Annual Report 2008 - scbbank.sr · Cash flow Statement 23 Explanatory Notes 24 Ratios 2007-2008 27 Contacts 28. Annual Report 2008 Annual Report 2008 2 Mission Statement Surichange

Annual Report 2008

SURICHANGE BANK N.V.A Change in Suriname BankingDr. S. Redmondstraat 71 • Tel: 471151

Annual Report 2008 Annual Report 2008

TABLE OF CONTENTS

Page Mission Statement 2 Organizationaldiagram 3 Organizationalstructure 4 PreliminaryReportoftheSupervisoryBoard 5 ManagementReport2008 6 TheBusiness 12 Auditor’sReport 19 Balanceat31December2008 20 Profitandlossaccount2008 22 CashflowStatement 23 ExplanatoryNotes 24 Ratios2007-2008 27 Contacts 28


2


Mission Statement

Surichange Bank N.V. strives to offer customized financial products. In addition, we also offer a coherent package of banking, investment and insurance products. A package that is tuned in to the requirements of today and tomorrow. In addition, we take care of the payment of remittances to customers in Suriname.

Annual Report 2008 Annual Report 2008Annual Report 2008 Annual Report 2008

3

Treasury Facilities

Consumer

Products & Services

GTS Risk

Management

Administration &

Reporting

IT Services General Affairs

Alcom

Credit Com

Audit Com

Supervisory Board

ORGANOGRAM Surichange Bank N.V.

Management Team

HRM & Marketing

Internal Audit

Compliance Officer

Secretariat


4


OrgANizATiONAL STruCTurE

The Supervisory Board consists of 5 members, more in particular: Prof. dr. C. Baidjnath Misier – Chairman of the BoardMr. J.C.P. Nannan Panday – Deputy Chairman of the BoardDrs. A. Brahim Mr. drs. A. Marshall Drs. I. Sandel

The bank has the following departments: - Consumer Products and Services - Global and Domestic Transactional Services - Facilities - Risk Control Department - Administration & Reporting - Information Technology Services - Internal Audit - Human Resources Management and Marketing- Secretariat - General Affairs


5

PrELiMiNArY rEPOrT OF THE SuPErViSOrY BOArD

To the General Meeting of Shareholders. In compliance with the provisions of Article 12 of the Articles of Association we have the honor to report the following in respect of the Annual Accounts 2008 of Surichange Bank N.V.

We had the company balance sheet as per 31 December 2008, the company profit and loss account for the year ended 2008, as well as the notes to these, audited. We advise you to approve this annual report, as it was presented together with the Auditor’s Report of BDO AbrahamsRaijmann & Partners Assurance N.V. for our consideration by the management. This approval will discharge the Management for its management and the Supervisory Board for its supervision.

The profit before tax amounted to SRD 1.606.000,=. After deduction of taxes an amount re-mains of SRD 1,028,000,=. This net profit will be added to the General Reserve. We agree to this proposal of the Management. For that reason we advise you to approve this proposal.

We are pleased to express our appreciation and recognition for the manner in which the Management and all other staff of the bank have performed for the company during the year under review.

Paramaribo, 15 April 2009

The Supervisory Board: Prof. dr. C. Baidjnath Misier – Chairman of the Supervisory BoardMr. J.C.P. Nannan Panday – Deputy Chairman of the Supervisory Board Drs. A. Brahim Mr. drs. A. Marshall Drs. I. Sandel


6


MANAgEMENT rEPOrT 2008

IntroductionThe slogan ‘I have a dream’ long cherished in the United States appears to have come true. Central banks in many countries are making long hours to meet the challenges of the interna-tional credit crisis. The Governor of the Central Bank of Suriname (CBvS) strives to maintain or increase the confidence of the Surinamese nation in its own currency. All significant develop-ments that herald a new era on the local and international levels. Wise monetary and fiscal policies, including the flow of money from the Netherlands, through Surichange BV, amongst other channels, which has a significant role in this flow of money, and the confidence of the people in the own currency have contributed to the current economic growth of the Surinamese economy. This growth also contributed to the positive develop-ment of the balance sheet total and the gross profits by respectively 48% and 73%. In the past year the national economy did not suffer from the international credit crisis and the related economic crisis that has hit large parts of the world. The international, national and sectoral developments in 2008 and the possible effects of these in 2009 will be discussed below.

International-NationalThe economic growth per country is the driver that also determines the growth of world trade. If the growth of this trade increases it will have positive effects for the individual countries. If the growth of world trade falls this can then also be noticed in the participating countries. For the year 2008 growth of world production was estimated by the International Monetary Fund (IMF) at 3.4%. The IMF’s estimate for 2009 is a rather gloomy ½%. In 2010 a revival is expected of 3%. This growth percentage of world production is lower as a result of the restlessness of the credit markets. Especially in the USA and Europe a global recession (economic crisis) is palpable. A shrinking of the economy by 1.6% in the USA and of 2% in Europe is expected.

The leaders of the global economy also suffer from the negative effects of the recession. According to the IMF World Economic Outlook of January 2009, the growth of production in India for 2008 is being adjusted from 7.3% to 5.1% in 2009. China will also slide from 9% (2008) to 6.7% in 2009. Our country will also not be safe. The growth of 6.7% in 2008 will probably fall to 4% in 2009. Exports will also decrease. Export products determine for over 80% the earnings on the current account (balance of the goods, services and capital rev-enue balance sheet) of the balance of payments and almost 25% of the government revenue. More than 70% of our exports (aluminum, gold and oil) are to the Western World (including Europe: Norway 30% and France 9%; USA 15%, Canada 13% and the Caribbean 6%). On a regional level there was no significant change in export and import pattern in the past year. Trinidad & Tobago remains our most important trading partner in the region and for 2009 we do not expect any significant changes in this picture.

According to Standard and Poors (S&P) because of the decreasing export earnings (price and volume effects) a deficit is expected on the current account of 1.3%. There was a surplus of almost 5% in 2008. This will then have its impact on the government revenue in December 2008.


7

The EUR-USD parity and its development in the international markets is important for both our export and import. To cover risks price agreements can be made with customers in USD. In the long run a more expensive USD can lead to a competitive disadvantage, because goods will become more expensive as a result.

With regard to the EUR-USD parity an exchange rate increase of the EUR is anticipated on the international forex market after the sharp drop almost to the level of 1.2500 of November 2008 (highest rate was almost 1.6000 in July 2008).

Possible causes of the fluctuations in the EUR-USD parity should be sought in the real, mon-etary and political atmosphere, in Europe as well as in the USA. Within this context we should think of the extent of use of the production capacity, the relative price differences between tradeables and non-tradeables, the oil price, the actual interest differences between the FED (the Federal Reserve Bank) and the European Central Bank (ECB), and the fiscal situation in the USA and Europe. Within this context the gold and oil price developments are also of im-portance. With regard to the relationship between USD -oil prices can be said that an oil price increase has a delayed effect on the rate of the USD. Briefly, fluctuations in the exchange rate of the USD have an automatic effect on the price of our export products (gold, oil, etc.).

Considering the cautious policies of the Central Bank of Suriname (CBvS) and the low money inflation we could say that the supply of money (notes and coins originating from the CBvS and money of account of the commercial banks) is reasonably manageable.

The demand for money, however, remains an issue. The demand is after all, dependent on, amongst other things, expected income, real income, permanent income, expected muta-tions in prices, the interest rate in the long term, the rate of return on investment objects, the uncertainty in relation to the future. Motives for the demand for money can be different.

One needs money for transactions, precautionary or speculative purposes. In Suriname we have the ‘fortunate’ circumstances of being able to conclude transactions in SRD, Euro or USD. This creates a bigger field of tension between demand and supply of money. Within this framework a further analysis of M1 (notes and coins and money of account in the hands of the public) and M2 (M1 and the secondary liquidities) is needed.

We stated that Suriname has so far been saved from the negative consequences of the credit crisis. This can also be seen from the statistics of the Central Bank of Suriname. The transfers from abroad to Suriname showed a slight increase. This is true for both the number and the volume (money) of the transfers. This emphasizes the mutual relationship between Suri-namese. Our partner in the Netherlands, Surichange BV, is doing its utmost to provide custom-ers with an optimal service that benefits the Surinamese economy. The bank then quickly and efficiently effects the payments. “Most remittances via the banking sector are done through Surichange Bank. SuriChange uses its own channel: Surichange money transfer office in the Netherlands sends money to Surichange Bank in Suriname...” (World Bank). As the Surinamese, also in the Netherlands, are well integrated and contribute to the improvement of the quality of Surinamese society we can speak here properly of Surinamese market seg-ments. Surichange BV Nederland is active in different countries through its network.


8


As a result of its track record (1986-2008) the World Bank involves it in its price comparisons with the market parties in this market segment. (The World Bank Group, 2008). Professor P.H. Franses, Dean for Economics at the Erasmus University of Rotterdam in the Netherlands says: “Informal economy saves Suriname from the credit crisis.” This is precisely what it is all about. “The relatively highly informal economy appears to save Suriname now from the disastrous consequences of the international credit crisis.” (DWT, 07/10/2008).

Remittances can be used in different manners. De Bruyn and Wets distinguish three types of uses: social (consumption; increase of standard of living, payment of debts, education and health care); economic (investments in money-generating activities, source of savings and improvement of the current account of the balance of payments); infrastructural (including the improvement of the road infrastructure and transportation means using collective remittances; this is not yet the case in Suriname).(T. de Bruyn and J. Wets: Migrantentransfers als ontwikkelingsinstrument, wat kan de over-heid doen?, Leuven 2004, pg 8-9).


9

NationalbySectorAs a result of the growth of world trade the Surinamese economy was able to significantly grow in the past year. With the expected decrease of the world trade one has to take into ac-count a dampening of the growth. This is especially true for the export sector in particular the bauxite, oil, timber, rice, banana and shrimp sectors. But considering the expected growth of 4% of the Surinamese economy in 2009 we think that the negative effects of the decrease in world trade can be mitigated using the earlier mentioned inputs.

A SWOT analysis of the Surinamese economy shows that essentially not much has changed in the past period.

Strength: stable macro-economic policies supported by a good fiscal and monetary policy, presence of raw materials and minerals and a good management of the state debts.

Weakness: weak management on an administrative level, few international, logistical and marketing experience, slow decision-making and fragile political climate.

Opportunity: good market opportunities especially in the Caribbean, Brazil and the East (including India, China);

Threat: competition on a regional and international level and possible changes in political insights.

R. Merhai Drs. S.P. Mathura QT


10



11


12


THE BuSiNESS

General

Since its establishment in September 2005 the bank has experienced a continuous growth. The balance sheet total increased in the year under review by 48% to SRD 72 million com-pared to 2007.

The operating result increased in the year under review by 72% to SRD 1.6 million compared to 2007.

DEVELOPMENT BALANCE SHEET TOTAL

25097

48257

71801

0

10000

20000

30000

40000

50000

60000

70000

80000

2006 2007 2008

(x S

RD

100

0)


13

Cashondeposit

The cash on deposit has increased in 2008 compared to 2007 by more than SRD 22 million to the level of SRD 60 million. The interest percentages offered as well as the good service have contributed to this growth.

Facilities

With regard to the quality of the credit portfolio it can be stated that it remained on a good level in 2008. The debit interest rates for both consumer loans and corporate loans in SRD were reduced in 2008. The interest rates for foreign currencies were also lowered in 2008 for as far as the EURO credits are concerned. The debit interest rate for USD remained unchanged in 2008. As a result of the growth of the credit portfolio and the improved credit management and credit control, one new account manager was hired in 2008. Within the credit operations of SCB the emphasis will remain in the future on volume growth in which the focus will be on high quality services, commercial approach and competitive interest conditions.

Composition of cash on deposit in percentages.

2008 2007

Savings account 43.22% 44.73%

Giro accounts 27.59% 20.52%

Term deposits 29.19% 34.21%


14


COMPOSITION OF THE CREDIT PORTFOLIO IN SRD AS OF THE 31st OF DECEMBER 2008

COMPOSITION OF THE CREDIT PORTFOLIO IN SRD AND IN FOREIGN EXCHANGE AS OF THE 31st OF DECEMBER 2008

Personal-loan2%

Investment-credit70%

Car-financing7%

building-credit4%

RC credit16%

Student-loan1%

SRD1475540%VV

2196760%

SRD VV


15

Riskmanagement

It is of the utmost importance for the bank that risks can be mapped well and that these are managed well. The best known risks a financial institution has to deal with are the credit market, liquidity, operational, legal and integrity risks. For SCB this is also of great importance and structures and processes are accurately followed by two staff members in the department.

Administration&Reporting

The foremost task of this department is the collection, entry and processing of information, as well as guaranteeing that all management information and internal and external reports are produced. The administration of remittances from the Netherlands to Suriname (Fast Money Transfers) also falls under this department.


16


HumanResourceManagement

The goal of Human Resource Management (HRM) is to create a work environment in which the staff feels motivated and is able to properly perform the tasks entrusted to them. In this manner HRM contributes to an important extent to achieving the general goals of SCB Bank NV. The staff increased further in 2008.


17

Marketing

The marketing department of SCB Bank NV was established in 2007. The marketing policy aims at given the bank the necessary name recognition (image) to increase the operating results.

The SCB lotteries that were held in relation to changing EU-ROs were a success in 2008. Within this framework we have decided to make it a returning event.


18


ConsumerServicesandTransactionalServicesEspecially the cash desks and information desk are daily in direct contact with the custom-ers. In addition, this department also takes care of opening savings and giro accounts, term deposits, and domestic and foreign transactions. The transactional services include the “ Fast Money Transfers” through our agent SuriChange B.V. in the Netherlands.

SwingrelationshipotherbanksIn 2008 we entered into swing relationships with Hakrinbank NV and Stichting Surinaamse Volkscredietbank.

InternalAuditThe role of this department has clearly changed over time. In analogy to the development at large financial institutions the traditional audit functions were expanded to include control and management of operational processes. This audit function is expressed amongst other things in financial and operational audit reports. Next to the value these reports have for management, they are also an important support for the activities of the external accountant for the annual accounts audit. The activities of the Internal Audit department is more aimed at “risk based auditing principles”.

InformationTechnologyServiceInformation technology ensures that the complete information flow, as well as the processing within the bank is as efficient as possible. In addition, it is further responsible for the mainte-nance of the banking system, network management, as well as the development of additional applications.


19

AuDiTOr’S rEPOrT

ReviewEngagementWe have audited the annual accounts included in this report to see whether it was accurately derived from the annual accounts 2008 of Surichange Bank N.V. audited by us.

Management’sResponsibilityThe management of the company is responsible for the preparation of the annual accounts in accordance with reporting standards used in the annual accounts 2008 of Surichange Bank NV. Our responsibility is to express an opinion on the annual accounts based on our audit. We must plan and conduct our audit in such a manner to obtain reasonable assurance that the annual accounts are free from material misstatement.

Auditor’sResponsibilityWe wish to draw your attention to the fact that to obtain reasonable assurance with regard to the financial position and results of Surichange Bank N.V insight is required and the annual accounts need to be read in conjunction with the Generally Accepted Auditing Standards.

OpinionIn our opinion, the annual accounts 2008 of Surichange Bank NV are derived in all materially important aspects in the appropriate manner.


20


BALANCE SHEET AS OF THE 31st OF DECEMBEr 2008(priortoallocationofprofits)

Paramaribo, 15 April 2009 Supervisory Board: Management

Prof. dr. C. Baidjnath Misier - Chairman of the Supervisory Board R. MerhaiMr. J. C. P. Nannan Panday – Deputy Chairman of the Drs. S.P. Mathura Supervisory BoardDrs. A. BrahimMr. drs. A. MarshallDrs. I. Sandel

Assets

(in thousands of SRD) 2008 2007

SRD SRD

Cash 2.584 3.865

Bank 27.885 18.920

Loans and advances to customers 36.691 21.674

Immovable property and capital equipment 3.415 3.546

Other assets, Loans and advances to customers 952 156

Transitory assets 274 96

Total assets 71.801 48.257


21



Total Liabilities 71.801 48.257

Liabilities

2008 2007

SRD SRD

Customer deposits and other funds on deposit 60.278 38.692

Other liabilities 2.510 1.786

Transitory liabilities 843 632

Provisions 214 219

Equity

Capital 4.500 4.500

Revaluation reserve 1.355 1.363

General reserve 1.073 466

6.928 6.329

Result current financial year 1.028 599

7.956 6.928


22


PrOFiT AND LOSS ACCOuNT FOr 2008


SRD SRD

Revenues

Interest Income 3.232 1.891

Interest Expense 2.002 1.308

Interest Margin 1.230 583

Income foreign currency transactions 2.342 2.399

Commission and other income 972 468

4.544 3.450

Expenditures

Staff expenses

1.338 1.123

Depreciation 427 467

Operating expenses 1.138 888

Addition to the provision for bad debts 35 36

2.938 2.514

Profit before tax 1.606 936

Income tax 578 337

Profit after tax 1.028 599




23


SRD SRD

Cash flow from operational activities

Profit before tax 1.606 936

Tax on the profits -578 -337

Profits after tax 1.208 599

Depreciation 427 467

Adjustment for provisions 35 36

1.490 1.102

Increase of receivables from banks -8.965 -11.982

Increase in loans to customers -15.053 -10.498

Decrease / (increase) other and transitory assets -1.085 -320

Increase in customer deposits and other funds on deposit 21.586 21.360

Increase in other liabilities and transitory liabilities 931 1.201

-1.096 863

Cash flow from investment activities

Investments in tangible fixed assets ( nett ) -185 -105

Mutation liquid assets (cash) -1.281 758

Liquid assets beginning of year under review 3.865 3.107

Liquid assets end of year under review 2.584 3.865

CASHFLOW STATEMENT


24


NOTES TO THE FiNANCiAL STATEMENTS gENErAL

PrinciplesofForeignCurrencyConversions

The assets and liabilities in foreign currencies were converted at the foreign exchange rates from the Central Bank of Suriname on balance sheet date. The exchange rate differences that come into being as a result of the valuation of the foreign exchange items are included on the profit and loss account under the item “Income foreign currency transactions” like the income from buying and selling foreign exchange.

The exchange rates used for the conversion into local currency on the balance sheet date are as follows:

PrinciplesofValuation

LoansandadvancestocustomersThe loans and advances provided for corporate and consumer account holders include mort-gage loans, investment loans, car financing, as well as personal loans. These are valuated at the nominal value after deduction of the specific provision required. The interest calculated in advance on personal loans and car financing was deducted from the loans provided under that heading.

ImmovablepropertyandcapitalequipmentThe buildings and land were included at the real value less the linear calculated depreciation on buildings which is based on an economic life of 50 years. The real value was derived from the valuation in Euros by Mr. R.R. Lobo, certified estate agent/ assessor, on the 31st of May 2006. The assessed Euro values were converted to local currency at the exchange rate for the Euro on the assessment date. The capital increase resulting from the revaluation less a provision for deferred income taxes on bank buildings is incorporated in the revaluation reserve under equity, while the deferred tax liability was entered as a liability at the current income tax rate.

The office inventory and means of transportation included under capital equipment were valued at the purchase price less the straight-line depreciations which are based on the eco-nomic life. Used and new means of transportation are depreciated over respectively 3 and 5 years, while the depreciation rate for ICT infrastructure runs at 33 1/3% and for other office inventory at 20% per year.

2008 2007 SRD SRDAmerican Dollar 2.71 2.71Euro 3.82 3.98


25

OtherassetsThe costs included here, such as the initial costs that relate to the period before the com-mencement of banking activities are depreciated on a straight-line basis in 3 years.

ProvisionsThis item includes a provision for deferred tax liabilities which resulted from the difference in the economic and tax valuation of banking buildings. The deferrals are calculated at the appli-cable nominal income tax rate. The provision is released, when because of depreciations the difference between the economic and tax valuation becomes smaller to level the tax pressure to the level of the profit before tax included in the profit and loss account.

OtherassetsandliabilitiesIn as far as it is not mentioned otherwise in the foregoing, the assets and liabilities are valued at nominal value.

Principlesofdeterminationofresults

The assets and liabilities are determined taking into account the principles outlined above and are attributed to the financial year to which they apply. Assets are accounted for in the year in which the services were rendered. Liabilities are accounted for in the year in which they will fall due. Income tax in the profit and loss account is calculated over the profit before tax at the applicable company rate, taking into account the income that is tax exempt.

The income tax is calculated on the basis of the recognized profit at the applicable nominal tax rate, taking into account costs that are not tax-deductible, such as the depreciation over the revaluation and tax exempt income.


26



27

RATIO'S(%) 2008 2007

Return on Equity 13.81 9.04

Return on Assets 1.71 1.63

Exploition ratio/Efficiency ratio 133 139

Ratio of personnel costs/ revenue 20.44 22.55

Ratio personnel costs/ expenditure 27.09 45.32

Ratio interest income/ interest expense 161.44 144.57

Profit ratio 32.74 37.23

Ratio interest income/ nett credit provision 8.8 11.13

Ratio interest expense/ funds on deposit 3.32 4.70

Capital ratio 11.08 12.03

BIS-ratio 23.95 28.14

REV

RTV

Rentedekkingsfactor

180.22

171.55

Ratio nett credit provision/ total assets

62.8

59.86

Ratio funds on deposit/ total assets

60.87

56.02

51.1 44.91

83.95

80.18


28


Management teamMr. Rajindrekoemar MerhaiDrs. Stanley Mathura QT

TreasuryDrs. Stanley Mathura QT

Secretariat

Mrs. Lucille van AmsExtension # 111

HRM / MarketingMrs. Melissa Schmeltz - SoerowintonoExtension # 229

Internal AuditMr. Wiedjairadj RamautarsingExtension # 113

Customer Services / GTSMr. Ruben BoedhoeExtension # 222

FacilitiesMr. Remie Sewberath MisserExtension # 220

Risk ManagementMiss Maitrie Mahabir Bsc.Extension # 225

Administration & Reporting

Drs. Oesha Naipal - MohanExtension # 112

IT ServicesMr. Andishsoebhaas SewradjExtension # 115

General AffairsMr. Krishnadath BindaExtension # 101

CONTACTS


29


Documents

Annual Report 2008 - scbbank.sr · Cash flow Statement 23 Explanatory Notes 24 Ratios 2007-2008 27 Contacts 28. Annual Report 2008 Annual Report 2008 2 Mission Statement Surichange