OTP Banka Slovensko, a.s. Unconsolidated Financial Statements … Banka_EN .pdf · 2010. 5. 12. · OTP Banka Slovensko, a.s. (hereinafter the “Bank” or “OTP Slovensko”) was

This is an English translation of the original Slovak language document.

OTP Banka Slovensko, a.s. Unconsolidated Financial Statements prepared in accordance with International Financial Reporting Standards as adopted by the European Union for the Period Ended 31 December 2009 and Independent Auditors’ Report

Unconsolidated Financial Statements for the Period Ended 31 December 2009 prepared in accordance with International Financial Reporting Standards as adopted by the European Union


Contents Page Independent Auditor’s Report Unconsolidated Financial Statements:

Unconsolidated Statement of Financial Position 1 Unconsolidated Income Statement 2 Unconsolidated Statement of Comprehensive Income 2 Unconsolidated Statement of Changes in Equity 3 Unconsolidated Statement of Cash Flows 4

Notes to the Unconsolidated Financial Statements 5 – 64



The accompanying notes on pages 5 to 64 are an integral part of these unconsolidated financial statements. This is an English translation of the original Slovak language document.

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2

Unconsolidated Income Statement for the period ended 31 December 2009

(EUR ‘000) Note Period Ended 31 Dec 2009

Period Ended 31 Dec 2008

Interest income 67 416 87 008 Interest expense (29 895) (45 304)

Net interest income 23 37 521 41 704 Provisions for impairment losses on loans and off-balance

sheet, net 24 (34 307) (9 211) Net interest income after provisions for impairment losses

on loans and off-balance sheet 3 214 32 493

Fee and commission income 13 140 16 165 Fee and commission expense (3 515) (3 713)

Net fee and commission income 25 9 625 12 452 Gains/(losses) on financial transactions, net 26 1 322 5 381 Gains/(losses) on financial assets, net 27 536 5 203 General administrative expenses 28 (37 398) (43 183) Other operating revenues/(expenses), net 29 (2 552) 474 Profit/(loss) before income taxes (25 253) 12 820 Income taxes benefit/(expense) 19 737 (1 826) Net profit/(loss) after tax (24 516) 10 994 Profit/(loss) per share in nominal value of

EUR 3.98 (in EUR) 39 (1.42) 0.64 Profit/(loss) per share in nominal value of

EUR 39 832.70 (in EUR) 39 (14 258.82) 6 390.54

Unconsolidated Statement of Comprehensive Income for the period ended 31 December 2009

(EUR ‘000) Note



Net profit/(loss) after tax (24 516) 10 994 Other components of comprehensive income, after tax Revaluation of financial assets available for sale 447 582 Total comprehensive income/(loss) for the reporting period (24 069) 11 576



3

Unconsolidated Statement of Changes in Equity as at 31 December 2009

(EUR ‘000) Share Capital Reserve Funds

Revaluation of Financial

Assets Available for Sale

Retained Earnings

Total

Equity as at 1 Jan 2008 68 526 8 038 - 27 836 104 400 Transfers - 1 153 - (1 153) - Total comprehensive income - - 582 10 994 11 576 Equity as at 31 Dec 2008 68 526 9 191 582 37 677 115 976

(EUR ‘000) Share Capital Reserve Funds

Revaluation of Financial

Assets Available for Sale

Retained Earnings

Total

Equity as at 1 Jan 2009 68 526 9 191 582 37 677 115 976 Euro conversion difference (38) 38 - - - Transfers - 1 099 - (1 099) - Total comprehensive income/(loss) - - 447 (24 516) (24 069) Equity as at 31 Dec 2009 68 488 10 328 1 029 12 062 91 907



4

Unconsolidated Statement of Cash Flows for the period ended 31 December 2009

(EUR ‘000) Note Period Ended 31 Dec 2009


CASH FLOW FROM OPERATING ACTIVITIES Net profit/(loss) after tax (24 516) 10 994 Adjustments to reconcile net income/loss to net cash provided by

operating activities: Provisions for impairment losses on loans and off-balance sheet,

net 34 307 9 211 Provisions for impairment losses on other assets, net 217 (138) Provisions for investments in subsidiaries and associates - (515) Depreciation and amortization 5 915 4 944 Additions to/(release of) other provisions for contingent liabilities 2 478 (18) Foreign exchange (gains)/losses on cash and cash equivalents (220) (4 336) Net effect of assets sold 43 (179) Net effect of income tax (737) 1 826

Changes in operating assets and liabilities: Net decrease/(increase) in statutory minimum reserves stipulated

by the National Bank of Slovakia (3 310) (1 405) Net decrease/(increase) in placements with other banks 6 407 (11 255) Net decrease/(increase) in financial assets at fair value through

profit and loss 4 075 (3 288) Net increase in financial assets available for sale (445) (39 693) Net decrease/(increase) in loans and receivables before

provisions for possible losses 177 304 (168 704) Net (decrease)/increase in amounts due to banks and deposits

from the National Bank of Slovakia and other banks (123 522) 110 440 Net decrease in amounts due to customers (58 549) (4 853) Net decrease/(increase) in other assets before provisions for

possible losses (256) 669 Net (decrease)/increase in other liabilities (6 939) (19 720)

Net cash flows from/(used) in operating activities 12 252 (116 020) CASH FLOW FROM INVESTMENT ACTIVITIES

Net cash flows from held-to-maturity investments (112 259) 29 826 Net additions to premises, equipment and intangible assets (4 385) (7 836)

Net cash flows from/(used) in investment activities (116 644) 21 990 CASH FLOW FROM FINANCING ACTIVITIES Net cash flows from securities redeemed (82 326) (33) Net (decrease)/increase in subordinated debt (160) 29 238 Net cash flows from/(used) in financial activities (82 486) 29 205 Effect of exchange rate fluctuations on cash and cash equivalents 220 4 336 Net decrease/(increase) in cash and cash equivalents (186 658) (60 489) Cash and cash equivalents at the beginning of the year 180 837 241 326 Cash and cash equivalents at the end of the year 33 (5 821) 180 837

In 2009, OTP Banka Slovensko, a.s. received cash from interest in the amount of EUR 67 217 thousand (2008: EUR 85 390 thousand) and paid the interest in the amount of EUR 33 662 thousand (2008: EUR 41 610 thousand).


These notes are an integral part of these financial statements. This is an English translation of the original Slovak language document.

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1. Introduction OTP Banka Slovensko, a.s. (hereinafter the “Bank” or “OTP Slovensko”) was established on 24 February 1992 and incorporated on 27 February 1992. The seat of the Bank is Štúrova street 5, 813 54 Bratislava. The Bank’s identification number (IČO) is 31318916 and its tax identification number (DIČ) is 2020411074. Members of Statutory and Supervisory Boards as at 31 December 2009

Board of Directors: Supervisory Board: Ernő Kelecsényi (Chairman) Péter Forrai (Chairman) Ing. Zita Zemková (Deputy Chairman) József Németh Dr. Gábor Tenk Ádám Kolossváry Ing. Radovan Jenis Szabolcs Horváth Ing. Katarína Mihóková Ing. Jozef Brhel JUDr. Erika Csekes

The Bank is led by the chief executive officer (CEO), who also acts as a chairman of the Board of Directors. In his/her absence, the CEO is fully represented by his/her representatives, ie by other members of the Bank’s Board of Directors. The Deputy Chairman of the Board of Directors also acts as the first Deputy Chief Executive Officer. Before the separate financial statements were issued on 25 January 2010, Mr. Ernő Kelecsény terminated his position as the chairman of the Board of Directors and the Chief Executive Officer of the Bank. Scope of Business The Bank holds a universal banking licence issued by the National Bank of Slovakia (“NBS” or “National Bank of Slovakia”) and carries out business in the Slovak Republic. The basic activity of the Bank is the provision of a wide range of banking and financial services to various entities, mainly to large and medium enterprises, private individuals, and institutional customers. The Bank’s core scope of business, under the banking licence from the NBS, is as follows: • Acceptance of deposits; • Provision of loans; • Provision of investment services, investment activities and non-core services under Act no.

566/2001 Coll. on Securities and Investment Services within the scope of the banking licence granted by the NBS;

• Trading on own account with money market financial instruments in both the local and foreign currency including the exchange activity;

• Trading on own account with capital market financial instruments in both the local and foreign currency;

• Trading on own account with coins made of precious metals, commemorative bank notes and coins, with bank note sheets and sets of circulating coins;

• Administration of receivables at the client’s account including related advisory services; • Financial leasing; • Domestic transfers of funds and cross-border transfers of funds (payments and settlements); • Issuance and administration of payment instruments; • Granting of bank guarantees, opening and validation of letters of credit; • Issuance of securities, participation in issues of securities and provision of related services; • Financial brokerage; • Business consulting services; • Deposits; • Depository services pursuant to separate regulations; • Banking information services; • Renting of safe deposit boxes; • Special mortgage instruments pursuant to Article 67 par. 1 under provision 2 par. 2 n) to Act No.

483/2001 Coll.; and • Processing of bank notes, coins, commemorative bank notes and coins.



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The Bank is authorised to provide investment services, investment activities and non-core services under the Act on Securities as follows:

• Receipt and transfer of the client’s instruction related to one or more financial instruments in

relation to financial instruments: negotiable securities, money market instruments, trust certificates or securities issued by foreign entities of collective investment, swaps related to interest rates or earnings which can be settled by delivery or in cash;

• Execution of the client’s instruction at its own account in relation to financial instruments: negotiable securities, money market instruments, trust certificates or securities issued by foreign entities of collective investment;

• Trading at own account in relation to financial instruments: negotiable securities, money market instruments, trust certificates or securities issued by foreign entities of collective investment, currency futures and forwards which can be settled by delivery or in cash;

• Investment advisory in relation to financial instruments: negotiable securities, money market instruments, trust certificates or securities issued by foreign entities of collective investment, currency futures and forwards that can be settled by delivery or in cash;,

• Firm commitment underwriting and placement of financial instruments in relation to negotiable securities;

• Placement of financial instruments without firm commitment in relation to financial instruments: negotiable securities, trust certificates or securities issued by foreign entities of collective investment;

• Deposit of trust certificates or securities issued by foreign entities of collective investment, deposit and administration of negotiable securities at the client’s account excluding holder’s administration, and related services, mainly administration of cash and financial collaterals;

• Trading with foreign exchange values if relevant to the provision of investment services; • Conducting of investment research and financial analysis or other form of general recommendation

related to transactions with financial instruments; and • Services related to underwriting of financial instruments. Operating profit/loss was mainly generated from the provision of banking services in the Slovak Republic. Shareholders Structure

The majority shareholder of the Bank is OTP Bank Nyrt. Hungary (“OTP Bank Nyrt.”) with 97.24% share of the Bank’s registered capital. OTP Bank Nyrt. is the direct parent company of the Bank. The shareholders’ structure (with respective shares exceeding 1%) and their share on registered capital is as follows:

Name/Business Name Share in Subscribed Registered

Capital as at 31 Dec 2009 Share in Subscribed Registered

Capital as at 31 Dec 2008 OTP Bank Nyrt. Hungary 97.24% 97.23% Ján Šubák 1.00% 1.00% Other minority owners 1.76% 1.77%

The shareholders’ shares of voting rights are equal to their shares of registered capital. Organisational Structure and Number of Employees

As at 31 December 2009, the Bank operated 5 regional centres (RC) and 72 branches in the Slovak Republic, as at 31 December 2008: 72 branches, 5 regional corporate centres (RKC), 4 regional retail centres (RRC) and 8 housing loan centres (CÚB). Effective from 1 February 2009, the Bank has a new organisational structure; the RKC, RRC and CÚB organisational units were closed and their activities were divided among the existing branches and newly-established regional centres. As at 31 December 2009, the number of Bank employees was 607 (31 December 2008: 739 employees), of which 87 were managers (31 December 2008: 124). The Board of Directors had 4 members (31 December 2008: 5) and the Supervisory Board had 7 members (31 December 2008: 7). Regulatory Requirements The Bank is subject to the banking supervision and regulatory requirements of the NBS. These regulations include indicators, and limits pertaining to liquidity, capital adequacy ratios, risk management system and the currency position of the Bank.



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Data on Consolidating Entity The Bank is part of the consolidation group of OTP Group; consolidated financial statements for all groups of consolidation group entities are prepared by Országos Takarékpénztár és Kereskedelmi Bank Nyrt., the parent company with its seat at Nádor utca 16, 1051 Budapest, Hungary (“OTP Bank Nyrt.”). OTP Bank Nyrt. is also an immediate consolidating entity of the Bank. Business Names of Subsidiaries as at 31 December 2009 Company′s Name Seat Type of Interest Auditor OTP Faktoring Slovensko, a.s. Tallerova 10, 811 02 Bratislava direct Deloitte Audit, s.r.o. 2. Principal Accounting Policies The principal accounting policies adopted in the preparation of these unconsolidated financial statements are set out below: Statement of Compliance The unconsolidated financial statements of the Bank for the period ended 31 December 2009 and comparative data for the period ended as at 31 December 2008 have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as adopted by the European Union (“EU”). IFRS as adopted by the EU do not differ from the standards issued by the International Accounting Standards Board (“IASB”), except for portfolio hedge accounting under IAS 39, which has not been approved by the EU. The Company has determined that portfolio hedge accounting under IAS 39 would not impact these unconsolidated financial statements had it been approved by the EU at the balance sheet date. In 2009, the Bank adopted all of the new and revised Standards and Interpretations issued by the International Accounting Standards Board (the IASB) and the International Financial Reporting Interpretations Committee (IFRIC) of the IASB as adopted by the EU that are relevant to its operations and effective for accounting periods commencing 1 January 2009. The adoption of these new and revised Standards and Interpretations has not resulted in changes to the Bank’s accounting policies that have affected the amounts reported for the current or prior year. The Bank decided not to adopt any of the standards or interpretations before the date of their effectiveness which were prepared for issue as at the date of the authorisation of these financial statements, but not yet effective. At the date of the authorization of these financial statements, the following standards were in issue but not yet effective: IASB Documents endorsed by the EU: Standards • Revised IFRS 3 “Business Combinations” (effective from the date of the beginning of the first fiscal

year beginning after 30 June 2009); • IFRS 1 “First-Time Adoption of International Financial Reporting Standards” (effective no later than

from the beginning of the fiscal year that starts after 31 December 2009); Interpretations • IFRIC 12 “Service Concession Arrangements” (effective no later than from the beginning of the first

fiscal year starting after the effective date, ie 25 March 2009); • IFRIC 16 “Hedges of a Net Investment in a Foreign Operation” (effective from the date of the

beginning of the first fiscal year beginning after 30 June 2009); • IFRIC 15 “Agreements for the Construction of Real Estate” (effective no later than from the

beginning of the fiscal year that starts after 31 December 2009); • IFRIC 17 “Distributions of Non-cash Assets to Owners” (effective for the reporting periods beginning

on or after 1 July 2009)



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Amendments • Amendments to IAS 27 “Consolidated and Separate Financial Statements” (effective from the date

of the beginning of the first fiscal year beginning after 30 June 2009); • Amendment to IAS 39 “Eligible Hedged Items” (effective from the date of the beginning of the first

fiscal year beginning after 30 June 2009); • Amendment to IFRIC 18 “Transfers of Assets from Customers” (effective no later than from the

beginning of the fiscal year that starts after 31 October 2009); • Amendments to IFRS 4 and IFRS 7 “Disclosures about Fair Value Measurements and Liquidity Risk

Associated with Financial Instruments” (effective no later than from the beginning of the fiscal year, which starts after 31 December 2009); and

• Amendment to IAS 32 “Financial Instruments: Presentation” (effective for annual periods beginning on or after 1 January 2011).

IASB Documents not yet endorsed by the EU: Standards • IFRS 9 “Financial Instruments” (issued on 12 November 2009)

Interpretations • IFRIC 19 “Extinguishing Financial Liabilities with Equity Instruments” (issued on 26 November 2009) • Modification to IFRIC 14 “Minimum Funding Requirements” (issued on 26 November 2009) Amendments • Amendment to IFRS 2 “Share-based Payment” (issued on 18 June 2009) • Improvements of IFRS (issued on 16 April 2009) • Revised IAS 24 “Related Party Disclosures” (issue on 4 November 2009) • Amendments to IFRS 1 “First Time Adoption of IFRS” (issued on 23 July 2009 and 28 January 2010) The adoption of these standards and interpretations in future periods is not expected to have a material impact on the Bank’s profit or equity. Purpose of Preparation These unconsolidated financial statements in the Slovak Republic were prepared so as to comply with Act on Accounting No. 431/2002 Coll. under special regulations - Regulation (EC) 1606/2002 of the European Parliament and of the Council on the Application of International Accounting Standards (IFRS). The Bank prepares unconsolidated financial statements, consolidated financial statements and annual report in accordance with IFRS. The unconsolidated and consolidated financial statements as at 31 December 2008 with the authorisation date for issue on 10 March 2009 are deposited in the collection of deeds maintained by the Commercial Register of the District Court Bratislava I, Záhradnícka 10, 812 44 Bratislava. The Bank also prepares consolidated financial statements in compliance with IFRS as adopted by the EU for the year ended 31 December 2009, that will be approved on 5 March 2010, and will be available at the Bank premises. The list of entities not consolidated in these separate financial statements is presented in Note 10. The financial statements are intended for general use and information, and are not intended for the purposes of any specific user or consideration of any specific transactions. Accordingly users should not rely exclusively on these financial statements when making decisions. Basis for the Financial Statements Preparation Separate financial statements were prepared under the historical cost basis, except for certain financial instruments, which have been recognised at fair value. The financial statements were prepared under an accrual principle of accounting, transactions and recognised events are recorded in the period to which they are related in time. Separate financial statements were prepared under the assumption that the Bank will continue as a going concern in the foreseeable future. The reporting currency used for disclosure in these separate financial statements is the euro, which is rounded to thousands of euros, unless stipulated otherwise. The amounts in brackets refer to negative values.



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As at 1 January 2009, the Slovak Republic entered the eurozone and the Slovak crown (SKK) was replaced by the euro (EUR). Assets and liabilities denominated in Slovak crowns were translated by the Bank using the conversion exchange rate of EUR/SKK 30.1260; as to the financial recognition, the Bank’s main currency became the euro. All comparative historical amounts for 2008 and prior period, originally reported in SKK are herein presented as comparative data denominated in euros using the conversion rate. Reclassification of Balances for the Previous Reporting Period In 2009, the Bank changed the method of presentation of accrued interest in the statement of the financial position. Individual accrued items are presented directly in the respective recognised items of assets and liabilities. At the same time, provisions for liabilities recognised as “Other liabilities” were disclosed in the separate line in the statement of financial position. Comparative data in the financial statements and notes for 2008 were adjusted to reflect the presentation adopted by the Bank for 2009 with no effect on profit or equity accounts.

(EUR ‘000) Reclassified

Balances 31 Dec 2008

Originally Presented Balances

31 Dec 2008

Effect of Reclassification

Assets

Cash, amounts due to and from banks and balances with the National Bank of Slovakia 187 309 187 274 35

Placements with other banks, net of provisions for possible placement posses 68 586 68 216 370

Financial assets for sale 43 584 42 217 1 367 Loans and receivables, net of provisions for possible losses 1 171 514 1 167 777 3 737

Held-to-maturity financial investments 106 497 104 596 1 901 Accrued interest receivable - 7 410 (7 410) Liabilities Due to banks and deposits from the National

Bank of Slovakia and other banks 171 983 171 487 496 Amounts due to customers 996 335 992 371 3 964 Liabilities from issued securities 287 084 283 742 3 342 Accrued interest payable - 8 040 (8 040) Provisions for liabilities 964 - 964 Other liabilities 19 192 20 156 (964) Subordinated debt 29 238 29 000 238 Significant Accounting Assessments and Judgements The presentation of financial statements in conformity with IFRS requires the management of the Bank to make judgements about estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as at the date of the financial statements, and their reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and future changes in the economic conditions, business strategies, regulatory requirements, accounting rules or/and other factors could result in a change in estimates that could have a material impact on the reported financial position and results of operations. Significant areas of judgment include the following: In connection with the current economic environment, based on currently available information the management has considered all relevant factors which could have effect on valuation and impairment of assets and liabilities in these financial statements, impact on the liquidity, funding of operations of the Bank and other effects these may have on financial statements. All such impacts, if any, have been reflected in these financial statements. There is a high level of uncertainty about future development which could result in material change in market value of securities and increased impairment of assets. The management of the Bank continues to monitor the situation and further possible impact of financial crisis and economic slowdown on its operations.



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The provisioning for loan losses and identified contingent liabilities includes many uncertainties as to the outcomes of the aforementioned risks and requires the Bank’s management to make many subjective judgments when estimating loss amounts. As described below, the Bank creates provision for impairment of loans and receivables where there is objective evidence that, as a result of past events, the estimated future cash-flows are negatively impacted. These provisions are based on Bank’s historical and current experience concerning default rates, recovery rates of loans, or time needed from a loss event to loan default, as well as subjective judgments of the Bank’s management about estimated future cash-flows. Considering current economic conditions, the outcome of these uncertainties could differ from the amounts of impairment provisions recognized as of 31 December 2009 and the difference could be material. The amounts recognised as provisions for liabilities are based on the management’s judgments and represent the best estimate of expenditures required to settle a liability of uncertain timing or amount resulting from an obligation.

In recent years, income tax rules and regulations underwent significant changes. In connection with the broad and complex issues affecting the banking industry, there are no historical precedents and/or interpretation judgments. In addition, tax authorities have broad powers as regards the interpretation of the effective tax laws and regulations during the tax review of a taxpayer. As a result, there is a higher degree of uncertainty as to the final outcome of a potential review conducted by tax authorities.

Translation of Amounts Denominated in Foreign Currencies Assets and liabilities denominated in a foreign currency are translated to euros using the reference exchange rate determined and announced by the European Central Bank valid as at the reporting date. Revenues and expenses denominated in a foreign currency are recognised as translated using the exchange rate valid as at the transaction date. Foreign exchange gains/losses on transactions are recognised on the income statement line “Net gains/(losses) on financial transactions”. Financial Instruments - Initial Recognition All financial assets are recognised and derecognised on trade date where the purchase or sale of a financial asset is under a contract whose terms require delivery of the financial asset within the timeframe established by the market concerned, and are initially measured at fair value, plus transaction costs, except for those financial assets classified as at fair value through profit or loss, which are initially measured at fair value. Financial assets are classified into the following specified categories: financial assets at fair value through profit or loss, financial assets available for sale, held-to-maturity financial investments, and loans and receivables. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. Cash and Cash Equivalents Comprise cash and balances in demand deposits with the NBS and other banks. Cash and cash equivalents only include amounts of cash immediately available and highly liquid investments with original maturity up to three months. For cash flow purposes, such amounts exclude a mandatory minimum reserve deposited with the NBS. The items are recorded in the statement of financial position line “Cash, due from banks and balances with the National Bank of Slovakia”.

Placements with Other Banks and Loans to Other Banks

Placements with other banks and loans to other banks are stated at amortised costs net of provisions for possible placement losses in the statement of financial position line “Placements with other banks, net of provisions for possible placement losses”. Interest is accrued using the effective interest rate method and credited to the income statement based on the amount of outstanding receivable. Such interest is recognized in the income statement in “Interest income”. Loans and Receivables and Provisions for Possible Losses Loans to customers are stated at the amortised costs net of provisions for loan losses in the statement of financial position line “Loans and receivables, net of provisions for possible losses”. Interest is accrued using the effective interest rate method and credited to the income statement based on the amount of outstanding receivable in the line “Interest income”. The Bank suspends accruing of interest on a loan receivable when the debtor has filed for bankruptcy or when both parties have withdrawn from the loan agreement.



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Fees and commissions related to loans are gradually amortised over the contractual term of the loan using the effective interest rate method. In line with the Bank’s objectives, loan receivables acquired through assignment are classified in accordance with IAS 39 as “Loans and receivables”. Upon initial recognition, loans are measured at cost including all transaction costs related to acquisition. For purchased loans, this means that their initial measurement equals the amount of financial settlement for assigned receivables. Any differences between the carrying amount as at the date of acquisition and the due amount (breakage cost, transfer fee, margin differentials, etc.) are accrued over the whole maturity period of the loan using effective interest rate method. Provisions cover estimated losses from impairment of loans if objective proof of impairment exists. Objective proof of impairment may include major financial difficulties of the debtor which led to an event of default (e.g.: delay with loan repayment for more than 90 days, forced restructuring, declaration of immediate maturity of the loan, bankruptcy) after the initial recognition of the loan. The Bank assesses credit risk on an individual and portfolio basis and creates individual and portfolio provisions. Provisions are recorded and reversed through the income statement in “Provisions for impairment losses on loans and off-balance sheet, net”. The Bank recognises write-offs of loans as “Provisions for impairment losses on loans and off-balance sheet, net” with releasing the relevant provisions for loan losses. Written-off loans and advances made to clients are recorded on the off-balance sheet, whereas the Bank continues to monitor and recover such loans except for loans where the Bank lost the legal title for their recovery or where the Bank ceased the recovery process as the recovery costs exceed the amount receivable. Each subsequent income on written-off receivables is recognised in the income statement as “Provisions for impairment losses on loans and off-balance sheet, net”. Detailed information about the credit risk management is stated in Note 35 Credit Risk. Financial Assets at Fair Value through Profit or Loss Financial assets at fair value through profit or loss include securities and derivative financial instruments held for trading and for the purposes of profit generating. At acquisition, held-for-trading securities are measured at cost. Subsequently, they are remeasured to fair value. Revaluation gains and losses are recognised in the income statement line “Gains/(losses) on financial assets, net”. If the quoted market prices are not readily available, the fair value of debt securities is estimated using the present value of future cash flows, and the fair value of unquoted equity instruments is estimated using the applicable price/earnings or price/cash flow ratios refined to reflect the specific circumstances of the issuer. Net interest income from securities at fair value through profit or loss is accrued using the the effective interest rate method and recognised directly in the income statement line “Interest income”. Financial Assets Available for Sale Financial assets available for sale include non-current securities that the Bank intends to hold for an indefinite period or which may be sold as liquidity requirements arise or market conditions change. Upon acquisition, these investments are measured at cost. Financial assets available for sale are then remeasured to fair value. Gains and losses on revaluation are recognised in equity as “Revaluation of financial assets available for sale“. Upon sale of the financial asset for sale, accumulated gains/losses from revaluation previously recognised in equity are recognised through the income statement. Financial assets available for sale also include investments with ownership interest less than 20% of the registered capital and/or voting rights. These investments are measured at cost less impairment provisions for permanent decrease in value, as their market price in an active market cannot be reliably measured. Impairment losses are recognized in the income statement line “Gains/(losses) on financial assets, net”.



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Held-to-Maturity Financial Investments Financial investments held to maturity represent debt financial assets with pre-defined date of maturity that the Bank intends and has the ability to hold until their maturity. At acquisition, such assets are measured at cost, which include transaction costs. These Investments are subsequently measured at amortised cost based on the effective interest rate method, net of provisions for impairment.

Interest income, discounts and premiums on securities held to maturity are accrued using the effective interest rate method and recognised directly in the income statement line “Interest income”.

Investments in Subsidiaries and Associates Investments in subsidiaries include the Bank’s investments in companies with an ownership interest more than 50% of the registered capital or more than 50% of the voting rights. Investments in subsidiaries are recognised at cost less provisions for the impairment. Impairment losses are recognised in the income statement line “Gains/(losses) on financial assets, net”. Dividend income is recognized in the income statement when the Bank’s right to receive payment has been established. Investments in associates include the Bank’s investments in companies with an ownership interest more than 20% and less than 50% of the registered capital or of the voting rights. Investments in associates are recognised at cost less impairment provisions. Impairment losses are recognised in the income statement line “Gains/(losses) on financial assets, net”. Sale and Repurchase Agreements Debt or equity securities sold under sale and repurchase agreements are recognised as assets in the statement of financial position line “Financial assets at fair value through profit or loss” and “Financial assets for sale” and the contracted payable is recorded in “Due to banks and deposits from the National Bank of Slovakia and other banks” and/or in “Amounts due to customers”. Securities purchased under agreements to resell securities are recorded as assets in the statement of financial position line “Cash, due from banks and balances with the National Bank of Slovakia”, and/or in “Placements with other banks, net of provisions for possible losses”, or in “Loans and receivables, net of provisions for possible loan losses”.

The difference between the sale and repurchase prices is treated as interest and accrued over the life of each REPO agreement using the effective interest rate method.

Non-Current Tangible Assets Non-current tangible assets (Property, Plant and Equipment) are stated at cost, less accumulated depreciation and accumulated impairment losses. Depreciation charges are computed using the straight-line method over the estimated useful lives of the assets corresponding to future economic benefits from assets based on the annual percentage depreciation rates as follows:

Type of Assets Useful Life in

Years Depreciation Rate per Annum in %

ATMs and motor vehicles, computers, office machines,

telecommunication equipment 4 25.0 Fixtures, fittings and office equipment, software 6 16.7 Computers, machines, equipment 8 12.5 Technical upgrade of leased buildings 10 10.0 Heavy bank program (safes), transportation means,

supply networks and infrastructure, air-conditioning facilities 12 8.4 Technical upgrade of buildings 15 6.7 Buildings and structures 40 2.5 Depreciation of tangible assets is charged to the income statement line “General administrative expenses”. Depreciation commences in the month that such assets are put into use. Land and works of art are not depreciated.



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At the balance sheet date, the Bank reviews the carrying value of its non-current tangible assets, estimated useful life and method of depreciation. The Bank also reassesses the recoverable amount of the asset is estimated to determine the extent (if any) of the impairment loss. Where the carrying value of premises, equipments, is greater than the estimated recoverable amount, it is written down immediately to the estimated recoverable amount through the income statement. Where the estimated recoverable amount exceeds the carrying amount of an asset, a provision for impairment loss is released through the income statement. At balance sheet date, the Bank also assesses whether there is any indication that an impairment loss recognised in prior periods for an asset may no longer exist or may have decreased. If any such indication exists, the entity estimates the recoverable amount of that asset. If the estimated recoverable amount exceeds the carrying value of an asset, a reversal of an impairment loss is recognised in the income statement. Non-Current Intangible Assets Non-current intangible assets are stated at cost, less accumulated amortisation and accumulated impairment losses. The Bank amortises non-current intangible assets using the straight-line method over the estimated useful lives of the assets corresponding to future economic benefits from assets based on the annual percentage depreciation rates. In the Bank, non-current intangible assets mainly include software, which is amortised over 5 years; the annual amortisation rate is 20%. Amortisation of non-current intangible assets is recognised in the income statement line “General administrative expenses”. Amortisation starts in the month when the assets are put into use. At the reporting date, the Bank reviews the carrying amount of its intangible assets, their estimated useful lives and methods of amortisation. Accrued Interest Receivable/Payable Accrued interest on loans is recognised in lines “Placements with other banks, net of provisions for possible placement losses” and “Loans and receivables, net of provisions for possible losses”. Accrued interest on received deposits is recognised in line “Due to banks and deposits from the National Bank of Slovakia and other banks” and “Amounts due to Customers“. Accrued interest on securities is recognised for individual items of securities in the statement of financial position. The Bank accounts for accrued interest on loans and deposits and securities are recognised using the effective interest rate method. Recognition of Income and Expenses Income and expenses are recognised in the income statement for all interest bearing instruments on an accrual basis using the effective interest rate. Interest income on securities includes revenues from fixed and floating interest rate coupons and accrued discount and premium. Fees and commissions are recognised in the income statement on an accrual basis. Fees and commissions related to the provision of loans are accrued over the entire maturity period of a loan and recognised in the income statement line “Interest income”. Fees and commissions that are not part of the effective interest rate are recognised as expenses and income in the income statement line “Fee and commission expense” on an accrual basis and as at the date of transaction. Income from dividends is recognised in the period of the origin of the title to receive dividends and is recognised in the income statement. Other expenses and income are recognised in the relevant period on an accrual basis. Income Tax and Other Tax The annual income tax liability is based on the tax base calculated from the profit/loss under IFRS and Slovak tax law. To determine the current income tax, tax rates valid as at the reporting date are applied. Deferred taxation is accounted for using the balance sheet liability method in respect of all temporary differences between the tax bases of assets and liabilities and their carrying amount in the statement of financial position.



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Deferred income taxes are computed using tax rates set for the subsequent taxable period and applicable at the moment of the tax asset realisation or the tax liability recognition, ie tax rates valid as at the preparation date of the statement of financial position. Deferred tax assets are recognised if it is probable, beyond reasonable doubt, that profits will be available in the future against which deductible temporary difference can be utilised. Tax assets are reassessed as at the reporting date. Deferred tax is recognised in the income statement, except for the deferred tax arising from items that are recognised through equity, such as financial instruments available for sale. In this case, the deferred tax is also recognised through equity. The Bank is a payer of the value added tax and selected local taxes. Taxes are recognised in the income statement line “General administrative expenses”, except for the value added tax, tax on acquisition of tangible and intangible assets, which enters the cost of non-current tangible and intangible assets. Derivative Financial Instruments In the ordinary course of business, the Bank is a party to contracts for derivative financial instruments, which represent a very low initial investment compared to the notional value of the contract. Generally, derivative financial instruments include currency forward and swap agreements. The Bank mainly uses these financial instruments for business purposes and to hedge its currency exposures associated with transactions in financial markets. Derivative financial instruments are initially recognised at acquisition cost, which includes transaction expenses and which is subsequently re-measured to fair value. Fair values of derivatives are determined using valuation techniques by discounting future cash flows by a rate derived from the market yield curve and foreign currency translations using the ECB rates valid on the calculation day. Fair values of derivative transactions are determined in parts. Changes in the fair value of derivative financial instruments that are not defined as hedging derivatives are recognised in the statement of income in “Foreign exchange gains and losses, net”. Derivatives with positive fair values are recognised as assets in the in the statement of financial position line “Financial assets at fair value through profit or loss”. Derivatives with negative fair values are recognised as liabilities in the statement of financial position line “Other liabilities”.

Liabilities from Securities in Issue Liabilities from securities in issue are recognised at amortised cost. The Bank mainly issues mortgage bonds. Interest expense is included in the income statement loss line “Interest expense”, and it is accrued using the effective interest rate method. Subordinated Debts Subordinated debt refers to the Bank’s external debt and, in the event of the Bank’s bankruptcy, composition or liquidation, the entitlement to its repayment is subordinated to liabilities to other creditors. The Bank’s subordinated debt is recognised on a separate line of the statement of financial position as “Subordinated debt”. Interest expenses paid for the received subordinated debt are recognised in the income statement line “Interest expense”. Provision for Off-Balance Sheet Liabilities In the ordinary course of business, off-balance sheet liabilities, such as guarantees, financial commitments to grant a loan and letters of credit are recorded by the Bank. Provisions for expected losses from off-balance sheet contingent liabilities are recognised in such amounts that enable the covering of possible losses. The management determines the adequacy of the provision based upon the reviews of individual items, recent loss experience, current economic conditions, the risk characteristics of the various categories of products, and other pertinent factors. To cover estimated losses on contingent unused loans, guarantees and letters of credit, the Bank creates provisions in the case when a payable - as a result of past events - has to be settled and it is likely that such settlement of a payable will require cash outflow, and the amount payable can be reliably determined. The calculation of the provision for off-balance sheet liabilities is analogical to credit exposures. Issued guarantees, irrevocable letters of credit, and unused loan commitments are subject to detailed monitoring of credit risks and credit principles, as in the case of extended loans.



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Provisions for estimated losses are recognised through profit or loss when the Bank has a present legal or implied obligation to make a payment as a result of a past event, when it is probable that an outflow of sources representing economic benefits will be required, and when a reliable estimate of the amount to be paid can be reliably determined. Provisions are recognised in the statement of financial position line “Provisions for liabilities”. Expenses for the recorded provision are recognised through income statement, line “Provisions for impairment losses on loans and off-balance sheet, net“. Provision for Liabilities and Employee Benefits The amount of provisions for liabilities is recognised as an expense and a liability when the Bank is exposed to potential liabilities from litigation or indirect liabilities as a result of past events, and when it is probable that to settle such liabilities an outflow of financial funds will be required. The result is a reduction of resources embodying the economic benefits and a reasonable estimate of the amount of the resulting loss can be made. Any loss resulting from the recognition of the provision for liabilities is recognised in the statement of comprehensive income for the period. In line with the valid legislation, the Bank provides a lump-sum payment upon taking retirement. The recorded provision represents a liability to an employee that is calculated using the set actuarial methods; the calculation is based on discounted future expenditures. As at the reporting date, the liability is measured at the present value. The provision is recognised in the statement of financial position line “Provisions for liabilities”. Expenses for the recorded provision are recognised through income statement, line “General administrative expenses”. Statement of Cash Flows Cash and cash equivalents for the purposes of cash flow presentation include cash, amounts due to and from banks and balances with the National Bank of Slovakia, excluding the compulsory reserve required by the NBS and amounts due to banks due up to three months. Bank’s Regulatory Capital In administration of its regulatory capital, the Bank aims to ensure business prudence and to continuously maintain the Bank’s regulatory capital at least at the level required for Bank’s own funds. To accomplish this, when preparing the yearly business plan the Bank also prepares a plan of adequacy of regulatory capital considering its business objectives and applying the knowledge gained from previous experience.

In 2009, the Bank monitored, on a monthly basis, the development of requirements for regulatory capital and prepared reports on the required levels of the Bank’s regulatory capital and submitted them to the National Bank of Slovakia. The achieved results are also discussed at the Board of Directors meetings on a quarterly basis. The regulatory capital of the Bank’s financing is stipulated by the provision of the National Bank of Slovakia and comprises: - the Bank’s basic regulatory capital and additional regulatory capital (including subordinated debt)

less the value of deductible items under a special regulation, - supplementary regulatory capital. Segment Reporting

Under IFRS 8 “Operating Segments“, the Bank adopted the reporting by segments. When preparing segment reporting, the Bank used its internal information, which is presented to the Bank’s management on a regular basis. The breakdown by individual segment categories recognised in the notes is based on the principle applied for the classification of the Bank’s customers as follows:

• Retail customers; • Corporate customers; • Treasury; and • Not specified.



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The segment of “retail customers” includes the following customers: individuals, sole traders and small businesses. Private banking customers are defined separately by individual management of their funds. The Bank provides retail customers standard bank products, particularly: consumer loans, mortgage loans, general-purpose loans, deposit products. The most common deposit products offered are current accounts, term deposits, saving accounts, credit and payment cards. Housing loans, general purpose loans secured by real estate were the core products of this segment. The segment of “corporate customers” includes domestic and foreign companies, domestic and foreign banks, and state-owned entities. Corporate customers are divided into “micro and small” (MSE) sub-segments, with revenues up to EUR 10 million: • Micro (revenues up to EUR 1 million); • Small (revenues from EUR 1 million to 3.5 million); and • Medium (revenues from EUR 3.5 million to 10 million)

and “medium and large” (MLE) segment businesses, with revenues over EUR 10 million: • Medium (revenues from EUR 10 million to 35 million) • Large (revenues more than EUR 35 million).

In terms of products, corporate customers were mostly provided with overdraft facilities, EU Agro loans for the SME segment and with long- and medium-term loans for housing cooperatives as well as loans for the apartment owners association for the insulation of apartment buildings. The segment of “Treasury” includes transactions performed on the Bank’s own account or on the client’s account and comprises the following types of transaction: trading with securities, trading with derivative instruments, trading on money markets, management of the Bank’s liquidity, investment portfolio on the Bank’s account. Geographically, operating profit was primarily generated by the provision of banking services in the Slovak Republic. Some assets and liabilities are placed outside the Slovak Republic. Owing to their immateriality, the Bank decided not to report the total amount of revenues from foreign entities. The breakdown of selected items of the financial statements by segments and the summary of the most significant exposures of total assets and liabilities to foreign entities is included in Note 30. 3. Fair Value of the Bank’s Financial Assets and Liabilities The fair value of the Bank’s financial assets and liabilities is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm's length transaction. Where available, fair value estimates are made based on quoted market prices. In circumstances where the quoted market prices are not readily available, the fair value is estimated using discounted cash flow models or other pricing models as appropriate. Market inputs are used in valuation models to the maximum extent. Changes in underlying assumptions, including discount rates and estimated future cash flows, significantly impact on the estimates. Therefore, the estimated fair market values may not be realised in the current sale of the financial instrument. Based on the used input data for the fair value estimates, the calculation of fair value of the Bank’s financial assets and liabilities can be classified into one of the three levels: Level 1: quoted prices from active markets for identical assets or liabilities Level 2: inputs other than “level 1” quoted prices, which can be obtained for assets or liabilities either

directly (eg prices) or indirectly (derived from interest rates etc.) Level 3: input data for assets or liabilities, which cannot be derived from market data In estimating the fair value of the Bank’s financial instruments, the following methods and assumptions were used: Cash, Amounts due from Banks, and Balances with the National Bank of Slovakia and Placements with Other Banks The carrying values of cash and balances with central banks are generally deemed to approximate their fair value.



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The estimated fair value of amounts due from banks that mature in 180 days or less approximates their carrying amounts. The fair value of other amounts due from banks is estimated based upon discounted cash flow analyses using interest rates currently offered for investments with similar terms (market rates adjusted to reflect credit risk). The fair value of non-performing amounts due from banks is estimated using a discounted cash flow analysis or the appraised value of the underlying collateral − level 2 of the fair value estimate. Provisions are not taken into consideration when calculating fair values.

Loans Generally, the fair value of variable yield loans that are regularly re-valued approximates their carrying value with no significant changes in credit risks. The fair value of loans at fixed interest rates is estimated using discounted cash flow analyses, based upon interest rates currently offered for loans with similar terms to borrowers of similar credit risks. The fair value of non-performing loans to customers is estimated using a discounted cash flow analysis or the appraised value of the underlying collateral, where available. The fair value of loans does not significantly differ from their book value. Held-to-Maturity Financial Investments The fair value of securities recorded in the portfolio is stated at the price determined by valuation techniques based on level 2 of the fair value estimate. In government and banking bonds, whose issuers have rating comparable with the country rating, fair value is calculated using the market yield curve without credit margin. For other types of bonds the credit margin reflecting the issuer’s credit risk is applied in addition to the market yield curve. Amounts due to Banks and Deposits from the National Bank of Slovakia and Other Banks and Amounts due to Customers The fair value of term deposits payable on demand represents the carrying value of amounts payable on demand as at the statement of financial position date. The fair value of term deposits at variable interest rates approximates their carrying values as at the balance sheet date. The fair value of deposits at fixed interest rates is estimated by discounting their future cash flows using rates currently offered for deposits of similar remaining maturities - level 2 of the fair value estimate. Amounts owed to customers approximate their fair values as the vast majority of such deposits bear variable interest rates, and the management has the ability to revalue at short notice. Liabilities from Issued Securities and Subordinated Debt The fair value of issued securities and subordinated debt is determined using valuation techniques by discounting future cash flows by a rate derived from the market yield curve by level 2 of the fair value estimate. Fair value is determined separately for individual issues of securities considering the relevant credit margin. The following table includes reconciliation between the fair value of selected financial assets and liabilities and their carrying amounts with carrying amount different from their fair value:

(EUR ‘000) Fair Value

31 Dec 2009

Carrying Amount 31 Dec 2009

Difference 31 Dec 2009

Fair Value 31 Dec 2008

Carrying Amount 31 Dec 2008

Difference 31 Dec 2008

Assets Held-to-maturity financial

investments 222 887 218 756 4 131 108 107 106 497 1 610 Liabilities Liabilities from issued securities 207 477 204 758 2 719 289 679 287 084 2 595 Subordinated debt 29 083 29 078 5 29 272 29 238 34



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Supplementary Data to the Financial Statements 4. Cash, Due from Banks and Balances with the National Bank of Slovakia (EUR ‘000) 31 Dec 2009 31 Dec 2008 Cash on hand:

In EUR 21 598 24 679 In a foreign currency 2 859 2 334

24 457 27 013 Due from banks and balances with NBS: Residual maturity within one year:

In EUR 50 751 159 401 In a foreign currency 869 895

51 620 160 296 Total 76 077 187 309

Included in the ‘Due from banks and balances with NBS’ denominated in EUR is the compulsory minimum reserve with the NBS in the amount of EUR 27 098 thousand (31 December 2008: EUR 23 819 thousand), the withdrawal of which is restricted. As a result of the Slovak Republic’s entry to the eurozone as at 1 January 2009, the system of monitoring and creating compulsory minimum reserves has been changed. The average amount of the Bank’s compulsory minimum reserves during the period bears an average threshold interest rate of the Eurosystem main refinancing operation. Excess monetary reserves bear no interest. As at 31 December 2009, compulsory minimum reserves bear interest at 1.0% (31 December 2008: 1.5%). ‘Due from banks and balances with NBS’ denominated in EUR as at 31 December 2009 also included a receivable in the amount of EUR 23 000 thousand from short-term placements with the NBS (31 December 2008: EUR 119 166 thousand).

5. Placements with Other Banks, Net of Provisions for Possible Placement Losses

(EUR ‘000) 31 Dec 2009 31 Dec 2008 Residual maturity within one year:

In EUR 37 059 46 255 In foreign currency 8 620 16 552

Residual maturity exceeding one year: In EUR 1 540 4 573 In foreign currency 374 1 206

Total 47 593 68 586

Interest on deposits with other banks, loans to other banks:

31 Dec 2009

in % 31 Dec 2008

in % Since Until Since Until Residual maturity within one year:

In EUR 0.25 2.18 1.50 5.43 In foreign currency 0.20 7.00 1.20 9.40

Residual maturity exceeding one year:


The majority of foreign currency short-term deposits with other banks as at 31 December 2009 are denominated in CZK, PLN and USD (31 December 2008: PLN, HUF, GBP a USD). In 2Q 2008, the Bank purchased loan receivables against foreign banks under standard business terms. As at 31 December 2009, the total amount of receivables was EUR 3 105 thousand (31 December 2008: EUR 14 063 thousand).



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6. Financial Assets at Fair Value through Profit or Loss (EUR ‘000) 31 Dec 2009 31 Dec 2008 Securities held for trading

Ordinary shares 3 3 3 3 Derivative financial instruments held for trading (Note 22) 181 4 256 Total financial instruments held for trading 184 4 259

As at 31 December 2009 and 31 December 2008, the held-for-trading securities portfolio included non-interest-bearing securities. Derivative financial instruments held for trading do not comprise hedging derivatives; they are held to earn profit. They include currency futures and interest rate/currency swaps. In 2009, the Bank recognised revenues from financial assets at FVTPL (from derivative transactions) in the amount of EUR 18 217 thousand (2008: EUR 32 959 thousand) and expenses in the amount of EUR 18 527 thousand (2008: EUR 22 917 thousand).

7. Financial Assets Available for Sale (EUR ‘000) 31 Dec 2009 31 Dec 2008 Securities available for sale – government bonds 44 054 43 058 Investments in corporate entities 526 526 Total financial instruments available for sale 44 580 43 584

The structure as per interest rates and residual maturities is provided below: (EUR ‘000) 31 Dec 2009 31 Dec 2008 Less than five years, fixed interest rates 34 293 3 620 Less than five years, floating interest rates - - More than five years, fixed interest rates - 30 234 More than five years, floating interest rates - - Non-interest bearing (zero coupon) 9 761 9 204 Total 44 054 43 058

All bonds are denominated in EUR and were bearing interest in the range of 4.90% and 5.00% as at 31 December 2009. As at 31 December 2009, a portion of the government bonds with total nominal value of EUR 15 269 thousand was pledged in favour of the NBS as a security and another portion with the total nominal value of EUR 15 933 thousand was pledged in favour of other clients as a security for liabilities from financial transactions. Under the Securities Pledge Agreements, the pledger (the Bank) cannot handle the pledged securities without prior approval by the pledgee (the client). As at 31 December 2009, the portfolio of securities available for sale was remeasured to fair value. As at 31 December 2009, the gain on revaluation represents the amount of EUR 447 thousand (31 December 2008: EUR 582 thousand) (net of deferred income tax) and is recognised through equity as “Revaluation of financial assets available for sale”.



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An analysis of investments in corporate entities as at 31 December 2009 (unless otherwise indicated, the companies are incorporated in the Slovak Republic) is as follows: Company Name Business Activity Share Cost Provision Net OTP Buildings, s.r.o. Real estate agency 19.00% 6 6 - S.W.I.F.T (Belgium) International clearing 0.005% 6 - 6 RVS, a.s. Wellness 12.65% 867 347 520 Visa Inc. * (USA) Interbank clearing 0.026% - - - Total 879 353 526

* Investment recognised at cost of EUR 1. An analysis of investments in corporate entities as at 31 December 2008 (unless otherwise indicated, the companies are incorporated in the Slovak Republic) is as follows:

Company name Business activity Share Cost Provision Net OTP Buildings, s.r.o. Real estate agency 19.00% 6 6 -

Dopravná banka, a.s. Activity of other financial

institutions 15.00% 3 983 3 983 - S.W.I.F.T (Belgium) International clearing 0.005% 6 - 6 RVS, a.s. Wellness 12.65% 867 347 520 Total 4 862 4 336 526

On 7 July 2009, Dopravná banka, a.s. was deleted from the Commercial Register and de-recognised. In 4Q 2008, the Bank increased its ownership interest in OTP Leasing, a.s., from 19% to 50%, recognising the investment in the statement of the financial position “Investments in subsidiaries and associates and interests in ventures” (Note 10). Afterwards, the entire ownership interest in OTP Leasing, a.s., was sold and the net loss on sale is recognised in the income statement line “Gains/(losses) on financial assets, net”. In 3Q 2008, the Bank sold its ownership interests in OTP Garancia poisťovňa, a.s., and OTP Garancia životná poisťovňa, a.s. The net gain on sale is recognised in the income statement line “Gains/(losses) on financial assets, net”. The net gain from sale of interest in OTP Garancia, a.s., OTP Garancia životná poisťovňa, a.s. and in OTP Leasing, a.s. represents amount of EUR 4 067 thousand. In 2Q 2008, the Bank realised a monetary contribution to the capital reserves of OTP Leasing, a.s., at the amount equal to the Bank's share in the company's registered capital. With the Bank’s unchanged 19% share in the company's registered capital, the monetary contributions amounted to EUR 156 thousand. The contributions were made for the purpose of the capital reinforcement of OTP Leasing, a.s. An analysis of movements in the provision for financial assets available for sale related to equity share in corporate entities is as follows: (EUR ‘000) 31 Dec 2009 31 Dec 2008

Balance at the beginning of year 4 336 5 471 Creation/(release) of provision during the period, net (3 983) (620) Transfer of provisions to investments in joint ventures (Note 10) - (515) Balance at the end of year 353 4 336

The release of a provision in 2009 refers to the de-recognition of the ownership interest owing to the deletion of Dopravná banka, a.s. from the Commercial Register on 7 July 2009. In 2008 release of provision refers to the sale of the ownership interests in OTP Garancia poisťovňa, a.s., and OTP Garancia životná poisťovňa, a.s in 3Q 2008. In 2008 transfer of the provision refers to reclassification of the ownership interest in OTP Leasing, a.s. to investments in joint ventures owing to an increase of the ownership interest from the initial 19% to 50% in 4Q 2008. The Bank is not unlimited guarantee partner in any reporting entities.



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8. Loans and Receivables, Net of Provisions for Possible Losses Loans and Receivables by Type of Product

31 Dec 2009 (EUR ‘000)

Carrying Amount Before Provisions

Individual Provision

Portfolio Provision

Carrying Amount After Provisions

Corporate loans 635 218 33 047 10 828 591 343 Corporate clients 542 584 21 484 3 095 518 005 Overdrafts 79 769 11 318 392 68 059 Mass loans* 12 114 170 7 328 4 616 Mortgage loans 750 75 12 663 Other 1 - 1 - Retail loans 375 754 325 6 272 369 157 Mortgage loans 237 693 281 1 848 235 564 Consumer loans 132 405 44 2 143 130 218 Other 5 656 - 2 281 3 375 Total 1 010 972 33 372 17 100 960 500

31 Dec 2008 (EUR ‘000)


Individual Provision

Portfolio Provision


Corporate loans 824 813 15 768 8 654 800 391 Corporate clients 719 700 12 316 2 012 705 372 Overdrafts 82 742 3 164 261 79 317 Mass loans* 15 766 208 6 358 9 200 Mortgage loans 6 604 79 23 6 502 Other 1 1 - - Retail loans 373 771 141 2 507 371 123 Mortgage loans 270 379 97 413 269 869 Consumer loans 100 586 44 714 99 828 Other 2 806 - 1 380 1 426 Total 1 198 584 15 909 11 161 1 171 514

* Mass loans include fast corporate loans and solvent business card product for corporate clients. The Summary of Provisions for Possible Loan Losses (EUR ‘000) 31 Dec 2009 31 Dec 2008 Balance at the beginning of year 27 070 31 328 Provisions for impairment losses on loans and off-balance sheet, net (Note 24) 33 714 9 230 Loan write-offs and assignments– (Note 24) (10 311) (13 463) Exchange rate differences (1) (25) Balance at the end of year 50 472 27 070

Other Information on Loans and Receivables As at 31 December 2009 and 2008, the loans denominated in a foreign currency approximately accounted for 3% and 7%, respectively, of the loan portfolio before provisioning for possible losses. Interest on loans and receivables:

31 Dec 2009

in % 31 Dec 2008

in % Since Until Since Until Contractual maturity within one year:

In EUR 1.98 24.25 1.72 23.75 In a foreign currency - - 1.54 6.30

Contractual maturity over one year:

In EUR 1.03 24.25 1.94 24.25 In a foreign currency 0.37 8.65 0.34 11.74

Loans with non-accrual status as at 31 December 2009 amounted to EUR 6 684 thousand, after the deduction of provisions for potential loan losses (31 December 2008: EUR 4 182 thousand). The Bank has stopped charging interest on these loans as bankruptcy was declared on the debtor or due to the Bank’s withdrawal from the loan contract following the client’s failure to meet contractual conditions.



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Interest income of the Bank for 2009 from loans impaired as at 31 December 2009 amounted to EUR 3 470 thousand and recognised in the income statement in “Interest income” (in 2008, interest income from loans impaired as at 31 December 2008 amounted to EUR 2 253 thousand). The receivables from interest income are combined with related loan balances when determining impairment provision. In 2Q 2008, the Bank purchased loan receivables under standard business terms from parent company. As at 31 December 2009, the total gross value of the receivables is EUR 50 356 thousand (31 December 2008: EUR 123 521 thousand). In 2009, the Bank transferred some purchased loan receivables to the parent company in the total gross amount of EUR 29 206 thousand. The impact of the transfers on the Bank’s profit/loss represents net loss of EUR 868 thousand and is recognised in the income statement line “Provisions for impairment losses on loans and off-balance sheet, net“.

9. Held-to-Maturity Financial Investments As at 31 December 2009 and 31 December 2008, the Bank recognised the following held-to-maturity investments: (EUR ‘000) 31 Dec 2009 31 Dec 2008 State bonds 108 073 42 064 Bonds issued by banks 104 513 58 264 Bonds issued by other corporations 6 170 6 169 Total securities held to maturity 218 756 106 497

All securities held-to-maturity are denominated in euros. In 2009, the Bank purchased the parent company’s bonds into its portfolio totalling EUR 62 267 thousand as at 31 December 2009 and mortgage bonds issued by the Hungarian bank OTP Jelzálogbank ZRt. with the balance sheet amount of EUR 1 001 thousand as at 31 December 2009. Interest on investments held to maturity:

31 Dec 2009

in % 31 Dec 2008


In EUR 0.86 4.90 4.50 4.50 Contractual maturity over one year:

In EUR 0.83 6.75 3.59 5.63 As at 31 December 2009, a portion of state bonds with a total face value of EUR 38 073 thousand was pledged in favour of a client as a collateral in respect of issued mortgage bonds (31 December 2008: EUR 40 331 thousand), another portion of state bonds with a total face value of EUR 4 979 thousand and a portion of bonds issued by banks with a total face value of EUR 3 983 thousand was pledged in favour of another client as collateral to secure liabilities from financial transactions. As at 31 December 2009, government bonds of Hungary and mortgage bonds issued by OTP Jelzálogbank ZRt. with a total face value of EUR 31 000 thousand, as well as a portion of government bonds with a total face value of EUR 10 000 thousand and a portion of bonds issued by banks with a total face value of EUR 33 194 thousand were pledged in favour of the National Bank of Slovakia as collateral to secure liabilities from refinancing transactions. In accordance with the securities pledge contracts, the pledger (the Bank) cannot dispose of pledged securities without approval by the pledgee (client). As at 31 December 2009 and 31 December 2008, the Bank did not record any other restrictions on the disposal of securities in its portfolio within held-to-maturity financial investments. As at 31 December 2009 and 31 December 2008, a portion of bonds issued by banks had collateral in the form of government bonds pledged by the issuing banks. According to contractual conditions, the Bank cannot dispose of this collateral – to sell or re-pledge it if no default occurs.



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10. Investments in Subsidiaries and Associates As at 31 December 2009 and 31 December 2008, the Bank recognised the following investments in subsidiaries and associates: (EUR ‘000) 31 Dec 2009 31 Dec 2008 Subsidiaries 1 202 1 202 Associates - - Total – gross value 1 202 1 202 Provision for investments in subsidiaries and associates (289) (289) Total – net value 913 913

An analysis of investments in subsidiaries and associates, as at 31 December 2009 and 2008 (all companies incorporated in the Slovak Republic), is as follows:

Company Company Seat Business Activity Ownership Interest /

Voting Power Held

OTP Faktoring Slovensko, a.s. Tallerova 10, 811 02 Bratislava

Factoring 100.00%

Additional information on investments in subsidiaries and associates as at 31 December 2009 and 2008: Company Acquisition Cost Provisions Net OTP Faktoring Slovensko, a.s. 1 202 (289) 913 Total 1 202 (289) 913

In 4Q 2008, the Bank increased its ownership interest in OTP Leasing, a.s., from 19% to 50% of the equity share (Note 7). Subsequently, the whole ownership interest in OTP Leasing, a.s. was sold and the loss on sale was recognised in the income statement line “Gains/(losses) on financial assets, net”. An analysis of movements in the provision for investments in subsidiaries and associates is as follows: (EUR ‘000) 31 Dec 2009 31 Dec 2008 Balance at the beginning of year 289 289 Transfer of provision from financial instruments available for sale (Note 7) - 515 Creation of provision during the year, net - 515 Write-off of provision - (1 030) Balance at the end of year 289 289

The transfer of the provision refers to reclassification of the investment in OTP Leasing, a.s. from financial instruments available for sale owing to the increase of the ownership interest from the initial 19% to 50% in the 4Q 2008. Additions to provisions in 2008 refers to recognition of provision for investment in OTP Leasing, a.s., which was recognised before the Bank’s ownership interest in OTP Leasing, a.s. was sold in 4Q 2008. Write-off of provisions relates to the sale of the entire equity share in OTP Leasing, a.s. in 4Q 2008.



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11. Non-Current Tangible and Intangible Assets

Movements of Assets (EUR ‘000)

Buildings and Land

Fittings and

Fixtures

Motor

Vehicles

Tangible Assets in

Acquisition

Intangible

Assets

Intangible Assets in

Acquisition

Total

Cost at 1 Jan 2008 22 665 32 355 662 1 494 7 642 2 643 67 461 Additions (+) 930 1 781 121 3 612 4 591 5 961 16 996 Disposals (-) (209) (2 229) (74) (3 598) (362) (5 039) (11 511) Cost at 31 Dec 2008 23 386 31 907 709 1 508 11 871 3 565 72 946 Accumulated depreciation and provisions at 1 Jan 2008 6 192 24 517 371 - 3 968 - 35 048

Depreciation (+) 788 2 704 125 - 1 327 - 4 944 Disposal (-) (41) (2 052) (74) - (362) - (2 529) Accumulated depreciation and provisions at 31 December 2008 6 939 25 169 422 - 4 933 - 37 463

Net book value at 31 Dec 2008 16 447 6 738 287 1 508 6 938 3 565 35 483 Cost at 1 Jan 2009 23 386 31 907 709 1 508 11 871 3 565 72 946 Additions (+) 400 792 6 1 027 4 457 3 704 10 386 Disposals (-) (360) (1 884) (52) (1 295) (11) (4 475) (8 077) Cost at 31 Dec 2009 23 426 30 815 663 1 240 16 317 2 794 75 255 Accumulated depreciation and provisions at 1 Jan 2009 6 939 25 169 422 - 4 933 - 37 463

Depreciation (+) 831 2 326 136 - 2 622 - 5 915 Disposal (-) (116) (1 854) (52) - (11) - (2 033) Accumulated depreciation and provisions at 31 December 2009 7 654 25 641 506 - 7 544 - 41 345 Net book value at 31 Dec 2009 15 772 5 174 157 1 240 8 773 2 794 33 910

An analysis of movements in impairment loss provisions accounts is as follows:

2009 2008 (EUR ‘000) Land Buildings Other Total Total At 1 Jan 2009/1 Jan 2008 299 - - 299 299 Additions (+) - - - - - Disposals (-) - - - - - At 31 Dec 2009/31 Dec 2008 299 - - 299 299



25

A summary of insurance of non-current tangible and intangible assets as at 31 December 2009:

(EUR ‘000) Anticipated

Annual Premium

Actual Insurance

Costs MTPL insurance 12 11 Motor hull insurance 42 36 Insurance of assets 97 98 Total 151 145

Costs of insurance coverage are recognised in the income statement line “General administrative expenses”. As at 31 December 2009, the Bank’s non-current tangible and intangible assets were insured up to 100% of the total amount of assets (31 December 2008: 100%). As at 31 December 2009, the Bank does not have as part of its non-current tangible and intangible assets the following: • Assets encumbered by a pledge • Assets with a limited right of disposal • Acquired assets for which the ownership title was not recorded in the Land Register as at the

balance sheet date, but which is used by the Bank • Assets acquired in privatisation 12. Other Assets (EUR ‘000) 31 Dec 2009 31 Dec 2008 Loss receivables from various debtors 3 616 3 817 Loss receivables from securities 6 104 12 492 Due from ceded receivables 83 125 Operating advances extended 472 458 Inventories 139 143 Deferred expenses 834 829 Amounts receivable from various debtors 682 634 Other receivables from clients 418 406 Other receivables 532 397 Other assets before provisions 12 880 19 301 Provisions for possible losses on other assets (10 041) (16 502) Other assets 2 839 2 799

As at 31 December 2009, the Bank does not recognise as part of other assets any amounts, to which a pledge is attached or for which it has a limited right of disposal. Provisions for possible losses from other assets mainly relate to the loss receivables from various debtors and loss receivables from securities. An analysis of movements in provisions for possible losses from other assets is as follows: (EUR ‘000) 31 Dec 2009 31 Dec 2008 Balance at the beginning of the year 16 502 16 723 Provisions for impairment losses on other assets, net (Note 29) 217 (138) Other assets written-off and assigned (Note 29) (6 677) (83) Exchange difference (1) - At the end of year 10 041 16 502

A decrease in loss receivables from securities resulted from the writing-off of receivables from companies in bankruptcy recognised in line “Other assets written-off and assigned” in connection with the legally effective closing of bankruptcy proceedings in 2009. Provisions were also released accordingly. The Bank does not record any subordinated financial assets.



26

13. Due to Banks and Deposits from the National Bank of Slovakia and Other Banks

(EUR ‘000) 31 Dec 2009 31 Dec 2008 Residual maturity within one year:

In EUR 100 435 132 909 In foreign currency 91 31 594

Residual maturity over one year:

In EUR 5 465 7 480 In foreign currency - -

Total 105 991 171 983

Amounts due to banks by type of product: (EUR ‘000) 31 Dec 2009 31 Dec 2008 Deposits 49 25 Term accounts of other banks 50 192 156 014 Loans received from other financial institutions 53 964 15 834 Other liabilities to financial institutions 1 786 110 Total 105 991 171 983

An analysis of received loans by individual types of banks (all loans are denominated in EUR):

(EUR ‘000) Type of Loan According to

Maturity

Contractual Maturity

31 Dec 2009

31 Dec 2008

Loans received from issuing banks:

Central banks Short-term 6. 1. 2010 35 002 -

Loans received from banks: Commercial banks Short-term 12. 2. 2010 10 019 - Reconstruction and development

banks Long-term 25. 11. 2011 3 340 6 740

Reconstruction and development banks

Long-term Individual 5 603 9 094

Repurchase loans received from banks: - -

Commercial banks - - Total 53 964 15 834

Of the total amounts due to banks as at 31 December 2009, the Bank does not recognise any overdue payables.

Interest on amounts due to banks:

31 Dec 2009

in % 31 Dec 2008

in % Since Until Since Until Residual maturity within one year:


Residual maturity over one year:

In EUR 2.10 4.70 2.10 2.70 In foreign currency - - - -

14. Amounts due to Customers

(EUR ‘000) 31 Dec 2009 31 Dec 2008 Current accounts and other short-term amounts due to customers 388 721 433 822 Term deposits 466 982 477 638 Pass books 22 807 26 246 Loans received from clients - 12 267 Municipalities 58 993 46 059 Other 283 303 Total 937 786 996 335



27

Amounts due to customers by type:

(EUR ‘000) 31 Dec 2009 31 Dec 2008 Non-financial organisations 238 229 291 611 Individuals 571 981 558 226 Financial institutions 15 436 32 013 Trade licence holders 20 491 27 464 Insurance companies 4 072 4 744 Non-profit organisations 13 426 15 112 Non-residents 14 875 20 803 Government sector 58 993 46 059 Not categorised in sectors 283 303 Total 937 786 996 335

Amounts due to customers by residual maturity:

(EUR ‘000) 31 Dec 2009 31 Dec 2008

Residual maturity within one year: In EUR 783 180 970 790 In foreign currency 26 100 23 839

Residual maturity over one year: In EUR 128 497 1 706 In foreign currency 9 -

Total 937 786 996 335

Interest on amounts due to customers:

31 Dec 2009

in % 31 Dec 2008


In EUR 0.05 4.10 0.50 5.50 In a foreign currency 0.05 6.40 0.03 10.40


In EUR 0.20 12.00 0.80 12.00 In a foreign currency - - - -

As part of its liquidity risk management efforts, the Bank regularly monitors deposit exposures and adjusts the structure of its assets to ensure its sufficient liquidity (in the form of liquid assets) in the event it may need to access cash deposits. As at 31 December 2009, the total of primary deposits of depositors and deposits exceeding EUR 3 320 thousand represented 11.85% of the Bank’s funds (31 December 2008: 10.18%). 15. Liabilities from Issued Securities (EUR’000) 31 Dec 2009 31 Dec 2008

Residual maturity within one year: Liabilities from deposit certificates - 10 Liabilities from financial bills of exchange 30 085 862 Liabilities from mortgage bonds 106 805 90 792 Liabilities from issued bonds - 33 340 Other 174 174

Residual maturity over one year: Liabilities from mortgage bonds 67 694 161 906

Total 204 758 287 084

Liabilities from issued deposit certificates as at 31 December 2008 bear no interest as they refer to liabilities from due deposit certificates.



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Interest on liabilities from issued securities:

31 Dec 2009

in % 31 Dec 2008


In EUR 0.80 4.60 3.61 5.99 In foreign currency - - 4.20 4.25


In EUR 0.86 4.70 3.37 4.70 In foreign currency - - - -

In 2009, the Bank issued Mortgage Bonds, Issues XVII, XVIII and XIX, with a total face value of EUR 12 173 thousand to finance mortgage loans provided by the Bank. In 2008, the Bank issued Mortgage Bonds, Issues XIII, XIV, XV and XVI, with a total face value of EUR 54 405 thousand. In 2009, the Bank paid Mortgage Bonds, Issues III, VI, IX, XV and XVI with a total face value of EUR 87 599 thousand and Bonds, Issue OTP I. with a total face value of EUR 33 194 thousand. In 2008, the Bank paid Mortgage Bonds, Issues VIII and X with a total face value of EUR 33 194 thousand.



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The summary of mortgage bonds as at 31 December 2009 and 31 December 2008 is as follows:

Mortgage Bonds Issued

Currency Quantity Face Value per Share

in EUR

Face Value of Issue

Carrying Amount

31 Dec 2009

Carrying Amount

31 Dec 2008

Interest Income

(coupon)

Frequency of Coupon

Payout Issue Date Due Date

Mortgage bonds Issue I

EUR 500 33 193.92 16 597 16 630 16 588 4.70% Annual 15. 10. 2003 15. 10. 2012

Mortgage bonds Issue III

EUR 500 33 193.92 16 597 - 16 970 4.50% Annual 30. 6. 2004 30. 6. 2009

Mortgage bonds Issue V

EUR 1 000 33 193.92 33 194 33 572 33 572 4.50% Annual 29. 9. 2004 29. 9. 2010

Mortgage bonds Issue VI

EUR 1 000 33 193.92 33 194 - 33 307 6M BRIBOR + 0.11% p. a.

Semi-annual 31. 5. 2005 31. 5. 2009

Mortgage bonds Issue VII

EUR 677 33 193.92 22 472 22 477 24 053 3M BRIBOR + 0.15% p. a.

Quarterly 21. 12. 2005 21. 12. 2015

Mortgage bonds Issue IX

EUR 500 33 193.92 16 597 - 16 792 6M BRIBOR + 0.09% p. a.

Semi-annual 29. 9. 2006 29. 9. 2009

Mortgage bonds Issue XI

EUR 1 000 33 193.92 33 194 33 285 33 573 6M BRIBOR + 0.08% p. a.

Semi-annual 30. 3. 2007 30. 3. 2010

Mortgage bonds Issue XII

EUR 660 33 193.92 21 908 21 926 21 988 3M BRIBOR + 0.08% p. a.

Quarterly 23. 11. 2007 23. 11. 2010

Mortgage bonds Issue XIII

EUR 500 33 193.92 16 597 17 178 17 170 4.50% Annual 12. 3. 2008 12. 3. 2011

Mortgage bonds Issue XIV

EUR 500 33 193.92 16 597 17 110 17 100 4.60% Annual 25. 4. 2008 25. 4. 2010

Mortgage bonds Issue XV

EUR 500 33 193.92 16 597 - 16 960 5.25% Annual 30. 7. 2008 30. 7. 2009

Mortgage bonds Issue XVI

EUR 139 33 193.92 4 614 - 4 625 5.99% Annual 15.12.2008 15.12.2009

Mortgage bonds Issue XVII

EUR 303 10 000.00 3 030 3 100 - 4.10% Annual 8. 6. 2009 8. 6. 2012

Mortgage bonds Issue XVIII

EUR 547 10 000.00 5 470 5 524 - 3.50% Annual 18. 9. 2009 18. 3. 2012

Mortgage bonds Issue XIX

EUR 3 673 1 000.00 3 673 3 697 - 4.00% Semi-annual 2. 11. 2009 2. 11. 2012

Total 174 499 252 698 As at 31 December 2009, mortgage bonds Issues I, V, VII, XI, XII, XIII and XIV were listed and traded on the Bratislava Stock Exchange. Mortgage bonds from Issue XVII will be listed on the stock exchange in 2010. The sale of mortgage bonds Issue XIX was not completed as at 31 December 2009. According to the Banking Act, the mortgage bonds issued must cover at least 90% of the outstanding amount of mortgage loans provided by the Bank. This threshold was decreased to 70% for the Bank for the period 1 March 2009 – 28 February 2011 under the decision of the NBS. As at 31 December 2009, the Bank’s coverage amounted to 73.17% (31 December 2008: 90.85%). As at 31 December 2009, a portion of liabilities from issued securities was secured by a pledge. It refers to Mortgage Bonds Issue V; the entire issue is secured by the creditor by a pledge over government bonds which are recognised in the Bank’s portfolio as held-to-maturity financial investments (Note 9).



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16. Other Liabilities (EUR ‘000) 31 Dec 2009 31 Dec 2008 Various creditors 935 1 533 Tax liabilities (except for income tax liabilities) 793 684 Provisions for unbilled and other liabilities 318 443 Social fund 106 133 Settlement with employees 345 149 Settlement with social institutions 166 80 Accrued one-off charges 2 922 3 329 Negative fair value of financial derivatives (Note 22) 22 735 Liabilities from payment transactions 3 295 6 088 Liabilities from loans to Družstevná bytová výstavba 3 345 4 990 Other liabilities 6 1 028 Total 12 253 19 192

Summary of changes in the social fund: (EUR ‘000) 31 Dec 2009 31 Dec 2008 Balance at the beginning of the year 133 133 Additions during the year 149 197 Drawings during the year (176) (197) Balance at the end of the year 106 133

17. Subordinated Debt In 2008, the Bank obtained and drew subordinated debt totalling EUR 29 million, which represents additional regulatory capital for the Bank (Note 32).

Type of Loan Curr. Type of Loan by Maturity

Start of Loan

Drawdown

Contractual Maturity

Carrying Amount of Loan

31 Dec 2009

Carrying Amount of

Loan 31 Dec 2008

Subordinated debt:

– OTP Financing Netherlands B.V.

EUR Long-term March 2008 March 2015 11 005 11 225

– OTP Financing Netherlands B.V.

EUR Long-term April 2008 April 2015 18 073 18 013

Total (EUR’000) 29 078 29 238

The interest rate on the subordinated debt received in March 2008 is based on 3-month EURIBOR plus 1.0 per cent margin and for subordinated debt received in April 2008 the interest rate is based on 3-month EURIBOR plus 1.5 per cent margin. OTP Financing Netherlands B.V. is a financial company, a member of the OTP Group, with its seat at Schouwburgplein 30 – 34, 3012 CL Rotterdam, Netherlands.

The Company’s scope of business mainly includes: • Raising and provision of financial borrowings and loans, accession to a debt as a co-debtor • Provision of financial guarantees, provision of securities to third parties • Advisory and consulting activities • Investments of financial funds • Lease, development, management, acquisition of movable and immovable assets



31

18. Share Capital Share Capital Nominal Amount per Share Number of Shares 31 Dec 2009 31 Dec 2008 EUR 3.98 per share 11 503 458 45 783 45 821 EUR 39 832.70 per share 570 22 705 22 705 Share capital at the end of reporting period 68 488 68 526

In line with the applicable regulations, resulting from the euro conversion, the Bank converted the share capital and the face value of shares from SKK to EUR. The rounding difference arising from the conversion of the share capital from SKK to EUR amounted to EUR 38 thousand and is recognised in reserve funds. As at 31 December 2009, the Bank’s share capital amounted to EUR 68 488 thousand (31 December 2008: EUR 68 526 thousand) and consisted of 11 503 458 registered uncertified shares with face value of EUR 3.98 per share, and 570 registered uncertified shares, publicly non-tradable, with face value of EUR 39 832.70 per share. All of the shares are ordinary shares and no special rights are attached to them. Voting rights per share are equivalent to the face value per share. As at 31 December 2009, the Bank’s entire share capital was registered in the Commercial Register and fully paid in. As at 31 December 2009, no shares of OTP Banka Slovensko, a.s. are held by the Bank, its subsidiaries, or entities in which the Bank has a significant interest. Reserve Funds

At 31 December 2009, reserve funds amounting to EUR 10 328 thousand (31 December 2008: EUR 9 191 thousand) include legal reserve fund in the amount EUR 4 490 thousand, reserve fund from the conversion of the share capital from SKK to EUR in the amount of EUR 38 thousand and other reserve funds in the amount of EUR 5 800 thousand. Based on the resolution of the General Meeting of OTP Banka Slovensko, a.s., in the first half of 2009 the Bank recognised an allocation to legal reserve funds totalling EUR 1 099 thousand from the profit earned in 2008 (Note 40). The legal reserve fund is intended to cover potential future losses, its distribution to shareholders is restricted in accordance with the Slovak Commercial Code.

19. Income Taxes (EUR ‘000) 31 Dec 2009 31 Dec 2008 Current tax expense/(revenue) - - Deferred tax expense/(revenue) (737) 1 826 Total (737) 1 826

The Bank records a deferred income tax recognised in the income statement in the amount of EUR 737 thousand (31 December 2008: - EUR 1 826 thousand) and on items recognised through equity in the amount of EUR 105 thousand (31 December 2008: EUR 137 thousand). The Bank’s tax on pre-tax profit differs from the notional tax which would arise if the income tax rate was applied as follows: (EUR ‘000) 31 Dec 2009 31 Dec 2008 Pre-tax profit/(loss) (25 253) 12 820 Theoretical tax at 19% (4 798) 2 436

Non-taxable income (73) (121) Non-deductible expenses 1 702 848 Provisions for assets and provisions for liabilities, net (366) (16) Adjusted estimates of deferred tax on tax loss carried forward (257) - Adjustment of provisions for uncertain utilisation of deferred tax assets 3 055 (1 321)

Income tax expense/(revenue) for the current reporting period (737) 1 826 Effective tax for the period (2.92%) 14.24%



32

In 2009, the Bank recorded a negative tax base (tax loss). The Bank recognised a decrease in income tax expense from recognition of a deferred tax in the amount of EUR 737 thousand (2008: EUR - 1 826 thousand) from decreased deferred tax liabilities. In 2008, the Bank recorded a positive tax base from which tax loss incurred in prior years was deducted. In 2008, the Bank recorded income tax expense from recognition of deferred tax.

20. Deferred Income Taxes Deferred income taxes are recognised using the liability method on a balance sheet basis. Application of this method reports temporary differences, i.e. the differences between the tax base of assets or liabilities and their carrying amount in the statement of financial position. The effective tax rate of 19% was applied (2008: 19%): (EUR ‘000) 31 Dec 2009 31 Dec 2008 Deferred tax liability Temporary difference between net values of fixed assets for accounting and

tax purposes (694) (755) Loans (provisions for loan impairment) - (643) Revaluation reserves on securities available for sale (recognised through

equity) (241) (136) Total deferred tax liability (935) (1 534) Deferred tax asset Loans (provisions for loan impairment) 4 946 2 369 Other assets 724 2 079 Provisions for liabilities 55 22 Tax losses that can be carried forward 3 173 1 340 Total deferred tax asset 8 898 5 810 Adjustment for uncertain realisation of deferred tax asset (7 503) (4 448) Net deferred tax asset/(liability) 460 (172)

(EUR ‘000) 31 Dec 2009 31 Dec 2008 Net deferred tax asset/(liability) – opening balance 1 Jan (172) 1 791 (Debited)/credited to current-year profit/loss 737 (1 826) (Debited)/credited to equity (105) (137) Net deferred tax asset/(liability) – closing balance 460 (172)

When recognising the deferred tax asset, the Bank followed the principle of prudence. Based on the approved budget and effective tax legislation, the Bank expects to report a positive tax base in the following years from which it will be able to deduct (carry forward) tax losses of prior years. The Bank did not recognise a deferred tax asset of EUR 7 503 thousand (2008: EUR 4 448 thousand), associated mainly with temporary differences resulting from provisions for loans and other assets, and a portion of tax losses carried-forward, owing to its uncertain timing and realisation in future reporting periods.

21. Provisions for Liabilities, Contingent Liabilities and Other Off-Balance Sheet Items

In the ordinary course of business, the Bank becomes a party to various financial transactions that are not reflected in the statement of financial position but recognised as off-balance sheet financial instruments. These include liabilities resulting from provided guarantees, unused loan commitments and issued letters of credit. The following represent notional amounts of these off-balance sheet financial liabilities, unless stated otherwise. (EUR ‘000) 31 Dec 2009 31 Dec 2008 Unused loan commitments 46 267 93 235 Other guarantees provided to clients 51 507 58 615 Unused overdrafts and approved overdraft facilities 26 758 43 904 Issued letters of credit - 4 198 Total 124 532 199 952



33

Loan commitments represent the unused part of permissions to provide a loan by means of credit transactions, guarantees, or letter of credits. The Bank faces potential losses related to credit risks resulting from loan commitments in the amount of unused loan commitments. The estimated amount of exposure is, however, lower than the total unused loan commitments, since the majority of such commitments are subject to loan covenants that clients are required to comply with. To cover estimated losses on subordinated unused loans, guarantees, and letters of credit, the Bank creates provisions in the case when a payable - as a result of past events - has to be settled and it is likely that such settlement of a payable will require cash outflow, and the payable amount can be reliably estimated. The calculation of the provision for off-balance sheet liabilities is analogical to the case of credit exposure. Issued guarantees, irrevocable letters of credit, and unused loan commitments are subject to detailed monitoring of credit risks and loan principles, as in the case of loans extended. Within its ordinary activities the Bank is a party in court causes and law suits. Each dispute is subject to monitoring and regular re-assessment as part of the Bank’s standard procedures. If it is probable that the Bank will be required to settle the claim and a reliable estimate of the amount can be made, provisions are recorded. The management of the Bank believes that obligations that could arise from these cases and law suits would not significantly affect the current and future financial situation of the Bank. Considering the advice of lawyers and the current status of individual cases, the management of the Bank created provisions for these risks in the amount EUR 2 484 thousand as at 31 December 2009 (2008: EUR 0 thousand). These provisions were recorded based on the resolution of court case after the reporting date of these financial statements. The Bank recognised the following provisions: (EUR ‘000) 31 Dec 2009 31 Dec 2008

Provisions for:

Unused loan commitments 320 301 Guarantees 1 196 577 Issued letters of credits - 41 Litigation 2 484 - Retirement payments 39 45

Total 4 039 964 Creation and release of provisions for off-balance sheet liabilities is recognised in the income statement line “Provisions for impairment losses on loans and off-balance sheet, net”. Creation and release of a provision for retirement payments is recognised in the income statements line “General administrative expenses“. The creation and release of provisions for litigation is recognised in the income statement line “Other Operating Revenues/(Expenses), Net”. An analysis of changes in provisions for off-balance sheet risks is as follows: (EUR ‘000) 31 Dec 2009 31 Dec 2008 Balance at the beginning of current reporting period 919 955 Creation of provision 2 640 1 471 Release of provision (2 047) (1 490) Exchange difference 4 (17) At the end of reporting period 1 516 919

An analysis of changes in the provision for litigations: (EUR ‘000) 31 Dec 2009 31 Dec 2008 Balance at the beginning of current reporting period - - Creation of provision 2 484 - Release of provision - - At the end of reporting period 2 484 -



34

An analysis of changes in the provision for retirement payments: (EUR ‘000) 31 Dec 2009 31 Dec 2008 Balance at the beginning of current reporting period 45 63 Creation of provision 12 4 Release of provision (18) (22) Exchange difference - - At the end of reporting period 39 45

22. Derivative Financial Instruments The Bank uses derivative financial instruments for trading purposes. Financial derivative instruments at face and fair values as at 31 December 2009 and 31 December 2008:

Face Value of Assets Face Value of Liabilities (EUR ‘000)

31 Dec 2009 31 Dec 2008 31 Dec 2009 31 Dec 2008 Currency instruments Foreign currency spots 20 499 142 980 20 447 138 837 Foreign currency forwards - 10 352 - 10 726 Of which EUR (non-sensitive due

to transition to EURO) n/a

80 415

n/a 79 976 Total 20 499 153 332 20 447 149 563

Face Value of Assets Face Value of Liabilities (EUR ‘000)

31 Dec 2009 31 Dec 2008 31 Dec 2009 31 Dec 2008 Currency instruments Foreign currency spots 181 4 140 22 259 Foreign currency forwards - 116 - 476 Of which EUR (non-sensitive due

to transition to EURO) n/a

475

n/a n/a Total 181 4 256 22 735 Positive fair value is included in “Financial assets at fair value through profit or loss” and negative fair value is included in “Other liabilities”. Changes in the fair value of derivative financial instruments that do not qualify for hedge accounting are recognised in the income statement line “Foreign exchange net gains and losses, net”. The significant year-on-year decrease in the face value of assets and liabilities from foreign currency transactions resulted from a decrease of foreign currency derivatives due to the conversion to Euro.

23. Net Interest Income

(EUR ‘000) Period Ended 31 Dec 2009


Interest income:

Loans and other receivables 55 094 72 376 Placements with other banks 3 808 9 284 Financial assets for sale 1 537 293 Held-to-maturity financial investments 6 977 5 055

Total interest income 67 416 87 008 Interest expense:

Due to banks and deposits from the National Bank of Slovakia and other banks and other payables (2 515) (5 853)

Amounts due to customers (18 078) (24 932) Liabilities from issued securities (8 446) (13 179) Subordinated debt (856) (1 340)

Total interest expense (29 895) (45 304) Net interest income 37 521 41 704



35

24. Provisions for Impairment Losses on Loans and Off-Balance Sheet, Net



Creation of provisions for loan receivables (59 585) (15 584) Release of provisions for loan receivables 36 182 19 817 Loans written off and assigned (Note 8b) (10 311) (13 463) (Creation)/release of provisions for off-balance sheet risks, net (593) 19 Provisions for impairment losses on loans and off-balance

sheet, net (34 307) (9 211)

25. Net Fee and Commission Income



Fee and commission income:

Banks 1 963 2 410 Public administration 906 455 Individuals 4 074 4 702 Other sectors 6 197 8 598

Total fee and commission income 13 140 16 165 Fee and commission expense:

Banks (1 976) (1 393) Public administration - - Individuals (24) (29) Other sectors (1 515) (2 291)

Total fee and commission expense (3 515) (3 713)

Net fee and commission income 9 625 12 452

26. Net Gain/(Loss) on Financial Operations



Gain and loss from foreign exchange transactions 1 632 (4 661) Gain and loss from futures and forwards (310) 10 042 Net gains/(losses) on financial operations 1 322 5 381

27. Net Gain/(Loss) on Financial Assets



Net gain from debt securities transactions 546 - Net gain from equity securities transactions (3 993) 4 067 Net gain from release of provisions for equity securities 3 983 1 136 Net gain/(losses) on financial assets 536 5 203



36

28. General Administrative Expenses



Personnel expenses

Wages and salaries (10 400) (13 213) Social security expenses (3 525) (3 919) Other social expenses (149) (198)

Expenses for provisions (Creation)/release of provisions for retirement payments, net 6 18 Other administrative expenses Purchased services (7 611) (8 408) Expenses for IT administration and maintenance (2 881) (2 725) Entertainment expenses (2 101) (4 769) Other purchased supplies (1 709) (2 116) Local and other taxes other than income tax (1 194) (1 294) Contribution to Deposits Guarantee Fund (1 329) (1 070) Other expenses (590) (545)

Depreciation, amortization and write-downs of non-current

tangible and intangible assets Non-current tangible assets (3 293) (3 617) Non-current intangible assets (2 622) (1 327)

General administrative expenses - total (37 398) (43 183)

In 2009, the costs of audit services amounted to EUR 133 thousand (2008: EUR 134 thousand) and expenses for other services provided by the audit firm to EUR 20 thousand (2008: EUR 20 thousand). The Bank has no pension scheme other than the Slovak Republic’s state pension system. Pursuant to the Slovak legal regulations, an employer is obliged to pay contributions to social security, health insurance, medical insurance, accident insurance, unemployment insurance, and contributions to a guarantee fund set as a percentage of the assessment base. These expenses are charged to the income statement in the period in which the employee was entitled to receive the salary. 29. Other Operating Revenues/(Expenses), Net



Provisions for impairment losses on other assets

Creation of provisions for other assets (149) (7) Release of provisions for other assets 6 609 228 Other assets written-off and assigned (Note 12) (6 677) (83)

Costs for the creation of provisions

(Creation)/release of provisions for litigation (2 484) - Other revenues

Revenues from sale of real estate and other assets 35 197 Lease revenues 38 31 Revenues from sale of commemorative coins 10 41 Other operating revenues 66 67

Other operating revenues/(expense), net – total (2 552) 474



37

30. Segment Reporting The separate income statement and other indicators per segments as at 31 December 2009: 31 Dec 2009 (EUR ‘000)

Retail Corporate Treasury Not specified Total

Interest income 25 343 29 751 12 322 - 67 416 Interest expense (13 488) (4 962) (11 445) - (29 895) Net interest income 11 855 24 789 877 - 37 521 Provisions for impairment losses on loans and off-balance sheet, net (3 152) (30 198) - (957) (34 307)

Net interest income after provisions for impairment losses on loans and off-balance sheet 8 703 (5 409) 877 (957) 3 214 Fee and commission income 7 785 5 002 - 353 13 140 Fee and commission expense (3 049) (3) - (463) (3 515) Net fee and commission income 4 736 4 999 - (110) 9 625 Net profit/(loss) from financial operations - - 568 754 1 322 Net profit/(loss) from financial assets - - 536 - 536 General administrative expenses - - - (37 398) (37 398) Other operating revenues/(expenses), net 10 (207) - (2 355) (2 552)

Profit/(loss) before income tax 13 449 (617) 1 981 (40 066) (25 253) Income tax - - - 737 737

Net profit/(loss) after tax 13 449 (617) 1 981 (39 329) (24 516) Assets by segment 365 778 592 842 - 427 192 1 385 812 Liabilities by segment 578 721 357 077 - 358 107 1 293 905



38

The separate income statement and other indicators per segments as at 31 December 2008: 31 Dec 2008 (EUR ‘000)

Retail Corporate Treasury Not specified Total

Interest income 24 450 47 927 14 631 - 87 008 Interest expense (11 421) (13 511) (20 372) - (45 304)

Net interest income 13 029 34 416 (5 741) - 41 704 Provisions for impairment losses on loans and off-

balance sheet, net (1 507) (6 946) - (758) (9 211)

Net interest income after provisions for impairment losses on loans and off-balance sheet 11 522 27 470 (5 741) (758) 32 493

Fee and commission income 8 017 7 289 - 859 16 165 Fee and commission expense (1 595) - (93) (2 025) (3 713) Net fee and commission income 6 422 7 289 (93) (1 166) 12 452 Net profit/(loss) from financial operations - - 13 446 (8 065) 5 381 Net profit/(loss) from financial assets - - 5 203 - 5 203 General administrative expenses - - - (43 183) (43 183) Other operating revenues/(expenses), net 17 70 - 387 474

Profit/(loss) before income tax 17 961 34 829 12 815 (52 785) 12 820 Income tax - - - (1 826) (1 826)

Net profit/(loss) after tax 17 961 34 829 12 815 (54 611) 10 994 Assets by segment 369 455 798 322 - 453 167 1 620 944 Liabilities by segment 564 281 428 090 - 512 597 1 504 968



39

Foreign Assets and Liabilities The structure of assets and liabilities related to counterparties outside the Slovak Republic: (EUR ‘000) 31 Dec 2009 31 Dec 2008 Assets 191 020 229 689

Of which: Hungary 120 617 79 573 Of which: Other EU countries 25 462 39 102

Liabilities 47 779 213 397

Of which: Hungary 4 222 164 080 Of which: Other EU countries 36 270 33 004

31. Related Party Transactions Group Related Party Transactions In ordinary business, the Bank enters into transactions with related parties. Transactions with related parties include transactions with member of the OTP Bank Group, the most significant of which represent time deposits, bonds issued by OTP Bank Nyrt., subordinated debt and the respective interest and fees received/paid: An analysis of the most significant transactions as at 31 December 2009 is in the following table:

31 Dec 2009 (EUR ‘000)

OTP Bank Nyrt. Subsidiaries

and Associates Other Companies

OTP Group Total

Assets Due from banks 48 - - 48 Loans - 20 889 36 904 57 793 Financial investments held

to maturity 62 267 - 1 001 63 268 Total 62 315 20 889 37 905 121 109 Liabilities Amounts due to other banks 90 - 32 122 Deposits (current accounts,

term deposits) - 10 419 429 Liabilities from Issued Securities - 4 615 - 4 615 Subordinated Debt - - 29 078 29 078 Total 90 4 625 29 529 34 244

31 Dec 2009 (EUR ‘000)

OTP Bank Nyrt. Subsidiaries

and Associates Other Companies

OTP Group Total

Expenses Interest 1 775 38 940 2 753 Fees 41 - 10 51 Provisions for impairment

losses on loans, net 818 14 - 832 Other expenses 315 - 1 494 1 809 Total 2 949 52 2 444 5 445 Revenues Interest 3 645 437 1 285 5 367 Fees 4 11 4 19 Net gains/(losses) on FX

transactions 3 507 - - 3 507 Other revenues - - 3 3 Total 7 156 448 1 292 8 896



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An analysis of the most significant transactions as at 31 December 2008 is in the following table:

31 Dec 2008 (EUR ‘000)

OTP Bank Nyrt.

Subsidiaries and Associates

Other Companies OTP Group

Total

Assets Due from banks 49 704 - - 49 704 Loans - 19 759 37 341 57 100 Financial investments held

to maturity - - - - Total 49 704 19 759 37 341 106 804 Liabilities Amounts due to other banks 156 022 - 8 156 030 Deposits (current accounts,

term deposits) - 5 6 736 6 741 Liabilities from Issued

Securities - - - - Subordinated Debt - - 29 238 29 238 Total 156 022 5 35 982 192 009

31 Dec 2008 (EUR ‘000)

OTP Bank Nyrt.

Subsidiaries and Associates

Other Companies OTP Group

Total

Expenses Interests 2 744 15 2 052 4 811 Fees 20 - 153 173 Provisions for impairment

losses on loans, net - 3 - 3 Other expenses 343 - 1 683 2 026 Total 3 107 18 3 888 7 013 Revenues Interests 148 684 1 924 2 756 Fees 22 39 90 151 Net gains/(losses) on FX

transactions 6 751 - - 6 751 Other revenues 7 - 8 15 Total 6 928 723 2 022 9 673

In April to June 2008, the Bank purchased loan receivables from its parent company, OTP Nyrt., at cost of EUR 150 232 thousand. In November 2008 the Bank received from its parent company, OTP Nyrt., short-term deposits, which are recognised as at 31 December 2008 in “Due to banks and deposits from the National Bank of Slovakia and other banks”. A portion of this short-term deposit maturing in January 2009 was paid by the Bank to the parent company in January 2009 and March 2009.

OTP Bank Nyrt. provided a guarantee up to EUR 36 513 thousand for the loan receivable from OTP Buildings, s.r.o. (member of the OTP Group). In the reporting period, the Bank continued to support its subsidiary and other companies in which it has investments, which belong to the OTP Bank Nyrt. Group. Transactions with the Bank’s Management Members As at 31 December 2009, income of members of the Board of Directors amounted to EUR 701 thousand, and members of the Supervisory Board to EUR 60 thousand (as at 31 December 2008: Board of Directors EUR 1 306 thousand , Supervisory Board EUR 85 thousand). As at 30 December 2009, the Bank recorded no loan receivables from members of the Board of Directors (31 December 2008: EUR 207 thousand). As at 31 December 2009, the Bank recorded no loan receivables from members of the Supervisory Board (31 December 2008: EUR 171 thousand). In the 3Q 2009, the total outstanding amount of the loan receivable was fully repaid through an extraordinary repayment in the amount of EUR 102 thousand. As at 31 December 2009 and 31 December 2008, the Bank recorded no other loans, advance payments and guarantees, or other major transactions with respect to the members of the Supervisory Board. Interest rates and other terms of transactions with related parties do not differ from the usual interest rates and contractual terms of the Bank.



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32. Regulatory Capital The Bank’s basic regulatory capital consists of share capital, legal reserve fund, other capital reserves, and retained earnings of prior years. Items reducing the amount of the Bank’s basic regulatory capital include an accumulated loss of prior years, loss for the current reporting period and net book value of software. Additional regulatory capital comprise subordinated debt and positive revaluation reserves on equity instruments in the portfolio of financial instruments available for sale measured at fair value less income tax. The Bank does not recognise any supplementary regulatory capital as at 31 December 2009. The aggregate of original and additional own funds of regulatory capital is reduced for the net book value of the Bank’s share in the share capital of a financial institution exceeding 10% of the share capital of this financial institution (OTP Faktoring, a.s.). As at 31 December 2009 and 31 December 2008, the Bank recognised regulatory capital above the minimum required level, ie the Bank met the capital requirements set by the regulator. The structure of the Bank’s regulatory capital as at 31 December 2009 and 31 December 2008 is as follows: (EUR ‘000) 31 Dec 2009 31 Dec 2008 Bank’s basic regulatory capital 79 959 94 323 Items forming the Bank’s basic regulatory capital 125 491 114 497

Paid up share capital 68 488 68 526 Reserve funds and other capital reserves 10 328 9 191 Retained earnings of prior years 46 675 36 780

Items deductible from Bank’s basic regulatory capital (45 532) (20 174) Accumulated loss of prior years (10 097) (10 097) Loss for the current reporting period (24 516) - Net book value of software (10 919) (10 077)

Additional regulatory capital 30 029 29 582 Subordinated debts 29 000 29 000 Positive revaluation reserves on equity instruments available for sale 1 029 582

Items deductible from Bank’s basic and additional regulatory capital (913) (913) Net book value of the Bank’s share on share capital of another financial

institution (913)

(913) Supplementary regulatory capital - - Total regulatory capital 109 075 122 992

33. Supplementary Data to Statements of Cash Flows (EUR ‘000) 31 Dec 2009 31 Dec 2008 Cash, due from banks and balances with NBS except for mandatory minimal

reserve 48 979 163 521 Due from other banks, falling due within three months 42 743 57 329 Due to banks, falling due within three months (97 543) (40 013) Total cash and cash equivalents (5 821) 180 837

Mandatory minimal reserve in the amount of EUR 27 098 thousand (31 December 2008: EUR 23 819 thousand) is excluded from cash and cash equivalents as its withdrawal is restricted (see Note 4). Significant non-cash movements excluded from cash flows are as follows: (EUR ‘000) 31 Dec 2009 31 Dec 2008 Write-off and assignments of loans (Note 8b) (10 311) (13 463)



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34. Financial Instruments and Risk Management A financial instrument means any arrangement that entitles the entity to obtain cash or other financial assets from a counterparty (financial asset), or which binds the entity to pay cash or to provide other financial assets to a counterparty (financial liability). Financial instruments are recorded by the Bank in the trading or banking book. The trading book includes those positions in financial instruments that are held by the Bank for trading purposes – short-term sale, and to achieve income from actual or expected differences between purchase and selling prices or from other changes in prices or interest rates. The Bank’s exposure to risks results from the use of financial instruments. The most significant risks include: • Credit risk • Market risk

o Currency risk o Interest rate risk o Other price risk

• Liquidity risk • Operational risk Risk Management Framework

The Risk & Law Division is responsible for risk management in the Bank and comprises the Legal and Work-Out department, Credit Risk Management Department, Separate Market and Operational Risk Management Department and Compliance Team. The Board of Directors represents a statutory body including the Bank’s executive management, which oversees risk-related issues. The authorities to manage risk are also delegated to individual steering committees, which oversee the risks: • Asset/Liability Management Committee (ALCO); • Based on monitoring key information on assets and liabilities the ALCO makes decisions and

proposes measures in order to optimise the structure of assets and liabilities to achieve maximum profitability of the Bank’s own capital within the limits of acceptable risk;

• Credit committee; • Credit monitoring committee; • Operational risk management committee (ORC); and • ORC has an advisory and decision-making role in the areas of operational risk, bank security and

business continuity management. The Board of Directors delegates its control over risks to the aforementioned committees in the form of statutes where the members of the steering committees, including their competencies and responsibilities, are designated. The competencies of the steering committees are specified in the CEO Order entitled “Permanent advisory and working bodies”, which defines the principles of the activities of the Bank’s bodies. An internal regulation is prepared for each type of risk and defines in detail competencies and responsibilities of individual bodies of the Bank. 35. Credit Risk Credit risk is the risk that a client or a counterparty of a financial instrument will fail to meet his contractual obligations, which would expose the Bank to the risk of a financial loss. This risk is predominantly driven by loans advanced to clients, receivables from banks and financial investments. The Bank classifies the level of accepted credit risk using limits for the risks accepted with respect to a single debtor or a group of debtors and with respect to individual territories and industries. Such risks are monitored on a regular basis and subject to a quarterly review. The exposure to any one borrower, including banks and brokers, is further restricted by sub-limits covering both on and off-balance sheet exposures and daily delivery risk limits in relation to trading items. Exposure to credit risk is managed through the regular analysis of the ability of debtors and potential debtors to meet interest and capital repayment obligations, and by changing these lending limits where appropriate. When analysing credit risks, the Bank takes into consideration the mitigation of risks with collateral instruments and guarantees from individuals and legal entities.



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The Bank evaluates debtors using scoring/rating models developed for individual products and client segments. The Bank manages the credit risk resulting from retail loans with Credit Scoring – IT application used to make decisions on loans advanced to individuals and retail corporate entities. In addition, the Bank manages the quality of loans using a system of transaction approvals by risk assessment specialists. Regular monitoring of the quality of the existing loan portfolio and monitoring of trends in the Bank’s portfolio form a significant part of risk management that helps maintain the quality of the entire portfolio and the required level of the Bank’s risk expenses. When recovering debts, the Bank applies a wide range of recovery instruments and strategies depending on the type and amount of the relevant debt. Recovery is performed using both internal and external sources. If a client’s debt recovery fails to be successful, the debt is transferred to external companies specialising in legal proceedings relating to bad debt recovery. Large or specific debts are solved by the Bank’s specialised internal team in cooperation with the legal department and other specialised units. When monitoring and managing credit risks, the Bank pays attention to concentration and residual risks. A concentration risk is a risk arising from concentrating the Bank’s transactions with an individual, parties economically related to the Bank, the state, a geographic area, an industry, a collateral provider etc. Bearing in mind concentration risk management efficiency, the Bank focuses on the quality aspect of portfolio management and appropriate portfolio diversification in compliance with the specified concentration limits (large asset exposure, industry or other limits). The residual risk means the risk arising from insufficient enforceability of rights resulting from the accepted collateral with respect to credit risk. The Bank predominantly eliminates the risk via consistently analysing the legal aspects of collateral and a conservative approach to collateral valuation. Credit Risk Management Organisation The Risk & Law Division is a business unit managed by the Bank’s Deputy CEO, who is a member of the Board of Directors. The division is responsible for reviewing credit risk, including: • Preparation of the strategies, principles, processes and procedures applied to risk management,

which cover the rules for loan assessment, collateral requirements for relevant risk levels and relating reporting;

• Setting limits for concentrating exposure to counterparties, related parties, and countries, and monitoring compliance with the limits;

• Assessment of credit risk in line with the defined principles; • Monitoring of meeting portfolio quality requirements and compliance with limits, and taking relevant

corrective measures; • Preparation, management and validation of scoring and rating models; • Preparation, maintenance and back testing of a provisioning model; and • Preparation of reports on credit, market and operational risks to be submitted to the Board of

Directors and the Supervisory Board.

Provisions

The Bank evaluates credit risk on an individual and portfolio basis and, subsequently, charges individual and portfolio provisions. Loans with individual evaluation comprise corporate receivables without any identified impairment with exposure exceeding EUR 850 thousand, corporate receivables with identified impairment, corporate receivables arranged prior to the Bank’s privatisation and all corporate and retail receivables in bankruptcy. The amount of the provision is the difference between the carrying amount and the recoverable amount, being the present value of expected cash flows, including amounts recoverable from guarantees and collateral, discounted at the original effective interest rate of loans as at the date of initial recognition. Provisions for loan losses are assessed with reference to the credit and economic standing of the debtor and take into account the value of all collateral or third party guarantees. Assets that are individually assessed for impairment and for which an impairment loss is or continues to be recognized are not included in a collective assessment of impairment.



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Receivables assessed on a portfolio basis include retail receivables, corporate receivables from mass products (all types of Quick Loans, Solvent Business Card), and corporate receivables with exposure of up to EUR 850 thousand (except for receivables in bankruptcy). In the calculation of provisions for portfolio-measured receivables the Bank applies statistical modelling based on the historical portfolio behaviour trends. Calculation of portfolio provisions is based on the probability of default (PD), loss given default (LGD), and rate of return (RI). Portfolio provisions cover losses that have not been individually identified, but based on historical experience are inherent in the portfolio at the balance sheet date. Most estimates related to portfolio provisions are based on Bank’s estimate of future cash-flows that will be collected from impaired loans and their timing. At present, these estimates are subject to a number of uncertainties and risks due to the high volatility of external factors affecting the portfolio quality. The Bank believes that estimates used in the process of quantifying provisions for loan losses, including off-balance sheet exposures (in particular estimates regarding future cash-flows from impaired loans and probabilities of loan default), represent the most reasonable projection of the future development of relevant exposures available under current circumstances. The management considers the recognised amount of provisions to be adequate to absorb incurred losses from impaired credit exposures. The Bank continues to monitor current economic conditions and the impact it has on individual estimates used on the loan impairment calculation. All estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates of loan impairment are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. Policy for Writing-Off of Receivables

The Bank writes off its loans and placements once the Bank receives a document on the client’s insolvency, the court’s decision on discharge of a receivable, or based on a decision of the Bank’s management to drop the execution, should the exaction expenses exceed the amount receivable, or based on the decision of the Bank’s management to write off such receivable if only a minimum amount of proceeds is expected to be recovered for a long period of time. Loan Collaterals

An estimated value of collateral is subject to numerous uncertainties and risks. Amounts that may ultimately be realised on liquidation of collateral for defaulted loans could differ from estimated amounts and the difference may be material. Collateral represents an estimated amount that the Bank would receive upon enforcement of the collateral as a result of a failure to repay the loan. Collateral fair value is estimated based on the value of collateral when the relevant loan is advanced. Collateral is monitored on a regular basis to review the current value and quality of the collateral in the entire loan period. Individual forms of collateral are subject to regular revaluation whose frequency depends on the collateral used. In respect of collateral treatment, the Bank pays special attention to the valuation and revaluation of individual collateral instruments, calculation of back-up collateral value, specification of collateral permissibility for credit risk mitigation and realisation of collateral in case of default of a collateralised loan. The Bank predominantly accepts the following types of collateral: • Financial collateral (cash, securities etc.); • Immovable assets; • Movable assets; and • Receivables and inventory. The Bank uses the following legal instruments: • Pledge; • Collateralising transfer of receivables; • Collateralising transfer of rights; and • Blocking of cash. The collateral valuation methodology and collateral revaluation frequency are dependent upon the type of collateral and minimum criteria pursuant to the valid legislative regulations implemented in the Bank’s integral regulations. The monitoring of the value of collateral instruments is specific for each type of collateral and the Bank applies an appropriate measure of prudence and conservatism.



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The Bank’s decision-making in realising collateral is individual and depends on factors such as the current condition and value of collateral, the current value of the receivable, receivable collection speed, costs of recovery, etc. The Bank principally uses the following forms of collateral realisation: • Voluntary auction; • Foreclosure proceedings; • Cash realisation of collateral held in support of the Bank’s receivable in bankruptcy proceedings; and • Sale of receivables. Classification of Risks from Loans and Receivables

31 Dec 2009 (EUR ‘000)

Exposure Provisions Coverage

by Provisions

Collateral Coverage by

Provisions and Collaterals

Loans measured on an individual basis 462 907 33 372 7.2% 250 852 61.4%

Corporate loans 462 582 33 047 7.1% 250 527 61.3% Of which: defaulted loans 73 060 29 059 39.8% 42 671 98.2% Retail loans 325 325 100.0% 325 200.0% Of which: defaulted loans 325 325 100.0% 325 200.0%

Loans measured on a portfolio basis 548 065 17 100 3.1% 429 548 81.5%

Corporate loans 172 636 10 828 6.3% 78 343 51.7% Of which: defaulted loans 10 451 7 289 69.7% 25 70.0% Retail loans 375 429 6 272 1.7% 351 205 95.2%

Consumer loans 132 361 2 143 1.6% 118 233 90.9% Of which: defaulted loans 10 809 1 627 15.1% 8 736 95.9%

Mortgage loans 237 412 1 848 0.8% 232 972 98.9% Of which: defaulted loans 15 758 1 848 11.7% 14 310 102.5%

Other 5 656 2 281 40.3% - 40.3% Of which: defaulted loans 2 363 2 281 96.5% - 96.5%

Total 1 010 972 50 472 680 400

31 Dec 2008 (EUR ‘000)

Exposure Provisions Coverage

by Provisions

Collateral Coverage by

Provisions and Collaterals

Loans measured on an individual basis 616 437 15 909 2.6% 285 266 48.9%

Corporate loans 616 296 15 768 2.6% 285 125 48.8% Of which: defaulted loans 28 364 14 377 50.7% 11 988 93.0% Retail loans 141 141 100.0% 141 200.0% Of which: defaulted loans 141 141 100.0% 141 200.0%

Loans measured on a portfolio basis 582 147 11 161 1.9% 454 831 80.1%

Corporate loans 208 517 8 654 4.2% 102 648 53.4% Of which: defaulted loans 9 836 6 168 62.7% 122 64.0% Retail loans 373 630 2 507 0.7% 352 183 94.9%

Consumer loans 100 542 714 0.7% 86 263 86.5% Of which: defaulted loans 5 183 643 12.4% 4 231 94.0%

Mortgage loans 270 282 413 0.2% 265 920 98.5% Of which: defaulted loans 9 967 370 3.7% 9 039 94.4%

Other 2 806 1 380 49.2% - 49.2% Of which: defaulted loans 1 433 1 371 95.7% - 95.7%

Total 1 198 584 27 070 740 097

As to the credit exposures as at 31 December 2009, 10 major credit exposures amounted to 16.45% of the total gross amount of loans to and receivables from clients (31 December 2008: 15.09% of the total gross amount of loans and advances made to clients).



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Exposure to Credit Risk from Loans and Receivables by Business Industries 31 Dec 2009 (EUR ‘000)


Specific Provision Portfolio Provision


Electricity generation 11 226 313 28 10 885 Households 373 949 357 5 410 368 182 Agriculture and food-processing industry 51 241 1 061 546 49 634

Trade and services 96 099 6 080 4 585 85 434 Metallurgy and machinery 17 119 4 055 146 12 918 Chemical industry 11 503 3 098 1 8 404 Transport and infrastructure 8 067 841 674 6 552 Timber and paper production 4 343 123 220 4 000 Construction industry 36 340 1 850 690 33 800 Other industries 401 085 15 594 4 800 380 691 Total 1 010 972 33 372 17 100 960 500 31 Dec 2008 (EUR ‘000)


Specific Provision Portfolio Provision


Electricity generation 12 316 300 8 12 008 Households 373 754 586 1 124 372 044 Agriculture and food-processing industry 61 159 1 091 510 59 558

Trade and services 124 517 2 417 3 829 118 271 Metallurgy and machinery 39 265 1 170 130 37 965 Chemical industry 11 381 209 - 11 172 Transport and infrastructure 12 824 434 501 11 889 Timber and paper production 13 055 34 198 12 823 Construction industry 34 381 631 506 33 244 Other industries 515 932 9 037 4 355 502 540 Total 1 198 584 15 909 11 161 1 171 514 As at 31 December 2009, the Bank reported a developer project portfolio in the amount of EUR 134 319 thousand (31 December 2008: EUR 103 308 thousand) and created provisions on a portfolio basis and an individual basis in the amount of EUR 263 thousand (31 December 2008: EUR 84 thousand) and EUR 5 399 thousand (31 December 2008: EUR 0 thousand), respectively. Analysis of Loans and Receivables Valued on an Individual Basis with Identified Impairment, Gross

31 Dec 2009 (EUR ‘000)

Debtor’s Bankruptcy

and Liquidation

Judicial Enforcement,

Notice of Crime

Declaration of Loan to

be Due Restructuring

Late Payments Over 90

Days

Total Collateral

Consumer loans 44 - - - - 44 64

Mortgage loans 281 - - - 210 491 1 275

Overdraft accounts 8 345 52 445 659 11 500 21 001 22 193

Corporate clients 14 793 951 3 484 20 022 48 278 87 528 104 319

Other 170 - - - - 170 - Total 23 633 1 003 3 929 20 681 59 988 109 234 127 851

31 Dec 2008 (EUR ‘000)

Debtor’s Bankruptcy

and Liquidation

Judicial Enforcement,

Notice of Crime

Declaration of Loan to

be Due Restructuring

Late Payments Over 90

Days

Total Collateral

Consumer loans 44 - - - - 44 44

Mortgage loans 98 - - - 1 860 1 958 1 027

Overdraft accounts 3 091 65 218 633 6 674 10 681 13 632

Corporate clients 7 941 992 1 207 3 041 25 166 38 347 25 231

Other 207 - - - 1 208 - Total 11 381 1 057 1 425 3 674 33 701 51 238 39 934



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Analysis of Restructured Loans and Receivables, Gross The following table shows the quantitative analysis of all loan receivables that were classified as restructured in the external default database as at the year-end and remained classified as restructured, ie the restructuring is a default event. Except for restructuring, they can also indicate another default event. (EUR ‘000) 31 Dec 2009 31 Dec 2008

Retail loans 3 340 865

Overdue up to 30 days 2 358 470 Overdue from 31 to 90 days 346 247 Overdue more than 90 days 636 148

Corporate loans 21 940 4 505 Overdue up to 30 days 9 876 2 715 Overdue from 31 to 90 days 5 196 346 Overdue more than 90 days 6 868 1 444

25 280 5 370

Information on Loan Credit Quality of Individually-Measured Loans and Receivables Neither Overdue Nor Impaired The table below summarizes quantitative distribution of corporate loans which are neither overdue nor impaired per rating classes:

Rating Class 31 Dec 2009

31 Dec 2008

Corporate loans I (the lowest risk of primary loan recoverability) 3 254 26 364 II 13 949 43 207 III 23 191 72 766 IV 36 281 81 873 V 27 959 53 245 VI 18 101 68 239 VII 96 336 84 233 VIII (the highest risk of primary loan recoverability) 112 182 116 811

Total – corporate loans 331 253 546 738 Loans granted to local governments

AA (the lowest risk of primary loan recoverability) 3 574 2 520 AB, AC, BA, BB 4 955 3 655 AD, BC, BD, CA, CB, CC, CD, DA, DB, DC (the highest risk of primary loan recoverability) 6 433

8 361

Total - local governments 14 962 14 536 Total 346 215 561 274

They include corporate individually-measured loans and loans granted to local governments without identified impairment and without default per rating classes.



48

Summary of Loans and Receivables Secured by a Pledge or Other Form of Collateral Loans and Receivables by Category

(EUR ‘000) Measured on an Individual Basis Without Identified Impairment

Measured on a Portfolio Basis Measured on an Individual Basis With Identified Impairment

TOTAL

31 Dec 2009 31 Dec 2008 31 Dec 2009 31 Dec 2008 31 Dec 2009 31 Dec 2008 31 Dec 2009 31 Dec 2008 a) Pledge over 168 588 245 502 384 635 394 046 75 695 28 725 628 918 668 273

Real estate 145 622 201 547 356 947 357 490 62 200 28 389 564 769 587 426 Securities - - 11 625 16 215 - - 11 625 16 215 Tangible assets 9 374 26 071 9 757 13 963 9 230 336 28 361 40 370 Trade receivables 13 592 17 884 6 306 6 378 4 265 - 24 163 24 262

b) Other collateral 19 601 53 189 82 666 93 339 5 222 5 428 107 489 151 956 State guarantees - - - - - - - - Bank guarantees - 17 227 206 515 4 557 4 316 4 763 22 058 Guarantees from other parties 18 646 35 962 9 117 16 858 430 1 047 28 193 53 867

Cash 955 - 35 603 31 454 - - 36 558 31 454 Other - - 37 740 44 512 235 65 37 975 44 577

Total amount of secured receivables 188 189 298 691 467 301 487 385 80 917 34 153 736 407 820 229

Note: Total amount of secured loans and receivables is higher than the total fair value of received collateral, as in the case of some loans the fair value of received collateral does not cover the total amount of a loan receivable. As at 31 December 2009 and 2008, the Bank did not record any receivables in its loan portfolio over which a pledge would be established or receivables with restricted right of handling.



49

Breakdown of Loans and Receivables by Number of Days Overdue: 31 Dec 2009 (EUR ‘000)

Without Identified Impairment

With Identified Impairment*

Total

Within maturity 368 862 478 099 846 961 Up to 30 days overdue 2 686 29 834 32 520 From 31 to 90 days overdue 5 308 36 378 41 686 From 91 to 180 days overdue - 24 520 24 520 From 181 to 360 days overdue - 16 413 16 413 More than 360 days overdue - 48 872 48 872 Total – gross 376 856 634 116 1 010 972 Provisions for potential loan losses - (50 472) (50 472) Total – net 376 856 583 644 960 500 Collateral 191 904 488 496 680 400

31 Dec 2008 (EUR ‘000)

Without Identified Impairment

With Identified Impairment*

Total

Within maturity 587 288 490 179 1 077 467 Up to 30 days overdue 4 459 33 974 38 433 From 31 to 90 days overdue - 32 942 32 942 From 91 to 180 days overdue - 13 829 13 829 From 181 to 360 days overdue - 4 986 4 986 More than 360 days overdue - 30 927 30 927 Total – gross 591 747 606 837 1 198 584 Provisions for potential loan losses - (27 070) (27 070) Total – net 591 747 579 767 1 171 514 Collateral 276 579 463 518 740 097

* This category includes exposures to which any provision is reported, either individual or portfolio. If any portion of a loan receivable (principal amount, interest, etc.) is overdue, the entire loan receivable is considered as an overdue receivable. Ageing Structure of Loans and Receivables without Identified Impairment, Gross:

31 Dec 2009 (EUR ‘000)

Within Maturity

Overdue 1 to 30 Days

Overdue More Than

30 Days Total Collateral

Consumer loans 12 005 536 - 12 541 11 766 Mortgage loans 496 - - 496 455 Overdrafts 40 409 - - 40 409 18 219 Corporate clients 313 196 2 150 5 308 320 654 161 464 Other 2 756 - - 2 756 - Total 368 862 2 686 5 308 376 856 191 904

31 Dec 2008 (EUR ‘000)

Within Maturity

Overdue 1 to 30 Days

Overdue More Than

30 Days Total Collateral

Consumer loans 1 116 52 - 1 168 884 Mortgage loans 2 533 1 043 - 3 576 2 851 Overdrafts 48 804 1 211 - 50 015 30 052 Corporate clients 534 835 2 153 - 536 988 242 792 Other - - - - - Total 587 288 4 459 - 591 747 276 579

The loans without identified impairment include portfolio- and individually-measured loans. As at 31 December 2009, the Bank recorded loan receivables with identified impairment in the amount of EUR 634 116 thousand, of which consumer loans amounted to EUR 119 865 thousand, mortgage loans to EUR 237 946 thousand, overdraft accounts to EUR 39 360 thousand, corporate clients to EUR 221 930 thousand and other loans with identified impairment to EUR 15 015 thousand.



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As at 31 December 2008, the Bank recorded loan receivables with identified impairment in the amount of EUR 606 837 thousand, of which consumer loans amounted to EUR 99 418 thousand, mortgage loans to EUR 273 407 thousand, overdraft accounts to EUR 32 727 thousand, corporate clients to EUR 182 712 thousand and other loans with identified impairment to EUR 18 573 thousand. Concentration of Credit Risk to the Slovak Republic The following table presents the Bank’s credit risk to the Slovak Republic, companies controlled by the Slovak government, municipalities, and similar exposures:

31 Dec 2009 31 Dec 2008 (EUR ‘000)

Amount Portion of

Total Assets Amount

Portion of Total Assets

Cash, due from banks and balances with the

National Bank of Slovakia 50 098 3.62% 156 663 9.66% Loans and receivables, net of provisions for

possible loan losses 29 329 2.12% 29 840 1.84% Financial assets for sale 44 054 3.18% 43 057 2.66% Held-to-maturity financial investments 76 152 5.50% 42 064 2.60% Total 199 633 14.41% 271 624 16.76%

Maximum Exposure to Credit Risk The following table provides an overview of the Bank’s maximum exposure to credit risk, regardless of any held collateral or other mitigation of credit risk resulting from financial instruments (assets): (EUR ‘000) 31 Dec 2009 31 Dec 2008 Due from banks and balances with the National Bank of Slovakia 99 213 228 882 Financial assets at fair value through profit or loss 184 4 259 Financial assets for sale, gross 44 933 47 920 Loans and receivables, gross 1 010 972 1 198 584 Financial investments held to maturity 218 756 106 497 Subtotal of balance sheet risks 1 374 058 1 586 142

Guarantees issued 51 507 58 615 Letters of credit issued - 4 198 Loan commitments to clients 73 025 137 139 Subtotal of off-balance sheet risks 124 532 199 952

Total 1 498 590 1 786 094

36. Market Risk The Bank takes on exposure to market risks. Market risks arise from open positions in interest rate, currency, and equity products, all of which are exposed to general and specific market changes. The Bank does not undertake any transactions with gold, precious metals or other commodities. Market Risk Management

Responsibility for market risk management in the Bank rests with the stand-alone Market and Operational Risks department, which is part of the Risk & Law division. The Bank’s principal risks include the currency (foreign exchange) risks and interest rate risk. The Bank categorises its financial instruments into the trading portfolio (trading book) or the non-trading portfolio (banking book) reflecting the purpose for which the financial instruments have been acquired. The trading book also includes positions arising from selected banking instruments acquired by the Bank with a view to generating short-term profits from the difference between the purchase and sale price. All other positions in financial instruments are carried in the banking book. The Treasury department is responsible for classifying financial instruments into the banking or trading books.



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The stand-alone Market and Operational Risks department is also charged with managing counterparty risk (counterparties being professional participants in money and capital markets) and country risk. The Bank has established maximum exposure limits to selected counterparties (banks). The counterparty limit is split into the credit limit, settlement limit and pre-settlement limit depending on the type of undertaken transactions. Foreign Currency Risk

Foreign currency risk is the risk that the value of financial instruments will fluctuate due to changes in foreign exchange rates. To analyze foreign currency risk sensitivity, the Bank uses the historical simulation method of Value- at-Risk (VaR) methodology. To calculate VaR, the Bank opted for a 99% confidence level, a one-year historical database of daily EUR/foreign currency movements, and a 1-day time limit. The VaR reflects the potential loss, which will not be exceeded for 99% of foreign overnight exchange rates that changed. The set of currency risk limits consists of the following restrictions in respect of the Bank’s open positions: • Overnight limits • Intraday limits • Daily stop-loss limit • VaR limit • PLA limit • Stress test limit and extraordinary stress test limit



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Net Foreign Exchange Position

The table below provides an analysis of the Bank's foreign currency exposures as at 31 December 2009: (EUR ‘000) EUR USD Other Currencies Total Assets

Cash, due from banks and balances with the National Bank of Slovakia 72 349 546 3 182 76 077 Placements with other banks, net of provisions for possible placement losses 38 599 2 674 6 320 47 593 Financial assets at fair value through profit or loss 184 - - 184 Financial assets for sale 44 580 - - 44 580 Loans and receivables net of provisions for possible losses 933 392 19 323 7 785 960 500 Financial investments held to maturity 218 756 - - 218 756 Investments in subsidiaries and associates 913 - - 913 Non-current tangible assets 22 343 - - 22 343 Non-current intangible assets 11 567 - - 11 567 Deferred tax receivables 460 - - 460 Other assets 2 734 90 15 2 839

Total assets 1 345 877 22 633 17 302 1 385 812

Liabilities

Due to banks and deposits from the National Bank of Slovakia and other banks 105 900 - 91 105 991 Amounts due to customers 911 677 10 176 15 933 937 786 Liabilities from issued securities 204 758 - - 204 758 Provisions for liabilities 4 035 1 3 4 039 Other liabilities 11 689 180 384 12 253 Subordinated debt 29 078 - - 29 078 Equity 91 907 - - 91 907

Total liabilities and equity 1 359 044 10 357 16 411 1 385 812

Net currency exposure at 31 Dec 2009 (13 167) 12 276 891 -

As at 31 December 2009 the “Value at Risk” calculated from open foreign currency positions of the Bank was EUR 5 thousand (31 December 2008: EUR 13 thousand).



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The table below provides an analysis of the Bank's foreign currency exposures as at 31 December 2008: (EUR ‘000) EUR USD Other Currencies Total Assets

Cash, due from banks and balances with the National Bank of Slovakia 184 080 489 2 740 187 309 Placements with other banks, net of provisions for possible placement losses 50 828 12 981 4 777 68 586 Financial assets at fair value through profit or loss 4 259 - - 4 259 Financial assets for sale 43 584 - - 43 584 Loans and receivables net of provisions for possible losses 1 089 009 73 829 8 676 1 171 514 Financial investments held to maturity 106 497 - - 106 497 Investments in subsidiaries and associates 913 - - 913 Non-current tangible assets 24 980 - - 24 980 Non-current intangible assets 10 503 - - 10 503 Deferred tax receivables - - - - Other assets 2 770 16 13 2 799

Total assets 1 517 423 87 315 16 206 1 620 944

Liabilities

Due to banks and deposits from the National Bank of Slovakia and other banks 140 389 31 333 261 171 983 Amounts due to customers 972 496 9 950 13 889 996 335 Liabilities from issued securities 287 012 72 - 287 084 Deferred tax liability 172 - - 172 Provisions for liabilities 914 50 - 964 Other liabilities 18 395 174 623 19 192 Subordinated debt 29 238 - - 29 238 Equity 115 976 - - 115 976

Total liabilities and equity 1 564 592 41 579 14 773 1 620 944

Net currency exposure at 31 Dec 2008 (47 169) 45 736 1 433 -



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Interest Rate Risk

Interest rate risk is the risk that the net current value of financial instruments will fluctuate due to changes in market interest rates. An interest rate risk is a risk that the value of a financial instrument will fluctuate as a result of changes in market interest rates and the risk that the maturity of interest-accruing assets will differ from the maturity of interest-bearing liabilities used to finance these assets. Hence, the period for which the interest rate is attached to the financial instrument shows the extent to which this instrument is exposed to the interest rate risk.

In monitoring the interest rate risk the Bank uses the following limits for the interest rate risk inherent in the trading book and for the interest rate risk inherent in the banking book: Limits for the Interest Rate Risk Inherent in the Trading Book: • Trading book position limit • Duration-position limit • Stop Loss limit • Value At Risk limit Limits for the Interest Rate Risk Inherent in the Banking Book: • Interest rate risk limit (standard interest rate shock):

a potential decline in the Bank’s own funds with a standard parallel +200 bp interest rate shock must not exceed 20 %.

• Duration limit (EUR, USD): the average remaining maturity of the securities portfolio in the banking book denominated in EUR and USD with duration greater than one year must not exceed five years.

• Duration limit (other currencies): the average remaining maturity of the securities portfolio in the banking book denominated in other currencies must not exceed 4.5 years.

• The interest rate risk limit upon a change in the shape of the yield curve for the whole portfolio

(jointly the banking book and the trading book): a potential decline in the Bank’s own funds upon the change in the shape of the yield curve (a shift in the yield curve by 100 bp, which will have a linear effect on the shape of the yield curve within 2.5 years and the yield curve remains unchanged in the period over 2.5 years) must not exceed 5%.



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Classification of Interest Sensitive Assets and Liabilities by Time Bands

Assets and liabilities which are not sensitive to interest rates are classified as “not specified“. The following table shows the analysis of interest rate sensitive assets and interest rate sensitive liabilities of the Bank by time buckets as at 31 December 2009:

(EUR ‘000) On Call Up to

3 Months From 3 to 12

Months From 1 Year to 5 Years

From 5 Years

and Over Not Specified Total

Assets Cash, due from banks and balances with the National Bank of

Slovakia 28 607 23 000 - - - 24 470 76 077 Placements with other banks, net of provisions for possible

placement losses - 44 888 2 082 - - 623 47 593 Financial assets at fair value through profit or loss - - - - - 184 184 Financial assets for sale - - - 42 687 - 1 893 44 580 Loans and receivables, net of provisions for possible losses - 682 076 100 728 51 660 9 469 116 567 960 500 Held-to-maturity financial investments - 62 879 33 194 118 418 - 4 265 218 756 Investments in subsidiaries and associates - - - - - 913 913 Non-current tangible assets - - - - - 22 343 22 343 Non-current intangible assets 11 567 11 567 Deferred tax assets - - - - - 460 460 Other assets - - - - - 2 839 2 839 Total assets 28 607 812 843 136 004 212 765 9 469 186 124 1 385 812 Liabilities Due to banks and deposits from the National Bank of Slovakia

and other banks 49 85 504 14 649 3 773 26 1 990 105 991 Amounts due to customers 451 074 200 633 149 198 127 965 - 8 916 937 786 Liabilities from issued securities - 77 931 79 389 45 222 - 2 216 204 758 Provisions for liabilities - - - - - 4 039 4 039 Other liabilities - - - - - 12 253 12 253 Subordinated debt - 29 000 - - - 78 29 078 Equity - - - - - 91 907 91 907 Total liabilities and equity 451 123 393 068 243 236 176 960 26 121 399 1 385 812 Interest rate risk at 31 Dec 2009 (422 516) 419 775 (107 232) 35 805 9 443 64 725 - Cumulative interest rate risk at 31 Dec 2009 (422 516) (2 741) (109 973) (74 168) (64 725) - -



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The following table shows the analysis of interest rate sensitive assets and interest rate sensitive liabilities of the Bank by time buckets as at 31 December 2008:

(EUR ‘000) On Call Up to

3 Months From 3 to 12

Months From 1 Year to 5 Years

From 5 Years

and Over Not Specified Total


Slovakia 41 094 119 166 - - - 27 049 187 309 Placements with other banks, net of provisions for possible

placement losses - 61 728 4 259 2 130 - 469 68 586 Financial assets at fair value through profit or loss - - - - - 4 259 4 259 Financial assets for sale - - - 12 668 29 023 1 893 43 584 Loans and receivables, net of provisions for possible losses - 835 219 195 611 50 569 10 756 79 359 1 171 514 Held-to-maturity financial investments - 18 256 16 597 69 743 - 1 901 106 497 Investments in subsidiaries and associates - - - - - 913 913 Non-current tangible assets - - - - - 24 980 24 980 Non-current intangible assets - - - - - 10 503 10 503 Deferred tax assets - - - - - - - Other assets - - - - - 2 799 2 799 Total assets 41 094 1 034 369 216 467 135 110 39 779 154 125 1 620 944 Liabilities Due to banks and deposits from the National Bank of Slovakia

and other banks 25 39 877 117 630 5 450 364 8 637 171 983 Amounts due to customers 499 320 314 315 175 597 1 013 - 6 090 996 335 Liabilities from issued securities - 129 613 71 173 82 813 - 3 485 287 084 Deferred tax liability - - - - - 172 172 Provisions for liabilities - - - - - 964 964 Other liabilities - - - - - 19 192 19 192 Subordinated debt - 29 000 - - - 238 29 238 Equity - - - - - 115 976 115 976 Total liabilities and equity 499 345 512 805 364 400 89 276 364 154 754 1 620 944 Interest rate risk at 31 Dec 2008 (458 251) 521 564 (147 933) 45 834 39 415 (629) -

Cumulative interest rate risk at 31 Dec 2008 (458 251) 63 313 (84 620) (38 786) 629 - -



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Interest Rate Risk Sensitivity Analysis To measure the interest rate risk, a GAP analysis methodology is applied. A net balance sheet position of the Banking Book and a net off-balance sheet position of the Banking Book are calculated based on the difference between the value of assets and liabilities in particular time buckets. Their total (Banking Book GAP) is multiplied in every time bucket by the relevant weight factor, which shows the duration of the financial instrument payable (or re-measured) in the middle of the given time bucket, resulting in weighted positions which can be used to determine the impact of interest rate changes on the Bank’s equity. For a potential decrease in the Bank’s regulatory capital in the case of parallel shift of the yield curve by 200 bp, the Bank has an internal limit of 20% of the Bank’s regulatory capital. An analysis of interest rate risk sensitivity is based on the assumption of a shift of the yield curve by 100 base points during the following 2.5 years (straight-line). Therefore, assets and liabilities with residual maturities over 2.5 years will not have an impact on the income statement under this scenario.

Portfolio EUR Up to 1 Month

Up to 3 Month

Up to 6 Month

Up to 12 Month

Up to 2 Years

Up to 3 Years

Up to 4 Years

Up to 5 Years

Up to 7 Years

Up to 10 Years

Up to 15 Years

Over 15 Years

Net balance sheet position of Banking Book 13 941 (19 910) 13 778 (128 598) (93 078) 24 200 35 901 68 792 1 128 2 735 3 114 2 465

Net off-balance sheet position of Banking Book 12 771 - - - - - - - - - - -

Banking Book GAP, total 26 712 (19 910) 13 778 (128 598) (93 078) 24 200 35 901 68 792 1 128 2 735 3 114 2 465

Weight factor 0.04% 0.15% 0.31% 0.50% 0.55% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% Weighted positions

(total GAP x weight factor) 11 (30) 43 (643) (512) - - - - - - -

In the EUR portfolio, an impact of a decrease in interest rates on the Bank’s profit/loss would amount to a loss of EUR 1 131 thousand.

Portfolio USD Up to 1 Month

Up to 3 Month

Up to 6 Month

Up to 12 Month

Up to 2 Years

Up to 3 Years

Up to 4 Years

Up to 5 Years

Up to 7 Years

Up to 10 Years

Up to 15 Years

Over 15 Years

Net balance sheet position of Banking Book 7 105 (2 298) 6 092 922 - - - (8) - - - -

Net off-balance sheet position of Banking Book (12 216) - - - - - - - - - - -

Banking Book GAP, total (5 111) (2 298) 6 092 922 - - - (8) - - - -


(total GAP x weight factor) (2) (3) 19 5 - - - - - - - -

In the USD portfolio, an impact of a decrease in interest rates on the Bank’s profit/loss would amount to a profit of EUR 19 thousand.



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Portfolio CZK Up to 1 Month

Up to 3 Month

Up to 6 Month

Up to 12 Month

Up to 2 Years

Up to 3 Years

Up to 4 Years

Up to 5 Years

Up to 7 Years

Up to 10 Years

Up to 15 Years

Over 15 Years

Net balance sheet position of Banking Book (919) 4 585 1 063 (279) - (1) - - - - - -

Net off-balance sheet position of Banking Book (4 609) - - - - - - - - - - -

Banking Book GAP, total (5 528) 4 585 1 063 (279) - (1) - - - - - -


(total GAP x weight factor) (2) 7 3 (1) - - - - - - - -

In the CZK portfolio, an impact of a decrease in interest rates on the Bank’s profit/loss would amount to a profit of EUR 7 thousand. The overall impact on the Bank’s profit and loss in all portfolios (USD, EUR, CZK, CHF and other foreign currencies) represents a decrease by EUR 1 158 thousand (31 December 2008: decrease by EUR 714 thousand) due to unfavourable movements in all interest rates. When using the same scenario for the trading portfolio, there is no impact on the Bank’s profit/loss as at 31 December 2009 (31 December 2008: decrease by EUR 4 thousand).



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Other Price Risks Under the IFRS definition, other price risks represent the risk that the fair value or future cash flows of a financial instrument will fluctuate due to changes in market prices (other than changes arising from the interest rate risk or currency risks) irrespective of whether these changes are attributable to the factors that are specific for the individual financial instrument or factors affecting all similar financial instruments traded on the market. Other price risks within the Bank primarily include equity and commodity risks. The Bank is not an active player on the equity or commodity markets and hence other price risks are immaterial. 37. Liquidity Risk Liquidity risk is the risk that the Bank will encounter difficulties in raising funds to meet commitments associated with financial instruments. The Bank’s liquidity position is monitored and managed based on expected cash inflows and outflows, and adjusting interbank deposits and placements accordingly. The net on-balance sheet liquidity position represents the extent to which the Bank may be required to provide funding to settle its liabilities associated with financial instruments. The Bank maintains its liquidity profile in accordance with the requirements of the National Bank of Slovakia. The following tables show an analysis of assets, liabilities and equity according to their maturities, reflecting the remaining period between the balance sheet date and the contractual maturity date. The analysis has been prepared on the basis of the most prudent consideration of maturity dates in cases where the repayment schedules facilitate earlier repayment. The assets and liabilities that could not be included into the relevant time buckets according the remaining maturity are reported in the ‘from 5 years and over’ category. Liabilities to clients due within one month principally include current accounts from which the clients are authorised to make withdrawals at call. The Bank’s historical experience suggests, however, that these accounts represent a stable source of funding.



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Classification of Balance Sheet Assets and Liabilities into Time Bands per Residual Maturity as at 31 December 2009

(EUR ‘000) Within

1 Month From 1 month to 3 Months

From 3 to 12 Months

From 1 Year to 5 Years

From 5 Years

and Over Total


Slovakia 76 077 - - - - 76 077 Placements with other banks, net of provisions for possible placement

losses 42 626 117 2 936 1 914 - 47 593 Financial assets at fair value through profit or loss 50 - 131 - 3 184 Financial assets for sale 156 1 211 - 42 687 526 44 580 Loans and receivables, net of provisions for possible loan losses 31 643 82 556 160 002 307 293 379 006 960 500 Held-to-maturity financial investments 260 14 268 66 445 136 123 1 660 218 756 Investments in subsidiaries and associates - - - - 913 913 Non-current tangible assets - - - - 22 343 22 343 Non-current intangible assets - - - - 11 567 11 567 Deferred tax assets - - - 460 - 460 Other assets 1 079 940 812 8 - 2 839 Total assets 151 891 99 092 230 326 488 485 416 018 1 385 812 Liabilities Due to banks and deposits from the National Bank of Slovakia and

other banks 77 145 20 398 2 983 5 439 26 105 991 Amounts due to customers 556 744 92 361 160 175 128 496 10 937 786 Liabilities from issued securities 215 34 277 102 572 45 222 22 472 204 758 Provisions for liabilities - - - 4 039 - 4 039 Other liabilities 7 387 1 268 1 375 2 223 - 12 253 Subordinated debt 73 5 - - 29 000 29 078 Equity - - - - 91 907 91 907 Total liabilities and equity 641 564 148 309 267 105 185 419 143 415 1 385 812

Net balance sheet liquidity position at 31 Dec 2009 (489 673) (49 217) (36 779) 303 066 272 603 -

Cumulative net balance sheet liquidity position at 31 Dec 2009 (489 673) (538 890) (575 669) (272 603) - -



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Classification of Balance Sheet Assets and Liabilities into Time Bands per Residual Maturity as at 31 December 2008

(EUR ‘000) Within

1 Month From 1 month to 3 Months

From 3 to 12 Months


From 5 Years

and Over Total


Slovakia 187 309 - - - - 187 309 Placements with other banks, net of provisions for possible placement

losses 51 617 6 082 5 108 5 779 - 68 586 Financial assets at fair value through profit or loss 538 3 511 188 19 3 4 259 Financial assets for sale 156 1 211 - 12 668 29 549 43 584 Loans and receivables, net of provisions for possible loan losses 79 411 43 158 220 581 392 707 435 657 1 171 514 Held-to-maturity financial investments 462 294 17 738 86 343 1 660 106 497 Investments in subsidiaries and associates - - - - 913 913 Non-current tangible assets - - - - 24 980 24 980 Non-current intangible assets - - - - 10 503 10 503 Deferred tax assets - - - - - - Other assets 875 798 954 172 - 2 799 Total assets 320 368 55 054 244 569 497 688 503 265 1 620 944 Liabilities Due to banks and deposits from the National Bank of Slovakia and

other banks 39 618 535 124 350 7 116 364 171 983 Amounts due to customers 657 801 112 987 223 841 1 696 10 996 335 Liabilities from issued securities 874 1 418 122 886 137 874 24 032 287 084 Deferred tax liability 172 172 Provisions for liabilities - 964 - - - 964 Other liabilities 12 863 2 592 227 3 510 - 19 192 Subordinated debt 225 13 - - 29 000 29 238 Equity - - - - 115 976 115 976 Total liabilities and equity 711 381 118 509 471 304 150 368 169 382 1 620 944

Net balance sheet liquidity position at 31 Dec 2008 (391 013) (63 455) (226 735) 347 320 333 883 - Cumulative net balance sheet liquidity position at 31 Dec 2008 (391 013) (454 468) (681 203) (333 883) - -



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Classification of Selected Off-balance Sheet Liabilities into Time Bands per Residual Maturity

31 December 2009 (EUR ‘000)

Within 1 Month

From 1 month to 3 Months

From 3 to 12 Months


From 5 Years and Over

Total

Future loans granted 73 025 - - - - 73 025 Guarantees issued (excluding commitments for guarantees) 236 23 11 733 7 818 29 248 49 058 Letters of credit issued - - - - - - Liabilities from spot transactions 1 150 - - - - 1 150 Liabilities from futures with financial transfers 16 526 - - - - 16 526 Provided guarantees from pledges 122 018 10 000 38 335 - - 170 353 Total as at 31 Dec 2009 212 955 10 023 50 068 7 818 29 248 310 112


Within 1 Month

From 1 month to 3 Months

From 3 to 12 Months


From 5 Years and Over

Total

Future loans granted 137 139 - - - - 137 139 Guarantees issued (excluding commitments for guarantees) 174 70 13 353 11 350 33 668 58 615 Letters of credit issued 3 407 791 - - - 4 198 Liabilities from spot transactions - - - - - - Liabilities from futures with financial transfers 86 317 35 524 14 197 - - 136 038 Provided guarantees from pledges 26 159 - 25 885 38 015 - 90 059 Total as at 31 Dec 2009 253 196 36 385 53 435 49 365 33 668 426 049

Classification of Non-discounted Future Cash Flows from Financial Liabilities into Time Bands per Residual Maturity


Within 1 Year From 1 Year to

5 Years From 5 Years

and Over Adjustment Total

Liabilities to banks, deposits of the National Bank of Slovakia

and other banks 100 554 5 439 26 (28) 105 991 Liabilities to clients 810 323 128 564 11 (1 112) 937 786 Liabilities under issued securities 140 654 49 187 22 679 (7 762) 204 758 Other liabilities 10 108 6 262 29 000 - 45 370 Total as at 31 Dec 2009 1 061 639 189 452 51 716 (8 902) 1 293 905


Within 1 Year From 1 Year to

5 Years From 5 Years

and Over Adjustment Total

Liabilities to banks, deposits of the National Bank of Slovakia

and other banks 166 187 7 116 364 (1 684) 171 983 Liabilities to clients 997 068 1 697 11 (2 441) 996 335 Liabilities under issued securities 140 658 146 609 25 632 (25 815) 287 084 Other liabilities 16 885 3 681 29 000 - 49 566 Total as at 31 Dec 2009 1 320 798 159 103 55 007 (29 940) 1 504 968

Note: Non-discounted future cash flows arising from interest are included in individual categories of financial liabilities. A difference between carrying amount of financial liabilities and their contractual non-discounted cash flows is disclosed in the Adjustment Column.



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38. Operational Risk The Bank defines operational risk as the risk of loss arising from the inappropriateness or failure of internal processes in the Bank, human errors or failures of systems used by the Bank or the risk of loss arising from external events. Operational risk also includes legal risk, i.e. the risk of loss primarily due to the failure to enforce contracts, threat of unsuccessful legal disputes or court rulings with adverse impacts. Operational risk management is addressed in the Instructions of the Board of Directors entitled “Operational Risk Management”, which provide guidance on identifying, estimating, monitoring and mitigating operational risks. The Bank’s principal objectives and principles in managing operational risks are outlined in the “Operational Risk Management Strategy” document. The standalone Market and Operational Risks department ensures compliance with the operational risk management requirements, processes and techniques and coordinates the development of basic principles and the development and maintenance of consistent methodology for identifying, monitoring, assessing and mitigating operational risks. In managing operational risks, the Bank utilises an IT system to track potential and loss-making operational risk incidents. On the basis of an expert estimate, the owner of the process/risk attributes three parameters (the average frequency of the incident, average loss caused by one incident and the maximum loss caused by one incident) to each identified operational risk incident. The parameters are used to measure the operational risk. For capital requirement calculation purposes, the Bank’s activities and processes are split into eight business lines and the sum of the indicator (net income per each business line) serves as a basis for calculating the operational risk capital requirement. Individual activities and processes of the Bank are mapped in the process map. On an annual basis the Bank undertakes an internal assessment whereby the process owners organise workshops focused on identifying and reassessing risks in the processes owned by them. An estimated loss is calculated in respect of each assessed risk, by estimating the impact and likelihood of the relevant risk. Operational risk management also involves developing business continuity plans that are designed to avert undesired interruption of the Bank’s activities and protect critical processes from the consequences of serious errors and unforeseen events. Continuity plans are developed for processes which have been assessed as being critical to the functioning of the Bank. The continuity plans include critical times for the failure of systems and applications and the time and procedures required to restore the process and achieve full recovery. The Bank tests and regularly reassesses the continuity plans to ensure they reflect the Bank’s current business strategy.



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39. Earnings/(Loss) Per Share Earnings/(loss) per share attributable to common shares of the Bank are computed as net profit for the relevant year attributable to the common shareholders divided by weighted average number of common shares outstanding during the year as follows: Note 31 Dec 2009 31 Dec 2008 Profit/(loss) (in EUR ‘000) (24 516) 10 994 Profit/(loss) for the year attributable to common shareholders

(in EUR’000)

(24 516) 10 994 Profit/(loss) per share At nominal value of EUR 3.98 (in EUR) 18 (1.42) 0.64 Weighted average number of common shares 11 503 458 11 503 458 At nominal value of EUR 39 832.70 (in EUR) 18 (14 258.82) 6 390.54 Weighted average number of common shares 570 570 40. Distribution of Profit for the Previous Period

Distribution of Profit/Loss for 2008 Profit/loss for 2008 − profit 10 994 Drawing: - Allotment to legal reserve fund 1 099 - Retained earnings 9 895

The financial statements for 2008 and distribution of profit for 2008 were approved by the General Meeting of OTP Banka Slovensko, a.s. on 2 April 2009. 41. Proposed Settlement of Loss for the Current Reporting Period

Proposed Settlement of Loss for 2009 Profit/(loss) for 2009 – loss (24 516) Settlement: – Retained earnings from previous years (24 516)

The loss reported for 2009 in the amount of EUR 24 516 thousand will be settled from retained earnings from previous years, which is subject to the approval by the General Meeting of OTP Banka Slovensko, a.s.. 42. Events After the Reporting Date Between the reporting date and the authorisation date of these financial statements for issue, there were no significant events that would require any adjustment to or additional disclosure in the financial statements, except for the resolution of the court case as reported in Note 21.