privatisation. Did you have any specific public enterprises in mind when you said that, and what is your view of the State’s decision to sell Telekom? We usually do not comment on specific enterprises. Our role is to highlight broader macro-economic trends and requirements in an economy. For Serbia, more active privatization across many sectors would be a key in its transition toward a more viable, exports- and savings-based economy. Also, you have previously com-

The management of all enterprises - and public enterprises are no exception here should best be left to professionals mented that transparency in business should be increased, the legislation governing businesses should be simplified and made uniform across the board, the issue of business losses and their limitation should be addressed and management should become more independent. To what extent does appointing politicians as public enterprise managers affect the operations of those enterprises? The management of all enterprises - and public enterprises are no exception here - should best be left to professionals. Serbian society is entitled to expect that the productive potential of the country is used in the most efficient way, enhancing the growth potential of the economy and the well-being of all Serbian citizens. You have also pointed out that public enterprises could help domestic currency by taking out dinar loans rather than euro loans. How prepared are banks, at this point, for granting corporate loans in dinars? We view the banks as well prepared for dinar lending, regardless of whether it is to public or private enterprises. In fact, there is substantial interest on their part to offer a wider range of dinar-based products to corporate clients. The banks have been active not only in responding to initiatives but are themselves coming up with ideas and innovative products in this respect.

THE SERBIAN BANKING AND FINANCIAL SECTOR

t was a difficult year for the banking sector in Europe, due to the sharp output contraction severely limiting demand for credit, coupled with increasing non-performing loans. Serbia is no exception here: its output fell by three percent and credit growth slowed substantially last year. However banks in Serbia weathered the downturn well. Compared to other countries, they remain very liquid and well-capitalized. The NBS deserves credit for creating substantial financial buffers. These have limited the extent of prior boom-related imbalances and provide strong reassuring signals in the event of any unexpected future shocks.

According to the agreement with the IMF, one of the obligations that Serbian authorities have is adopting business plans for the ten biggest state-owned companies. The authorities were supposed to have done this by the end of February, but by March, the task was still not complete. What is the situation like today and did the authorities meet their obligations in this respect? We have received nine plans, and one plan – for JAT – has not yet been submitted because the government has embarked on a restructuring of this enterprise, which has to be reflected in such a plan. Most of the plans that we have received are consistent with the agreed nominal wage bill freeze. At this time, we are clarifying why a couple of the smaller enterprises submitted plans that are not fully consistent with such a freeze. What role does the Serbian banking sector play in Serbian government plans and programmes, and the IMF’s expectations? In our view, the cooperative approach within the so-called Vienna initiative between the NBS, the government, commercial banks, and international financial institutions has worked particularly well. It will be a useful experience for addressing any future financial crises. Do you think that the resignation of the National Bank of Serbia governor, Radovan Jelašić will have any effect on monetary policy and the stability of the banking sector? No. We do not expect changes. The agreed program is in place for the next year. Our shared view - with the Serbian authorities - is that the current inflationtargeting framework has served Serbia well.

Guide to the Banking & Financial Sector in Serbia 2010 19

SURVEY GFK FMR CONFERENCE 2010

Safety Over Risk Around 70% of global consumers think banks and other ﬁnancial institutions are responsible for the world crisis.

By Katarina ANDJIĆ, Research Assistant GfK

he FMR conference which covered different aspects of the financial market in Serbia was recently organized by GfK Belgrade. The last two years have had a dramatic impact on the financial markets in the world, as well as in Serbia. The aim of this conference was to examine trends in the Serbian financial market and to change the behaviour of financial services’ users. Probably, the key question of most of the decision makers in these companies was: “How should we respond to these changes?” The conference most certainly gave some answers that will be of use.

Global Trends After the recession, the world was turned upside down. 2009 was a shock for most people, and still now, they are discussing how they managed to survive the period. As consequence of the crisis, global consumer conﬁdence was at its lowest level in the last ten years. This low level of conﬁdence indicates that people believe that

bad times are upon us. Low confidence is noticeable on the financial markets too. Around 70% of global consumers think that banks and other financial institutions are responsible for the world crisis. This percentage is significantly lower in favour of insurance companies, as around 35% of consumers blame them for recession. However, all financial institutions should take some kind of responsibility and time will surely be needed to change that image. A remarkable global trend is that consumers are choosing safety over risk. People have come to the realisation that it is high time to get serious about saving; 86% of them have adopted some kind of moneysaving strategy this year. They save their money in all possible ways – they buy more carefully, look for store discounts and use coupons. Another trend is consumers’ demand for “back to basics” financial services. Financial institutions need to offer basic products and services, and to revert to “basic” communication with their clients in order to build strong and trusted relationships and gain mutually beneficial results.

20 Guide to the Banking & Financial Sector in Serbia 2010

Economic and Financial Markets in Serbia It is logical that the world recession must have had an impact on Serbia, but nobody expected that it would be so strong. According to the Purchasing Power Index, a decrease has been recorded in purchasing power. In 2009 it was 2.933 euros per year, and compared to the previous year, it decreased 5%, and compared to 2007, 9%. There are a few general trends in consumers’ behaviour during last period. More and more, money is being spent on food, and large purchases are not being made as much as before (it should be mentioned that consumers still perceive large purchases as spending more than 40 euros per one shopping). These trends have impacted on the financial behaviour of Serbian citizens. Also, the number of current accounts and credit cards in default increased by 8.5% and 4%, respectively. 58% of consumers stated that the financial crisis didn’t have an influence on their incomes, while 18% of them think this influence is strong, due to the fact that

their incomes had decreased. To see the real measure of that number, it is better not to present it in percentages – 18% of consumers is more than a million people who live with decreased incomes. Furthermore, we should also add the number of people who lost their job in the previous year (more than a half a million), and finally there is the sum of a million-anda-half people who experienced a personal crisis. In Serbia, more than one third of the population (35%) save for their children. This is a detail that distinguishes Serbia (as well as the Ukraine) from other Central and Eastern European countries. Also, among Serbian people, travel is an important motive for saving. One of the main reasons for saving remains the concept of “saving for a rainy day”, and this can be explained by the character of the people who are still frightened by the negative experiences of the 90s. When it comes to specific banking and insurance institutions, significant changes in spontaneous brand awareness have been recorded compared to previous years. For example, Komercijalna Banka, ProCredit Bank and Piraeus Banka recorded a significant increase in terms of spontaneous brand awareness, while Raiffaisen Bank recorded a decrease. Banca Intesa recorded the highest level of awareness (with a stable base of 70% of consumers who recognise it), which is no change on last year’s result. In the case of insurance companies, Delta Generali recorded a significant increase in terms of spontaneous brand awareness (58% of consumers recognise it), while a decrease was noted for Uniqa (with only 20% of consumers who spontaneously recognised it). A strong impact of the recession can be observed in the bank products which Serbian people are planning to start using in the next period. An overdraft is the most attractive bank product – consumers need to buy and spend money to survive, and an overdraft is seen as a kind of saviour in bad times. Problems come later, when it is necessary to pay the overdraft off, but this is perceived as being ”far into the fu-

People have come to the realisation that it is high time to get serious about saving; 86% of them have adopted some kind of money-saving strategy this year ture” , and the immediate focus is on surviving NOW. Among insurance products, the most attractive product to new users is life insurance – again highlighting that people are very interested in providing a certain and stable future for themselves. In regards to ﬁnancial institutions, there is one important feature that is still seen in positive terms – trust. 48% of Serbian citizens trust domestic banks, whereas 41% trust foreign banks, and 38% of them trust insurance companies. To illustrate how high the level of trust in these companies actually is, let’s compare it to other nonﬁnancial institutions for example, government, ministries and the justice sys-

A strong impact of the recession can be observed in the bank products which Serbian people are planning to start using in the next period

tem of Serbia. The most trusted bank is Komercijalna Banka with a base of 42% of trusting clients. Second place goes to Banca Intesa. The lowest level of trust is recorded for smaller banks on the Serbian market, such as Privredna Bnka Beograd, Unicredit Bank Serbia, OTP Banka and Meridian Bank-Credit Agricole Group. Dunav Osiguranje and DDOR Novi Sad Osiguranje are most trusted insurance companies. This can be explained by the tendency of Serbian people to stay faithful to companies which have had a long life in the insurance market in Serbia. Third place goes to Delta Generali, which isn’t as old as the previous two, but it is a company which has built a relatively strong base of trusting consumers (38% of them). These three companies are the most dominant in the insurance market. All other companies recorded a signiﬁcantly lower level of trust.

Looking Ahead It is hard to try and anticipate the future of the financial market in Serbia. The fact is that this market has been greatly protected from the influence of the crisis during the past years. However, a lot of people believe that financial institutions are responsible for the crisis, so it might be expected that the crisis will cause some kind of boomerang effect which goes back to the financial market. Nevertheless, banks and insurance companies have to utilise the high trust levels of Serbian people to make their position more stable. Another recommendation is to make closer relations with their clients. The concept of “back to basics” is very important if these institutions want to survive in the market over the next period, and that doesn’t mean merely offering basic products. This concept is even wider, and most importantly it must be oriented to respect the individual needs of every client. Good and healthy communication with clients will be of utmost importance, which will distinguish good and profitable companies from the others. For further information visit: www.gfk.com

Guide to the Banking & Financial Sector in Serbia 2010 21

INSURANCE A DIFFICULT YEAR FOR INSURANCE COMPANIES

The Struggle Continues in 2010 The percentage of non-life insurance still dominates, with a real increase in life insurance premiums. The crisis has lowered non-mandatory insurance premiums.

Branko Pavlovic, associate member of the Executive Board and Delta Generali Insurance licensed actuary By Danijela JOVANOVIĆ

hen the crisis hits, people as a rule, first give up “what they can live without”. Thus, we have seen a significant decrease of non-mandatory insurance premiums in our insurance market, while the mandatory vehicle liability insurance premium is increasing. The insurance market in Serbia has a positive, albeit relatively slow trend, according to the National Bank of Serbia, which is in charge of monitoring the work of this part of the financial sector. Under the influence of the global financial crisis, total premiums in 2009 increased by

only 2,6%, to a total of 53,5 billion dinars. “Last year was rather difﬁcult for all players on the insurance market in Serbia,” Branko Pavlovic, associate member of the Executive Board and Delta Generali Insurance licensed actuary told CorD. “In dinars, the total insurance premium increased minimally, from 52,2 to 53,5 billion dinars, while in reality the premium dropped due to the decrease in the value of the dinar during 2009.” Life insurance premiums increased both nominally, in dinars, as well as realistically. “This is particularly encouraging in view of the low development level of this type of insurance in Serbia. The mandatory vehicle liability insurance premium also

The number of insurance companies increased last year from 24 to 26, with a 4.9% decrease in the number of employees, to a total of 11,142 22 Guide to the Banking & Financial Sector in Serbia 2010

increased, one of the reasons being the reregistration of a large number of vehicles with Montenegrin license plates,” Pavlovic said. “Comprehensive insurance premiums decreased the most, due to a significant drop in the sale of new vehicles, especially through leasing. An important fact for clients is that technical reserves of the entire market increased by over 17%, guaranteeing that insurance companies will be carrying out their obligations in the future.” Pavlovic said that the position of the three leading insurance companies for non-life insurance has not changed, while in 2009, Delta Generali took the first position regarding life insurance. Despite the financial crisis, the Serbian market is still attractive for foreign investments into insurance companies. Thus, in 2009, two foreign companies were granted licenses to operate in Serbia. Important provisions have been adopted to regulate business activities in the insur-

COVERAGE

echnical reserves of non-life insurance in 2009 were primarily covered by bank deposits - 27%, cash - 21%, state securities -16%, claims for unearned premiums 10% and stocks traded on the market - 8%. Technical reserves of life insurance were primarily invested into state securities - 72%, followed by bank deposits - 20%.

ance field during times of financial crisis. By the end of the year, all companies offering health insurance were obliged to get in line with the decree on voluntary health insurance. According to Pavlovic, the law on mandatory traffic insurance and the law on traffic safety, which came into power at the end of 2009, will have the strongest influence on further business activities.

Expectations in 2010 According to the prevailing trend at the beginning of this year, 2010 will be no easier than last year. “During the first trimester of 2010, the nominal upward trend of total premiums of around 2% on the entire insurance market from previous year continued, which implies a difficult year in the field of insurance, similar to the previous year,” Branko Pavlovic explains. “The growth rate of life insurance premiums during the first three

months halved compared to the growth rate from the previous year, when it increased by 24%.” Despite everything, it appears that our market did not lose its attractiveness to foreign investment. “We expect that new insurance companies will be established in the course of the year. One of the biggest European insurance companies is interested in starting a business in Serbia, probably by acquiring one or more domestic companies. Furthermore, one large Russian company announced it will be opening its insurance company in Serbia,” Pavlovic reveals. The implementation of the law on traffic safety and mandatory traffic insurance has already started to yield results – through a decreased number of traffic accidents, and consequently a decreased number of damages claims. The provision of the “bonusmalus” system in mandatory vehicle liability insurance has been adopted. According to this provision, drivers who cause damages pay up to three times bigger insurance policies than careful drivers. The implementation of this system should increase the responsibility of drivers and further decrease the number of traffic accidents.

Legal Amendments “Amendments of tax provisions and the introduction of tax beneﬁts in life and health insurance should take place by the end of this year,” Pavlovic says. “Considering the fact that life insurance is the driving force of the development of insurance market in developed countries, tax beneﬁts are necessary if this insurance is to take its proper place in

Serbia as well. Life insurance is a combination of insurance against risk of death and long-term savings, thus tax beneﬁts that enable premium growth, that is, growth of this type of long-term savings, will quickly bring proﬁts to the state as well. Insurance companies must invest these funds in a conservative manner, so that the state can use these funds for future large infrastructure projects without taking further loans abroad.”

Insurance in the Serbian Home “According to data of the National Bank of Serbia, in the last year the number of beneficiaries of accident insurance was greater than the number of residents which means that the average citizen most probably enjoyed this type of collective insurance,” Pavlovic says. “Each of the two million vehicles was subject to vehicle liability insurance, thus an average family enjoyed this insurance as well, while a certain number of families insured their houses and apartments against the risk of fire and other threats. The total number of policies reached almost four million items on the entire market – which means that every second citizen had one individual insurance policy. An average four-member family dedicated less than 300 euros to all types of commercial insurance last year. Pavlovic believes that the awareness of the need for insurance is still insufficiently developed in the average Serbian family, but he also says that positive trends are visible, which, accompanied by the subsiding of the financial crisis in our society, will bring about the development of this impor tant field in the future.

WE ARE LAGGING BEHIND

he mild increase of the participation of life insurance in total premiums, from 12.2% to 14.7% in 2009, is still far from the average in the 27 EU member states, where this participation reached around 62% two years ago. Guide to the Banking & Financial Sector in Serbia 2010 23

INTERVIEW NEBOJŠA DIVLJAN, MANAGEMENT BOARD CHAIRMAN AND CEO OF DELTA GENERALI OSIGURANJE

Privatization Leads to We have sent a clear proposal regarding tax deductions for life insurance because this is the way to collect longterm funds of the highest quality, which is considered good investment potential for the economy of every state By Ana STOJANOVIĆ

”I

believe the impression that this year and the following year will be developmental periods for insurance companies is unrealistic. There are no signs that could justify the expectation of significant development. The crisis revealed how neglected our real sector is, and nothing spectacular will happen there in the near future,” Nebojsa Divljan commentes. “The market, on the whole, will have a single-digit growth rate, and in dinars at that, which is closer to the concept of stagnation than to any realistic development. I believe that we can extend such an assessment to the next year as well. However, I believe that the insurance industry will use this period to rationalize and consolidate its business, educate the population and improve client relations, so that in 2011 we may have a certain degree of growth.”

What does the state do to support insurance development in Serbia, especially with regard to tax deductions

and the development of the financial market? At this moment, there are no tax deductions related to life insurance. We have sent a clear proposal to the state regarding tax deductions for life insurance because this is the way to collect long-term funds of the highest quality, which is considered good investment potential for the economy of every state. By accepting the so-called French model, which provides for the reimbursement of a part of the premium paid, the state would support the development of life insurance, and would thus help itself as well. Life insurance has a long term element, which, unlike other financial sectors, demands long term investment of funds. And while other sectors are hesitant to make long-term investments with lower interest rates, such investments suit our industry. Thus, we have offered a comprehensive proposal for tax deductions and creation of new financial instruments to the state. Life insurance develops only with tax stimulations and plays a double roll - to teach citizens to take their future into their own hands and to gather investment funds of the highest quality. We believe that, for long-term

24 Guide to the Banking & Financial Sector in Serbia 2010

state investment projects, there is no better source than life insurance savings. We are still waiting for the response of the state. The total insurance premium in Serbia participates in the GDP with 1.9%, while this participation amounts to 3.2% in Croatia and 5.4% in Slovenia. What influences such a low percentage of participation of total premium in the GDP of Serbia? There are several reasons for this trend. The total amount of the average vehicle insurance premium is lower than in the neighbouring countries. It is lower both because of the age and the type of vehicles. In addition to this, the awareness regarding the need for insurance is still insufficiently developed in Serbia. This is obvious when you look at the small number of house or apartment insurance policies against fire and other dangers. Furthermore, compared to neighbouring countries, the introduction of life insurance arrived late, by as much as ten years, and this is the reason why the total premium collected is lower. To increase the percentage of total insurance premium in the GDP, a significant development of life insurance is needed, and, as I

Market Liberalization said before, this does not happen automatically - the state has to develop stimulative measures. Last year, the share of life insurance as a total of all insurance increased by 2.5 percent points. Are you satisfied with this increase? The increase of the total premiums of life insurance increased last year by 25% in dinars. At first glance, this appears to be a good growth rate. However, this is just an illusion. This is primarily due to the effect of the exchange rate increase, as well as the fact that the collected premium relates to policies which have been sold years in the past. But when we compare the number of newly sold policies with last year, we can see a significant decrease. This trend has continued during the first three months of this year, and it is safe to say that life insurance is in a serious crisis due to the decrease of new production. To some extent, this is understandable, because, in times of crisis, it is difficult for people to make decisions regarding longterm investments. This problem, however, is not only our own. At the same time, comprehensive insurance has decreased by 10% and property insurance decreased by 6%. Comprehensive insurance premiums suffered the most significant decrease due to a major decrease in the sale of new vehicles, especially through leasing. This trend will most probably continue during this year. Until the economic crisis is over, we should not expect any significant change here. As

In the situation where citizens do not buy even basic insurance for their property, we should consider the possibility of expanding the number of mandatory insurances for property insurance, I donâ&#x20AC;&#x2122;t believe that the downward trend will continue, partially because of a certain amount of new investments which are being activated. To what degree do incomes of citizens influence the insurance market growth and to what degree does this growth benefit from competition between insurance companies? The decrease in the standard of living influenced the drop in the sale of apartments, cars, household appliances, even food. The decrease of life and comprehensive insurance is thus logical, especially if we take into account that some of these contracts are tied to bank loans. But the increase in incomes of citizens, which will happen sooner or later, will not by itself result in the growth of the insurance market. As I have already pointed out many times, state measures and a change in the attitude of citizens are needed. On the market where only every second citizen has a single individual policy, which is most often a car insurance policy, it is necessary to invest a lot of effort into education, although some basic knowledge already exists. In the situation where citizens do not buy even basic insurance for their property, we should consider the possibility of expanding the number of mandatory insurances. In our country, it is still customary

BUSINESS RESULTS

n 2009, Delta Generali experienced a 10% growth and our total premium was 9.3 billion dinars. This is a great result, bearing in mind that the market as a whole stagnated, while the total market premium in euros decreased. The fact also remains that, for Serbian conditions, we are already a large company and we cannot have a spectacular growth if the market as a whole is in a state of stagnation.

that in the case of natural disasters people turn to the state for help rather than protect themselves by purchasing insurance. As to the question of how much will competition contribute to growth, I can only say that a good supply of all products that citizens need already exists, thus it stands to reason that new competitors will not significantly improve this aspect. During this and the following year, what type of insurance will Delta Generali Insurance be focusing on? We have developed our company primarily based on innovative products and distribution channels. Currently we have a well-balanced portfolio in all sectors of insurance, so each sector is equally important to us. However, we are investing most of our energy in the consolidation of life insurance. How do you see the insurance sector in the following two-three years? Not much different. Another two or three serious competitors will arrive, but they cannot bring a significantly newer quality to the insurance market. For further market development full privatization of the insurance industry would be very beneficial, because in Serbia, as in all other Eastern European countries, the existence of stateowned and quasi-state-owned companies limits competition. It is obvious that this last obstacle on the road to the creation of a fully liberalized market will not be removed in this period. In the end, some type of tax stimulation for the development of life insurance will be created, but it will start yielding real results only after two or three years.

Guide to the Banking & Financial Sector in Serbia 2010 25

INVESTMENT FUNDS

A Challenge for Real At the beginning of 2010, the assets of investment funds were 15% lower compared to 2007. Most funds have restructured their portfolios, so, once the market picks up, it is quite realistic to expect that investment units will follow suit – comments Vladimir Pavlović from Fima Invest. By Danijela JOVANOVIĆ

eople who invested money via these investment funds share the destiny of all Serbian capital market players. Not only did the financial crisis have a negative effect on profit, but the initial value of invested capital was often halved. Still, judging by the developments on the Belgrade Stock Exchange and the statements made by professional investors, a slight recovery is noticeable. Only the big players will remain ‘standing on their two feet’ come the end of 2010, as the smaller ones are most likely going to lose the market battle. Before 2010, there were a total of 14 openend investment funds active in Serbia. Most of them were so-called asset growth funds, with only several being balanced funds and money market funds. On 31st December, 2009, all open-end funds in Serbia disposed of assets totalling 1.1 billion dinars (10.9 million euro). If we compare this to the year before, that is. 2008,

the assets stood at 1.4 billion dinars (15.3 million euro), which was still significantly lower than in other regional countries. “Investment funds were successful in 2009, a year which saw the stock exchange indices falling to their historic minimum”, says Vladimir Pavlović, portfolio manager at Fima Invest, a company that manages investment funds. “The value of assets managed by funds (in Serbia) amounted to nearly 10 million euro, which is a 15% decline compared to 2007.” Pavlović also points out that the situation has become more stable in 2010. “The investment unit values started to grow, followed by rather small, symbolic investments in funds. Most of the funds have restructured their portfolios, so once the market picks up, it is quite realistic to expect that investment units will follow suit,” Pavlović says. An investment fund (open-end fund) functions along the principle of pooling funds via issuing investment units. The value of an investment unit is comprised of the net

STOCK EXCHANGE DEVELOPMENTS

ast year, the total trading turnover on the Belgrade Stock Exchange stood at 36.2 billion dinars or 383.3 million euro. The Belexline stock exchange index, which is a market capitalization weighted index that consists of shares traded on the BELEX markets, recorded 4.7% annual growth. It is worth mentioning that, in April, this index was at its historical minimum (below its initial value). The Belex15 index, which describes the most liquid Serbian shares, went up by 15.5% last year.

26 Guide to the Banking & Financial Sector in Serbia 2010

Vladimir Pavlović, Portfolio Manager at Fima Invest value of the open-end fund’s assets per investment unit on the day of payment plus the purchase fee. The initial value of these units is the same in any fund, which is 1,000 dinars. Converted into euros, the value can vary depending on the National Bank of Serbia’s median exchange rate on the day each of these funds becomes operational. When the value of these units is reduced to ‘an average’ (the assets of all funds divided by a total number of all investment units), we find that in 2009, their value was 479.38 dinars (4.99 euro). The reason why the value of certain funds’ investment units was more than halved compared to their initial value lies in the fact that these funds became operational at the time when the capital market was still developing (these are the funds that came to our market three years ago and were the first such funds in our country), so their investment units were afflicted by insolvent

CHALLENGES

Players shares. On the other hand, there are funds that became operational last year like Fima Novac, Erste Euro Balanced and Erste Cash and the value of their units is constantly growing. Funds like Zepter Capital and Jubmes Aktiv disappeared from the market all together last year. The fluctuations become even greater once an investment unit value is translated into euros. As the Securities Commission says, displaying the investment unit value in euro is not only important for foreign investors, but also has a great bearing on the decisions made by domestic investors. “This especially rings true in the case of small domestic investors, bearing in mind that they ‘start’ their investment cycle by converting their capital from euro to dinars, and ‘finish’ it by converting dinars into euros. They acknowledge ’foreign currency profit’ and ‘foreign currency loss’ as the only realistic value, hence displaying the investment unit value in euro is very important for conjecturing the future tendencies on the investment fund market”, the Securities Commission says. While some claim that the real indicator of a fund’s success is its investment unit value, other say that it is the fund’s assets that determine this. Some would also say that the real success indicator is actually the yield. “In the period from March 2007 to December 2009, there was a negative average yield rate per investment unit in all investment funds. On 31st December, 2009, this rate stood at -51.8%”, the Securities Com-

he biggest challenge that the investment fund management companies have been facing in 2010 is unprofitable operations brought on by modest assets that the funds manage and low revenue”, says Vladimir Pavlović. “Consolidation in this industry is imminent, with only the few biggest players actually posed to survive the crisis.”

Funds like Zepter Capital and Jubmes Aktiv disappeared from the market all together last year

ASSET GROWTH RATE

he average asset growth rate, in the period since the beginning of operations of open-end funds in Serbia until 31st December, 2009, stood at 0.4% a day. This is primarily owing to the expansion in 2007 and first half of 2008. When discussing individual funds, the youngest of all open-end funds, Erste Cash recorded the highest average asset growth rate of 1.2% a day. In the observed period, Focus Novčani Fond had the biggest drop in asset growth at. -1.2% a day.

mission says. Incidentally, the Commission is an institution in charge of supervising the work that the investment fund management companies do in Serbia. When talking about the average yield rate, one should bear in mind that not all investment funds in Serbia became operational at the same time. “An open-end investment fund, Hypo Balance managed to generate the biggest yield per single investment unit, compared to its initial value on 31st December, 2009, and that was 19.7%”, the Commission outlines. If we observe the value of the investment unit in euro, we get a different picture about the average gross yield per unit bearing in mind that, during the last three months of 2009, dinar considerably depreciated. So, the negative yield rate per investment unit, expressed in euro, for each open-end investment fund was notably lower and it stood at -59.3%. According to the Commission, the Focus Premium Fund had the lowest average yield per investment unit, expressed in euro, during the observed period. The Fund’s investment unit fell from an initial 12.61 euro (on 7th September, 2009) to 3.04 euro (on 31st December, 2009), which is only a quarter of the initial value! Delta Plus, on the other hand, had the biggest asset value on the last day of 2009, which stood at 246.7 million dinars (2.6 million euro), followed by FIMA ProActive with 205.2 million dinars (2.1 million euro). The fund that took the last place, with the lowest asset value on 31st December, 2009, was Focus Novčani Fond (Focus Money Fund) with only 12.6 million dinars (130,800.00 euro), which is below the required asset value of 200.000,00 euro. KD Ekskluziv shared the same destiny. In terms of the relative share, Delta Plus had an almost 25% share in the combined assets of all investment funds in Serbia, followed by FIMA ProActive (1/5 share) and Raiffeisen Akcije with less than 1/5.

Guide to the Banking & Financial Sector in Serbia 2010 27

COMMENT

Investment Funds Surviving the Crisis “We are witnessing a trend toward safer investment strategies, as well as investment outside of Serbia”

By Aleksandar ZAVIŠIĆ, Investment Advisor, USAID’s Economic Growth project

ecent developments in investment funds, particularly private equity investments and hedge funds, in the European Union gained momentum this week as the European Parliament has approved the draft of the new Directive. Alternative investment funds or hedge funds, as defined by the new Directive have received massive attention by the public, since the outbreak of the crisis in fall 2008. Shortly afterwards, these collective investment institutions, along with credit rating agencies, have topped the EU’s legislative priority list. There is a perception, commonly held by non-industry observers, that hedge funds, being market trend indicators, have not caused but rather intensified the financial crisis. New regulation aims to closely

monitor them by obligating non-EU funds to register in the EU as well. Thus, European investors automatically face more restrictive investment possibilities, which cause concern and protest. It appears that managers of these funds have raised legitimate questions as to who has the right to prevent wealthy individuals, colossal pension funds, endowments, insurance companies, from investing their money as they see fit, without any accountability for bad assessments, and on which grounds such prevention would be legal. Hence, it has been emphasized by many that the new circumstances, without investment risk mitigation, will produce a lower return. On the other hand, current events, or to be more specific, problems in the Serbian investment fund industry, are still tied to the juvenile obstacles facing this financial sector branch. In 2006, USAID’s Serbia Economic Growth project provided a formidable amount of help to the Serbian Government to adopt a modern legal framework for investment funds. Nevertheless, many local asset managers were not up to the task and decided to invest in assets at peak historical prices. Currently, twenty local investment funds hold not more than EUR 10 million of assets under management.

28 Guide to the Banking & Financial Sector in Serbia 2010

We are witnessing a trend toward safer investment strategies, as well as investment outside of Serbia. Both due to the crisis and low investment possibilities, an interest in asset preservation strategy has been building since mid 2008, ushering in the first money market funds. These funds have been introduced simultaneously with the intensified issuance of T-Bills, which have drawn an increased interest. For the first time, money market funds are profiting for investors, and more symbolically, are benefiting this financial area in the making. Two or three years ago the problem was bad timing, but now it is clear that the exchange rate fluctuation has become and remains the obstacle for profitable and predictable investments, as well as for the realistic evaluation of portfolio performance. Diversification, in the truest sense of the word, implies a multifarious exposure outside national borders, and better, over-seas exposure. Volatility is becoming a decisive factor for the financial markets, creating a business environment that exhausts the nervous and impatient, transferring their money to those who are not. The difference between government and privately issued securities is fading away, becoming relative, which raises the value of the right information, speed and knowledge.

Currently, twenty local investment funds hold not more than EUR 10 million of assets under management

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„INTERNATIONAL BUSINESS SECTOR IN SERBIA 2010“ June 4, 2010. Crystal Ballroom, Hyatt Regency, Belgrade

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Guide to the Banking & Financial Sector in Serbia 2010 29

PENSION FUNDS

Safety Before Proﬁt By Danijela JOVANOVIĆ

en in Serbia decide more often than women to save for retirement. However, the female population, although less numerous in the overall membership of private pension funds in Serbia, tends to be more generous: women pay their contributions more regularly than men and are a higher share of active users. According to data of the National Bank of Serbia, investing in the future through private pension funds in 2009 was profitable. Last year voluntary pension funds had an income of 15.04%. By the end of 2009, the net assets of these funds amounted to 7,188 billion dinars. “The year of 2009 was much more favorable for the voluntary pension fund industry than the previous one. In 2009, all funds had a two-digit rise in income, and according to this parameter, one could say that the crisis is behind us,” says director of Delta Generali Voluntary Pension Fund Natasa Marjanovic in an interview with Serbian Banking Guide. Despite such good results, the entire industry had serious problems in acquiring new membership. This is the segment where the consequences of the crisis are still felt, and at the same time it is the biggest challenge that the companies managing these funds are currently facing. “The problem is recruiting new membership,” Marjanovic points out. “This pertains to long-term savings, which, considering the distribution ratio of employees to pensioners is the only one that guarantees a decent income during retirement and has proved resistant to the financial crisis. The psychological effect of the crisis influenced people to simply fail to decide to start saving in voluntary pension funds. Furthermore, the lack of high

The income of voluntary pension funds in Serbia in 2009 was over 15% quality, especially debt securities on the Serbian capital market, is still significant. This problem greatly limits further development of this industry. Moreover, the lack of further steps in the reform of the entire system of pension insurance could be a potential problem.” Snezana Ristanovic, director of the society for the management of the voluntary pension fund “Raiffeisen FUTURE”, confirms that a reform is necessary. ”The announced changes and amendments

30 Guide to the Banking & Financial Sector in Serbia 2010

Despite such good results, the entire industry had serious problems in acquiring new membership

to the law on pension funds and pension plans - changing the age limit for withdrawing funds from 53 to 58 years and limiting one-time withdrawal of funds to 30% of funds collected - will encourage long-term investment and higher profit for members of private pension funds,” Snezana Ristanovic claims. She points out that the main reason for introducing changes is to de-stimulate the withdrawal of assets from these funds. “If the state is already granting important tax benefits for this type of saving, then it is logical that these funds should be used when citizens are no longer able to work, and not to cover one-time expenses,” Snezana Ristanovic says, pointing out that the proposed amendments will pertain only to people who become members of the fund after the amendments to the law come into power. New rules do not apply to those who already have contracts under

During the last trimester of 2009, the assets of the funds increased by 54.9% compared to the same period the year before Natasa Marjanovic, Director of Delta Generali Voluntary Pension Fund the current law. Natasa Marjanovic does not believe that this change of age limit is a substantial one. “The proposed new solution which pertains to moving the age limit for the use of assets accumulated in the voluntary pension fund from 53 to 58 years should not significantly affect members of pension funds. Therefore, I don’t consider this to be a substantial change,” Marjanovic says, explaining that “The voluntary pension fund is primarily a product intended for companies, that is, the majority of members are employees whose employers are paying their voluntary pension contributions. Bearing in mind that it is natural for members to start using their additional pension at the same time as their government pension, not even this limit of 58 years will be a decisive factor for the majority of our members to start using their funds. In addition to this, it is important to point out that the longer, the greater, the more regular the contributions to the voluntary pension fund, the greater the accumulated sum and consequently the higher the pension.” The Director of Delta Generali pension fund points out that the change of management compensation, from the current 2% on the annual level, to 1.25% when the assets of all funds reach 0.75% of the GDP, will signify even lower expenses for members of the fund. “At this time, the assets of all funds

amount to around 0.23% of the GDP. This means that, ceteris paribus, the assets should triple in order to implement the lower rate for calculating management compensation. With the current growth rate, this could take place between three and five years from now, but this certainly depends on the GDP growth rate in our country,” Marjanovic says.

Plans for 2010. “New companies for managing voluntary pension funds will probably not appear this year. During the first half of 2010, the number of these companies decreased because two companies merged into one. Recruitment of new members will remain difficult, but the focus of voluntary pension funds will remain on bringing the product closer to the highest possible number of both employers and citizens,” Marjanovic points out, adding, “Our goal as conservative institutional investors, is to secure a decent income for our members in their old age, after several dozen years, when the positive effects of income on income become particularly pronounced. This longterm goal will, of course, not change.” However, the question is raised of the perspective of private pension insurance in Serbia, in view of the fact that the purchasing power of citizens remains low, as well as the level of knowledge on this issue; furthermore, the economic conditions are unfavorable and the capital market is still undeveloped. “Voluntary pension funds are long-term, conservative investors and their first priority when investing the funds of their members is investment safety, followed by profit, which makes them more resistant to

Snezana Ristanovic, Director of the society for the management of “Raiffeisen FUTURE” crisis,” Marjanovic points out. “Bearing in mind the dismal demographic picture, as well as the constantly growing deficit of the state pension system, voluntary pension funds are becoming a necessity if people want to secure a decent income in their old age. Although the financial crisis left a certain mark on the industry of voluntary pension funds both in Serbia and in the region, we believe that this mark is short-lived, because this is indisputably a high-quality product, which will continue to develop, and as the awareness of the necessity for saving money for retirement grows, these funds will take the place in Serbia they already have in developed countries.”

Increase of Assets Currently, there are nine societies for managing private pension funds in Serbia. They manage the assets of 10 private pension funds. During the last trimester of 2009, the assets of the funds increased by 54.9% compared to the same period the year before. According to NBS data, the total of funds that members have invested, after deducting payment charges, amounts to 590 million dinars, while withdrawals amount to 131 million. The FONDex index, the average value of investment units of all funds, marked a 1.74% increase and reached its highest value on December 31st, 2009. At the end of last year, the exact number of individuals who had invested money into private pension funds was 165.224.

Guide to the Banking & Financial Sector in Serbia 2010 31

LEASING NO MAJOR CHANGES ON THE FINANCIAL LEASING MARKET

Higher Proﬁt D

Individual leasing users in Serbia owe a total of seven billion, entrepreneurs just under ﬁve billion and businesses almost 85 billion dinars. By Marica VUKOVIĆ

he shortest description of the situation on the Serbian financial leasing market would be the following – leasing providers financially benefitted more in 2009 than in the year before. Still, for companies in Serbia leasing is

the number-one choice when purchasing a car or a bus. The Serbian economy and its citizens owe just under 100 billion dinars on the account of concluded leasing contracts. On 31st December, 2009, a total of 17 leasing companies were operational in Serbia. Most of them are owned by foreign entities, and only five have owners

32 Guide to the Banking & Financial Sector in Serbia 2010

originating from Serbia. It is easy to notice that foreign-owned banks are the ones that mostly provide financial leasing. Hence, it is no surprise that they secure the funds for financial leasing by obtaining loans from abroad. According to the National Bank of Serbia (NBS), on 31st December, 2009, foreign loans made up 86.2% of total bank liabilities, while financial leasing placements made 75.1% of total assets. As the NBS says, the creditors are mostly the bank founders or legal entities that operate within the same banking group. The profitability of leasing providers went up last

espite the Crisis year due to a slight increase in pre-tax net profits. Higher active interest rates and lower passive interest rates contributed to a significant increase in net interest rate margins. “Due to higher capital and lower liabilities, solvency on the financial leasing market grew, as seen in relevant indicators – the total liabilities are 11.44 times higher than the capital, while the longterm liabilities are 11.22 times higher,” the NBS says. The total pre-tax profit of the financial leasing market stood at 2.054 billion dinars last year, which is 4.3 times higher compared to 2008, when the generated profit was 476 million dinars. “In the observed period, the total expenses were reduced by 42%, while the total revenue went down by 38.3%, which resulted in a higher pre-tax profit share in the overall revenue which went up from 1% to 6.8%”, the annual report compiled by the NBS says. The most important revenue category was the positive exchange rate differences,

The total pre-tax profit of the financial leasing market stood at 2.054 billion dinars last year

WHAT HAS BEEN BOUGHT?

t the end of 2009, just like at the end of 2008, the leasing funds were mostly spent on purchasing freight vehicles, mini-buses and buses, i.e. 39.4% of the total funds. The leasing placements per sector haven’t changed much with the transport and storage sector having the biggest share (29.5%), followed by the processing industry (17.9%), retail sector (14.8%), and agriculture, hunting and forestry (13%), while the share of other sectors is below10%. followed by the interest rate revenue and business revenue. On the expense side, financial expenses, i.e. negative exchange rate differences, had the biggest share, followed by the interest rate expenses and operating expenses.

LEASING USERS The placement structure, per leasing user, hasn’t changed much compared to the year before. Last year, most of the placements were still directed towards legal entities (87.1%), while physical persons participated in overall placements with 5.9%. The legal entities’ share in total placements went up, while the share of physical persons in the placements went down. If we are talking about individual leasing users, the latest data from the Association of Banks in Serbia’s Credit Bureau shows that 13,011 persons concluded a total of 13,526 leasing contracts (by 30th April, 2010). So, individual leasing users

DROP IN BALANCE ASSETS

n 31st December, 2009, leasing providers had 111.3 billion dinars worth of balance assets, which is 15.5% of the banking sector’s balance assets. However, if we compare this data to 2008, we can clearly see that the balance assets of leasing providers were reduced by 9.2%, while, in the same period, the banking sector’s balance assets went up by 21.6%.

in Serbia currently owe just over 7 billion dinars. Entrepreneurs concluded a total of 6,262 leasing contracts and they owe 4.8 billion dinars. When it comes to companies, 12,558 of them concluded 43,556 contracts and they owe a total of 84.9 billion dinars. Cumulatively, all three categories owe a total of 97 billion dinars on the account of purchasing equipment and vehicles via leasing.

WHAT IS NOT BEING PAID? During 2009, the value of returned lease items stood at 2.7 billion dinars, which, together with the balance from previous years, amounted to over three billion dinars, i.e. 3.6% of the portfolio and 34% of the capital. “Out of the total returned lease items, 20.4% of them were the subject of new financial leasing arrangements, 30% were sold, while 50% are still uncommitted”, says the National Bank of Serbia, which supervises the financial leasing arrangements in Serbia. At the end of 2009, the total value of returned lease items stood at 1.5 billion dinars, which is 1.8% of the portfolio or 16.8% of total capital. At the end of 2008, the overall value of returned lease items made 0.4% of the portfolio and 5.5% of the capital.

Guide to the Banking & Financial Sector in Serbia 2010 33

banks’ core data AGROINDUSTRIJSKO KOMERCIJALNA BANKA AIK BANKA AD NIŠ MAIN INFO: Nikole Pašića 42, 18000 Niš / Phone: +381-18-507-400 / Fax:+381 - 18-523-538 E-mail: kabinet@aikbanka.rs / www.aikbanka.co.rs ID: 6876366 / SWIFT: AIKBRS22 / Staff: 478 /Auditor: DELOITTE DOO BEOGRAD

MAIN SHAREHOLDERS (OVER 5%) ATEBANK 20.84% UNIKREDITBANK BANK AUSTRIA AG 6.93% MEMBERS OF THE MANAGEMENT BOARD Ljubiša Jovanović, President of the Management Board Miodrag Kostić, Christos Stokas, Jovan Gorčić, indepedent member, Đorđe Đukić, indepedent member

EXECUTIVE BOARD Jelica Marjanović, Chairman of the Executive Board Vladan Đorđević ORGANIZATIONAL STRUCTURE MAIN AFFILIATES 1 AFFILIATES 23 BRANCHES 37 COUNTERS 24

ALPHA BANK SRBIJA A.D., BEOGRAD MAIN INFO: Kralja Milana 11, 11000 Belgrade / Phone: 381-11-3234-931,3235-931 / Fax: 38111- 3246 840; 32 47 581 / E-mail: gm-office@alphabankserbia.com www.alphabankserbia.com ID: 07736681 / SWIFT: JUBARSBG / Staff: cca. 1494 / Auditor: KPMG doo Belgrade

MAIN SHAREHOLDERS (OVER 5%) ALPHA BANK A.E. 100.00%

Panagiotis H. Vlasiadis, Chairman of the Executive Board 34 Guide to the Banking & Financial Sector in Serbia 2010

MEMBERS OF THE MANAGEMENT BOARD Spyros N.Filaretos, President of the Management Board, Lazaros Papagaryfallou, Georgios N. Kontos, Nebojša Savić, indepedent member, Ilija Dražić, indepedent member, Charalampos E. Papanayotou

EXECUTIVE BOARD Panagiotis H. Vlasiadis, Chairman of the Executive Board Veselinka Milošević, Minas Athanasiadis, Periklis Drougkas ORGANIZATIONAL STRUCTURE AFFILIATES 24 BRANCHES 113 COUNTERS 27

source: NBS

BANCA INTESA AKCIONARSKO DRUŠTVO BEOGRAD MAIN INFO: Milentija Popovića 7b, 11000 Belgrade / Phone: +381 – 11- 201 12 00 / Fax: +38111-201-1207 / E-mail: kabinet@bancaintesabeograd.com / www.bancaintesabeograd.com / ID: 7759231 / SWIFT: DBDBCSBG / Staff: 3009 /Auditor: BDO BC Excel, Beograd MAIN SHAREHOLDERS (OVER 5%) Intesa holding international 77.79% Intesa Sanpaolo SPA 15.21% IFC 7.00%

Gyorgy Suranyi, President xxx of the Management Board

Draginja Đurić, Presidentxxx of the Executive Board

MEMBERS OF THE MANAGEMENT BOARD Gyorgy Suranyi, President of the Management Board Massimo Pierdicchi, Paolo Grandi, Adriano Arietti - indepedent member, Dr. Nevenka Žarkić-Joksimović -

indepedent member, Beata Kissne Foldi EXECUTIVE BOARD Draginja Đurić, Chairman of the Executive Board Giancarlo Miranda, Dejan Tešić, Darko Popović, Dragica Mihajlović ORGANIZATIONAL STRUCTURE BRANCHES 206 COUNTERS 2

BANKA POŠTANSKA ŠTEDIONICA AD BEOGRAD MAIN INFO: Kraljice Marije 3, 11120 Belgrade / Phone: +381-11-2020 292/ Fax: +381-11-3376 777 / E-mail: razvoj@posted.co.rs / www.posted.co.rs ID: 07004893 / SWIFT: SBPOCSBG / Staff: 1410 / Auditor: KPMG DOO BEOGRAD MAIN SHAREHOLDERS (OVER 5%) Republika Srbija 63.72% JP PTT Saobraćaja Srbija 32.28% MEMBERS OF THE MANAGEMENT BOARD Miloš Miščević, President of the Management Board, Dragan Radulović - indepedent member, Milutin Đurić - indepedent member, Dragan Milosavljević, Smiljka Stojanović, Dragana Kalinović

EXECUTIVE BOARD Srđan Cekić, Chairman of the Executive Board Jelena Mijailović-Milojević, Jasminka Bošnjak ORGANIZATIONAL STRUCTURE AFFILIATES 4 BRANCHES 41 COUNTERS 1

Guide to the Banking & Financial Sector in Serbia 2010 35

banks’ core data CREDY BANKA AD KRAGUJEVAC MAIN INFO: Kralja Petra I 26, 34000 Kragujevac / Phone: 381-34-335-617 / Fax: 381-34-331370,336-175 / E-mail: info@credybanka.com / www.credybanka.com ID: 07654812 / SWIFT: kragcs22 / Staff: 710 / Auditor: BDO DOO BEOGRAD

MAIN SHAREHOLDERS (OVER 5%) NOVA KBM D.D. MARIBOR 55.09% Republika Srbija 24.77%

Matijaž Kovačoč, President of the Management Board

Milovan Bošković, Chairman of the Executive Board

MEMBERS OF THE MANAGEMENT BOARD Matijaž Kovačoč, President of the Management Board Dušan Jovanović, Branko Žerdoner - indepedent member,Milorad Bjelopetrović, Dobrosav Milovanović indepedent member

EXECUTIVE BOARD Milovan Bošković, Chairman of the Executive Board Jovanka Mačužić ORGANIZATIONAL STRUCTURE AFFILIATES 18 BRANCHES 30 AGENCIES 4 OUTLETS 2 COUNTERS 38

ČAČANSKA BANKA A.D. ČAČAK MAIN INFO: Pivarska 1, 32000 ČAČAK / Phone: 381-32-302-203 / Fax: 381-32-225 048, / E-mail: office@cacanskabanka.co.rs / www.cacanskabanka.co.rs ID: 07601093 / SWIFT: CABARS22 / Staff: 395 / Auditor: KPMG DOO Belgrade

MAIN SHAREHOLDERS Republika Srbija: 38.81% European bank for reconstruction and development London 24.97%

Ljubiša Sudimac, President of the Management Board

Dragan Jovanović, President of the Executive Board

36 Guide to the Banking & Financial Sector in Serbia 2010

MEMBERS OF THE MANAGEMENT BOARD Ljubiša Sudimac, President of the Management Board, Vera Leko, PhD Zoran Njegovan, PhD, Radovan Mrvošević, Andrzej Witak,

EXECUTIVE BOARD Dragan Jovanović, Chairman of the Executive Board Aleksandar Ćalović, Vice President of the Executive Board Milanka Mandić, ORGANIZATIONAL STRUCTURE BRANCHES 15 SUB-BRANCHES 13 COUNTERS 5

source: NBS

ERSTE BANK A.D. NOVI SAD MAIN INFO: Bulevar oslobođenja 5, 21000 Novi Sad / Phone: 381-21- 480 9404 / Fax: 381-21489-0651 / E-mail: info@erstebank.rs; www.erstebank.rs ID: 08063818 / SWIFT: GIBARS22 / Staff: 964 Auditor: ERNST&YOUNG DOO BEOGRAD

Andreas Klingen, President of the Managment Board

Slavko Carić, Chairman of the Executive Board

MAIN SHAREHOLDERS (OVER 5%) EGB CEPS HOLDING Gmbh, 74,00% Steiermärkische Bank und Sparkassen AG 26.00%

EXECUTIVE BOARD Slavko Carić, Chairman of the Executive Board Jasna Terzić, Suzan Tanriyar

MEMBERS OF THE MANAGEMENT BOARD Andreas Klingen, President of the Managment Board, Franc Kerber, Ernst-Gideon Loudon – independant member, Aleksandar Vlahović – independant member, Damir Bronić

ORGANIZATIONAL STRUCTURE COMMERCIAL CENTER 3 PROFIT CENTAR 12 BUSINESS CENTER 7 AFFILIATES 47 BRANCHES 12 CENTER HOR HOUSE LOANS 2

EUROBANK EFG AD BEOGRAD MAIN INFO: Vuka Karadžića 10, 11000 Belgrade / Phone: Euro PHONE 0800-1111-44/ Fax:+ 381-11-333-23-38/ E-mail: office@eurobankefg.rs / www.eurobankefg.rs / ID: 17171178 / SWIFT: EFGBRSBG / Staff: 1583 / Auditor: PricewaterhouseCoopers doo Beograd

MAIN SHAREHOLDERS (OVER 5%) Eurobank EFG Ergasias Athens 55.21% EFG NEW EUROPE HOLDING B.V.AMSTERDAM 42.74%

Filippos Karamanolis, Chairman of the Executive Board

MEMBERS OF THE MANAGEMENT BOARD Theodoros Karakasis, President of the Management Board, Members:, Evvagelos Kavvalos, Nikolaos Aliprantis, Stavros Ioannou, Piergiorgio Pradelli

Indepedent members: Slobodan Slović, Angelos Tsichrintzis, EXECUTIVE BOARD Filippos Karamanolis, Chairman of the Executive Board, Nataša Kovačević, Slavica Pavlović, Danilo Đurović, Vuk Zečević, Georgios Michalakopoulos, Antonios Chatzistamatiou ORGANIZATIONAL STRUCTURE BRANCHES 119

Guide to the Banking & Financial Sector in Serbia 2010 37

banks’ core data FINDOMESTIC BANKA AD BEOGRAD MAIN INFO: Kosovska 10, 11000 Belgrade / Phone: 381-11-333 6000 / Fax: 381-3331 775, 3331 796 / E-mail: office@findomestic.rs www.findomestic.rs / ID: 17076841 / SWIFT: FIDMRSBG / Staff: 295 / Auditor: BDO BC Excel doo Beograd

MAIN SHAREHOLDERS (OVER 5%) FINDOMESTIC BANCA SPA FIRENZE 100.00%

Chiaffredo Salomone, President of the Management Board

Eric Blanchetete, Chairman of the Executive Board

MEMBERS OF THE MANAGEMENT BOARD Chiaffredo Salomone, President of the Management Board Carlo Fioravanti, Marco Pantaleoni, Yves Christian Henri Gaudin, Virgilio Belli, Aleksandar Sekulović indepedent member, Daniel Maurice

Henri Astraud EXECUTIVE BOARD Eric Blanchetete, Chairman of the Executive Board Vladimir Marković, Angelo Scatigna, Jean Bernard Verneyre ORGANIZATIONAL STRUCTURE BRANCHES 22 COUNTERS 45

HYPO ALPE-ADRIA-BANK A.D. BEOGRAD MAIN INFO: Bulevar Mihajla Pupina 6, 11000 Belgrade / Phone: +381-11-222-6000 / Fax: +38111-222-6555 / E-mail: office@hypo-alpe-adria.rs / www.hypo-alpe-adria.rs / ID: 7726716 / SWIFT: haabrsbg / Staff: 851 / Auditor: Price Waterhouse Coopers

MAIN SHAREHOLDERS (OVER 5%) HYPO ALPE-ADRIA-BANK INTERNATIONAL AG Klagenfurt 99.92%

Vladimir Čupić, Chairman of the Executive Board

38 Guide to the Banking & Financial Sector in Serbia 2010

MEMBERS OF THE MANAGEMENT BOARD Andreas Dörhöfer, President of the Management Board Anton Knett , Dr. Christoph Schasche - indepedent member, Dr. Dragan Ćurčin - indepedent member,

Wolfgang Peter, Božidar Špan EXECUTIVE BOARD Vladimir Čupić, Chairman of the Executive Board Zoran Vojnović - Vice President, Rade Vojnović, Mirko Španović ORGANIZATIONAL STRUCTURE REGIONAL AFFILIATES 3 BRANCHES 23 SUB-BRANCHES 18

source: NBS

JUBMES BANKA A.D. BEOGRAD MAIN INFO: Bulevar Zorana Đinđića 121, 11070 Belgrade / Phone: 381-11- 311-52-70/ Fax: 381-11-311-02-17 / E-mail: jubmes@jubmes.rs / www.jubmes.rs / ID: 07074433 / SWIFT: JMBNRSBG / Staff: 115 / Auditor: DELOITTE DOO Belgrade

MAIN SHAREHOLDERS (OVER 5%) Republika Srbija 21.17% Beobanka a.d. Beograd, u stečaju 6.98% SFRJ 5.61% Hypo kastodi 5.10%

Milan Stefanović, Chairman of the Executive Board

MEMBERS OF THE MANAGEMENT BOARD Tanja Đelić, President of the Managment Board Dr Dejan Erić, Dragiša Vučković,

Branka Mijanović, indepedent member, Dr Miroslav Paunović, indepedent member EXECUTIVE BOARD Milan Stefanović, Chairman of the Executive Board Slobodan Lečić, Jasna ČupićPopović, Biljana Milosavljević, Zlatko Hašimbegović

“JUGOBANKA JUGBANKA” A.D. KOSOVSKA MITROVICA MAIN INFO: Kralja Petra I 165, 28000 Kosovska Mitrovica / Phone: + 381-28-425-455 / Fax: +381-28-425-452 / E-mail: jugbankakm@yahoo.com / www.jugbanka.com / ID: 09023321 / SWIFT: JJKMRS21 / Staff: 76 / Auditor: MGI Beograd MAIN SHAREHOLDERS (OVER 5%) Jugobanka a.d. Beograd, u stečaju 51.25% Fond za razvoj RS-Beograd 30.63% Beobanka a.d. Beograd, u stečaju 10.00%

Draško Knežević, Chairman of the Executive Board

MEMBERS OF THE MANAGEMENT BOARD Zvonko Burić, President of the Managment Board Milomir Jevtić, Dragan Milenković,

Zoran Jakšić, indepedent member, Milosava Jovanović, indepedent member EXECUTIVE BOARD Draško Knežević, Chairman of the Executive Board Zlatomir Arsić, Ljubiša Popović ORGANIZATIONAL STRUCTURE BRANCHES 8 COUNTERS 9

Guide to the Banking & Financial Sector in Serbia 2010 39

banks’ core data KBC BANKA AD BEOGRAD MAIN INFO: Požeška 65b, 11030 Belgrade / Phone: +381-11-30-50-300 / Fax: +381-11-35-40930 / E-mail: office@kbcbanka.rs / www.kbcbanka.rs / ID: 17138669 / SWIFT: AAAARSBG / Staff: 637 / Auditor: ERNST&YOUNG DOO BEOGRAD

MAIN SHAREHOLDERS (OVER 5%) KBC INSURANCE NV 100.00% MEMBERS OF THE MANAGEMENT BOARD Dirk Mampaey, President of the Managment Board Ronny Delchambre, Rita Paula Clementina Docx, dr Miroljub Hadžić indepedent member, Milorad Filipović - indepedent member

Avram Milenković, President of the Executive Board

EXECUTIVE BOARD Avram Milenković, Chairman of the Executive Board Aleš Pospišil, Francis J. O. Renard ORGANIZATIONAL STRUCTURE AFFILIATES 19 BRANCHES 69

KOMERCIJALNA BANKA AD BEOGRAD MAIN INFO: Svetog Save 14, 11000 Belgrade / Phone: +381-11-308-01-00, 308-01-50 / Fax: +381-11-344-13-35, 344 2372 / E-mail: posta@kombank.com / www.kombank.com / ID: 07737068 / SWIFT: KOBBCSBG / Staff: 3147 / Auditor: KPMG DOO BEOGRAD

Vesna Džinić, President of the Managment Board

Ivica Smolić, President of the Executive Board

40 Guide to the Banking & Financial Sector in Serbia 2010

MAIN SHAREHOLDERS (OVER 5%) Republika Srbija 42.59% European bank for reconstruction and development 25.00% MEMBERS OF THE MANAGEMENT BOARD Vesna Džinić, President of the Managment Board, Anka Gajić, Dr Miroslav Todorović, Franz Leitner, Dragica Pilipović-Chaffey, Mr Mirko Petrović -indepedent member, Dr Boško Živković, indepedent member

EXECUTIVE BOARD Ivica Smolić, Chairman of the Executive Board Dragan Santovac, Lidija Sklopić, Andrijana Milanović, Slavica Đorđević ORGANIZATIONAL STRUCTURE MAIN AFFILIATES 2 AFFILIATES 25 BRANCHES 262 COUNTERS 1

source: NBS

KOSOVSKO METOHIJSKA BANKA AD ZVEČAN MAIN INFO: Kralja Milutina bb, 38227 Zvečan / Phone: 381-28-664-730, 381-11-3240-285 / Fax: 381-28-664-735 / E-mail: office@kosmet-banka.com / www.kosmet-banka.com / ID: 09081488 / SWIFT: KMEBYU21 / Staff: 91 / Auditor: MOORE STEPHENS REVIZIJA I RACUNOVODSVO DOO BEOGRAD

MAIN SHAREHOLDERS (OVER 5%) PKB-Orvin-Orahovac 2.51% Klin.bol.cen. Priština 2.09% DP “Trepča” bat. Gnjilane 1.92% Galenika broker a.d. Zemun 1.78% Semenarstvo dd Klina 1.76% MEMBERS OF THE MANAGEMENT BOARD Zoran Stanišić, President of the Managment Board, Dragan Radaković, Milovan Stanojević, Radmila Anđelković - indepedent member,

Radenko Luković - indepedent member, Ljubiša Golubović indepedent member, Branislav Cvejić - indepedent member EXECUTIVE BOARD Dimitrije Ljiljak, Chairman of the Executive Board Sonja Lukić, Dobrija Radović ORGANIZATIONAL STRUCTURE OUTLETS 14 BRANCHES 1 COUNTERS 1

“MARFIN BANK” AD BEOGRAD MAIN INFO: Dalmatinska 22, 11000 Belgrade / Phone: +381-11/330-63-00 / Fax: +381-11/32414-48 / E-mail: office@marfinbank.rs / www.marfinbank.rs / ID: 07534183 / SWIFT: LIKIRSBG / Staff: 464 / Auditor: “Ernst&Young” d.o.o.

MAIN SHAREHOLDERS (OVER 5%) MARFIN POPULAR BANK PUBLIC Co Ltd 97.22% MEMBERS OF THE MANAGEMENT BOARD Christos J. Stylianides, President of the Managment Board Kyriakos Mageiras, Panayiotis C. Kounnis, Zoran Radovanović, indepedent member, Miroslava Milenović, indepedent member

EXECUTIVE BOARD Rodoula Hadjikyriacou, Chairman of the Executive Board Panicos Eracleous, Vladan Manić, Borislav Strugarević, Rodoula Christodoulides, Alexios Gkegkios, Andreas Moyseos ORGANIZATIONAL STRUCTURE AFFILIATES 28 BRANCHES 2

Guide to the Banking & Financial Sector in Serbia 2010 41

banks’ core data CRÉDIT AGRICOLE BANKA SRBIJA, AKCIONARSKO DRUŠTVO, NOVI SAD MAIN INFO: Braće Ribnikar 4-6, 21000 Novi Sad / Phone: +381-21-4876-876 / Fax: +381-214876-976 / E-mail: info@creditagricole.rs/ www.creditagricole.rs / ID: 08277931 / SWIFT: MEBA RS 22 / Staff: 1002 / Auditor: PricewaterhouseCoopers doo Beograd MAIN SHAREHOLDERS (OVER 5%) CREDIT AGRICOLE S.A. 100.00%

Francois-Eduard Drion, Chairman of the Executive Board

MEMBERS OF THE MANAGEMENT BOARD Bernard De Wit, President of the Managment Board François Pinchon, Thierry Girard, Guglielmo Benini, Pierre Finas, indepedent member, Miloš Švarc, indepedent member, Zoran Drakulić, indepedent member, François Mace,

Predrag Vraneš - indepedent member EXECUTIVE BOARD Francois-Eduard Drion, Chairman of the Executive Board Jean - Paul Pinchon, Marija MarićMitrović, Benoit Destoppeleire ORGANIZATIONAL STRUCTURE MAIN AFFILIATES 1 REGIONAL AFFILIATES 6 AFFILIATES 83

“METALS-BANKA” A.D.NOVI SAD (RAZVOJNA BANKA VOJVODINE) MAIN INFO: Stražiloska 2, 21000 Novi Sad / Phone: +381-21-488-44-00 / Fax: 381-21-488-45-05 / E-mail: info@metals-banka.rs / www.metals-banka.rs / ID: 08212538 / SWIFT: MBSORS22 / Staff: 669 / Auditor: DELOITTE DOO BEOGRAD MAIN SHAREHOLDERS (OVER 5%) Izvršno veće AP Vojvodine 61.87% “ DDOR Novi Sad”A.D. 10.10% MANAGEMENT BOARD Ljiljana Sredojev - President of the Management Board, Stevan Šogorov - independent member, Christian Otto Neu, Ivan Ferko , Giulio Baseggio - independent member

42 Guide to the Banking & Financial Sector in Serbia 2010

EXECUTIVE BOARD Srđan Petrović - Chairman of the Executive Board, Ljiljana Đukić, Jelena Kokelj-Protić ORGANIZATIONAL STRUCTURE MAIN AFFILIATES 10 AFFILIATES 36

source: NBS

MOSKOVSKA BANKA A.D BEOGRAD MAIN INFO: Karadjordjeva 89, 11000 Beograd / Phone: +381-11-3952-200 / Fax: +381-11-39522-40 / E-mail: office@moskovskabanka.rs / www.moskovskabanka.rs / ID: 20439866 / SWIFT: MBBGRSBG / Staff: 44 / Auditor: BDO d.o.o Beograd

MAIN SHAREHOLDERS (OVER 5%) AKCIONARSKA KOMERCIJALNA BANKA-MOSKOVSKA BANKA 100,00% MEMBERS OF THE BOARD OF DIRECTORS Borodin, Andrei F., President of the Management Board Sytnikov Alexei V., Milutin Nikolic independent member, Gorbatsevich Pavel I., Mario Frleta - independent member

Vladimir Zečar, Chairman of the Executive Board

EXECUTIVE BOARD Vladimir Zečar, Chairman of the Executive Board Slaviša Đorđević ORGANISATIONAL STRUCTURE BRANCHES: 1

NLB BANKA AD BEOGRAD MAIN INFO: Bulevar Mihaila Pupina 165v, 11070 Belgrade / Phone: +381-11-2225-100 / Fax: +381-11-2225-194 / E-mail: info@nlb.rs / www.nlb.rs / ID: 08250499 / SWIFT: CONARS22 / Staff: 688 / Auditor: PRICE WATERHOUSE COOPERS DOO BEOGRAD

MAIN SHAREHOLDERS (OVER 5%) Nova Ljubljanska banka 99.98063%

Andrej Hazabent, President of the Managment Board

Zoran Đurović, Chairman of the Executive Board

MEMBERS OF THE MANAGEMENT BOARD Andrej Hazabent, President of the Managment Board - indepedent member Milan Marinič - indepedent member, Matej Narat- indepedent member, Petar Savatović - indepedent member, Anton Ribnikar

EXECUTIVE BOARD Zoran Đurović, Chairman of the Executive Board Boris Završnik, Srđan Brajović, Branko Kobal ORGANIZATIONAL STRUCTURE AFFILIATES 16 BRANCHES 55 AGENCIES 15

Guide to the Banking & Financial Sector in Serbia 2010 43

banks’ core data OPPORTUNITY BANKA A.D. NOVI SAD MAIN INFO: Bulevar oslobođenja 2A , 21000 Novi Sad / Phone: +381-21 - 489-31-11 / Fax: +381-21 - 489-31-23 / E-mail: office@obs.rs / www.obs.rs / ID: 08761132 / SWIFT: OPPBRS22 / Staff: 151 / Auditor: KPMG Beograd

Keith Flintham, President of the Managment Board

Rodger Voorhies, Chairman of the Executive Board

MAIN SHAREHOLDERS (OVER 5%) OPPORTUNITY TRANSFORMATION INVESTMENTS, INC 63.51% EUROPEAN BANK FOR RECONSTRUCTION AND DEVELOPMENT 19.11% NEDERLANDSE FINANCIERINGSMAATSCHAPPIJ VOOR ONTWIKKELINGSLANDEN N.V. 12.74% MEMBERS OF THE MANAGEMENT BOARD Keith Flintham, President of the

Managment Board Florian Grohs, Stacie Schrader, Radmila Grozdanić - indepedent member, Karel Rene Jacobus de Waala, Kenneth D. Vander Weele EXECUTIVE BOARD Rodger Voorhies, Chairman of the Executive Board, Dragan Gojković, Vladimir Vukotić, Vitomir Stamenković ORGANIZATIONAL STRUCTURE AFFILIATES: 5 OFFICE: 13

OTP BANKA SRBIJA A.D. NOVI SAD MAIN INFO: Bulevar oslobođenja 80, 21000 Novi Sad / Phone: +381-21-48-000-00 / Fax: +38121-48-000-32 / E-mail: office@otpbanka.rs / www.otpbanka.rs / ID: 08603537 / SWIFT: OTPVRS22 / Staff: 768 / Auditor: DELOITTE DOO BEOGRAD

MAIN SHAREHOLDERS (OVER 5%) OTP BANK 91.43% HOME ART & SALES SERVICES A.G. 4.03%

Auth Henrik, President of the Executive Board

44 Guide to the Banking & Financial Sector in Serbia 2010

MEMBERS OF THE MANAGEMENT BOARD Auth Henrik, President of the Managment Board Hargitainé Várhegyi Teréz, Farago Csaba Attila - indepedent member, Dušan Dobromirov - indepedent

member, Vlatko Sekulović indepedent member EXECUTIVE BOARD Szabolcs Horváth, Chairman of the Executive Board Móczár Sándor, Laura Fodor Agošton, Attila Kozsik, Lilla Farsang ORGANIZATIONAL STRUCTURE AFFILIATES: 51

source: NBS

PIRAEUS BANK AKCIONARSKO DRUŠTVO BEOGRAD MAIN INFO: 11070 Novi Beograd, Milentija Popovića 5b / Phone: +381-11-3024-000 / Fax: 38111-3024-040 / E-mail: banka@piraeusbank.rs / www.piraeusbank.rs / ID: 17082990 / SWIFT: PIRBRSBG / Staff: 557 / Auditor: MOORE STEPHENS MAIN SHAREHOLDERS (OVER 5%) PIRAEUS BANK SA PIREUS 100.00%

Stavros Lekkakos, President of the Managment Board

Neoclis Neocleous, Chairman of the Executive Board

MEMBERS OF THE MANAGEMENT BOARD Stavros Lekkakos, President of the Managment Board Ilias Milis, George Mantakas, Adrianos Evangelos Kompopoulos, Vasiliki Oiconomou, Sotirios Syrmakezis- indepedent member, Konstantinos Georgiou - indepedent member,

Aleksandra Jovanović - indepedent member, Georgios Liakopoulos - indepedent member, Branimir Marković - indepedent member EXECUTIVE BOARD Neoclis Neocleous, Chairman of the Executive Board Konstantinos Vagiotis, Dimitrios Kariotis, Dušan Milinković ORGANIZATIONAL STRUCTURE AFFILIATES 47 COUNTERS 1

POLJOPRIVREDNA BANKA AGROBANKA A.D. BEOGRAD MAIN INFO: Sremska 3-5, 11000 Belgrade / Phone: +381-11-2637-622 / Fax: +381-11-328-1408 / E-mail: dusan.antonic@agrobanka.rs / www.agrobanka.rs / ID: 7564856 / SWIFT: AGRLRSBG / Staff: 851 / Auditor: Deloitte DOO Beograd MAIN SHAREHOLDERS ( OVER 5%) Republika Srbija 20,07% Hypo Kastodi 4 7.45 % Raiffeisen Zentralbank 5.56 %

Rajko Latinović, President of the Management Board

Mr Dušan Antonić, Chairman of the Executive Board

MEMBERS OF THE MANAGEMENT BOARD Rajko Latinović, President of the Management Board Vera Mihatovič, Živojin Plavšić, Dr. Danilo Šuković - independent member, Dr. Mirko Vasiljević

- independent member, Dr. Marko Backović, independent member, Aleksandar Ilić, EXECUTIVE BOARD Mr Dušan Antonić, Chairman of the Executive Board Branislav Pešić, Slavoljub Korićanac, Nikola Aranđelović, Bojan Zarić ORGANISATIONAL STRUCTURE AFFILIATES 15 BRANCHES 100 COUNTERS 24

Guide to the Banking & Financial Sector in Serbia 2010 45

banks’ core data PRIVREDNA BANKA A.D., PANČEVO MAIN INFO: Trg slobode br. 2-6, 26000 Pančevo / Phone: +381-13-344-555, 305-700 / Fax: +381-13- 343-050 / E-mail: info@pbp.rs / www.pbp.rs / ID: 8222274 / SWIFT: PBPARS22 / Staff: 301 / Auditor: MOORE STEPHENS revizija i računovodstvo doo Beograd

MAIN SHAREHOLDERS (OVER 5%) Republika Srbija 92.98% MEMBERS OF THE MANAGEMENT BOARD Nenad Urošević, President of the Managment Board Nadica Mihailović, Marija Pantelić, Vesna Đurić - indepedent member, Marija Mitić - indepedent member

EXECUTIVE BOARD Snežana Munić, Chairman of the Executive Board Svetlana Kavaja, Nenad Pejčić ORGANIZATIONAL STRUCTURE BRANCHES 7 OUTLETS 5 COUNTERS 3

PRIVREDNA BANKA BEOGRAD AD MAIN INFO: Bulevar kralja Aleksandra 70, 11000 Belgrade / Phone: +381-11-3816-555 / Fax: +381-11-3816-400 / E-mail: office@pbb-banka.com / www.pbb-banka.com / ID: 7051093 / SWIFT: PBBBRSBG / Staff: 398 /Auditor: DELOITTE DOO BEOGRAD

MAIN SHAREHOLDERS (OVER 5%) Republika Srbija 19.41 % Raiffeisen Zentralbank 5.90 %

Čedo Petrović, President of the Executive Board

46 Guide to the Banking & Financial Sector in Serbia 2010

MEMBERS OF THE MANAGEMENT BOARD Vuk Mrvić, President of the Managment Board Marko Hinić - indepedent member, Tomislav Grahovac, Dr Blagoje Paunović - indepedent member, Zvone Taljat

EXECUTIVE BOARD Čedo Petrović, Chairman of the Executive Board Darko Drinjaković, Mirjana Laković ORGANIZATIONAL STRUCTURE BRANCHES 37 COUNTERS 14

source: NBS

PROCREDIT BANK A.D. BEOGRAD MAIN INFO: Milutina Milankovica 17, 11070 New Belgrade / Phone:+ 381-11-2077-906 / Fax: +381-11-2077-905 / E-mail: info@procreditbank.rs / www.procreditbank.rs / ID: 17335677 / SWIFT: PRCBRSBG / Staff: 1802 / Auditor: PRICEWATERHOUSECOOPERS DOO BEOGRAD

MAIN SHAREHOLDERS (OVER 5%) ProCredit holding a.g.Frankfurt 83.33% Commerzbank AG Frankfurt 16.67%

Dörte Weidig, President of the Management Board

Svetlana Tolmačeva, Chairman of the Executive Board

PRESIDENT OF THE MANAGEMENT BOARD Dörte Weidig, President of the Management Board Dr. Klaus Glaubitt, Dr. Klaus-Peter Zeitinger, Gabriele Heber, Helen Alexander, Goran Živkov,

Rainer Ottenstein EXECUTIVE BOARD Svetlana Tolmačeva, Chairman of the Executive Board Mirjana Garapić-Zakanji, Dejan Janjatović ORGANIZATIONAL STRUCTURE BRANCHES 76

RAIFFEISEN BANKA AD BEOGRAD MAIN INFO: Bulevar Zorana Đinđića 64a 11000 Belgrade / Phone: +381-11-3202-100 / Fax: +381-1111-220-2179 / E-mail: contact@raiffeisenbank.rs / www.raiffeisenbank.rs / ID: 17335600 / SWIFT: RZBSRSBG / Staff: 2020 / Auditor: KPMG DOO BEOGRAD

MAIN SHAREHOLDERS (OVER 5%) Raiffeisen International Bank-Holding AG 100,00%

Dr. Herbert Stepic, President of the Managment Board

Oliver Roegl, Chairman of the Executive Board

MEMBERS OF THE MANAGEMENT BOARD Dr. Herbert Stepic, President of the Managment Board, Peter Lennkh, Heinz Hoedl - indepedent member, Tatjana Aleksić-Weese - indepedent member, Martin Grüll

EXECUTIVE BOARD Oliver Roegl, Chairman of the Executive Board Goran Kesić, Svetozar Šijačić, Zoran Petrović, Nenad Sibinović ORGANIZATIONAL STRUCTURE REGIONAL AFFILIATES 8 BRANCHES 96

Guide to the Banking & Financial Sector in Serbia 2010 47

banks’ core data SOCIETE GENERALE BANKA SRBIJA AD BEOGRAD MAIN INFO: Bulevar Zorana Djindjića 50a/b 11070 Belgrade / Phone: +381-30 -11- 555 / Fax: +381-11-31-32-885 / E-mail: stanovnistvo.sgs@socgen.com, privreda.sgs@socgen. com / knjiga.utisaka@socgen.com / www.societegenerale.rs / ID: 7552335 / SWIFT: SOGYRSBG / Staff: 1205 / Auditor: Deloitte doo Beograd MAIN SHAREHOLDERS (OVER 5%) Societe Generale S.A. 99.99%

Goran Pitić, President of the Board of Directors

Antoine Toussaint, Chairman of the Executive Board

MEMBERS OF THE MANAGEMENT BOARD Goran Pitić, President of the Management Board Jean-Didier Reigner, Jean-Lin Deschanel, Serge Eveille, Costin Grigore Borc - independant member,

EXECUTIVE BOARD Antoine Toussaint, Chairman of the Executive Board Patrick Porcher, Miroslav Rebić, Zdravno Krunić Sonja Miladinovski, Gilles Verseils ORGANIZATIONAL STRUCTURE BRANCHES 88

SRPSKA BANKA A.D. BEOGRAD MAIN INFO: Savska 25, 11000 Belgrade / Phone: +381-11-3607-200, 3607-499 / Fax: 381-112644-854, 2659-492 / E-mail: banka@srpskabanka.rs / www.srpskabanka.rs / ID: 7092288 / SWIFT: SRBNRSBG / Staff: 394 / Auditor: BDO BEOGRAD

MAIN SHAREHOLDERS (OVER 5%) Republika Srbija 96.52% MEMBERS OF THE MANAGEMENT BOARD Sanja Jeftović, President of the Managment Board, Tanja Vasiljević, Ljubiša Đurović, Vidosava Đagić, Milorad Ištvan Ivan Maričić, Chairman of the Executive Board

48 Guide to the Banking & Financial Sector in Serbia 2010

EXECUTIVE BOARD Ivan Maričić, Chairman of the Executive Board Svetislav Trifunović, Ivan Ristić ORGANIZATIONAL STRUCTURE OUTLETS 15 COUNTERS 1

source: NBS

UNICREDIT BANK SRBIJA A.D. BEOGRAD MAIN INFO: Rajićeva 27-29, 11000 Belgrade / Phone: 381-11-32 04 500 / Fax: 381-11-33 42 200 / E-mail: office@unicreditgroup.rs / www.unicreditbank.rs / ID: 17324918 / SWIFT: BACXRSBG / Staff: 907 / Auditor: KPMG DOO BEOGRAD

MAIN SHAREHOLDERS (OVER 5%) UniCredit Bank Austria 100.00%

Erich Hampel, President of the Managment Board

Klaus Priverschek, Chairman of the Executive Board

MEMBERS OF THE MANAGEMENT BOARD Erich Hampel, President of the Managment Board Martin Klauzer - indepedent member, Helmut Haller, Nikola Janković, indepedent member, Boris Begović indepedent member

EXECUTIVE BOARD Klaus Priverschek, Chairman of the Executive Board Branislav Radovanović Vice President of the Executive Board, Bernhard Henhappel ORGANIZATIONAL STRUCTURE BRANCHES 70

UNIVERZAL BANKA A.D. BEOGRAD MAIN INFO: Francuska 29, 11000 Belgrade / Phone: 381-11-3022-801 / Fax: 381-11-3343-017 / E-mail: office@ubbad.rs / www.ubbad.rs / ID: 06031676 / SWIFT: UBBGRSBG / Staff: 481 / Auditor: ERNST&YOUNG DOO BEOGRAD

MAIN SHAREHOLDERS (OVER 5%) MEMBERS OF THE MANAGEMENT BOARD Budimir Jovković, President of the Managment Board Milovan Đurović, Milovan Đurović,Ratko Banović, Radmila Bajević, Miodrag Pavlović indepedent member, Rajko Koprivica - indepedent member, Aleksandar Milojević - indepedent member

EXECUTIVE BOARD Ljiljana Stojanović, Chairman of the Executive Board Miodrag Đukić, Milovan Puzović ORGANIZATIONAL STRUCTURE AFFILIATES 17 BRANCHES 44 COUNTERS 2

Guide to the Banking & Financial Sector in Serbia 2010 49

banks’ core data

source: NBS

VOJVOÐANSKA BANKA AD NOVI SAD MAIN INFO: Trg slobode 7, 21000 Novi Sad / Phone: 381-21-488-66-00, 488-67-35 / Fax: 38121- 662-48-59 / E-mail: infocentar@voban.co.rs / www.voban.co.rs / ID: 08074313 / SWIFT: VBUBCS22 / Staff: 2575 / Auditor: DELOITTE DOO BEOGRAD

MAIN SHAREHOLDERS (OVER 5%) National bank of Greece 100.00% MEMBERS OF THE MANAGEMENT BOARD Agis Leopoulos, President of the Managment Board Anthimos Thomopoulos, Darko Spasić - indepedent member, Milan Parivodić - indepedent member, Demetrios Lefakis

Marinis Stratopoulos, Chairman of the Executive Board

EXECUTIVE BOARD Marinis Stratopoulos, Chairman of the Executive Board Milan Vukičević, Efstratia Fountoukou , Vojislav Lazarević ORGANIZATIONAL STRUCTURE AFFILIATES 69 BRANCHES 75

VOLKSBANK AD BEOGRAD MAIN INFO: Bulevar Mihajla Pupina 165g, 11000 Belgrade / Phone: +381-11/2013-259, Fax: 381-11-20-13-270 / E-mail: info@volksbank.rs / www.volksbank.rs / ID: 07792247 / SWIFT: VBOERSBG / Staff: 471 / Auditor: KPMG d.o.o. BEOGRAD

MAIN SHAREHOLDERS (OVER 5%) Volksbank international AG 96.90%

Udo Szekulics, President of the Managment Board

Axel Hummel, Chairman of the Executive Board

50 Guide to the Banking & Financial Sector in Serbia 2010

MEMBERS OF THE MANAGEMENT BOARD Udo Szekulics, President of the Managment Board Mag. Gerhard Wöber, David Vadnal, Nóra Kocsis, indepedent member, Branislav Ćosić, indepedent member

EXECUTIVE BOARD Axel Hummel, Chairman of the Executive Board Gordana Matić, Klaus Müller, Josef Gröblacher ORGANIZATIONAL STRUCTURE BRANCHES 26

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