RNS Number:6482Z
Credit Andorra Preference Ltd
04 July 2007
CREDIT ANDORRA S.A.
In 2006, the world economy, once more led by the United States, continued to
move ahead in a balanced and dynamic way. The European Union enjoyed a framework
of stable growth and consolidated its recovery. The emerging economies continued
to show very high growth rates thanks to the prices of raw materials and the low
interest rates which still permitted high investment levels. In spite of the
apparent moderation of its economic activity and low returns on the stock
market, Japan continued to grow, thanks to corporate profits and commercial
exports. On top of this favourable global economic environment came the
excellent performance of financialmarkets which showed very attractive returns
for the fourth year in a row.
Within this framework, in 2006 the Andorran economy maintained the positive
trend seen in recent years. The indicators show that economic activity is well
consolidated from a macroeconomic point of view. Standard & Poor's estimated a
per capita income in 2006 at 36,954 dollars and classified the country with an
excellent AA long-term rating and a short-term rating of A-1+.
For the Credit Andorra Group, 2006 was a notable year because of two significant
events: the completion of the process of integrating CaixaBank and the
divestment of "la Caixa" from our organization. On December 31, we successfully
finalized the process of integrating the two organizations and, as a result, we
have strengthened our leadership in the Andorran market and bolstered our
position in the international financial system through consolidation of the
Credit Andorra Group, owned entirely by Andorran capital. The Group's operations
are basically concentrated in the banking and insurance markets.
The results of the integration process have been excellent. We have unified the
Credit Andorra branch network under one corporate name, with a total of 21
offices and 42 automatic teller machines, and have consolidated our leadership
in the Andorran banking sector with a market share of 37%. In this process, we
have brought together different capabilities, have retained talent and have thus
created a team of more than 400 professionals ready to look after our customers
with even better personal attention and effectiveness. Furthermore, we have
broadened our range of financial products and services, obtaining economies of
scale and incorporating the best practices, products and services of the two
organizations. We should also mention that in 2006 we continued to strengthen
our progressive international growth through Crediinvest SICAV based in
Luxembourg and Private International Management, an asset management company
located in Switzerland.
The consolidated balance sheet of the new Credit Andorra Group on December 31,
2006, shows an excellent year both in terms of income and results. Customer
resources being handled went above 10,000 million euros, reaching 10,263 million
euros, 9.4% more than the previous year. Growth of loan investment reached
25.8%, with a figure of 2,444 million euros and, as a result, total income rose
by 12.2%, going to 12,706 million euros.
The ordinary margin rose to 223.8 million euros, 12.6% more than the year
before. This growth was possible thanks to the increase in commissions earned,
23.5% more than the previous year. The operating margin, after showing the
impact of amortization of goodwill related to the acquisition of CaixaBank (9.8
million euros), reached 130.4 million euros, 19.1% more than in the year 2005.
As a result of the abovementioned and thanks to a careful policy of containing
expenses, we have reached an excellent efficiency ratio of 23.05%. After
applying a prudent policy of provisions, the net consolidated result of the
Credit Andorra Group was 121.3 million euros, 19.8% more than the year before.
For the 17th time in a row, the international rating agency, Fitch Ratings, has
given us an individual A/B rating and has classified us with a support 3 rating,
a long-term A rating and a short-term F1 rating. According to Fitch, these
ratings "reflect the leading position of the company in the Andorran market, its
solid management and profitability, its good liquidity, its quality of assets
and its prudent risk management". We should also like to point out that this
year Credit Andorra was again given the award "Bank of the Year 2006 for Andorra
" by the financial magazine The Banker published by the Financial Times
editorial group. This is the fourth time we have won this distinction in the
five years since Andorra was included in the list of participating countries
(2002, 2003, 2004 and 2006).
In 2006, we strengthened the management of our investment funds when
Crediinvest, our fund management company, became an associate member of AIMA
(Alternative Investment Management Association). We also obtained the GIPS
(Global Investment Performance Standards) which ensures that yields published by
our asset management company are comparable at the international level.
With regard to the social and environmental commitments of the Credit Andorra
Group to Andorran society, again this year we have prepared the Corporate Social
Responsibility Report to make known our economic, social and environmental
results with full transparency.
In the area of social action, the Credit Andorra Foundation is the main driving
force of our activities. The balance shown after the first operating year of the
new Credit Andorra Foundation is very positive. We have consolidated the social
assistance programmes, which now include management of the Data-processing and
Media Library Workshop for the elderly, seminars and workshops on diseases of
great social impact, and a support programme for the volunteer work of the
Association of Elderly Volunteers.
In the educational area, we have continued to give aid to young people of our
country through the Credit Andorra Foundation scholarship programme and have
actively collaborated with the University of Andorra. In the cultural field, we
have participated in setting up the Fundacio Escena Nacional d'Andorra, a
forward-looking project which will provide a firm base for theatre arts in our
country. We have not neglected other cultural activities already well
established, such as the International Narciso Yepes Festival, the International
Organ Cycle of the Principality of Andorra and the annual programme of concerts,
both within and beyond our borders, of the National Classical Orchestra of
Andorra and the National Youth Chamber Orchestra of Andorra.
In short, 2006 was a key year to define a broad project for our future which
starts in 2007. The challenges that lay ahead are to maintain our position as
the leading bank group in Andorra, to continue improving our customer service
and to be competitive in the international financial environment. Our team of
professionals is our main capability to attain these goals.
The integration of the two banks involved a major internal effort throughout the
year but this has borne fruit. This was possible thanks to the confidence of our
customers and the involvement and efforts of our staff. Now, our goal is to
continue improving each day in order to best serve our customers and our
country.
Establishment and Domicile
The Bank is domiciliated in Av. Meritxell,80, Andorra la Vella, Principality of
Andorra, telephone number +376 875 700.
Legal Form
The Bank was registered as a bank in the Principality of Andorra on 29th
December, 1949. It is a limited liability company under Andorran law registered
for an indefinite term by the Departament of Comerc of the Andorran Ministry of
Economy, under number 1673 - Book B-I - page 70.
Shareholders
Pintat Mas Family 22,23%
Employees of Credit Andorra 21,00%
Maria Reig i Moles 20,00%
Pintat Santolaria Family 12,05%
Casal Vall Family 8,56%
Casal Mor Family 7,79%
Other Andorran families (less than 3%) 8,37%
Statutory Auditors
The auditors of the bank are Ernst & Young Ltd. (Geneva) who were appointed to
audit the accounts of the bank for a period of 4 years, up to and including the
financial period ending on 31st December 2006. Auditors have not resigned, been
removed or re-appointed during the period covered by the historical financial
information contained herein.
Risk Control and Management
The management and control of risk has always been a priority objective of
Credit Andorra and, for this purpose, we have developed the necessary
infrastructure, internal methods and controls.
Policy and limits on risk are established and supervised by a committee called
the Assets, Liabilities and Risks Committee (with functions equivalent to those
ofALMCO, the Assets and Liabilities Management Committee). Among other
functions, this committee approves risk policies affecting the management of
assets and liabilities of the entity and management mandates. At the same time,
the committee sets and revises the limits of balancing entries with banks and
supranational entities and/or private entities. At the same time, with the aim
of avoiding the concentration of risk, limits are established for issuers of
financial instruments whether within or outside the Credit Andorra balance
sheets.
All steps taken by this committee bear in mind the rules of ANIF, the Andorran
national body that carries out the tasks of regulation, control and supervision
of the country's financial activities and new regulatory trends, in compliance
with the directives of the New Basle Capital Accord which puts emphasis on the
increasing sensitivity to risks and risk management.
For some years, without ignoring classical methods of risk control, Credit
Andorra has applied Value-at-Risk (VaR) methodology in all areas of risk
management. Through statistical and stochastic techniques, VaR provides a
measurement of risk. Formally, VaR is a synthetic figure that indicates the
maximum loss to be expected for a specific interval of confidence in the value
of a portfolio over a fixed time span.
Management of Market Risk
The market VaR is calculated daily for a timescale of one day and with a
confidence interval of 95% for the portfolios of the entity as a whole. A
detailed report indicating the VaR, with differing timescales and intervals of
confidence, is periodically sent to members of the Executive Committee and the
Assets, Liabilities and Risks Committee. These VaR measurements, along with
others, make possible a test of integrity and consistency. During this period,
the average daily VaR for share portfolios, calculated with a 95% interval of
confidence and a timescale of one day, was 6.1 thousand euros with a maximum and
minimum of 21.3 thousand euros and 0.3 thousand euros respectively, and minimum
of 690.9 thousand euros and 59.3 thousand euros respectively, as compared with
the authorized risk limit of one million euros.
Analysis of this report is supported by Backtesting tests. In 2006, Backtesting
showed that both gains and losses were in line with intervals of confidence. The
daily VaR of the share portfolios as a whole, with a level of confidence of 95%,
was exceeded in 6.5% of all cases throughout 2006, compared with the expected
5%. For investment portfolios as a whole, the daily VaR, with a confidence level
of 95%, was exceeded in only 5% of cases during the year as against what was
statistically expected.
Management of Credit Risk
At the end of 2006, of the total exposure to credit risk, interbank deposits
represented 33%, the securities portfolio represented 16%, while customer loans
accounted for the remaining 51%.
So far as concerns interbank deposits and the securities portfolio, Credit
Andorra has also introduced the loan VaR as a management and control tool. This
calculation is carried out by applying the so-called "CreditManager" programme
developed by J.P. Morgan. Credit Andorra follows the loan VaR with a timescale
of one year and an interval of confidence of 99%.
At year-end, the loan VaR for the securities portfolio and interbank deposits
was 3,653.1 thousand euros out of a total exposure to risk of 1,152,853.6
thousand euros. This loan VaR is below the risk limit of 7,000 thousand euros
set by the Assets, Liabilities and Risks Committee. Put another way, this level
of loan VaR would be equal to having a portfolio with an AA rating.
In credit risk, special attention is given to balancing entry risk and country
risk. These are regularly monitored always with respect to established limits.
Management of Interest Rate and Foreign Currency Risk
Credit Andorra has traditionally paid special attention to maintaining a very
strict relation between investment and how it is financed. For this reason, the
Assets, Liabilities and Risks Committee has not set any ordinary limit for the
establishment of open positions and therefore any gap not in keeping with the
normal development of daily operations must have prior authorization.
The control of these risks is maintained through the ALM II programme. Exposure
to interest rate risk as a consequence of gaps between investment and financing
is very limited. In fact, at the end of 2006, a displacement parallel to the
interest rate curve of all currencies of 1% would have had an impact of less
than 0.20% of shareholder equity.
Liquidity risk, understood as that risk arising from the difficulty the entity
may have in meeting its payments or in obtaining funds for that purpose, is
handled through the management tools mentioned above.
Foreign currency risk is also subject to daily monitoring, both with regard to
transactions at sight and those at term. At year-end, the open position in
foreign currency risk, consolidated in euros, was 232.0 thousand euros as
against the established limit of 5 million euros.
Management of Operational Risk
The Basle Committee defined operational risk as the risk of direct or indirect
loss caused by errors and omissions in processes, persons and internal systems
or outside events.
Credit Andorra has continued to develop the organizational structure and
establish the necessary capacity to ensure adaptation to the Basle Capital
Accord with regard to the measurement and management of operational risk.
Share Capital
Share capital is represented by 900,000 shares in "A" series and 100,000 shares
in "E" series, each of 70 euros, fully subscribed and paid up.
During the year, sale of the holding of "la Caixa" Group (46.35%) was carried
out in favour of other shareholders.
Management
Board of Directors
Chairman: Mr. Antoni Pintat i Santolaria
Deputy-Chairman: Mr. Jaume Casal i Mor
Secretary - CEO: Mr. Josep Peralba i Duro
Members: Ms. Rosa Pintat Santolaria
Ms. Maria Reig i Moles
Mr. Josep Vidal i Marti
Executive committee members
Mr. Josep PERALBA DURO Chairman and CEO
Mr. Xavier CORNELLA GRAU General Management Group Division Director
Mr. Josep BRUNET NIU Global Insurance Division Director
Mr. Xavier CORNELLA CASTEL Financial Division Director
Mr. Agusti GARCIA PUIG General Secretariat Director
Mr. Frederic GINE DUIMENGE Loan Division Director
Mr. Ramon LLADOS BERNAUS Manufacturing and Human Resources
Division Director
Mr. Josep Lluis GRASA JORDANA Risk Management Division Director
Mr. Xavier RUIZ SENA Banking Business Division Director
Mr. Marti TREMOSA FITE Information Technology Division Director
Certain Relationships
There are no potential conflicts of interests between any duties to the bank of
the members of either the Board of Directors or the Executive Board and their
private interests or other duties.
Significant Events following year-end
In the process begun in July 2005 with the purchase of the CaixaBank Group,
accounting and data-processing integration was successfully completed on January
1, 2007. This also involved changing the corporate image of the branch network.
In the course of 2007, it is expected to fully complete the process of
integration of the two entities which, when operating as a single body, will
allow for the fullest optimization of technical and human resources.
On January 1, 2007, as a consequence of the process of restructuring the entity
arising from the acquisition of CaixaBank SA by Credit Andorra SA, and as a step
previous to a process of externalizing the pension obligations of CaixaBank SA
in a specialized Group company, these acquired obligations will be changed from
forming part of a pension plan with defined benefits to a defined contributions
plan through individual contracts of acceptance, signed by each of those
participating.
Other Matters of Interest
Credit Andorra SA established the Fundacio Credit Andorra registered in the
Principality of Andorra on December 15, 1987, for an indefinite period of time.
The Foundation has its own legal identity, Andorran nationality and is of a
private nature.
This Foundation, which is a non-profit body, has as it objective to contribute
to improving the quality of economic, cultural and social life in Andorra
through taking on, programming, funding and carrying out of specific aims. Among
these aims, we should especially mention the granting of study scholarships to
those who deserve them in order to help them obtain the best possible education
in whatever areas that may have an influence on the bettering of the economic,
scientific, educational, cultural and services structure of the country.
In 2006, always with the aim of adapting its work to the needs of the country,
three major areas were the target for activities carried out by the Credit
Andorra Foundation. These included its social work programmes, especially those
aimed at the elderly and organizations dealing with the disabled. Another key
area was in educational activities, particularly in the granting of
scholarships. It was also involved in cultural activities, dealing with
pedagogical aspects and all those areas directly related to the country, its
history and its natural environment.
Statement
Credit Andorra Group
ASSETS
Euros (thousands)
2006 2005
Cash and deposits with OECD central banks 32,266 30,899
Deposits with Andorran National Institute of Finance (ANIF) 46,245 47,287
Financial intermediaries 1,075,878 1,126,137
Financial intermediaries at sight 91,216 59,573
Due from banks on time deposit 989,610 1,074,355
Provision for insolvencies -4,948 -7,791
Loan investments 2,429,826 1,923,743
Customer loans and credits 2,285,741 1,786,450
Overdrafts on customer accounts 117,809 121,717
Bills discounted 40,056 34,231
Provision for insolvencies -13,780 -18,655
Securities portfolio 438,185 458,257
Bonds and other fixed-income securities 340,490 364,885
Provision for insolvencies -1,686 -1,577
Provision for market fluctuations - -
Investments in Group companies 13,730 13,029
Other investments 20,019 18,941
Provision for market fluctuations - -
Shares and other equity securities 14,672 14,205
Provision for market fluctuations -2,109 -2,109
Investment funds 53,069 50,883
Consolidation goodwill 156,534 176,101
Consolidation goodwill 195,668 195,668
Accumulated amortization -39,134 -19,567
Intangible fixed assets & expenses to be written off 12,335 12,487
Intangible fixed assets and expenses to be written off 38,840 34,188
Accumulated depreciation -26,505 - 21,701
Fixed assets 111,955 110,821
Fixed assets 212,574 210,357
Accumulated depreciation -98,669 - 97,483
Provision for depreciation -1,950 -2,053
Accrued income & prepaid expenses 41,429 33,074
Accrued income 41,364 32,897
Prepaid expenses 65 177
Others assets 21,487 43,977
Operations in course 16,230 37,793
Stock 555 514
Options acquired 4,702 5,670
Total assets 4,366,140 3,962,783
LIABILITIES
Euros (thousands)
2006 2005
Andorran National Institute of Finance (ANIF) 62,085 63,404
Creditors 3,413,776 3,082,577
Due to banks and lending institutions 155,069 203,119
Customer deposits 3,258,707 2,879,458
Bonds issued 12,318 40,945
Provision for risks & contingencies 27,825 25,053
Provision for pensions and similar obligations 25,324 20,223
Provision for contingent liabilities 893 595
Other provisions 1,608 4,235
Provision for general banking risks 68,619 60,463
Subordinated liabilities 150,000 100,000
Accrued expenses and deferred income 37,930 28,584
Accrued expenses 36,845 26,861
Deferred income 1,085 1,723
Other liabilities 30,257 44,277
Operations in course 14,707 31,373
Options issued 3,622 4,381
Suppliers and other creditors 11,928 8,523
Share capital 70,000 70,000
Reserves 421,959 391,103
Legal reserve 7,000 7,000
Guarantee reserve 33,063 33,063
Voluntary reserve 346,131 325,477
Revaluation reserve 13,934 13,934
Consolidation reserve 21,831 11,629
Income 71,371 56,377
Income for year 121,371 101,275
Income for previous years awaiting allocation - 102
Dividends paid out in advance -50,000 45,000
Total liabilities and shareholder equity 4,366,140 3,962,783
This information is provided by RNS
The company news service from the London Stock Exchange
END
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