INDOCHINA BANK · Indochina Bank is moving forward to establish a strong foothold in the country by...
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INDOCHINA BANK A N N U A L R E P O R T
Transcript of INDOCHINA BANK · Indochina Bank is moving forward to establish a strong foothold in the country by...
INDOCHINA BANKA N N U A L R E P O R T
TABLE OF CONTENTS
Part 1. Summary Corporate Background 1
1.1. Corporate Information 1
1.2. Corporate Background 1
1.3. Vision of the Bank 1
• Chairman’sMessage 2
1.4. General Performance in the year 2014 3
1.5. Plan and Business objective of Indochina Bank 2015 5
Part 2. Organization Structure 6
2.1. List of shareholders 6
2.2. Board of Directors 6
2.3. BoardofManagement 7
2.4. OtherCommittees 7
Part 3. Financial Report 8
3.1. History of External Auditors 8
3.2. Financial Reports 8
3.3. Notes to Financial Statements 12
Part 4. Business Unit Network 24
4.1. MapofallBranchesandServiceUnitswithincountry 24
4.2. Location of the Branches and Service Units 25
Part 5. Events 26
1.2. Corporate Background
IndochinaBankLtd(“theBank”)isaforeignownedlocallyincorporatedcommercialbank.TheBankwasincorporatedinLaoPeople’sDemocraticRepublic(“LaoPDR”)on26May2008underaForeignInvestmentLicenseNo.070-08/PIgrantedbyMinistryofPlanningandInvestmentandunderBankingBusinessLicenseNo.53/BOLgrantedbytheBankoftheLaoPDR(“BOL”)on28November 2008.
Indochina Bank officially started operation on 6 February 2009 inVientiane Capital. The Bank’s shareholders comprise of reputableCorporationsandindividualwithstrongandstablefinancialbackground,namelyMr.OhSeiYoung,ThePublicOfficialBenefitAssociationofKorea,SoulbeiPrivateEquityFundofKoreaandLVMCInvestmentLtdofKorea
1.3. Vision of the Bank
IndochinaBankismovingforwardtoestablishastrongfootholdinthecountrybytakingadvantageofthesteadyeconomicgrowthofLaoPeople’sDemocraticRepublic.Thevisionofthebankis;“TobetheNo.1privatebankinLaos,intermsofbusinessgrowth,customerservice,products,profitaswellasbranding,andcontinuallyenhancingourservicetomeetcustomer’shighestlevelofsatisfaction.”
Part 1. Summary Corporate Background
1.1 Corporate Information
Bank Name : Indochina Bank Ltd.
RegistrationNo. :53/BOL,28thNovember2008
Chairman :Mr.OhSeiYoung
ManagingDirector :Mr.TayHongHeng
RegisteredOffice: 1stFloor,CapitalTower,116,23SinghaRoad,VientianeCapital,LaoPDR
ContactNumbers :Tel:+85621455000-2,Fax:+85621455111
Website :www.indochinabank.com
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CHAIRMAN’S MESSAGE Indochina Bank has entered its sixth anniversary since inception with a sterling performance andgrowthin itsbalancesheet.FY2014netprofitaftertaxofLAK39.9billionwasanincreaseascomparedwith 2013 while balance sheet has grown over42.7%. With the increasing trust and satisfactionfrom our clients, the increase in our deposits has significantly contributed to the growth of the balance sheet while our lending assets have alsoreached a remarkable level.
Wewillcontinuetodevelopourproductsandservices to best serve our customers and the community. The bank is committed to on-going investment inexpandingcustomercoveragenetwork,ourhumanresourcesandtechnologywhilecarefullymanaging ourrisk.Ourstaffwithlargepooloftalenthasbeenon-boarded and equipped with customer-centricapproach to doing business which is aiming at maximizingthebenefitsforourcustomers.The current competitive market situation, thoughbeing challenging, has presented the bank withthe opportunity to emerge as a leading local bank that always extends support to the clients in protectingtheirwealth,enhancingthevalueoftheir investmentandhelpingmanagethegrowthoftheirbusinesses. Our “Extreme Banking” concept will continue to ensure best services, lowest fees, safest deposit and highest deposit interest rates are offeredasouruniqueclientvalueproposition.With sincere appreciation, Iwould like to take thisopportunitytothankourcustomers,theregulators,the shareholders and the staff of Indochina Bank for theircontinuedconfidenceandsupportthroughouttheyear.Withoutthese,wewouldnothaveachievedsuch a significant result. I reaffirm that Indochina Bank will stay focused on our customers and our strength in order to deliver an even better performance in the next year.
OhSeiYoungChairman
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1.4. General Performance in the year 2014Overview of 2014
The country still enjoyed the continuous economicgrowthon yearlybasis.Thegrowthwas slightly above7% in the year. Average inflationratedecreasedto justabove4%whichhappenstobethe lowest inthe last5years.Despiteanumberof challenges,thegovernmenthasbeeninsertingalotofeffortsinensuringthegrowthandstabilitywithintheeconomy.
Increasingcompetitioninthebankingsectorcontinueswiththenumberofnewentrantsintothemarket.Despitethegrowth in number of banks credit growth was modest relative to the previous year. State-owned banks still maintain their major-market-share-owner status while the rest are competing for business based on their specific core competency. Theinfluxofnewforeignbankshasinevitablytriggeredmorethoughtfulstrategiesamongtheexistingplayerstoretaintheircustomer base and business.
Inflation Rate During the Year
Sources:BankofLaoPDR;AsianDevelopmentBank
Source: The World Bank
Annual GDP Growth
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Performance of Indochina Bank : 2014 vs 2013
Inspiteofincreasingcompetitionandnumerouschallengesinthebusiness,IndochinaBankhasmaintaineditsleadingbankstatusbydeliveringthebestservicesandproductstoitsclients.Thebankhasachievedanotheryearofprofitabilityin 2014. This has indicated to the market that the management of the bank has a full understanding of the business and environmentwithinwhichitisoperating.
IndochinaBankrecordedgrowthintotalassetsfromLAK2,204,449million(FY2013)toLAK3,146,612million(FY2014),representinganincreaseof42.74%.TotaldepositsgrewfromLAK1,760,373milliontoLAK2,359,110million.Lendinggrewbynearly37%whilemaintaininghealthyportfolioduetostrongriskmanagement.NetprofitaftertaxofLAK39,947millionrepresentsthegrowthofnearly8%relativetoFY2013,whichisarecordhighachievementforthebank.
The establishment of Luangprabang and Xiengkhouang Service Units in 2014 has reflected our on strong commitment inproviding the“easy-to-access” services forour customers regardlessofgeographies.TheBank is stillplanning for furtherexpansionindifferentstrategiclocationsforensuringcustomers’bestbankingexperiencewithus.
The growth of Indochina Bank
Table of Comparative Performance 2014 VS 2013 (inmillionLAK)
(inmillionLAK)
20142013
2014 vs 2013
Budgeted
2,000,000
1,920,000
2,428,000
46,208
Performance
2,359,110
2,257,893
3,146,612
39,949
598,739
609,451
942,163
2,932
%increased
34.01
36.97
42.74
7.92
1,760,371
1,648,442
2,204,449
37,015
Amount increased
Deposits
Loans
Assets
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1.5. Plan and Business Objective of Indochina Bank 2015
Customeristhekeyfocusofourbusiness.Ouraimistoalwaysbethereforourcustomers.IndochinaBankwillcontinuetoinvestinmodernizingitsinfrastructureandproductstobestmeetitscustomers’requirements.Wealwaysstrivetosettrendinthemarket by demonstrating our points of differentiation to our customers.
Whilesustainingthegrowthofbusiness,wewillworkcloselywithregulatorstoensureeffectiveriskmanagement.
Investmentonhumanresourcewillcontinuethroughouttheyearsgiventhelongtermgoalofthebankistoproducehighclassbankersforexceedingcustomer’sexpectations.
Manykeycorporatesocialresponsibilityinitiativesarebeingplannedoutfortheyearinordertomakearealimpacttothelocalcommunity. CSR is a very important element of our business given it reflects on our drive to give back to the society.
Theaboverepresentsonlysomepartsofourplanwhichisallaboutourcustomers.
Yearly profit after tax
(inmillionLAK)
Yearlyprofitaftertax
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Part 2. Organization Structure
2.1. List of shareholders
2.2. Board of Directors
1 MrOhSeiYoung(Korean) 45.59%2 PublicOfficialsBenefitAssociationofKorea 15.00%3 SoulbeiIndochinaPrivateEquityFundofKorea 27.41%4 LVMCInvestmentLtdofKorea 12.00% Total: 100.00%
Mr. Oh Sei Young ChairmanMr.OhisaprominentandsuccessfulbusinessmaninLaoPDR.He istheFounderandChairmanofKolaoGroup,whichwasincorporatedinLaoPDRinMay1997.
Mr. So SungilMember Mr.SoisashareholderdispatchedfromPublicOfficialsBenefitAssociation(POBA).POBAisamajorstrategicpartnerofIndochinaBanksince2008,andoneofthebiginvestmentinstitutioninSouthKorea,whichmanagesatotalassetof7billionUSDollars.
Mr. Kim Tai HoonMemberMr.KimbuilthiscareerinfinancialindustrywithShinhanInvestmentCorporationandKyoboSecuritiesoverthelast16yearsaftergraduatingfromYonseiUniversitywithBachelorsinBusinessAdministration.HisspecialtyliesinM&AandPEFmanagementinInvestmentBankingDivision.HisoutstandingM&AandPEFdealshavebeenwithfinancialandtelecomcompanies.HeiscurrentlytheChiefInvestmentOfficerinSoulbeiPrivateEquityFund
Dr. Sung Sang YongDeputy ChairmanDr.SangYongSungstartedhisfinancialcareerwithKoreaRatingsin1998.HeisanexpertincorporatefinancingandstrategicplanningandcurrentlyalsoservesasavicepresidentandchieffinancialofficerofIndochinaBank’sgroupaffiliate,KolaoHoldings.PriortojoiningtheCompany,Dr.SungworkedatShinhanInvestmentCorp.Dr.SunggraduatedfromWashingtonUniversityofSt.Louiswithamaster’sdegreeinbusinessadministrationandChung-AngUniversitywithaPh.Dinbusinessadministration.
Mr. Tay Hong Heng MemberMr.Taystartedhisbankingcareerin1976withPublicBankBhd,Malaysia.For20yearsheserveddomesticbranchesinvariousstatesinMalaysiainthecapacityofBranchManager.From1996to2003(7years)hewastheCountryHeadofPublicBankVientianeBranch,LaoPDR.Thereafterupto2008(5years)hewassecondedastheGeneralDirectortoVIDPublicBank,Vietnam.PresentlyheistheManagingDirectorofIndochinaBanksinceitsinceptionin2008.
Mr. Bounheng SOPHIDAMemberMr.BounhenggraduatedfromFlindersUniversity,AustraliawithaMaster’sdegreeinBusinessAdministration.HestartedoffhisbankingcareerwithPublicBankin1998beforejoiningANZin2007andIndochinaBankin2014
Ms. Chanpheng VongsombathMemberMs.ChanphengfurtheredherstudyatLevobskayaEngineeringEconomicInstitute,Sovietin1989.From1995to2002(7years)sheworkedwithPublicBankBhdVientianeBranch.Ms.ChanphengjoinedKolaoastheHeadofFinanceDepart-mentbeforejoinedIndochinaBankinSeptember2008andpresentlysheistheGeneralManageroftheIndochinaBank.
No Shareholders Share(%)
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2.3. Board of Management MembersoftheBoardofManagementduringtheyearandatthedateofthisreportareasfollows: Name Position Date of Appointment Mr.TayHongHeng ManagingDirector Appointedon20April2009 Ms.ChanphengVongsombath DeputyManagingDirector Appointedon01August2014 Mr.BounhengSouphida DeputyManagingDirector Appointedon01August2014 Mr.WongChewHuat SeniorGeneralManager Appointedon01February2014
2. Audit Committee
Name Position Date of Appointment
Ms.KhonemalaSitthilath Chairperson 01February2014 Mr.TayHongHeng Member 01February2014 Ms.ChanphengVongsombath Member 01February2014 Mr.BounhengSouphida Member 01February2014 Mr.WongChewHuat Member 01February2014
3. Risk Management Committee
Name Position Date of Appointment
Ms.KhonemalaSitthilath Chairperson 01February2014 Mr.TayHongHeng Member 01February2014 Ms.ChanphengVongsombath Member 01February2014 Mr.BounhengSouphida Member 01February2014 Mr.WongChewHuat Member 01February2014 Mr.KingnguenBounkeua Member 01February2014 Mr.ChanhxayKhanthavong Member 01February2014
4. Loans Committee
Name Position Date of Appointment Mr.TayHongHeng Chairman 01February2014 Ms.ChanphengVongsombath Member 01February2014 Mr.BounhengSouphida Member 01February2014
2.4. Other Committees
1. Governance Committee
Name Position Date of Appointment
Ms.ChanphengVONGSOMBATH Chairperson 2June2010 Ms.ThavoneVONGSOMBATH Member 2June2010 Mr.OhSeiYoung Member 2June2010
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PART 3. FINANCIAL REPORT
3.1. History of External Auditors• 2009and2010theBankwasauditedbyKPMGLaoCo.,Ltd• 2011,2012,2013and2014
3.2. Financial Report
INCOMESTATEMENTfor the year ended 31 December 2014
Code ITEMS Notes 2014LAKm 2013LAKm
165,332268
155,8899,175
(104,430)(865)
(103,565)60,90219,705
(303)2,398
82,702
7,240(26,785)(16,256)(10,529)(5,895)(8,558)
-(2,408)2,408
48,704(11,689)37,015
227,40365
222,9064,432
(151,901)(10,930)
(140,971)75,50215,523(1,287)1,042
90,780
12,265(30,320)(19,989)(10,331)(5,986)
(14,175)---
52,564(12,615)39,949
3
3
344
5
67
8
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A. OPERATINGINCOMEANDEXPENSES1. Interest and similar income1.1 Interest and similar income frominterbank transactions1.2 Interest and similar income from loans to customers1.3 Other interest and similar income2. Interest and similar expense2.1 Interest and similar expense for interbank transactions2.2 Interest and similar expense for customer depositsI. NETINTERESTANDSIMILARINCOME3 Fees and commission income4 Fees and commission expense5 Net gain from dealing in foreign currencies and goldII. NETOPERATINGINCOMEB OTHERINCOMEANDEXPENSES6 Other operating income7 Administrationexpenses7.1 Payrollandotherstaffcosts7.2 Otheradministrativeexpenses8 Depreciation and amortization expenses9 Other operating expenses10 Netspecificprovisionforloanstocustomers10.1 Provisionexpensefornon-performingloans10.2 Reversalofprovisionfornon-performingloansIII. TOTAL PROFIT BEFORE TAX11 Corporate income taxIV. PROFIT AFTER TAX
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BALANCE SHEET
As at 31 December 2014
As at 31 December 2014
Code ASSETS Notes 31 December 31 December2014LAKm 2013LAKm
272,16949,792
144,85577,522
21,97021,970
-
151,075151,075
1,648,442
29,757
6681,607
27,482
81,0368,411
72,625
2,204,449
18,902-
18,900-2
1,741,471303,984
1,437,487-
58,45548,0733,3057,077
1,818,828
339,0353,7729,501
33,313
385,6212,204,449
440,72969,546
259,601111,582
301,673296,743
4,930
26,00026,000
2,257,893
27,0921,278
60525,209
93,22511,36681,859
3,146,612
333,099152
99,315233,632
-2,259,643
436,4011,802,186
21,05674,57365,9996,8651,709
2,667,315
419,5147,737
16,09235,954
479,297
3,146,612
91010
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12
13
14.114.2
15
16
17
1819
20
13.2
I Cash and balances with the BOL1 Cash on hand2 Demand deposits3 Compulsory reserves and registered capital deposit II Amounts due from other banks1 Demand deposits2 Term deposits III Investment in Securities1 Held to maturity securities IV Loans and advances to customers, net of specific provision V Fixed assets1 Work in progress2 Intangiblefixedassets3 Tangiblefixedassets VI Other Assets1 Accrued interest receivables2 Other assets TOTAL ASSETS
I Amounts due to other banks1 Demand deposits2 Term deposits3 Borrowingsfromotherbanks4 Other payables to other banks II Amounts due to customers1 Demand and saving deposits2 Term deposits3 Other payables to customersIII Other liabilities1 Accrued interest payables2 Tax payable3 Other liabilities TOTAL LIABILITIESIV Capital and reserves1 Paid-upcapital3 Regulatory reserve fund4 General provision for credit activities5 Retained earnings TOTAL CAPITAL TOTAL LIABILITIES AND CAPITAL
Code LIABILITIES AND CAPITAL Notes 31 December 31 December 2014LAKm2013LAKm
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STATEMENT OF CHANGES IN EQUITYfor the year ended 31 December 2014
Paid-upcapitalLAKm
Regulatory reserve fund
LAKm
General provision
for credit
activitiesLAKm
Retained earnings
LAKm
TotalLAKm
181,866 157,169
-----
339,035 ---
80,479-----
419,514
71 ----
3,701-
3,772 -
(30)-----
3,995--
7,737
5,544 ---
3,977-
(20)9,501
------
6,563-
28 16,092
1,015 -
(956)37,015
-(3,701)
(60)33,313
(300) 30
--
(33,043)39,949
-(3,995)
-35,954
188,496 157,169
(956)37,0153,977
-(80)
385,621 (300)
--
80,479(33,043)39,9496,563
- 28
479,297
Balances as at 1 January 2013Additionalpaid-upcapitalduringtheyearDividend paid to shareholder NetprofitfortheyearNet general provision charged during the yearAppropriation to regulatory reserves for the yearOthersBalances at 31 December 2013Adjust retained earnings in 2013 due to tax authoritiesAdjust statutory reserve in 2013 Addition dividend for 2013Additionalpaid-upcapitalduringtheyearDividend paid to shareholder NetprofitfortheyearNet general provision charged during the yearAppropriation to regulatory reserves for the yearOthersBalances at 31 December 2014
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CASH FLOW STATEMENTfor the year ended 31 December 2014
Notes 2014 2013 LAKm LAKm
37,015
11,6895,8953,977 102
58,678
97,739(621,607)(2,781)(8,653)
(10,558)362,545(10,197)12,532(2,950) (125,252)
127(5,393) 83 (64,145) (69,328)
157,169
-157,169(37,411)254,858 (830)
216,617
39,949
12,6155,9866,563
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65,121
(38,990)(609,450)(2,955)(9,495)
314,197518,172(12,159)17,925(2,564)
239,802
(610)(2,752)
33125,075
121,746
80,479(32,754)47,725409,273216,617
- 625,890
1814
13.2
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Net profit after taxAdjustments for:Enterprise income tax expenses Depreciation and amortization chargesLoan loss provision expensesLoss on asset disposalsCash flows from operating profit before changing in operating assets and liabilities(Increase)/Decreaseinoperatingassets Balanceswithotherbanks Loans and advances to customers Accrued interest income Other assetsIncrease/(Decrease)inoperatingliabilities Depositsandborrowingsfromotherbanks Customer deposits and other amounts due to customers Enterprise income tax paid during the year Accrued interest expense Other liabilitiesNet cash flows used in/(used in) operating activitiesINVESTING ACTIVITIESConstruction in progressPaymentsforfixedassetacquisitionProceed from asset disposalsInvestment in securitiesNet cash flows used in investing activitiesFINANCING ACTIVITIESCapital contributionDividend paid to shareholderNet cash flows from financing activitiesNet (decrease)/increase in cash and cash equivalentsCash and cash equivalents at the beginning of the yearEffect of foreign exchange differenceCash and cash equivalents at the end of the year
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3.3. Notes to Financial Statements
1.INDEPENDENTAUDITORS’REPORTTo: The Shareholders of Indochina Bank LtdWehaveauditedtheaccompanyingfinancialstatementsofIndochinaBankLtd(“theBank”),whichcomprisethebalancesheetasat31December2014, the incomestatement, statementofchanges inequityandcashflowstatement for theyear thenended,andasummaryofsignificantaccountingpoliciesandotherexplanatoryinformationassetoutonpageson4to29.Management’sResponsibilityfortheFinancialStatements
Management is responsible for thepreparation and fair presentationof these financial statements in accordancewith the AccountingLawofLaoP.D.RandtheaccountingregulationsstipulatedbytheBankofLaoP.D.Rrelevanttopreparationand presentationof financial statements, and for such internal controls asmanagementdetermines is necessary to enable the preparationoffinancialstatementsthatarefreefrommaterialmisstatement,whetherduetofraudorerror.
Auditors’Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit.We conducted our audit in accordancewithInternationalStandardsonAuditing.Thosestandardsrequirethatwecomplywithethicalrequirementsandplan andperform the audit toobtain reasonable assurance aboutwhether thefinancial statements are free frommaterial misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial s tatements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatementofthefinancialstatements,whetherduetofraudorerror.Inmakingthoseriskassessments,theauditorsconsider internalcontrolrelevanttotheBank’spreparationandfairpresentationofthefinancialstatements inordertodesignauditproceduresthatareappropriateinthecircumstances,butnotforthepurposeofexpressinganopinionontheeffectiveness of the Bank’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimatesmade by themanagement, as well as evaluating the overall presentation of the financialstatements.
Webelievethattheauditevidencewehaveobtainedissufficientandappropriatetoprovideabasisforourauditopinion.
OpinionInouropinion,thefinancialstatementspresentfairly,inallmaterialrespectsthefinancialpositionoftheBankasat31 December2014, andof its financialperformanceand its cash flows for theyear thenended inaccordancewith the AccountingLawofLaoP.D.RandwiththeregulationsstipulatedbytheBankofLaoP.D.Rrelevanttopreparationand presentationoffinancialstatements.TheattachedsupplementaryinformationonfinancialstatementsinUSDdoesnotformpartofthefinancialstatementandisincludedsolelyforinformationpurposes.Suchsupplementaryinformationisnotwithinthescopeofourauditandtherefore,wedonotgiveopiniononsuchinformation.
Vientiane,LaoP.D.R30March2015
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2. SUMMARY OF SIGNIFICANT accounting policies
Thesignificantaccountingpoliciesadoptedinthepreparationofthesefinancialstatementsaresetoutbelow:
2.1 Basis of preparation
TheBankmaintainsitsrecordsinLaoKip(“LAK”)andpreparesitsfinancialstatementsinmillionsofLAK(“LAKm”)inaccordance
DecreeNo.02/PRbythePrimeMinisterofLaoP.D.Rdated22March2000andtheEnterpriseAccountingLawofLaoP.D.Rand
other relevant accounting regulations as stipulated by Bank of Lao P.D.R (“LAS”).
Theaccompanyingfinancialstatementshavebeenpreparedusingaccountingprinciples,proceduresandreportingpractices
generallyacceptedinLaoP.D.R.Accordingly,theaccompanyingfinancialstatementsandthenotestheretoarenotdesigned
for thosewhoarenot informedaboutLaoP.D.R’saccountingprinciples,proceduresandpracticesand furthermorearenot
intendedtopresentthefinancialpositionandresultsofoperationsandcashflowsinaccordancewithaccountingprinciplesand
practices generally accepted in countries other than Lao P.D.R.
2.2 Fiscal year
ThefiscalyearoftheBankstartson1Januaryandendson31December.
2.3 Recognition of interest income and expense
Interest incomeandexpenseare recognized in the income statementonaccrualbasisusing straight-linemethodand the
interestratesstipulatedinthelending/depositingcontractswithclients.
Therecognitionofaccruedinterest incomeissuspendedwhenthe loansbecomingnon-performingorwhenmanagement
believesthattheborrowerhasnoabilitytorepaytheinterestandprincipal.Interestincomeonsuchloansisonlyrecordedin
theincomestatementwhenactuallyreceived.
2.4 Recognition of fee and commission income
Feeandcommissionconsistsoffeesreceivedforfundtransferservices,tradefinance,creditlinefeeandothers.
Fee and commissions are recognized in the income statement on cash basis.
2.5 Net gain/(loss) from dealing in foreign currency
Netgain/(loss)fromdealinginforeigncurrenciescompriserealisedandunrealisedforeignexchangedifferencesarisingfrom
foreigncurrencies tradingand translationof foreigncurrenciesmonetaryassetsand liabilities.Netgain/(loss) fromdealing
inforeigncurrenciesduringtheyearareconvertedintoLAKatratesrulingatthemonthend.Translationofmonetaryitems
originatedinforeigncurrenciesatthemonthendisalsorecordedasincomeorexpenseduringthefinancialyear.
2.6Cashandcashequivalents
Cashandcashequivalentsconsistofcashandhighlyliquidshort-terminvestmentswithanoriginalmaturityoflessthan30days
thatarereadilyconvertibletoknownamountofcashandaccountsduefrombankswithoriginalmaturityoflessthan30days.
2.7 Loans and advances to customers
Loansandadvancestocustomersarerecognizedatcostandpresentedatoutstanding balance lessspecificprovision
for loans and advances to customers as at 31 December 2014.
2.8 Specific provision for loans and advances to customers
In accordancewith Regulation 324/BOL (“BOL324”) dated 19 April 2011, the Bank is required to classify loans and create
provisionforimpairmentlosses.Accordingly,loansareclassifiedintoPerformingloansorNon-performingloansbasedonthe
paymentarrearsstatusandotherqualitative factors.LoansclassifiedaseitherNormalorPass (GroupA)orSpecialMention
(GroupB)areconsideredasPerformingloans.LoansclassifiedaseitherSubstandard(GroupC)orDoubtful(GroupD)orLoss
(GroupE)areconsideredasNon-performingloans.
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Changesinspecificprovisionisrecordedtotheincomestatementas“Netspecificprovisioncharges/(reversal)forloansandadvances tocustomers”.Accumulatedspecificprovisionreserve is recorded in thebalancesheet in“Loansandadvances tocustomers,netofspecificprovisions”.DetailsontheloanclassificationandspecificprovisionandtheprovisionamountthatwereactuallybookedbytheBankasat31 December 2014 are presented in Note 13.2.
2.9 General provision for credit activitiesInaccordancewithBOL324,theBank isrequiredtocreateageneralprovisionfor loanlossesattherate3.00%ofthetotal balanceofWatchorSpecialMentionloansasatthereportingdateandgeneralprovisionmadeforNormalorPassloansshallbeupontheBOL’snotificationforeachyear.Fortheyearended31December2014,thegeneralprovisionrateforNormalorPassloansisrangingfrom0.50to1%inaccordancewiththeOfficialLetterNo.242/BOLissuedbytheBankofLaoPRDon2April2011.Accordingly,theBankprovidedgeneralprovisionatrateof0.50%outoftotalbalanceofNormalorPassloans.TheBankcompliedwiththeBOL’sregulationsongeneralprovisionprovidedforNormalorPassandWatchorSpecialMentionloans for the year ended 31 December 2014.InaccordancewiththerelevantaccountingregulationsasstipulatedbytheBankofLaoP.D.R,changesingeneralprovisionforcredit activities are recorded to the income statement as “Other operating expenses” for general provision expense and “Other operating income” for reversal of general provision expense and general provision reserve is recorded in the balance sheet in “General provision for credit activities” under capital and reserves of the Bank.
2.10 Investment securities Held-to-maturitysecuritiesHeld-to-maturityinvestmentsecuritiesaredebtsecuritieswithfixedordeterminablepaymentsandmaturities,whichtheBankhas intention and ability to hold to maturity to earn interest. These securities have determined values and maturities. When they aresoldbeforematuritydate,thesesecuritieswillbereclassifiedastradingsecuritiesoravailable-for-salesecurities.
Held-to-maturitysecuritiesareinitiallyrecognizedatcostandsubsequentlypresentedatcost.
Periodically,theheld-to-maturitysecuritiesaresubjecttoreviewforimpairment.Provisionforimpairmentofthesesecuritiesismadewhentherehasbeenasignificantorprolongeddeclinedinthefairvaluebelowtheircost.Provisionforimpairmentisrecognizedas“Netgain/(loss)fromsecuritiesinvestmentintheincomestatement.
2.11 Fixed assetsFixedasset includesof tangiblefixedassetsand intangiblefixedassetsand landuse rights.Tangiblefixedassetsconsistof building,furnitureandfixtures,officeequipments,vehicles.Intangiblefixedassetsconsistofcomputersoftware.Fixedassetsarestatedatcostlessaccumulateddepreciation,ifanyThecostofanassetcomprisesitspurchasepriceplusanydirectlyattributablecostsofbringingtheassettoworkingconditionfor its intended use. Expenditures for additions, improvements and renewals are capitalized and expenditures formaintenance and repairs arecharged to the income statement.Cost and accumulated depreciation of sold or disposed assets are derecognized in the balance sheet and any gains or losses resulting from their disposal are posted to the income statement.
AccordingtoBOL324,provisionforloansandadvancestocustomersisestablishedbymultiplyingtheoutstandingbalanceof
eachloanitemwiththeprovisionratesapplicabletothatloanclassificationasfollows:
Group Category Specificprovisionrate
C Substandard 20%
D Doubtful 50%
E Loss 100%
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2.12 Depreciation and amortization Depreciationandamortizationoffixedassetsareprovidedonthestraightlinebasisatprescribedratesovertheirestimated useful life in accordancewith thenewTax LawNo.05dated 20December 2011whichwas effective onor after 1 January2013stipulatedbythePresidentoftheNationalAssembly.Thefollowingaretheannualratesused:
Computersoftware 50% Building&improvements 5% Officeequipment 20% Furniture&fixtures 20% Motorvehicles 20%
2.13 Statutory reservesUndertherequirementoftheLawonCommercialBankdated16January2007,commercialbanksarerequiredtoappropriatenetprofittofollowingreserves: Regulatory reserve fund Business expansion fund and other funds
InaccordancewiththeRegulationoncapitaladequacyNo.1/BOLdated28August2002bytheGovernoroftheBankofLaoP.D.Randotherrelevantguidance,commercialbanksarerequiredtoprovidestatutoryreserveattheratebetween5%to10%ofprofitaftertaxdependingonthedecisionoftheBoardofDirector.Accordingly,theBankhasprovidedthefollowingreservesfor the year 2014: Reserves %ofprofitaftertax(afterdeductionofaccumulatedlosses) Regulatoryreservefund 10% Businessexpansionfundandotherfunds -
2.14 Foreign currency transactionsTheBankmaintains itsaccountingsystemandrecordsall transactions inoriginalcurrencies.Monetaryassetsand liabilitiesdenominatedinforeigncurrenciesatyearendaretranslatedintoLAKatexchangeratesrulingonthebalancesheetdate(seethelistofexchangeratesofapplicableforeigncurrenciesagainstLAKon31December2014aspresentedbelow).IncomeandexpensesarisinginforeigncurrenciesduringtheyearareconvertedintoLAKatyearendrates.Foreignexchangedifferencesarising from the translation of monetary assets and liabilities on the balance sheet date are recognized in the income statement.
United State Dollar (“USD”)
Thai baht (“THB”)
Euro (“EUR”)
Japanese yen (“JPY”)
Australian Dollar (“AUD”)
8,068.00
246.49
9,667.00
64.91
6,352.00
8,005.00
245.85
10,874.00
74.2
6,904.00
31-Dec-14 31-Dec-13 LAK LAK
15
3. NET INTEREST AND SIMILAR INCOME
4. NET FEES AND COMMISSION INCOME
2014 2013LAKm LAKm
2014 2013LAKm LAKm
268
155,8899,175
165,332
(865)(103,565)
(104,430)60,902
122 104
1,46731
1,349118
4,2195,040
727,183
19,705
(42)(261)(303)
19,402
65
222,9064,432
227,403
(10,930)(140,971)
(151,901) 75,502
105 150 931
54 1,287 123 4,2708,242
86 275
15,523
(129)(1,158)
(1,287)14,236
Interest and similar income:Interest income frominterbank transactionsInterest income from loans to customersOther interest and similar income
Interest and similar expense:InterestexpensefromborrowingsfromotherbanksInterest expense from customer deposits
Net interest and similar income
Fees and commission income from:Domestic banksTravelchecks,bankchecksandothervaluablesCommission from import creditSecuritiesTelecommunication(fax,telegram)Fee on transferring moneyFees on LoanLate payment penalties charged to customersFees from exchangesOtherincomefromfinancialservicesandcustomers
Fees and commission expense:FeesforsettlementservicesviaCheck,Fax,TT,SwiftOtherfinancialservices
Net fees and commission income
2.15 Taxation
Provisionismadefortaxationonthecurrentyear’sprofits,basedontheTaxLawgoverningtaxationwithinLaoP.D.R.TheBank
wasobligedtopaytaxatrateof24%oftotalprofitbeforetaxinaccordancewiththeTaxLawNo.05dated20December2011
whichwaseffectiveonorafter1January2013.TheBank’staxreturnsaresubjecttoexaminationbythetaxauthorities.Because
theapplicationof tax lawsandregulations inmanytypesof transactions issusceptibletovarying interpretations,amounts
reportedinthefinancialstatementscouldbechangedatalaterdateuponfinaldeterminationbythetaxauthorities.
5. OTHER OPERATING INCOME
4,8802,259
1017,240
8,2003,950
11512,265
Income from returned expensesReversal of general provision (see Note 13.2)Others
2014 2013LAKm LAKm
16
8. OTHER OPERATING EXPENSES
9. CASH ON HAND
10. BALANCES WITH THE BANK OF LAO P.D.R (“BOL”)
7. OTHER ADMINISTRATIVE EXPENSES
31-Dec-14 31-Dec-13LAKm LAKm
31-Dec-14 31-Dec-13LAKm LAKm
6,2361,225
1 102 994
8,558
22,66927,123
49,792
144,85577,516
6222,377
1,801555228
1,497872553569252
3,458136608
10,529
10,5131,623
808 8
1,22314,175
30,20839,338
69,546
259,601111,288
294371,183
2,193666169
1,2561,083
503706177
2,800208570
10,331
General provision expenses (see Note 13.2)Depositor Protection FundReturned incomeLoss on disposals of assetsOthers
CashonhandinLAKCash on hand in foreign currencies (“FC”)
Demand deposits Compulsory reservesRegistered capital deposit
Office rental expensesFuel expensesOffice stationery expensesPublication,marketingandpromotionexpensesTelecommunication expensesRepair and maintenance expensesElectricityandwaterexpensesAudit and legal feesOther expensesExternal servicesInsurance fee
6. PAYROLL AND OTHER STAFF COSTS
12,3623,894
16,256
14,9725,017
19,989
Wages and salariesOther staff costs
2014 2013LAKm LAKm
2014 2013LAKm LAKm
2014 2013LAKm LAKm
17
BalanceswiththeBOLincludedemanddeposits,compulsoryreservesandregisteredcapitaldeposit.Thesebalancesearnnointerest.UnderregulationsoftheBOL,theBankisrequiredtomaintaincertaincashreserveswiththeBOLintheformofcompulsorydeposits,whicharecomputedat5.00%forLAKand10.00%forUSDandTHB,onabi-monthlybasis,(2013:5.00%and10.00%)ofcustomerdeposits having original maturities of less than 12 months. Intheyear,theBankmaintaineditscompulsorydepositsincompliancewiththerequirementsbytheBOL.
11. AMOUNTS DUE FROM OTHER BANKS
31-Dec-1431-Dec-13LAKmLAKm
21,970 12,574 12,556
18 -
9,396 7,338347 685 1,026
--
21,970
296,743 17,140 16,554
57313
279,603 235,869
4,647504
38,5834,930
4,930301,673
Demand depositsBalances with domestic banksBanquepourleCommerceExterieurLao(BCEL)JointDevelopmentBank(JDB)Lao Development Bank (LDB)Balances with oversea banksStandardCharteredBank,NewYorkStandardCharteredBank,BangkokStandardCharteredBank,FrankfurtDeutscheBankTrustCompanyAmerica,NewYorkTerm depositsSacombank-LaosBranch
12. INVESTMENT IN SECURITIES
31-Dec-1431-Dec-13LAKm LAKm
120,07531,000
151,075
-26,000
26,000
Held-to-maturitysecuritiesBonds issued by the Bank of Lao P.D.RBondsissuedbytheMinistryofFinance
BondsissuedbytheMinistryofFinance
DetailsbondsissuedbytheMinistryofFinanceasat31December2014areasfollows:
Issuance date
25-Jul-1218-Sep-12
LAKm
21,0005,000
26,000
Term
2 years3 years
Interestrate(%p.a)
3.00%3.50%
18
13. LOANS AND ADVANCES TO CUSTOMERS,NET OF SPECIFIC PROVISION13.1 Loans and advances to customers
31-Dec-1431-Dec-13LAKm LAKm
1,648,442-
1,648,442
2,257,893-
2,257,893
Loans and advances to customers Lessspecificprovisionforloans(Note13.2)
Analysis by currency
Analysis by status of loan
13.2 Provision for credit losses
MovementsofloanlossprovisionoftheBankduringtheyear2014areasfollows:
Interestratesforcommercialloansduringtheyearareasfollows:
31-Dec-1431-Dec-13LAKmLAKm
31-Dec-1431-Dec-13LAKmLAKm
SpecificprovisionGeneralprovisioninLAKminLAKm
879,259611,208157,975
1,648,442
1,648,4421,598,079
50,363----
1,648,442
5,544 6,236
(2,259) (20)
9,501 10,513(3,950)
28 16,092
1,176,646900,436180,811
2,257,893
2,257,8932,065,801192,092
----
2,257,893
- 2,408
(2,408)------
7.8%-16.0%4.25%-15.0%6.5%-30.0%
2014 Interest rates%perannum
2013 Interest rates%perannum
8.4%-19.2%8.0%-19.2%9.0%-30.0%
LoansandadvancesdenominatedinLAKLoans and advances denominated in USDLoans and advances denominated in THB
Performing loans-NormalorPass-WatchorSpecialMentionNon-performingloans-Substandard-Doubtful-Loss
Balance as at 1 January 2013Provision charged to expense in the yearReversal of provision in the yearForeign exchange difference Balance at 31 December 2013Provision charged to expense in the yearReversal of provision in the yearForeign exchange difference Balance at 31 December 2014
LoansandadvancesdenominatedinLAKLoans and advances denominated in USDLoans and advances denominated in THB
ThebreakdownofloanclassificationandprovisionasrequiredbytheBOLasat31December2014areasfollows:
Performing loans-NormalorPass-WatchorSpecialMentionNon-Performingloans(NPL)Total:
SpecificprovisionLAKm
-----
Loan balanceLAKm
2,065,801192,092
-2,257,893
General provisionLAKm
10,3295,763
-16,092
Total provisionLAKm
10,3295,763
-16,092
Classification
19
TotalLAKm
TotalLAKm
ComputersoftwareLAKm
ComputersoftwareLAKm
6,156-
(4,152)2,004
4,5491,002
(4,152)1,399
1,607 605
4,8481,3086,156
3,1941,3554,549
1,6541,607
6,156-
(4,152)2,004
4,5491,002
(4,152)1,399
1,607605
4,8481,3086,156
3,1941,3554,549
1,6541,607
Cost: Asat1January2014AdditionsDisposalAs at 31 December 2014Accumulated amortization:Asat1January2013Amortize for the year 2014DisposalAs at 31 December 2014Net book value:Asat1January2014As at 31 December 2014
Cost: Asat1January2013AdditionsAs at 31 December 2013
Accumulated amortization:Asat1January2013Amortization for the year 2013As at 31 December 2013
Net book value:Asat1January2013As at 31 December 2013
14. FIXED ASSETS14.1 Intangible fixed assets
Movementsofintangiblefixedassetsfortheyearended31December2014areasfollows:
Building& improvements
inLAKm
Furniture &fixturesinLAKm
MotorvehiclesinLAKm
Total inLAKm
Office equipment
inLAKm
20,485330
-20,815
8,2092,061
-10,270
12,27610,545
4,965
690 -
5,655
1,511 545
-2,056
3,4543,599
14,0931,500
(30)15,563
4,1981,844
(22)6,020
9,8959,543
3,087
232 (662)
2,657
1,230 534
(629)1,135
1,8571,522
42,630
2,752 (692)44,690
15,1484,984 (651)19,481
27,48225,209
Cost: Asat1January2014AdditionsDisposalsAs at 31December2014Accumulated depreciation:Asat1January2014Charge for the year DisposalsAs at 31 December 2014Net book value:Asat1January2014As at 31 December 2014
14.2 Tangible fixed assets
Movementsoftangiblefixedassetsfortheyearended31December2014areasfollows:
Movementsofintangiblefixedassetsfortheyearended31December2013wereasfollows:
20
Cost:Asat1January2013AdditionsReclassifyDisposalAs at 31December2013Accumulated depreciation:Asat1January2013Charge for the yearReclassifyDisposalAs at 31 December 2013Net book value:Asat1January2013As at 31 December 2013
Furniture&fixtures
inLAKm
7,131
306 (2,472)
-4,965
998 -
513 -
1,511
6,1333,454
Officeequipment
inLAKm
11,870
2,311-
(88)14,093
2,7401,487
- (29)4,198
9,1309,895
Building&improvements
inLAKm
17,793
220 2,472
-20,485
6,1812,541(513)
-8,209
11,61212,276
Motorvehicles
inLAKm
2,513
1,248-
(674)3,087
1,194 512
-(476)
1,230
1,3191,857
Total
inLAKm
39,307
4,085-
(762)42,630
11,1134,540
- (505)15,148
28,19427,482
Movementsoftangiblefixedassetsfortheyearended31December2013wereasfollows:
15. OTHER ASSETS
31-Dec-14 31-Dec-13 LAKm LAKm
50,4992,790
19,33672,625
50,5085,585
25,76681,859
Rental depositsPrepaymentsOthers
16. AMOUNTS DUE TO BANKS AND OTHER FINANCIAL INSTITUTIONS
-
16,4002,500
---
--
18,900
152
40,27212,50024,20419,3393,000
40,000193,632
333,099
Demand depositsSocial Security OrganizationTerm depositsVietinBank,LaosBranchDepositors Protection FundLao Viet Bank (LVB)MayBank,LaosBranchSocial Security OrganizationBorrowings from other banksMaruhanJapanBankHeungkuk Life Insurance Company Limited
Termdepositsfromotherbankshavetermofrangingfrom6monthsto36monthsandbearinterestatratesrangingfrom5.50%to12.00%forLAKperannumand4.00%perannumforUSD.Borrowingsfromotherbankscomprise: Short-termloanfromMaruhanJapanBankamountingtoLAKm40,000,whichhasatermof1yearsandbearsinterestatrateof8.50%perannum. Medium-termloanfromHeungkukLifeInsuranceCompanyLimitedamountingtoUSD24,000,000,whichhasatermof3yearsandbearsinterestatrateof6.80%perannum.
31-Dec-14 31-Dec-13 LAKm LAKm
21
Theinterestratesforamountduetocustomersareasfollows:
83,386 35,69747,689
220,598 57,536163,0621,437,487538,762898,725
- 1,741,471
86,486 45,30741,179
349,915 80,914269,0011,802,186639,5951,162,591
21,056 2,259,643
No interestNo interest
3.50%1.75%1.75%
5.75%-12.50%3.75%-7.00%2.75%-6.00%
No interestNo interest
3.50%1.75%1.75%
5.75%-13.50%3.75%-8.00%2.75%-7.00%
Demand depositsDemanddepositsinLAKDemand deposits in FCSaving depositsSavingdepositsinLAKSaving deposits in FCFixed term depositsFixedtermdepositsinLAKFixed term deposits in FCOther payables to customers
DemanddepositsinLAKDemand deposits in foreign currenciesSavingdepositsinLAKSaving deposits in USDSaving deposits in THBFixedtermdepositsinLAKFixed term deposits in USDFixed term deposits in THB
18. TAX PAYABLE18.1. Corporate income tax expense (“CIT”)
2013 Interest rate (%p.a.)
2014 Interest rate(%p.a.)
3,305--
3,305
48,70448,704
11,689 1,680 133
(10,197) 3,305
4,0612,475 329
6,865
52,56452,564 12,615 3,305 300
(12,159) 4,061
2014LAKm
2014LAKm
2013LAKm
2013LAKm
CIT payableValue Added Tax payableWithholding tax payable
ProfitbeforetaxoftheyearTaxable profitCIT expense, at the statutory rate of 24% (2013: 24%)CIT payable at the beginning of the yearAdjustmentforprioryeartaxaccordingtoTaxauthority’sassessmentCIT tax paid during the yearCIT payable at the end of the year
18.2 Current corporate income taxTheBankisobligedtopaytaxatrateof24%oftotalprofitbeforetaxinaccordancewiththeTaxLawNo.05dated20December2011whichwaseffectiveonorafter1January2013.Detailedcorporateincometaxfortheyears2013and2014areasfollows:
31-Dec-14 31-Dec-13 LAKm LAKm
17. AMOUNTS DUE TO CUSTOMERSBalancesofcustomerdepositsandotheramountsduetocustomersasof31December2014areasfollow:
22
3,57955-
3,4437,077
49,792144,85521,970
216,617
300,77338,262
339,035
181,866157,169
339,035
515-
630564
1,709
69,546259,601296,743
625,890
381,25238,262
419,514
339,03580,479
419,514
31-Dec-14LAKm
31-Dec-13LAKm
External account payableDeferred incomePayables to staffsOther payables
Cash on handCurrentaccountswiththeBOLCurrentaccountswithotherbanks
Ordinary sharesPreference shares
Opening balanceAdditionalpaid-upcapitalduringtheyearClosing balance
19. OTHER PAYABLES
21. CASH AND CASH EQUIVALENTS
Breakdownofpaid-upcapitaloftheBankisasfollows:
20. PAID-UP CAPITAL Themovementofpaid-upcapitalduringtheyearispresentedbelow:
Because theapplicationof tax lawsand regulations inmany typesof transactions is susceptible tovarying interpretations,amountsreportedinthefinancialstatementscouldbechangedatalaterdateuponfinaldeterminationbythetaxauthorities
22. EVENTS AFTER THE BALANCE SHEET DATEOtherthanasdisclosedelsewhereinthesefinancialstatements,atthedateofthisreport,therewerenoevents,whichoccurredsubsequentto31December2014thatsignificantlyimpactedthefinancialpositionoftheBankasat31December2014.
Mr. Tay Hong HengManaging Director
Mr. Chanhxay KhanthavongHead of Finance Division
2014LAKm
2013LAKm
31-Dec-14LAKm
31-Dec-14LAKm
31-Dec-13LAKm
31-Dec-13LAKm
23
PART 4. Network of the Bank
4.1. Map of all Branches within country
24
4.2. Location of the Branches and Service Units1. Vientiane CapitalMain Branch Address:CapitalTower,116,23SinghaRoad,P.O.Box6029,Tel.:(+856-21)455000-3Fax:(+856-21)455111
2. Vientiane CapitalAuto City Service UnitAddress:AseanRoad,BanNakham,SikhottabongDistrict,Phone:(+856-21)520702-4Fax:(+856-21)520705
3. Vientiane CapitalVangthong Market Service UnitAddress:BanThongkhankham,ChanthabulyDistrict,Tel.:(+856-21)255395-6Fax:(+856-21)255397
4. Champasack ProvincePakse BranchAddress:BanPhonekhong,Pakse,Phone:(+856-31)260300-4Fax:(+856-31)260305
5. Khammouan ProvinceThakhek Service UnitAddress:VientianeRd,BanNabong,ThakhekDistrict,Phone:(+856-51)625600-3Fax:(+856-51)625604
6. Oudomxay ProvinceOudomxay Service UnitNorthernHighwayNo.13,BanNavannoy,XayDistrict,Phone:(+856-81)260023-5Fax:(+856-81)260026
7. Bolikhamxay ProvincePaksan Service UnitAddress:13SouthRoad,SivilayVillage,PaksanDistrict,Phone:(+856-54)280172-3Fax:(+856-54)280174
8. Luang Namtha ProvinceLuang Namtha Service UnitAddress:PhonxayVillage,LuangNamthaDistrict,Phone:(+856-86)212256-7Fax:(+856-86)212258
9. Savannakhet ProvinceSavannakhet BranchAddress:HuameuangtaiVillage,KaysonePhomvihaneDistrict,Phone:(+85641)250000-4,Fax: ( +856 41) 250 0005
10. Luangphabang ProvinceLuangphabang Service UnitAddress:PhouvaoRoad,BanPongkham,LuangphabangDistrict,Phone:(+85671)215000-1,Fax:(+85671)215002
11. Xiengkhuang ProvinceXiengkhuang Service UnitAddress:XaysanaRoad,BanTheun,PaekDistrict,Phone:(+85661)313001-2,Fax: (+856 61) 313 003
25
PART 5. Events
VIP Appreciation Dinner 2014
Community Project 2014 in Pakngneum District
26
Xiengkuang and Luangphabang Service Unit Opening
Community Project 2014 in Oudomxay Province
27
1 Floor Capital Tower,116,23SinghaRd,P.O.Box6029, Vientiane,LaoP.D.RTel:(856-21)455000-2,Fax:(856-21)455111,www.indochinabank.com
st
