OPEN JOINT STOCK COMPANY AMRAHBANK JOINT STOCK BANK
NOTES TO THE FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 DECEMBER 2008
(in Azerbaijan Manats)
51
Weighted
average
effective
interest rate
Up to
1 month
1 month to
3 months
3 month to
1 year
1 year to
5 years
Over
5 years
Maturity
undefined
31 December
2008
Total
FINANCIAL LIABILITIES
Due to banks and other credit
institutions
1.01%
290,443
563,352 2,504,710 2,197,318
78,078
- 5,633,901
Customer accounts
16.78%
2,387,742 2,349,372 11,992,890 11,309,394
-
- 28,039,398
Total interest bearing
financial liabilities
2,678,185 2,912,724 14,497,600 13,506,712
78,078
- 33,673,299
Due to banks and other credit
institutions
249,836
-
-
-
-
-
249,836
Customer accounts
8,707,953
-
-
-
-
- 8,707,953
Other financial liabilities
202,393
59,000
-
-
-
-
261,393
Total financial liabilities
11,838,367 2,971,724 14,497,600 13,506,712
78,078
- 42,892,481
Weighted
average
effective
interest rate
Up to
1 month
1 month to
3 months
3 month to
1 year
1 year to
5 years
Over
5 years
Maturity
undefined
31 December
2007
Total
FINANCIAL LIABILITIES
Due to banks and other credit
institutions
6.00%
165,883
595,805 4,476,566
4,427,992
46,256
- 9,712,502
Customer accounts
16.83%
2,380,570 2,901,910 12,815,222
2,415,350
-
- 20,513,052
Total interest bearing
financial liabilities
2,546,453 3,497,715 17,291,788
6,843,342
46,256
- 30,225,554
Due to banks and other credit
institutions
20,020
-
-
-
-
-
20,020
Customer accounts
9,728,509
-
-
-
-
- 9,728,509
Other financial liabilities
33,879
-
144,497
-
-
-
178,376
Total financial liabilities
12,328,861 3,497,715 17,436,285
6,843,342
46,256
- 40,152,459
OPEN JOINT STOCK COMPANY AMRAHBANK JOINT STOCK BANK
NOTES TO THE FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 DECEMBER 2008
(in Azerbaijan Manats)
52
Market Risk
Market risk covers interest rate risk, currency risk and other pricing risks to which the Bank is
exposed. There have been no changes as to the way the Bank measures risk or to the risk it is
exposed in 2008.
The ALMC also manages interest rate and market risks by matching the Bank’s interest rate
position, which provides the Bank with a positive interest margin.
Interest rate sensitivity
The Bank manages fair value interest rate risk through periodic estimation of potential losses that
could arise from adverse changes in market conditions.
The following table presents a sensitivity analysis of interest rate risk, which has been determined
based on “reasonably possible changes in the risk variable”. The level of these changes is
determined by management and is contained within the risk reports provided to key management
personnel.
Impact on profit before tax based on asset values as at 31 December 2008 and 31 December 2007:
As at 31 December 2008
As at 31 December 2007
Interest rate
+1%
Interest rate
-1%
Interest rate
+1%
Interest rate
-1%
Financial assets:
Due from banks
10,000
(10,000)
-
-
Loans to customers
386,632
(386,632)
369,256
(369,256)
Investments available-for-sale
55,630
(55,630)
-
-
Financial liabilities:
Due to banks and other credit institutions
(54,735)
54,735
(91,432)
91,432
Customer accounts
(249,037)
249,037
(188,645)
188,645
Net impact on profit before tax
148,490
(148,490)
89,179
(89,179)
Impact on shareholders’ equity:
As at 31 December 2008
As at 31 December 2007
Interest rate
+1%
Interest rate
-1%
Interest rate
+1%
Interest rate
-1%
Financial assets:
Due from banks
7,800
(7,800)
-
-
Loans to customers
301,573
(301,573)
288,020
(288,020)
Investments available-for-sale
43,391
(43,391)
-
-
Financial liabilities:
Due to banks and other credit institutions
(42,693)
42,693
(71,317)
71,317
Customer accounts
(194,249)
194,249
(147,143)
147,143
Net impact on shareholders’ equity
115,822
(115,822)
69,560
(69,560)
OPEN JOINT STOCK COMPANY AMRAHBANK JOINT STOCK BANK
NOTES TO THE FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 DECEMBER 2008
(in Azerbaijan Manats)
53
Currency risk
Currency risk is defined as the risk that the value of a financial instrument will fluctuate due to
changes in foreign exchange rates. The Bank is exposed to the effects of fluctuations in the
prevailing foreign currency exchange rates on its financial position and cash flows.
The ALMC controls currency risk by management of the open currency position on the estimated
basis of fluctuations of different currencies and other macroeconomic indicators, which gives the
Bank an opportunity to minimize losses from significant currency rates fluctuations toward its
national currency. The Treasury Department performs daily monitoring of the Bank’s open currency
position with the aim to match the requirements of national banks.
The Bank’s exposure to foreign currency exchange rate risk is presented in the table below:
AZN
USD
USD 1 =
AZN 0.8010
EUR
EUR 1 =
AZN 1.1292
Other
currency
31 December
2008
Total
Financial assets
Cash and balances with the
National Bank of the
Republic of Azerbaijan
5,299,109 1,457,907
86,193
76,251
6,919,460
Due from banks
1,000,458
470,290
63,543
130,706
1,664,997
Loans to customers
36,020,086 3,083,219
296,757
-
39,400,062
Investments available-for -sale
5,762,993
-
-
-
5,762,993
Other financial assets
212,783
171,109
-
25,588
409,480
Total financial assets
48,295,429 5,182,525
446,493
232,545
54,156,992
Financial liabilities
Due to banks and other credit
institutions
5,505,447
217,874
-
-
5,723,321
Customer accounts
20,450,005 12,594,911
534,703
32,012
33,611,631
Other financial liabilities
160,162
83,313
4,296
13,622
261,393
Total financial liabilities
26,115,614 12,896,098
538,999
45,634
39,596,345
OPEN BALANCE SHEET
POSITION
22,179,815 (7,713,573)
(92,506)
186,911
OPEN JOINT STOCK COMPANY AMRAHBANK JOINT STOCK BANK
NOTES TO THE FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 DECEMBER 2008
(in Azerbaijan Manats)
54
AZN
USD
1 USD =
AZN 0.8453
EUR
1 EUR =
AZN 1.2450
Other
currencies
31 December
2007
Total
Financial assets
Cash and balances with the National
Bank of the Republic of Azerbaijan
6,871,344
1,996,376
466,821
13,084
9,347,625
Due from banks
-
608,089
3,496
8,179
619,764
Loans to customers
28,705,427
9,254,415
258,908
-
38,218,750
Investments available-for-sale
200,000
-
-
-
200,000
Other financial assets
65,142
173,791
-
-
238,933
Total financial assets
35,841,913 12,032,671
729,225
21,263
48,625,072
Financial liabilities
Due to banks and other credit
institutions
4,768,887
4,394,347
-
-
9,163,234
Customer accounts
14,921,812
12,805,691
865,418
117
28,593,038
Other financial liabilities
168,758
7,749
1,869
-
178,376
Total financial liabilities
19,859,457 17,207,787
867,287
117
37,934,648
OPEN BALANCE SHEET
POSITION
15,982,456
(5,175,116)
(138,062)
21,146
Currency risk sensitivity
The following table details the Bank’s sensitivity to a 10% increase and decrease in the USD and
EUR against the AZN. 10% is the sensitivity rate used when reporting foreign currency risk
internally to key management personnel and represents management’s assessment of the possible
change in foreign currency exchange rates. The sensitivity analysis includes only outstanding
foreign currency denominated monetary items and adjusts their translation at the end of the period
for a 10% change in foreign currency rates. The sensitivity analysis includes external loans as well
as loans to foreign operations within the Bank where the denomination of the loan is in a currency
other than the currency of the lender or the borrower.
As at 31 December 2008
As at 31 December 2007
AZN/USD
+10%
AZN/USD
-10%
AZN/USD
+10%
AZN/USD
-10%
Impact on profit or loss
(771,357)
771,357
(517,512)
517,512
As at 31 December 2008
As at 31 December 2007
AZN/EUR
+10%
AZN/ EUR
-10%
AZN/ EUR
+10%
AZN/EUR
-10%
Impact on profit or loss
(9,251)
9,251
(13,806)
13,806
OPEN JOINT STOCK COMPANY AMRAHBANK JOINT STOCK BANK
NOTES TO THE FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED 31 DECEMBER 2008
(in Azerbaijan Manats)
55
Limitations of sensitivity analysis
The above tables demonstrate the effect of a change in a key assumption while other assumptions
remain unchanged. In reality, there is a correlation between the assumptions and other factors. It
should also be noted that these sensitivities are non-linear, and larger or smaller impacts should not
be interpolated or extrapolated from these results.
The sensitivity analyses do not take into consideration that the Bank’s assets and liabilities are
actively managed. Additionally, the financial position of the Bank may vary at the time that any
actual market movement occurs. For example, the Bank’s financial risk management strategy aims to
manage the exposure to market fluctuations. As investment markets move past various trigger levels,
management actions could include selling investments, changing investment portfolio allocation and
taking other protective action. Consequently, the actual impact of a change in the assumptions may
not have any impact on the liabilities, whereas assets are held at market value on the balance sheet.
In these circumstances, the different measurement bases for liabilities and assets may lead to
volatility in shareholder equity.
Other limitations in the above sensitivity analyses include the use of hypothetical market movements
to demonstrate potential risk that only represent the Bank’s view of possible near-term market
changes that cannot be predicted with any certainty; and the assumption that all interest rates move
in an identical fashion.
Price risks
The Bank is exposed to equity price risks arising from equity investments. Equity investments are
held for strategic rather than trading purposes. The Bank does not actively trade these investments.
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