Gross profit at Všeobecná Úverová Banka (VÚB) a.s., Slovakia's largest commercial bank, fell sharply in 1996, but bank officials said on May 2 they were satisfied with the result because it included heavy provisioning for its loan portfolio.
VÚB officials said its pre-tax profit fell to 79.6 million Sk in 1996 from 2.91 billion Sk profit in 1995, as it created some 1.5 billion Sk in reserves for classified loans. "We consider the result satisfactory since our main priority was to continue the restructuring of our loan portfolio," VÚB Vice-President Dušan Paulík told a news conference after the bank's annual general meeting. "The planned pre-tax profit was some 75 million crowns, so the final figure was fully in line with our policy which has a target to decrease the deficit of sources for covering risky assets," Paulík continued, adding the bank still needed to create reserves of 7.8 billion Sk.
Paulík said the bank's non-performing loans - which decreased by 4.7 billion Sk in 1996 to some 40 billion Sk - were lower mainly by more effective execution of property deposited for credits. The overall volume of credits on VÚB's books totalled 110 billion Sk at the end of last year. The bank accounts for about 33 percent of the entire amount of credits extended in Slovakia.
"You have to put the bad loans in perspective, since our bank inherited two-thirds of its risky assets from the communist Czechoslovak state bank," Paulík said. VÚB inherited the risky assets as part of the split of the former Czechoslovakia in 1993.
VÚB's capital adequacy ratio was 7.33 percent as of December 31, 1996, but the bank achieved the figure due to some "unspecified exemptions" from the National Bank of Slovakia (NBS) criteria for fulfilling the measure, Paulík said. "This year [1997] will be much more difficult concerning the capital adequacy since the NBS will no longer accept any exemptions for fulfilment of the criteria," Paulík said.
The NBS target for VÚB's capital adequacy ratio without the exemptions is 4.18 percent for the first quarter of 1997, and the central bank will gradually increase the required ratio for VÚB to 6.2 percent by the end of this year. The NBS demanded a capital adequacy ratio of 8.0 percent for all banks.
Paulík also announced that the bank's shareholders approved a plan to issue 3 billion Sk worth of 10-year bonds in 1997, and another 4.5 billion Sk worth of paper with a similar maturity in 1998. "The volume of these two tranches is the upper ceiling, and we will specify the exact sum later this year," Paulík said. VÚB's balance sheet total increased by 11 billion Sk last year to 181.5 billion Sk.
VÚB is one of the two largest commercial banks - together with Investičná a Rozvojová Banka (IRB) bank - which can be privatized, though it is still controlled by the state through its privatization agency, the National Property Fund (FNM). The FNM holds 50.799 percent of VÚB.
