OREANDA-NEWS. On March 03, 2008 VAB Bank summarized preliminary results of 2007 based on the unaudited financial statements under Ukrainian Accounting Standards (UAS). Audited financial statements for the year ended 31 December 2007 under IFRS and UAS are expected by the end of March and April 2008 respectively, reported the press-centre of VAB Bank.

The year of 2007 was successful for VAB Bank which showed 54% growth in total assets for the reporting period (UAH 6 792 million or USD 1 345 million as of 31.12.2007). The growth was mainly driven by the 77% increase in the loan portfolio to UAH 4 559 million or USD 903 million as of 31 December 2007.

In line with the bank’s strategy of shifting focus to the retail business, the highest increase was shown by the retail segment with growth rate of loans to individuals at 244% in 2007, which was above the market growth rate for the respective period. Share of loans to individuals in the Bank’s total loan portfolio grew from 20% as of YE2006 to 27% as of YE2007.

Regulatory capital of the bank under Ukrainian Accounting Standards increased by 42% to UAH 692 million or USD 137 million. The growth was a result of shareholders’ capital injection of about USD 20 million and USD 20 million subordinated loan facility from the Netherlands Development Finance Company (FMO).

VAB Bank closed 2007 with the preliminary profit under IFRS of USD 1.8 million (or UAH 3 557 thousand under UAS). This was a result of increased operating and administrative expenses attributable to the Bank’s expansion of the branch network, hiring new personnel, improvement of IT systems, re-branding and active marketing, which lay a solid foundation for increased sales and business performance in the next years, but bring down the current profitability of the Bank. Major expenditures on network development have been completed in 2007. Already from 2008 the investments shall start paying-off and profit for 2008 is expected to escalate to USD 7 million.

In pursuance of the strategy adopted in late 2005, over the period of 2006-2007 the bank increased its distribution network 2.6 times to 170 branches and outlets, set up a network of over 500 sales points for consumer loans, implemented clear customer segmentation and new approach to customer service throughout the network, introduced sales motivation system as well as launched a new bank operating system to ensure efficient control over the increased volumes of business.

In 2007 VAB Bank was also active in the capital markets, both domestic and international. In April the bank attracted the USD 51 million syndicated loan facility and in June successfully debuted with the USD 125 million Eurobond issue, which was accepted very positively by the investors and the initial book was more than twice oversubscribed. In 4Q2007 VAB Bank also attracted USD 20 million in the form of subordinated debt from FMO, The Netherlands, and issued domestic bonds for UAH 150 million (approximately USD 30 million), over 90% of which were purchased by foreign-owned insurance and banking institutions operating in Ukraine.

In January 2008, the Supervisory Board of the Bank adopted a new development strategy for 2008-2010, which is an organic evolution of the earlier strategy and maintains the focus on the retail business and SME clientele. The strategy also provides for the total capital increase to USD 200 million by YE2008 and maintenance of the assets and loan portfolio growth rates on a par with the previous years. On 12 February 2008, the General Meeting of the Shareholders of VAB Bank passed a resolution to increase capital of VAB Bank by USD 50 million. The issue will be subscribed in March 2008. It is also planned that the new issue will be registered with the central bank already in May.

The shareholders structure has not changed over 2007, maintaining the parity in foreign and local ownership between Netherlands-based TBIF Financial Services B.V. and a family of local businessman Mr Sergey Maksimov. In December 2007, the foreign shareholder signed the agreement with Israel Discount Bank Ltd for the purchase of 11% in Kardan Financial Services (KFS), a Kardan N.V. subsidiary and a parent company of TBIF. The transaction also envisages that Discount Bank Ltd will provide KFS with over USD 300 million of credit facilities.

Reflecting the strengthening of the management team, development of the VAB Bank's retail franchise, expansion of its distribution network and tightened risk management practices, Moody’s Investors Services upgraded outlook on the Bank's long-term foreign and local currency deposit ratings (B2) to positive in May 2007.

For the second consecutive year Standard & Poor’s put VAB Bank among the top-5 most transparent banks in Ukraine; recent survey was held in December 2007.

Reference data
All figures stated herein, unless indicated otherwise are unaudited, have been prepared under Ukrainian Accounting Standards and translated into US Dollars (where applicable) at the official exchange of the National Bank of Ukraine as of the respective date.