Aizkraukles banka increases the profit forecast and intends to implement changes in the management

August 26, 2002 / Banking

The Shareholders Meeting of AS Aizkraukles Banka (AB) has approved the audited financial results for first half-year of 2002 and resolved not to distribute the bank’s half-year profits in dividends, but to retain it within shareholders equity of the bank, with an objective of fostering the further development of the bank. As of the end of July, the shareholders equity of AB equalled 14.958 million lats.

The audited bank’s performance for the first half-year indicate that the AB’s profits generated during the first half-year equals 1.892 million Ls. That is by 43.9% more than initially planned. Audit was performed by Ernst&Young, an international auditing company.

Increased the Profit Forecast for 2002

Pursuant to the evaluation of the audited results of AB, the shareholders of the bank have resolved to increase the profit forecast for this year up to 3.26 million Ls, having regard to the fact that the first half-year earnings of AB exceeded the forecasted ones.

Having planned active expansion of the bank both in the Latvian and international markets, the shareholders of AB are considering the significant increase in expenditure to be faced in 2002, and are, therefore, anticipating the lesser profit prospects for this year in comparison with the previous year, when the audited profit of AB was equal to 4.2 million Ls. Among adverse factors one should mention also the low interest rates prevailing at the financial market, which undermines the profit prospects of the banking sector at large.

"The profits of AB are growing sharper than anticipated, and this provides the grounds for appreciating the overall performance of the bank," — notes one of the largest shareholder of AB, Mr. Ernests Bernis.

Sustainable Development Advocated

Shareholders expect the bank to achieve all financial objectives set forth this year; therefore there is no need for the adjustment of any other financial forecasts of the bank. "Although AB has been among the most profitable banks in Latvia over the recent years, it, nevertheless, is prudent to plan for balanced growth in the other principal performance indicators of the bank" — Mr. E. Bernis explains.

The paid-in share capital of AB equals 10 million lats, the number of shares — 100 thousand. There are 155 shareholders in AB, including 122 individuals and 33 companies. The main shareholding is, for the time being, represented by Mr. Olegs Fils — 45.83%, Mr. Ernests Bernis — 44.8% and Mr. Aleksandrs Bergmanis — 3.87% shareholding.

Major Shareholders of AB Will Comprise the Board of the Bank

The stage of development reached by AB has indicated the necessity of separating the strategic and administrative management of the bank, which used to be combined by now. Namely, the major shareholders — Mr. Ernests Bernis, Chairman of the Council, and Mr. Olegs Fils, Vice-chairman of the Board, used to act also as the Director of the International Division of the bank and, accordingly, the Director of the Financial Market Division.

Therefore, it was resolved to implement a new management structure at the bank commencing from September 1st. It implies the reorganisation of the bank’s Board. Henceforth, each of the members of the AB’s Board shall be in charge of strategic development of several functional areas within the bank. The new organisational structure is anticipated to relieve the members of the Board from any administrative duties, whatsoever.

Number of the Board Members Lowered

The reorganisation provides for decrease in the number of the Board members — from six down to three persons. Henceforth, the Board shall be composed of Mr. Ernests Bernis, Mr. Olegs Fils and Mr. Pavels Snejersons. It was resolved to entrust the responsibilities of the Chairman of the Board to Mr. Ernests Bernis. Whereas the current Chairman of the AB’s Board — Mr. Aleksandrs Bergmanis was elected as the Chairman of the Council of the Bank.

Shareholders of AB expect the joint effort of the main shareholders in the Board of the bank to expedite the adoption of vital decisions. "Functional allocation of responsibility will help to manage the development of new product and other projects involving several divisions of the bank more efficiently" -Mr. E. Bernis explains. "The shareholders of AB are unanimously convinced that this will enable us to activate the operations of the bank aimed at achieving the strategic objectives of the bank; increasing the local market share."

The new AB’s management structure is based on the international experience in managing of similar organisations. This will provide more efficient functioning of the bank and the development of operations. Changes within the bank shall expedite the decision-making process, also regarding the lending activities.

The reorganisation of the management entails also the creation of the Business Technology Division. The responsibilities of that Division shall include the implementation of new business approaches in the work of the bank as well as the training and development of the bank’s personnel. The new Division shall be managed by Ms. Zane Kurzemniece, former Member of the Board. Thus there are, at present, eight Divisions and 40 departments within Aizkraukles Banka.

by Olegs Fils,
Vice-chairman of the Board of AS Aizkraukles Banka