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Credicom Consumer
Finance Bank SA 2016 Annual Report
Certification of the Board of Directors and Board of Directors’ Report
Financial Statements
Notes to the Financial Statements including Financial Risk management disclosures
Independent Auditors’ Report
Availability of the Financial Statements
Credicom Consumer Finance Bank Directors’ Report Year ended 2016
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Certification of the Board of Directors and Board of
Directors’ Report
Credicom Consumer Finance Bank Directors’ Report Year ended 2016
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Certification of the Board of Directors
Certification by the Chief Executive Officer and the BoD member in accordance with article 4 par. 2
of the Law 3556/2007)
We, the members of the Board of Directors of Credicom Consumer Finance Bank SA, certify that to
the best of our knowledge:
the annual financial statements for the year ended 31 December 2016, which have been
prepared in accordance with the applicable accounting standards, present fairly the assets,
liabilities, equity and annual results of the Bank, and
the annual report of the Board of Directors presents fairly the development, the
performance and the position of the Bank, including the description of the main risks and
uncertainties they face.
London, 5 September 2017
CEO A member of the Board of
Directors
Anastasia Sakellariou Anastasios Karkazis
Credicom Consumer Finance Bank Directors’ Report Year ended 2016
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Board of Directors’ Report
Global outlook: Medium term risks skewed to the downside
Global economy gained speed from H2-2016 onwards anticipating a continuation of the current
positive momentum. Global economic growth is expected to accelerate to 3.6% compared to 3.1%
in 2016 according to April’s World Economic Outlook of the International Monetary Fund.
Current expectations of a stronger activity and a more robust global demand, along with agreed
restrictions on oil supply, supported the recovery in commodity prices from their troughs in the
first months of 2016. Higher commodity prices provided some relief to commodity exporters and
led to an increase in global headline inflation.
The outlook profile and growth drivers vary among advanced and emerging economies. In the
advanced economies group, the U.S. is projected to gather steam due to the ongoing expansionary
fiscal policy, whereas in Europe, the cyclical recovery from the 2008-09 & 2011-12 crises will help
retain growth modestly above potential over the next few years. Among emerging economies,
especially those that rely heavily on energy or metal exports, the adjustment to lower commodity
prices is a driver of the outlook, in both the short and medium term. The slowdown of productivity
growth remains a medium-term challenge for many emerging markets.
Downside risks stem from several potential factors:
• An inward shift in policies, such as a move towards protectionism, with lower global growth due
to reduced trade and cross-border investment flows.
• A faster-than-expected pace of interest rate hikes in the United States, which in turn could
trigger a more rapid tightening in global financial conditions and a sharp dollar appreciation,
with adverse repercussions for vulnerable economies.
• An abrupt rollback of financial regulation, which could spur excessive risk taking and increase
the likelihood of future financial crises.
Other factors of noneconomic nature include geopolitical tensions, domestic political discord, risks
from weak governance and corruption, extreme weather events, and terrorism and security
concerns.
Greece: Possible green-shoots in economic recovery
The better than expected economic recovery along with the completion of the long-waited second
review of the 3rd Economic Adjustment Programme for Greece have created a positive momentum
for the country in 2017. This has resulted in the release of an EUR 8.5bn tranche in July 2017,
allowing the Greek government to repay upcoming debt maturities amounting to EUR 6.6bn in the
same month, including the ECB (EUR 3.9bn.) and private-sector bondholders (EUR 2.3bn.). It will
also enable the settlement of some of the government's arrears, thereby injecting much-needed
liquidity into the economy.
The risk of a currency denomination has diminished substantially. While the events of 2015
illustrate the volatility of Greek politics, the current political situation is calmer, and opinion polls
Credicom Consumer Finance Bank Directors’ Report Year ended 2016
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indicate a broad-based shift of support towards parties that are in favor of continued euro area
membership.
After three years of stagnation and a cumulative loss in output of more than 27% since the onset
of the crisis, Greece has started posting positive growth rates. Employment has been rising for
more than a year, thereby supporting private consumption. Investments are expected to be
supported by an acceleration of the EU structural funds that amount to EUR 15.2bn (8.4% of 2017
GDP) for the 2014-2020 period. On top of that, significant funding is available from the European
Investment Bank (EIB, Aaa stable) and the European Bank for Reconstruction and Development
(EBRD, Aaa stable).
In 2016, Greece’s fiscal targets were exceeded, posting a primary surplus of 4.2% of GDP as
opposed to the target of 0.5% of GDP. The budget deficit in the first five months of the current
year (on a modified cash basis for central government only) was EUR 1.24bn., circa 25% lower than
the deficit for the same period in 2016. The targeted fiscal deficit for this year according to the
medium-term fiscal plan stands at EUR 2.03bn. The primary surplus was also higher than last year,
by circa 26%. Revenues were slightly below target while overall spending was 3.8% lower than the
target.
Real GDP in Q1-2017 turned out more positive than first estimated, with growth at 0.4% both on a
quarterly and annual basis, compared to a first estimate of -0.1% QoQ and -0.5% YoY. The leading
indicators also point upwards, with industrial production expanding by more than 7% on average
in January-April compared to the previous year. The economic sentiment indicator has recovered
to 2015 levels, prior to the political turmoil caused by the July 2015 referendum.
For 2017, economic activity is expected to continue to recover even more, with consumer and
investor sentiment as the fundamental growth drivers in the short-term. According to the
European Commission, real GDP is expected to grow by 2.1% YoY in 2017 and 2.5% in 2018, while
private consumption is expected to be the main driver of growth in 2017, supported by the
increase in employment. Furthermore, exports are set to gain momentum in the upcoming years as
Greece’s tourism sector and related sectors are experiencing increased demand.
The main risks related to growth have been the completion of the second review, and that was
successfully concluded in H1-2017, allowing the disbursement of EUR 8.5bn from the ESM. This at
the same time has paved the way for a number of fiscal and structural measures that the
government has to legislate. These measures aim to provide a higher level of comfort than
previously that the fiscal stance will remain appropriately tight in 2017 and 2018, while some of the
other measures implemented could have a positive economic impact over the coming years. Inter
alia, these measures are focusing on the reduction of the particularly elevated stock of non-
performing exposures (NPEs) in the banking sector. Besides adoption of bank-specific NPE-
reduction targets and the legislation to allow the operation of specialized asset management
companies, the government has now also strengthened the process for out-of-court debt
restructuring and provided legal safeguards for those involved in such debt workouts. The process
of NPE reduction is back-loaded focusing on a reduction targeted period of 2019-2020. The
cleaning-up of the banks’ balance sheet is a pre-condition so as to return to bank lending as well
as corporate investment.
Credicom Consumer Finance Bank Directors’ Report Year ended 2016
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All of the above have led to an upgrade of Greece’s sovereign bond rating by Moody’s in June by
one notch to Caa2 from Caa3 with a Positive Outlook. In detail, the three main drivers for this
upgrade were first the successful conclusion of the second review, second the improved fiscal
prospects on the back of 2016 fiscal outperformance and third the tentative signs of the economy
stabilizing. Equally important though is the Positive Outlook, implying a further upgrade of the
country’s sovereign rating should the completion of the third Economic Adjustment Programme
successfully conclude, leading to potential debt relief.
Credicom: The strategy for a ‘Challenger’ Bank
The Bank has traditionally been a specialist in consumer and car finance both directly by offering
consumer finance and car loans and indirectly through a car leasing subsidiary active in the long-
term rental of new or used private cars1. Its current performing loan portfolio consists almost
exclusively of car loans originated prior to 2013, when it ceased to pursue new business. In
essence, since 2013 the Company has operated in a rundown mode which it anticipates to be
completed by 2018.
As at 17/2/2017 and following the approval by the European Competent Authorities (ECB/SSM and
Bank of Greece), the Bank has been fully acquired by Atlas Merchant Capital LLC through its
affiliate AMC Oak Sarl, a Luxembourg entity. The ultimate purchaser is Atlas Merchant Capital Fund
LP (‘AMC’) which is an investment fund specializing in the financial services industry, particularly in
areas of growth and opportunity with a focus on investment management.
Our plan is to use the Company’s full banking license and operational platform to:
(a) provide comprehensive banking services (i.e. lending to corporates and SMEs, ancillary payment
services, accepting deposits, retail banking, etc.) and
(b) to acquire, restructure and refinance existing loans in companies (medium and large SMEs) that
have viable business models, but overleveraged capital structures requiring urgent capital and
funding infusions.
As a first step, we intend to pursue a “thematic approach by sector” for restructuring, new funding
and servicing, out of a fraction of the pool of €110bn NPE loans, which relate to viable operating
companies in Greece. At the same time, the Bank will also engage in more capital intensive
activities in order to develop into a clean Challenger bank, with state of the art IT infrastructure and
‘best in class’ personnel. Going forward, we will develop a multichannel proposition to acquire and
serve its customer base, based on 3 channels:
- Online
- Mobile and
- Branches / RMs (Hub branches and Kiosks).
Eventually and by 2020, the Bank’s business model will have matured and the Bank will have a fair
share of the Greek market.
1 Disposed on the 23rd of March to Atithasos Trading & Shipping S.A.
Credicom Consumer Finance Bank Directors’ Report Year ended 2016
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Furthermore, management will build on the strong existing compliance culture of Credicom and
further align the current Internal Control Environment which is based on permanent and periodic
controls, to a 3 Lines of Defense model, with clear roles and responsibilities and a risk framework
interrelated to the Bank’s risk appetite.
The above strategy and actions are described in detail in the Bank’s Business Plan which has been
approved by the ECB/SSM and BoG on 17/2/2017.
2016 Financial Performance
Credicom’s 2016 Interest Income was significantly lower than that of the previous year, due to
lower loans outstanding. In addition, Interest Expense also moderated as a result of the full
repayment of interbank borrowings from the former shareholder CACF. The lower banking activity
had a similar negative effect on Net Fee and Commission Income that decreased by -78%, resulting
in Net Banking Income of €1.6 million compared to €5.5 million in the previous year.
Net Other Operating Income amounted to €1.8 million from €3.0 million of which €1.0 million
related to the one-off return of withheld tax on bonds interest. Excluding this item, the income
stemming from the collection activity of the written-off loan portfolio remained stable compared
to the previous year at circa €1.6 million. The Company’s total operating income amounted to €3.5
million from €8.5 million in 2015 posting a decline of 59% off the back of the amortising
underlying book.
The Company’s Operating Expenses continued to decline reaching €7.9 million, 17% lower than
2015. This drop was the result of lower (a) collection and legal costs, (b) depreciation costs
attributed to hardware and software equipment, and c) reduced payments to Service Providers. On
the other hand, Personnel expenses stood at €3.6 million vs. €3.1 million in the previous year, due
to the increased provision for the pre-existing Voluntary Exit Plan. Overall, the 2016 Pre-Provisions
Result amounted to €-4.4 million vs. €-1.0 million in the previous year.
During 2016 there was a reversal on provisions for loans and advances, to adjust for the better
macroeconomic environment and the improved recoveries compared to 2015. Moreover, the Bank
impaired its participation in Emporiki Rent by €2.1 million, following the disposal agreement
completed on 23.3.2017.
The recognition of deferred tax assets (€12 million) is based on the assumption that the Bank,
being a going concern, will generate sufficient taxable profits over the course of the next twenty
years to utilize losses relating solely to loan loss impairments and accounting write offs, also taking
advantage of recent favorable legislation. In 2016, Credicom’s after tax result was a profit of €9.6
million compared to a loss of €-2.2 million in 2015.
Regarding the Bank’s financial position as of the end of 2016, total assets amounted to €50.6
million compared to €52.8 million as of the end of 2015. Gross Loans in December 2016 reached
€33.7 million decreasing by €42.9 million compared to 31.12.2015 (€79.6 million) due to customer
repayments and accounting write-offs (€11.7 million). The accumulated loan loss allowances as at
the end of 2016 amounted to €14.6 million compared to €30.4 million in 2015. The coverage of
loans in arrears over 90 days reached 90.2%, whereas the NPL ratio of the portfolio stood at 44.3%.
Credicom Consumer Finance Bank Directors’ Report Year ended 2016
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Cash and reserves amounted to €17.5 million, compared to just €0.9 million in 2015, even after the
full repayment of the Bank’s interbank liabilities to CACF (amounting to €11.2 million in 2015).
Other assets also declined due to the lower banking activity along with Tangible and Intangible
Assets.
On 31.12.2016, equity reached €45.8 million, and the Bank’s Common Equity Tier 1 ratio stood at
91.7%. Credicom’s active goal is to maintain a capital base at considerably higher levels than the
minimum requirements set by the regulators (Bank of Greece) and the other Greek banks based on
Basel III (CRD IV) rules.
2017 prospects
We believe that 2017 will be a turning point for the Bank and will lead to significant changes in the
Balance Sheet. Following several years in a run-down mode the Bank will overhaul its operating
model entirely, shifting from a run-down, auto-loans financier to a proper Challenger Bank. To this
end, the Bank and its advisors have developed a detailed plan that describes all steps and
investments required to transform Credicom into a full-service bank. The plan encompasses:
- offering credit advisory services to Greek corporations and NPL servicing and/or acquisition;
- transforming into a challenger bank within 12 months, focusing on medium and large SME /
corporate lending, and funding through retail deposits via a 'light' branch network and state-of-
the-art online / mobile value proposition;
- assessing expansion into additional retail and SME / corporate products in 3 – 4 years time
depending on customer demand.
The targeted organizational structure and operational model has been designed, in parallel with
the IT architecture and required IT investments for the core banking system and the peripheral
applications. The recruitment plan has been clearly formulated and will commence in the next 12
months.
In order to fund the envisaged plan, the BoD has decided to initiate a sizeable capital raising
process through a private placement that will be launched in the second half of 2017. Actual timing
and size of this effort is subject to market conditions.
Financial Risk management
Credicom is a fully standalone Bank with all key risk management functions performed internally.
The risk management function designs and implements a system of transversal supervision and
prevention mechanism, which was built upon the French regulatory system.
The Bank’s new management is currently building on the existing infrastructure in order to develop
a ‘3 lines of defense’ model, with an aim to align the risk management function to the new
business model. The main pillars of financial risk management are described below. The notes to
the financial statements also include the tables with current and prior year balances.
Credicom Consumer Finance Bank Directors’ Report Year ended 2016
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Credit risk
Credit risk, is defined as the potential risk that a Bank’s borrower or counterparty will fail to meet
its obligations. The Bank has developed credit rating models in order to assess credit risk per
category of loan portfolios. Furthermore, the Bank, based on prior experience loan portfolio
evaluation, is able to establish policies in order to limit credit risk.
In order to analyze the credit risk, the Bank on a monthly basis monitors the ageing analysis of the
total loan portfolio as well as the collectability of defaulted loans. The Bank has developed an
impairment loss provision model based on historical performance of the loan book and the actual
data of recoveries. The booked impairment allowances cover the expected/estimated credit losses
as calculated by the provisioning model.
In the context of the continuous alignment with the Basel II[I] supervisory requirements and the
reinforcement of credit risk management processes the Bank has started to design and develop
new models of credit risk management.
The Board of Directors and the Management of the Bank, is responsible for setting up and
operating appropriate management structures that will further improve Bank’s Corporate
Governance. In that context, and for managing credit risk, the Bank has established the Credit
Committee.
Market Risk
Market risk is the risk that movements in market factors, such as foreign exchange rates, interest
rates, credit spreads, equity prices and commodity prices, will reduce the income or the value of
the Bank’s portfolios.
The Bank is mainly exposed to interest rate risk, which is monitored on a regular basis, with the use
of appropriate measures/ratios and the results are communicated on a monthly basis to the
shareholders and Asset Liability Committee (ALCO). The Bank has minimal interest rate risk which is
limited to the repricing of interest bearing assets (interbank deposits and its sovereign bonds
portfolio), since the largest part of the loan book includes fixed rate loans.
Liquidity risk
Liquidity risk is the risk that the Bank does not have sufficient financial resources to meet its
obligations as they fall due or that it can only do so at an excessive cost. Funding risk is the risk
that funding considered to be stable, and therefore used to fund assets, becomes not sustainable
over time.
Liquidity risk arises from mismatches in the timing of cash flows, whereas funding risk arises when
illiquid asset positions cannot be funded at the expected terms and when required.
As at 31/12/2016 the Bank has cash and cash equivalents of 18mln and during the years 2015 and
2016 the Bank has fully repaid its debt obligations amounting to 113mln. The Bank is currently
comfortably above the Bank of Greece Ratio A and B liquidity thresholds and LCR since the Bank’s
liabilities consist mainly of Equity.
Credicom Consumer Finance Bank Directors’ Report Year ended 2016
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Related parties
As at 31/12/2016, the Bank’s related parties are i) entities of the Credit Agricole group (including E-
Rent) and ii) key management personnel. The balances and the profit and loss impact of
transactions with related parties for the period 1/1/2016 – 31/12/2016, are explained in note 23 of
the financial statements.
Environmental issues
Due to the nature of the Bank’s activities, the actual and potential impact to the environment from
the Bank’s activities, is not significant.
Labor issues
The Bank offers a working environment of equal opportunities to all staff, where rights deriving
from the local regulation are respected. Furthermore, the Bank supports its personnel through
trainings and other activities.
Anastasia Sakellariou
Chief Executive Officer
London, 5 September 2017
Credicom Consumer Finance Bank Financial Statements Year ended 2016
10
Financial Statements
Income Statement and statement of comprehensive income
Balance Sheet
Statement of Changes in Equity
Cash Flow Statement
Credicom Consumer Finance Bank Financial Statements Year ended 2016
11
Income Statement
amounts in € thousands Reference
Year ended
31.12.2016
Year ended
31.12.2015
Interest income 6 1.678 5.669
Interest expense 6 (353) (1.501)
Net interest income
1.325 4.168
Fee and commission income 7 305 1.367
Net Banking Income
1.630 5.535
Dividend income 8 - 107
Other operating income 9 1.838 2.851
Operating income
3.468 8.493
Operating expenses 10,11,16 (7.887) (9.495)
Profit before impairments and provisions
(4.419) (1.002)
Reversals of impairment and impairment losses on
loans and advances to customers 13 4.062 (1.234)
Other impairment losses and provisions 15 (2.068) -
Profit / (loss) before tax
(2.425) (2.236)
Income Tax 12 12.007 -
Profit / (loss) after tax
9.582 (2.236)
Statement of comprehensive income
amounts in € thousands Reference
Year ended
31.12.2016
Year ended
31.12.2015
Profit / (loss) after tax for the year
9.582
(2.236)
Other comprehensive income -
-
-
Total comprehensive income for the year
9.582
(2.236)
The above income statement and statement of comprehensive income should be read in conjunction with
the accompanying notes
Credicom Consumer Finance Bank Financial Statements Year ended 2016
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Balance Sheet
amounts in € thousands Reference 31.12.2016 31.12.2015
ASSETS
Cash & cash equivalents 14 17.540 879
Loans & advances to customers
(net of loan loss reserves) 13 19.126 46.168
Bond loans - 801
Investment in E-Rent 15 - 2.068
Property, Plant & Equipment 16 594 750
Intangible assets 16 193 519
Deferred tax assets 12 12.007 -
Other assets 17 1.177 1.611
Total assets 50.637 52.796
LIABILITIES
Due to customers 18 591 577
Due to banks 19 - 11.173
Voluntary Exit Plan provision 20 2.690 2.811
Other liabilities 21 1.563 2.017
Total liabilities 4.844 16.578
EQUITY
Share capital 22 48.700 48.700
Share premium 22 133.053 133.053
Reserves - 7
Retained earnings (135.960) (145.542)
Total equity 45.793 36.218
Total equity and liabilites 50.637 52.796
The above balance sheet should be read in conjunction with the accompanying notes
Credicom Consumer Finance Bank Financial Statements Year ended 2016
13
Statement of Changes in Equity
amounts in € thousands Reference
Share
Capital
Share
Premium Reserves
Retained
Earnings
Total
equity
Opening balance 1.1.2015 22 48.700 133.053 10 (143.305) 38.458
Share Plan reserve - - (3) - (3)
Profit / (loss) after tax - - - (2.237) (2.237)
Closing balance 31.12.15 48.700 133.053 7 (145.542) 36.218
Opening balance 1.1.2016 22 48.700 133.053 7 (145.542) 36.218
Share Plan reserve - - (7) - (7)
Profit / (loss) after tax - - - 9.582 9.582
Closing balance 31.12.16 48.700 133.053 - (135.960) 45.793
The above statement of changes in equity should be read in conjunction with the accompanying notes
Credicom Consumer Finance Bank Financial Statements Year ended 2016
14
The above cash flow statement should be read in conjunction with the accompanying notes
Cash Flow Statement
amounts in € thousands Reference
Year ended
31.12.16
Year ended
31.12.15
Profit / (loss) before tax (2.425) (2.237)
Adjustments for:
Depreciation 16 483 653
PP&E and intangible assets disposals and / or write offs 16 - 2
Impairment losses on loans and advances to customers 13 (4.062) 1.234
Other impairment losses and provisions 15 1.940 (798)
Dividends 8 - (107)
Cash flows from operating activities (4.064) (1.253)
Net (increase)/decrease in loans and advances to customers 13 31.905 62.253
Net (increase)/decrease in other assets 17 434 607
Net increase/(decrease) in due to customers 18 13 11
Net increase/(decrease) in other liabilities 21 (454) 25
Changes in operating assets and liabilities 31.898 62.896
Net cash flows from operating activities before taxes paid 27.834 61.644
Income tax paid - -
Net cash flows from operating activities after taxes paid 27.834 61.644
Proceeds from sale of tangible assets - 4
Purchases of intangible assets - (50)
Proceeds received from liquidation of subsidiary Credicom
Insurance Brokers - 60
Dividends received 8 - 107
Net cash flows from investing activities 0 121
Increase/(decrease) of due to banks (intercompany) 19 (11.173) (69.519)
Net cash flows from financing activities (11.173) (69.519)
Net increase/(decrease) in cash and cash equivalents 16.661 (7.755)
Cash & cash equivalents at the beginning of the year 14 879 8.634
Cash & cash equivalents at the end of the year 14 17.540 879
Credicom Consumer Finance Bank Notes to the Financial Statements Year ended 2016
15
Notes to the Financial Statements and Financial Risk
Management Disclosures
1. General Information
2. Accounting Policies
3. Financial Risk Management
4. Capital management
5. Critical estimates and judgements
6. Interest income and interest expense
7. Fee and commission income
8. Dividend income
9. Other operating income
10. Personnel costs
11. Other operating expenses
12. Income tax and deferred tax
13. Loans and advances to customers
14. Cash and cash equivalents
15. Investment in E-Rent
16. Property, Plant & Equipment and intangible assets
17. Other assets
18. Due to customers
19. Due to banks
20. Voluntary Exit Plan provision
21. Other liabilities
22. Share capital and share premium
23. Related parties transactions
24. Contingent liabilities and other commitments
25. Subsequent events
Credicom Consumer Finance Bank Notes to the Financial Statements Year ended 2016
16
1. General information
Credicom Consumer Finance Bank SA (hereafter the “Bank”) is a financial institution with a full
banking license. The Bank was incorporated by Emporiki Bank and Credit Agricole Consumer
Finance (‘CACF’ – subsidiary of Credit Agricole SA -‘CASA’) in 2003. As at 31/12/2016 the Bank’s
sole shareholder was CACF. The Bank’s current activities include the management of a retail
loan portfolio, however the Bank can also become active, at its sole discretion, in several other
activities, i.e. corporate and private banking, asset management, NPLs management, insurance,
financial intermediation/advisory services, insurance etc.
As at 17/2/2017 and following the approval by the European Competent Authorities (ECB/SSM
and Bank of Greece), the Bank has been fully acquired by Atlas Merchant Capital LLC through
its affiliate, AMC Oak Sarl, a Luxembourg entity. The ultimate purchaser is Atlas Merchant
Capital Fund LP (‘AMC’) which is an investment fund specializing in the financial services
industry, particularly in areas of growth and opportunity with a focus on investment
management. The firm makes investments in global as well as emerging markets. Within global
markets, it seeks to invest in the capital-intensive businesses in developed world, including the
United States, Canada, Western Europe, and Japan. AMC makes majority controlled and
minority investments. Atlas Merchant Capital LLC was founded in 2013 and is based in New
York, New York. The Key Executives of the Fund are presented in the below table:
Atlas Merchant Capital LLC - Key Executives
Name Position
R.E. Diamond Jr Founding Partner and CEO
D.I. Schamis Founding Partner and CIO
T.J. Kacani Chief Operating Officer
P.J. Durkin Head of External Relations
M.D Hansen Head of U.K. and Europe
C.M. Savage Managing Director
Credicom’s current address is Syngrou Avenue 187, Nea Smyrni and the Company Registration
number is 55026/06/B/03/15.
These financial statements are the Bank's stand-alone financial statements. The Bank has opted
to apply the exemption provided by IFRS 10 and does not prepare consolidated financial
statements. The Bank's financial statements are included in the consolidated financial
statements of the parent company, CASA which holds 100% of the Bank's share capital, as at
31/12/2016.
The current composition of the Board of Directors and as well as that as at 31/12/2016, is
presented in the table below:
Credicom Consumer Finance Bank Notes to the Financial Statements Year ended 2016
17
Credicom BoD composition
current composition
as at 31 December 2016
Name Position
Name Position
Matthew Hansen President
Joseph Antoine Pierre Adam President
Anastasia Sakellariou CEO
Phillipe Genon Catalot CEO
John Sawyer Member
Jacques André René Fenwick Member
Anastasios Karkazis Member
Dimitrios Spentzas Member
Timothy Kacani Member
Dimitrios Passas Member
David Schamis Member
Buabid Abdelhakim Member
Corrado Passera Member
Michael Katounas Member
From 24/2 to 1/8/2017 the CEO position was temporarily held by Anthimos Thomopoulos.
The Bank’s financial statements have been approved by the BoD as at 5/9/2017 and are subject
to approval by the Annual General Meeting of Shareholders.
2. Accounting Policies
2.1 Basis of preparation
The financial statements of the Bank have been prepared in accordance with International
Financial Reporting Standards (IFRS) and the interpretations issued by the IFRS Interpretations
Committee (IFRS IC), as endorsed by the European Union (EU), issued and effective or issued
and early adopted as at the time of preparing these financial statements.
The financial statements of the Bank are presented in thousands euro and any roundings are
performed in the nearest thousand.
The main principle for the preparation of the financial statements is the historical cost
convention.
The preparation of the financial statements in conformity with IFRS requires the use of certain
critical accounting estimates. It also requires management to exercise judgment in the process
of applying the Company’s accounting policies. The areas involving a higher degree of
judgment or complexity, or areas where assumptions and estimates are significant to the
financial statements, are disclosed in Note 5 “Critical judgments and estimates”.
The areas involving a higher degree of judgment or complexity, or areas where estimates and
assumptions are significant to the financial statements are the areas of impairment of loans
and advances to customers and the assessment of the recoverability of deferred tax assets
(‘DTA’). These areas are further analyzed in Note 5. Actual results in the future may differ from
those reported.
Going concern assessment
Management has performed a going concern assessment based on three pillars: liquidity,
macroeconomic conditions and capital adequacy.
Credicom Consumer Finance Bank Notes to the Financial Statements Year ended 2016
18
Liquidity
Currently, the Greek banking system is supported to a large extent by the Eurosystem (ECB and
ELA). According to the provisions of the ESM programme for Greece, liquidity will be provided
to the Greek banking system as long as the agreed targets between the Greek Government and
the Institutions are met. Following the completion of the 2nd review under the 3rd Economic
Adjustment Programme, €8.5bn were disbursed in July, a part of which will be injected in the
market through clearing of arrears by the Greek State to the private sector.
Eurosystem funding as at 31/12/2016 stands at €67bn (2015: €107bn) out of which €23bn is
provided by the ECB and €44bn by the ELA. In June 2017, the ELA funding limit was set at EUR
€43.6bn signaling a reduction of EUR 0.6bn compared to the previous period. The further
reduction of the Eurosystem funding is dependent on the stabilization of customer deposits
levels, which in turn is dependent on the stabilization of the Greek macroeconomic
environment and the expectations regarding future GDP growth and disposable income.
Credicom has zero exposure to the above mentioned mechanisms and its current liquidity
ratios are comfortably above the levels prescribed by banking regulation.
Macroeconomic environment
In 2016, the Greek economy entered a stabilization and recovery cycle, ratified by the better
than expected GDP growth in 2016 against previous, official estimates and following a
contraction of 0.3% in 2015. Additionally, GDP deflator marginally increased in 2016 against an
average annual decline of 1.5% in the 3 year until 2015. Despite the delayed completion of the
2nd review of the 3rd Economic Adjustment Programme, real GDP in Q1 2017 stood at 0.4% on
a yearly basis, while the Economic Sentiment indicator in H1-2017 continues to improve. These
evolutions signal the gradual improvement of the local economic activity, despite the
imposition of capital controls, which is expected to foster private consumption and capital
expenditure, leading to real GDP growth of 2.1% in 2017 and 2.5% in 2018 (European
Commission, Spring Forecasts 2017).
On the fiscal front, the general government balance turned to a surplus of 0.7% of GDP in 2016
and significantly over-performed the primary surplus target of 0.5% of GDP for 2016 according
to the ESM programme definition. The composition of the fiscal adjustment was broadly
balanced in 2016. Revenues were boosted by a robust growth in underlying tax bases but also
by several one-off factors related to clearing tax liabilities from previous years. Primary
expenditure decreased mainly due to exceptionally low military deliveries and a gradual
completion of the motorways concession project.
All of the above led to an upgrade of Greece’s sovereign bond rating by Moody’s in June by
one notch to Caa2 from Caa3 with a Positive Outlook, signaling a potential upgrade of the
country’s sovereign rating should the completion of the third Economic Adjustment
Programme successfully conclude.
Going forward the Greek Government’s targets are the restoration of consumer and business
confidence and the stabilization of the domestic economic environment, in an – inter alia –
challenging geopolitical arena. The risks and uncertainties during this process mainly relate to
the agreed reforms implementation risk and to political factors than can create external shocks.
Credicom’s management team has assessed the potential impact of the above factors in the
implementation of its Business Plan.
Credicom Consumer Finance Bank Notes to the Financial Statements Year ended 2016
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Capital
The Greek banking system has gone through a series of capital increases, Asset Quality Reviews
and Stress Tests that have resulted in a significant improvement in the capital adequacy ratios
since Greece first engaged in Economic Adjustment Programmes in April 2010. The average
Core Tier I ratio for the 4 systemic banks stands at 17% as at 31/12/2016.
Credicom has an exceptionally high CET1 ratio mainly due to low risk levels of its balance sheet
assets (mainly cash and sovereign bond securities).
Based on the above, the Bank’s financial statements have been prepared under the going
concern assumption.
Standards and Interpretations effective for the current financial year
- IAS 16 and IAS 38 (Amendments) “Clarification of Acceptable Methods of Depreciation and
Amortization
This amendment clarifies that the use of revenue-based methods to calculate the depreciation
of an asset is not appropriate and it also clarifies that revenue is generally presumed to be an
inappropriate basis for measuring the consumption of the economic benefits embodied in an
intangible asset.
The adoption of the amendment had no impact on the Bank’s financial statements.
- IAS 27 (Amendment) “Separate financial statements”
This amendment allows entities to use the equity method to account for investments in
subsidiaries, joint ventures and associates in their separate financial statements and clarifies the
definition of separate financial statements.
The adoption of the amendment had no impact on the Bank’s financial statements.
- IAS 1 (Amendments) “Disclosure initiative”
These amendments clarify guidance in IAS 1 on materiality and aggregation, the presentation
of subtotals, the structure of financial statements and the disclosure of accounting policies.
The adoption of the amendment had no impact on the Bank’s financial statements.
- IFRS 10, IFRS 12 and IAS 28 (Amendments) “Investment entities: Applying the consolidation
exception”
These amendments clarify the application of the consolidation exception for investment
entities and their subsidiaries.
The adoption of the amendment had no impact on the Bank’s financial statements.
Annual Improvements to IFRSs 2012
The amendments set out below describe the key changes to certain IFRSs following the
publication of the results of the IASB’s 2010-12 cycle of the annual improvements project.
Credicom Consumer Finance Bank Notes to the Financial Statements Year ended 2016
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- IFRS 2 “Share-based payment”
The amendment clarifies the definition of a ‘vesting condition’ and separately defines
‘performance condition’ and ‘service condition’.
- IFRS 3 “Business combinations”
The amendment clarifies that an obligation to pay contingent consideration which meets the
definition of a financial instrument is classified as a financial liability or as equity, on the basis
of the definitions in IAS 32 “Financial instruments: Presentation”. It also clarifies that all non-
equity contingent consideration, both financial and non-financial, is measured at fair value
through profit or loss.
- IFRS 8 “Operating segments”
The amendment requires disclosure of the judgments made by management in aggregating
operating segments.
- IFRS 13 “Fair value measurement”
The amendment clarifies that the standard does not remove the ability to measure short-term
receivables and payables at invoice amounts in cases where the impact of not discounting is
immaterial.
- IAS 16 “Property, plant and equipment” and IAS 38 “Intangible assets”
Both standards are amended to clarify how the gross carrying amount and the accumulated
depreciation are treated where an entity uses the revaluation model.
- IAS 24 “Related party disclosures”
The standard is amended to include, as a related party, an entity that provides key
management personnel services to the reporting entity or to the parent of the reporting entity.
The adoption of the amendment had no impact on the Bank’s financial statements.
Annual Improvements to IFRSs 2014
The amendments set out below describe the key changes to four IFRSs.
- IFRS 5 “Non-current assets held for sale and discontinued operations”
The amendment clarifies that, when an asset (or disposal group) is reclassified from ‘held for
sale’ to ‘held for distribution’, or vice versa, this does not constitute a change to a plan of sale
or distribution, and does not have to be accounted for as such.
- IFRS 7 “Financial instruments: Disclosures”
The amendment adds specific guidance to help management determine whether the terms of
an arrangement to service a financial asset which has been transferred constitute continuing
involvement and clarifies that the additional disclosure required by the amendments to IFRS 7,
‘Disclosure – Offsetting financial assets and financial liabilities’ is not specifically required for all
interim periods, unless required by IAS 34.
Credicom Consumer Finance Bank Notes to the Financial Statements Year ended 2016
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- IAS 19 “Employee benefits”
The amendment clarifies that, when determining the discount rate for post-employment
benefit obligations, it is the currency that the liabilities are denominated in that is important,
and not the country where they arise.
- IAS 34 “Interim financial reporting”
The amendment clarifies what is meant by the reference in the standard to ‘information
disclosed elsewhere in the interim financial report’.
The adoption of the amendments had no impact on the Bank’s financial statements.
Standards and Interpretations effective for subsequent periods
- IFRS 9 “Financial Instruments” and subsequent amendments to IFRS 9 and IFRS 7 (effective for
annual periods beginning on or after 1 January 2018)
IFRS 9 replaces the guidance in IAS 39 which deals with the classification and measurement of
financial assets and financial liabilities and it also includes an expected credit losses model that
replaces the incurred loss impairment model used today. IFRS 9 establishes a more principles-
based approach to hedge accounting and addresses inconsistencies and weaknesses in the
current model in IAS 39. Below are highlighted the main points of IFRS 9 in the areas most
relevant to the Bank’s current and planned activities.
a. Classification & measurement
IFRS 9 classifies financial assets in the following measurement categories:
Fair value through profit and loss (‘FVTPL’)
Fair value through other comprehensive income
Amortized cost.
Debt instruments: instruments that do not meet the definition of an equity instrument in its
entirety, such as loans, government and corporate bonds and trade receivables.
Classification and subsequent measurement of these instruments depend upon:
The Bank’s business model for managing the asset and
The cash flow characteristics of the asset
Based on these factors, debt instruments are classified in the following 3 categories:
Amortized cost: financial assets held in order to collect contractual cash flows, and their
contractual cash flows represent solely payments of principle and interest (SPPI).
Fair value through other comprehensive income: held within a business model whose
objective is achieved by both collecting contractual cash flows and selling financial assets and
their contractual cash flows represent solely payments of principle and interest.
Fair Value through profit and loss: assets that do not meet the criteria of the previous
categories or designated upon initial recognition at fair value through profit or loss to
eliminate an accounting mismatch.
Credicom Consumer Finance Bank Notes to the Financial Statements Year ended 2016
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Business model: The business model reflects how the Bank manages the assets in order to
generate cash flows, whether the objective is solely to collect contractual cash flows from the
asset, to realize cash flows from the sale of assets, or both. Financial assets that are held for
trading or that are managed on a fair value basis will be measured at FVTPL.
The Bank plans to perform a business model assessment consistently with its operating model
and the information provided to key management personnel. The Bank is currently in a
transformation process with the aim to become a ‘Challenger” bank and in making the above
assessment a number of factors will be considered, e.g. the stated policies and objectives for
each portfolio, how the performance of each portfolio is evaluated and reported, the risks
associated with the performance of the business model and how those risks are managed and
past experience on how the cash flows from those portfolios were collected, information about
past sales activity and expectations about future sales activity and how the Bank’s stated
objective for managing the financial assets is achieved.
SPPI: The Bank will consider whether the contractual terms of the instrument are consistent
with a basic lending arrangement i.e. interest includes only consideration for the time value of
money, credit risk, other basic lending risks and a profit margin. An assessment of whether a
financial asset contains a contractual term that could change the amount or timing of
contractual cash flows in a way that it would not be consistent with the above condition, will
have to take place. Where the contractual terms introduce exposure to risk or volatility that are
inconsistent with a basic lending arrangement, the related financial asset will be measured at
FVTPL.
Equity instruments: Instruments that do meet the definition of an equity instrument in its
entirety.
All equity investments are subsequently measured at fair value through profit and loss, except
where management has elected, upon initial recognition, to irrevocably designate an equity
investment at fair value through other comprehensive income. This would be the case where
the investment would be held for purposes other than generating investment returns. This is a
common case for entities of the banking sector.
b. Impairment
IFRS 9 requires a bank to determine an expected credit loss (ECL) amount on a probability-
weighted basis as the difference between the cash flows that are due to the bank in
accordance with the contractual terms of a financial instrument and the cash flows that the
bank expects to receive. IFRS 9 requires ECLs to reflect an unbiased and probability-weighted
amount that reflects a range of possible outcomes; and reasonable and supportable
information that is available without undue cost or effort about past events, current conditions
and forecasts of future conditions.
The new impairment model will apply to financial assets that are measured at amortized cost
and at fair value through other comprehensive income, including loans and advances to
customers, debt securities and loan commitments issued as well as lease receivables.
Given the size of the existing loan book and its deleveraging rate, the ECL model is not
expected to result to significantly higher loss allowance compared to the existing model under
IAS 39.
The Bank is currently in the process of performing a gap analysis between the existing
impairment loss calculation methodology and the guidance of IFRS 9. This task has been
undertaken by the Finance and Risk Divisions. IFRS 9 will be applied retrospectively by
Credicom Consumer Finance Bank Notes to the Financial Statements Year ended 2016
23
adjusting the Bank’s balance sheet on the date of transition on 1 January 2018. At that point,
management will also decide on the determination of the business model. Furthermore, upon
adoption of IFRS 9, the Bank intends to apply the exemption not to restate comparative
balances for prior periods.
- IFRS 15 “Revenue from Contracts with Customers” (effective for annual periods beginning on or
after 1 January 2018)
IFRS 15 has been issued in May 2014. The objective of the standard is to provide a single,
comprehensive revenue recognition model for all contracts with customers to improve
comparability within industries, across industries, and across capital markets. It contains
principles that an entity will apply to determine the measurement of revenue and timing of
when it is recognised. The underlying principle is that an entity will recognise revenue to depict
the transfer of goods or services to customers at an amount that the entity expects to be
entitled to in exchange for those goods or services.
The Bank is currently investigating the impact of IFRS 15 on its financial statements.
- IFRS 16 “Leases” (effective for annual periods beginning on or after 1 January 2019)
IFRS 16 has been issued in January 2016 and supersedes IAS 17. The objective of the standard
is to ensure the lessees and lessors provide relevant information in a manner that faithfully
represents those transactions. IFRS 16 introduces a single lessee accounting model and
requires a lessee to recognise assets and liabilities for all leases with a term of more than 12
months, unless the underlying asset is of low value. IFRS 16 substantially carries forward the
lessor accounting requirements in IAS 17. Accordingly, a lessor continues to classify its leases
as operating leases or finance leases, and to account for those two types of leases differently.
The Bank is currently investigating the impact of IFRS 16 on its financial statements. The
standard has not yet been endorsed by the EU.
- IAS 12 (Amendments) “Recognition of Deferred Tax Assets for Unrealised Losses” (effective for
annual periods beginning on or after 1 January 2017)
These amendments clarify the accounting for deferred tax assets for unrealised losses on debt
instruments measured at fair value.
The amendments have not yet been endorsed by the EU.
- IAS 7 (Amendments) “Disclosure initiative” (effective for annual periods beginning on or after 1
January 2017)
These amendments require entities to provide disclosures that enable users of financial
statements to evaluate changes in liabilities arising from financing activities.
The amendments have not yet been endorsed by the EU.
- IFRS 2 (Amendments) “Classification and measurement of Shared-based Payment transactions”
(effective for annual periods beginning on or after 1 January 2018)
The amendment clarifies the measurement basis for cash-settled, share-based payments and
the accounting for modifications that change an award from cash-settled to equity-settled. It
also introduces an exception to the principles in IFRS 2 that will require an award to be treated
as if it was wholly equity-settled, where an employer is obliged to withhold an amount for the
Credicom Consumer Finance Bank Notes to the Financial Statements Year ended 2016
24
employee’s tax obligation associated with a share-based payment and pay that amount to the
tax authority.
The amendments have not yet been endorsed by the EU.
- IFRS 4 (Amendments) “Applying IFRS 9 Financial instruments with IFRS 4 Insurance contracts”
(effective for annual periods beginning on or after 1 January 2018)
The amendments introduce two approaches. The amended standard will: a) give all companies
that issue insurance contracts the option to recognise in other comprehensive income, rather
than profit or loss, the volatility that could arise when IFRS 9 is applied before the new
insurance contracts standard is issued; and b) give companies whose activities are
predominantly connected with insurance an optional temporary exemption from applying IFRS
9 until 2021. The entities that defer the application of IFRS 9 will continue to apply the existing
financial instruments standard—IAS 39.
The amendments have not yet been endorsed by the EU.
- IAS 40 (Amendments) “Transfers of Investment Property” (effective for annual periods
beginning on or after 1 January 2018)
The amendments clarified that to transfer to, or from, investment properties there must be a
change in use. To conclude if a property has changed use there should be an assessment of
whether the property meets the definition and the change must be supported by evidence.
The amendments have not yet been endorsed by the EU.
- IFRIC 22 “Foreign currency transactions and advance consideration” (effective for annual
periods beginning on or after 1 January 2018)
The interpretation provides guidance on how to determine the date of the transaction when
applying the standard on foreign currency transactions, IAS 21. The Interpretation applies
where an entity either pays or receives consideration in advance for foreign currency-
denominated contracts.
The interpretation has not yet been endorsed by the EU.
- IFRIC 23 “Uncertainty over income tax treatments” (effective for annual periods beginning on
or after 1 January 2019)
The interpretation explains how to recognise and measure deferred and current income tax
assets and liabilities where there is uncertainty over a tax treatment. IFRIC 23 applies to all
aspects of income tax accounting where there is such uncertainty, including taxable profit or
loss, the tax bases of assets and liabilities, tax losses and credits and tax rates.
The interpretation has not yet been endorsed by the EU.
Credicom Consumer Finance Bank Notes to the Financial Statements Year ended 2016
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- Annual Improvements to IFRSs 2014 (2014 – 2016 Cycle) (effective for annual periods
beginning on or after 1 January 2017). The amendments set out below describe the key
changes to two IFRSs.
The amendments have not yet been endorsed by the EU.
- IFRS 12 “Disclosures of Interests in Other Entities”
The amendment clarified that the disclosures requirement of IFRS 12 are applicable to interest
in entities classified as held for sale except for summarized financial information.
- IAS 28 “Investments in associates and Joint ventures”
The amendments clarified that when venture capital organisations, mutual funds, unit trusts
and similar entities use the election to measure their investments in associates or joint ventures
at fair value through profit or loss (FVTPL), this election should be made separately for each
associate or joint venture at initial recognition.
2.2 Investments in subsidiaries
The Bank consolidates the financial statements of an entity that is controlled by the Bank and
its subsidiaries. Control is achieved when the Bank:
has power over the investee;
is exposed, or has rights, to variable returns from its involvement with the investee; and
has the ability to use its power to affect its returns.
Where an entity is governed by voting rights, the Bank consolidates when it holds, directly or
indirectly, the necessary voting rights to pass resolutions by the governing body.
In all other cases, the assessment of control is more complex and requires judgement of other
factors, including having exposure to variability of returns, power to direct relevant activities
and whether power is held as agent or principal.
The Bank reassesses whether or not it controls an investee if facts and circumstances indicate
that there are changes to one or more of the three elements of control listed above.
When the Company has less than a majority of the voting rights of an investee, it has power
over the investee when the voting rights are sufficient to give it the practical ability to direct
the relevant activities of the investee unilaterally. The Bank considers all relevant facts and
circumstances in assessing whether or not the Bank’s voting rights in an investee are sufficient
to give it power, including:
the size of the Bank’s holding of voting rights relative to the size and dispersion of holdings
of the other vote holders;
potential voting rights held by the Bank, other vote holders or other parties;
rights arising from other contractual arrangements; and
any additional facts and circumstances that indicate that the Bank has, or does not have, the
current ability to direct the relevant activities at the time that decisions need to be made,
including voting patterns at previous shareholders’ meetings.
Credicom Consumer Finance Bank Notes to the Financial Statements Year ended 2016
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Consolidation of a subsidiary begins when the Bank obtains control over the subsidiary and
ceases when the Bank loses control of the subsidiary. Specifically, income and expenses of a
subsidiary acquired or disposed of during the year are included in the consolidated statement
of profit or loss and other comprehensive income from the date the Bank gains control until
the date when the Bank ceases to control the subsidiary.
The Bank has only one investment, 100% of the issued shares of E-Rent, that was designated as
non core activity and sold subsequent to year end.
2.3 Interest income and expense
Interest income and expense on loans and advances at amortised cost, financial investments
debt securities, and interest expense on financial liabilities held at amortised cost, are
calculated using the effective interest method which allocates interest, direct and incremental
fees and costs, over the expected lives of the assets and liabilities and presented as ‘Interest
income’ and ‘Interest expense’ in the income statement
The effective interest method requires the Bank to estimate future cash flows, considering all
contractual terms of the financial instrument, as well as the expected lives of the assets and
liabilities.
Interest on impaired financial assets is recognized using the rate of interest used to discount
the future cash flows for the purpose of measuring the impairment loss.
2.4 Net fee and commission income
Fees and commission charged for services provided or received by the Bank are recognized as
the services are provided (for instance, asset management services). Fee income earned on the
execution of a significant act is recognized as revenue when the transaction is completed (for
instance, investment advisory fees)
2.5 Net trading income
Financial assets and financial liabilities held for trading are stated at fair value, with any gains or
losses arising on remeasurement, recognised in profit or loss. The net gain or loss recognised
in profit or loss incorporates any dividend or interest earned on the financial asset and is
included in the ‘Net trading income' line item.
Dividend income is recognized in profit or loss when the Bank’s right to receive the dividends is
established. This is the ex-dividend date for listed equity securities, and the date when
shareholders approve the dividend for unlisted equity securities.
Net income/(expense) arising from remeasurement of financial instruments designated at fair
value includes all gains and losses from changes in the fair value of financial assets and
liabilities designated at fair value through profit or loss, including derivatives that are managed
in conjunction with those financial assets and liabilities, and liabilities under investment
contracts. Interest income, interest expense and dividend income in respect of those financial
instruments are included in the “Net trading income” line item.
Credicom Consumer Finance Bank Notes to the Financial Statements Year ended 2016
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2.6 Financial instruments
Financial assets and financial liabilities are recognised when the Bank becomes a party to the
contractual provisions of the instruments.
Financial assets and financial liabilities are initially measured at fair value. Fair value is the price
that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. Transaction costs that are directly
attributable to the acquisition or issue of financial assets and financial liabilities (other than
financial assets and financial liabilities at fair value through profit or loss) are added to or
deducted from the fair value of the financial assets or financial liabilities, as appropriate, on
initial recognition. Transaction costs directly attributable to the acquisition of financial assets or
financial liabilities at fair value through profit or loss are recognised immediately in profit or
loss.
i. Financial assets
Financial assets are classified into the following specified categories: financial assets ‘at fair
value through profit or loss' (FVTPL), ‘held-to-maturity' investments, ‘available-for-sale' (AFS)
financial assets 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. All regular
way purchases or sales of financial assets are recognised and derecognised on a trade date
basis. Regular way purchases or sales are purchases or sales of financial assets that require
delivery of assets within the time frame established by regulation or convention in the
marketplace.
Effective interest method
The effective interest method is a method of calculating the amortised cost of a debt
instrument and of allocating interest income over the relevant period. The effective interest
rate is the rate that exactly discounts estimated future cash receipts (including all fees and
points paid or received that form an integral part of the effective interest rate, transaction costs
and other premiums or discounts) through the expected life of the debt instrument, or, where
appropriate, a shorter period, to the net carrying amount on initial recognition.
Income is recognised on an effective interest basis for debt instruments other than those
financial assets classified as at FVTPL.
Financial assets at FVTPL
Financial assets are classified as at FVTPL when the financial asset is (i) contingent
consideration that may be paid by an acquirer as part of a business combination to which IFRS
3 applies, (ii) held for trading, or (iii) it is designated as at FVTPL.
A financial asset is classified as held for trading if:
it has been acquired principally for the purpose of selling it in the near term; or
on initial recognition it is part of a portfolio of identified financial instruments that the Bank
manages together and has a recent actual pattern of short-term profit-taking; or
it is a derivative that is not designated and effective as a hedging instrument.
Financial assets at FVTPL are stated at fair value, with any gains or losses arising on
remeasurement recognised in profit or loss. The net gain or loss recognised in profit or loss
Credicom Consumer Finance Bank Notes to the Financial Statements Year ended 2016
28
incorporates any dividend or interest earned on the financial asset and is included in the ‘other
gains and losses' line item.
Held-to-maturity investments
Held-to-maturity investments are non-derivative financial assets with fixed or determinable
payments and fixed maturity dates that the Bank has the positive intent and ability to hold to
maturity. Subsequent to initial recognition, held-to-maturity investments are measured at
amortised cost using the effective interest method less any impairment.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments
that are not quoted in an active market. Loans and receivables (including trade and other
receivables, bank balances and cash, and others) are measured at amortised cost using the
effective interest method, less any impairment.
Interest income is recognised by applying the effective interest rate, except for short-term
receivables when the effect of discounting is immaterial.
Available-for-sale financial assets (AFS financial assets)
AFS financial assets are non-derivatives that are either designated as AFS or are not classified
as (a) loans and receivables, (b) held-to-maturity investments or (c) financial assets at fair value
through profit or loss.
Listed redeemable notes held by the Bank that are traded in an active market are classified as
AFS and are stated at fair value at the end of each reporting period. The Bank’s investments in
unlisted shares that are not traded in an active market but that are also classified as AFS
financial assets and stated at fair value at the end of each reporting period (because the
directors consider that fair value can be reliably measured). Changes in the carrying amount of
AFS monetary financial assets relating to changes in foreign currency rates, interest income
calculated using the effective interest method and dividends on AFS equity investments are
recognised in profit or loss. Other changes in the carrying amount of available-for-sale financial
assets are recognised in other comprehensive income and accumulated under the heading of
investments revaluation reserve. When the investment is disposed of or is determined to be
impaired, the cumulative gain or loss previously accumulated in the investments revaluation
reserve is reclassified to profit or loss.
Dividends on AFS equity instruments are recognised in profit or loss when the Banks right to
receive the dividends is established.
AFS equity investments that do not have a quoted market price in an active market and whose
fair value cannot be reliably measured and derivatives that are linked to and must be settled by
delivery of such unquoted equity investments are measured at cost less any identified
impairment losses at the end of each reporting period.
Impairment of financial assets
Financial assets, other than those at FVTPL, are assessed for indicators of impairment at the end
of each reporting period. Financial assets are considered to be impaired when there is objective
evidence that, as a result of one or more events that occurred after the initial recognition of the
Credicom Consumer Finance Bank Notes to the Financial Statements Year ended 2016
29
financial asset, the estimated future cash flows of the investment have been affected. Losses
which may arise from future events are not recognized.
For AFS equity investments, a significant or prolonged decline in the fair value of the security
below its cost is considered to be objective evidence of impairment. In assessing whether it is
significant, the decline in fair value is evaluated against the original cost of the asset at initial
recognition. In assessing whether it is prolonged, the decline is evaluated against the
continuous period in which the fair value of the asset has been below its original cost at initial
recognition.
For all other financial assets, objective evidence of impairment could include:
significant financial difficulty of the issuer or counterparty; or
breach of contract, such as a default or delinquency in interest or principal payments; or
becoming probable that the borrower will enter bankruptcy or financial re-organization; or
the disappearance of an active market for that financial asset because of financial
difficulties.
The fair value of financial instruments is generally measured on an individual basis. The factors
considered in determining whether a loan is individually significant for the purposes of
assessing impairment include the size of the loan, the number of loans in the portfolio, the
importance of the individual loan relationship and how this is managed. Loans that are
determined to be individually significant will be individually assessed for impairment, except
when volumes of defaults and losses are sufficient to justify treatment under a collective
methodology. Currently, Credicom has some loans of ‘stock financing’ which are individually
assessed.
For certain categories of financial assets, such as trade receivables, assets are assessed for
impairment on a collective basis even if they were assessed not to be impaired individually.
Impairment is assessed collectively to cover losses which have been incurred but have not yet
been identified on loans subject to individual assessment or for homogeneous groups of loans
that are not considered individually significant, generally retail lending portfolios.
Objective evidence of impairment for a portfolio of receivables could include the Bank's past
experience of collecting payments, an increase in the number of delayed payments, as well as
observable changes in national or local economic conditions that correlate with default on
receivables.
For financial assets carried at amortised cost, the amount of the impairment loss recognised is
the difference between the asset's carrying amount and the present value of estimated future
cash flows, discounted at the financial asset's original effective interest rate.
For financial assets that are carried at cost, the amount of the impairment loss is measured as
the difference between the asset's carrying amount and the present value of the estimated
future cash flows discounted at the current market rate of return for a similar financial asset.
Such impairment loss will not be reversed in subsequent periods.
The carrying amount of the financial asset is reduced by the impairment loss directly for all
financial assets with the exception of trade receivables, where the carrying amount is reduced
through the use of an allowance account. When a trade receivable is considered uncollectible,
it is written off against the allowance account. Subsequent recoveries of amounts previously
Credicom Consumer Finance Bank Notes to the Financial Statements Year ended 2016
30
written off are credited against the allowance account. Changes in the carrying amount of the
allowance account are recognised in profit or loss.
Loans (and the related impairment allowance accounts) are normally written off, either partially
or in full, when there is no realistic prospect of recovery. Where loans are secured, this is
generally after receipt of any proceeds from the realization of security. In circumstances where
the net realizable value of any collateral has been determined and there is no reasonable
expectation of further recovery, write-off may be earlier.
Loans subject to collective impairment assessment whose terms have been renegotiated are no
longer considered past due, but are treated as up-to-date loans for measurement purposes
once a minimum number of payments required has been received. Where collectively assessed
loan portfolios include significant levels of renegotiated loans, these loans are segregated from
other parts of the loan portfolio for the purposes of collective impairment assessment to reflect
their risk profile.
When an AFS financial asset is considered to be impaired, cumulative gains or losses previously
recognised in other comprehensive income are reclassified to profit or loss in the period.
For financial assets measured at amortised cost, if, in a subsequent period, the amount of the
impairment loss decreases and the decrease can be related objectively to an event occurring
after the impairment was recognised, the previously recognised impairment loss is reversed
through profit or loss to the extent that the carrying amount of the investment at the date the
impairment is reversed does not exceed what the amortised cost would have been had the
impairment not been recognised.
In respect of AFS equity securities, impairment losses previously recognised in profit or loss are
not reversed through profit or loss. Any increase in fair value subsequent to an impairment loss
is recognised in other comprehensive income and accumulated under the heading of
investments revaluation reserve. In respect of AFS debt securities, impairment losses are
subsequently reversed through profit or loss if an increase in the fair value of the investment
can be objectively related to an event occurring after the recognition of the impairment loss.
Derecognition of financial assets
The Bank derecognises a financial asset when the contractual rights to the cash flows from the
asset expire, or when it transfers the financial asset and substantially all the risks and rewards of
ownership of the asset to another party. If the Bank neither transfers nor retains substantially
all the risks and rewards of ownership and continues to control the transferred asset, the Bank
recognises its retained interest in the asset and an associated liability for amounts it may have
to pay. If the Bank retains substantially all the risks and rewards of ownership of a transferred
financial asset, the Bank continues to recognise the financial asset and also recognises a
collateralised borrowing for the proceeds received.
On derecognition of a financial asset in its entirety, the difference between the asset’s carrying
amount and the sum of the consideration received and receivable and the cumulative gain or
loss that had been recognised in other comprehensive income and accumulated in equity is
recognised in profit or loss.
Credicom Consumer Finance Bank Notes to the Financial Statements Year ended 2016
31
ii. Financial liabilities and equity instruments
Classification as debt or equity
Debt and equity instruments issued by the Bank are classified as either financial liabilities or as
equity in accordance with the substance of the contractual arrangements and the definitions of
a financial liability and an equity instrument.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity
after deducting all of its liabilities. Equity instruments issued by the Bank are recognised at the
proceeds received, net of direct issue costs.
Repurchase of the Bank's own equity instruments is recognised and deducted directly in equity.
No gain or loss is recognised in profit or loss on the purchase, sale, issue or cancellation of the
Bank's own equity instruments.
Compound instruments
The component parts of compound instruments (convertible notes) issued by the Bank are
classified separately as financial liabilities and equity in accordance with the substance of the
contractual arrangements and the definitions of a financial liability and an equity instrument.
Conversion option that will be settled by the exchange of a fixed amount of cash or another
financial asset for a fixed number of the Bank's own equity instruments is an equity instrument.
Financial liabilities
Financial liabilities are classified as either financial liabilities ‘at FVTPL' or ‘other financial
liabilities'.
Financial liabilities at FVTPL
Financial liabilities are classified as at FVTPL when the financial liability is (i) contingent
consideration that may be paid by an acquirer as part of a business combination to which IFRS
3 applies, (ii) held for trading, or (iii) it is designated as at FVTPL.
A financial liability is classified as held for trading if:
it has been incurred principally for the purpose of repurchasing it in the near term; or
on initial recognition it is part of a portfolio of identified financial instruments that the Bank
manages together and has a recent actual pattern of short-term profit-taking; or
it is a derivative that is not designated and effective as a hedging instrument.
Financial liabilities at FVTPL are stated at fair value, with any gains or losses arising on
remeasurement recognised in profit or loss. The net gain or loss recognised in profit or loss
incorporates any interest paid on the financial liability and is included in the ‘other gains and
losses' line item.
Other financial liabilities
Other financial liabilities (including borrowings and trade and other payables) are subsequently
measured at amortised cost using the effective interest method.
Credicom Consumer Finance Bank Notes to the Financial Statements Year ended 2016
32
Financial guarantee contracts
A financial guarantee contract is a contract that requires the issuer to make specified payments
to reimburse the holder for a loss it incurs because a specified debtor fails to make payments
when due in accordance with the terms of a debt instrument.
Financial guarantee contracts issued by the Bank are initially measured at their fair values and,
if not designated as at FVTPL, are subsequently measured at the higher of:
the amount of the obligation under the contract, as determined in accordance with IAS 37;
and
the amount initially recognised less, where appropriate, cumulative amortisation recognised
in accordance with the revenue recognition policies.
Derecognition of financial liabilities
The Bank derecognises financial liabilities when, and only when, the Bank's obligations are
discharged, cancelled or have expired. The difference between the carrying amount of the
financial liability derecognised and the consideration paid and payable is recognised in profit
or loss.
2.7 Employee compensation and benefits
Retirement benefit costs and termination benefits
A defined contribution plan is a post-employment benefit plan under which the Bank pays
fixed contributions into a separate entity (a Fund) - and has no legal or constructive obligation
to pay further contributions, if the fund does not hold sufficient assets to pay all employee
benefits relating to employee service in the current and prior periods. The Bank makes
contributions to defined contribution plans on a contractual and voluntary basis.
Payments to defined contribution retirement benefit plans are recognised as an expense when
employees have rendered service entitling them to the contributions.
A defined benefit plan is a post-employment benefit plan, other than a defined contribution
plan, which normally defines an amount of benefit that an employee will receive upon
retirement, usually dependent on one or more factors such as age, years of service and
compensation. The Bank currently has no such plans. The Bank doesn’t have any defined
benefit plans.
2.8 Taxation
Income tax expense represents the sum of the tax currently payable and deferred tax.
Current tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from
‘profit before tax’ as reported in the statement of profit or loss and other comprehensive
income because of items of income or expense that are taxable or deductible in other years
and items that are never taxable or deductible. The Bank's current tax is calculated using tax
rates that have been enacted enacted by the end of the reporting period.
Credicom Consumer Finance Bank Notes to the Financial Statements Year ended 2016
33
Deferred tax
Deferred tax is recognised on temporary differences between the carrying amounts of assets
and liabilities in the financial statements and the corresponding tax bases used in the
computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable
temporary differences. Deferred tax assets are generally recognised for all deductible
temporary differences to the extent that it is probable that taxable profits will be available
against which those deductible temporary differences can be utilised.
Deferred tax liabilities are recognised for taxable temporary differences associated with
investments in subsidiaries and associates, and interests in joint ventures, except where the
Bank is able to control the reversal of the temporary difference and it is probable that the
temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from
deductible temporary differences associated with such investments and interests are only
recognised to the extent that it is probable that there will be sufficient taxable profits against
which to utilise the benefits of the temporary differences and they are expected to reverse in
the foreseeable future.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and
adjusted to the extent that it is no longer probable that sufficient taxable profits will be
available to allow all or part of the asset to be recovered.
Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in
the period in which the liability is settled or the asset realised, based on tax rates (and tax laws)
that have been enacted or substantively enacted by the end of the reporting period.
The measurement of deferred tax liabilities and assets reflects the tax consequences that would
follow from the manner in which the Bank expects, at the end of the reporting period, to
recover or settle the carrying amount of its assets and liabilities.
Current and deferred tax for the year
Current and deferred tax are recognised in profit or loss, except when they relate to items that
are recognised in other comprehensive income or directly in equity, in which case, the current
and deferred tax are also recognised in other comprehensive income or directly in equity
respectively.
The Bank provides for potential current tax liabilities that may arise on the basis of the amounts
expected to be paid to the tax authorities.
Income tax comprises current tax and deferred tax. Income tax is recognized in the income
statement except to the extent that it relates to items recognized in other comprehensive
income or directly in equity, in which case the tax is recognized in the same statement as the
related item appears.
Current tax is the tax expected to be payable on the taxable profit for the year and any
adjustment to tax payable in respect of previous years.
Deferred tax is recognized on temporary differences between the carrying amounts of assets
and liabilities in the balance sheet, and the amounts attributed to such assets and liabilities for
tax purposes. Deferred tax is calculated using the tax rates expected to apply in the periods in
which the assets will be realized or the liabilities settled.
Credicom Consumer Finance Bank Notes to the Financial Statements Year ended 2016
34
Current and deferred tax is calculated based on tax rates and laws enacted, or substantively
enacted, by the balance sheet date.
2.9 Provisions, contingent liabilities and guarantees
Provisions
Provisions are recognised when the Bank has a present obligation (legal or constructive) as a
result of a past event, it is probable that the Bank will be required to settle the obligation, and a
reliable estimate can be made of the amount of the obligation.
The amount recognised as a provision is the best estimate of the consideration required to
settle the present obligation at the end of the reporting period, taking into account the risks
and uncertainties surrounding the obligation. Provisions are measured at the present value of
the expenditures expected to be required to settle the obligation using a pre-tax rate that
reflects current market assessments of the time value of money and the risks specific to the
obligation. The increase in the provision due to the passage of time is recognised as interest
expense.
When some or all of the economic benefits required to settle a provision are expected to be
recovered from a third party, a receivable is recognised as an asset if it is virtually certain that
reimbursement will be received and the amount of the receivable can be measured reliably.
Contingent liabilities
Contingent liabilities are recognised when the Bank has a possible obligation that arises from
past events and whose existence will be confirmed only by the occurrence or non-occurrence
of one or more uncertain future events not wholly within the control of the Bank or has a
present obligation that arises from past events but is not recognised because either it is not
probable that an outflow of resources embodying economic benefits will be required to settle
the obligation or the amount of the obligation cannot be measured with sufficient reliability.
Contingent liabilities, which include certain guarantees and letters of credit pledged as
collateral security, and contingent liabilities related to legal proceedings or regulatory matters,
are not recognized in the financial statements but are disclosed unless the probability of an
outflow of resources embodying economic benefits is remote.
2.10 Functional currency
The functional and business currency of the economic environment in which the Bank operates,
is the Euro. Transactions in currencies other than the Euro are recognized at the rates of
exchange prevailing at the dates of the transactions. At the end of each reporting period,
monetary items denominated in foreign currencies are retranslated at the rates prevailing at
that date. Non-monetary items carried at fair value that are denominated in foreign currencies
are retranslated at the rates prevailing at the date when the fair value was determined. Non-
monetary items that are measured in terms of historical cost in a foreign currency are not
retranslated.
Exchange differences on monetary items are recognised in profit or loss in the period in which
they arise except for:
exchange differences on transactions entered into in order to hedge certain foreign
currency risks; and
Credicom Consumer Finance Bank Notes to the Financial Statements Year ended 2016
35
exchange differences on monetary items receivable from or payable to a foreign operation
for which settlement is neither planned nor likely to occur (therefore forming part of the net
investment in the foreign operation), which are recognised initially in other comprehensive
income and reclassified from equity to profit or loss on repayment of the monetary items.
2.11 Intangible assets
Intangible assets with finite useful lives that are acquired separately are carried at cost less
accumulated amortisation and accumulated impairment losses. Amortisation is recognised on a
straight-line basis over their estimated useful lives. The estimated useful life and amortisation
method are reviewed at the end of each reporting period, with the effect of any changes in
estimate being accounted for on a prospective basis. Intangible assets with indefinite useful
lives that are acquired separately are carried at cost less accumulated impairment losses.
An intangible asset is derecognised on disposal, or when no future economic benefits are
expected from use or disposal. Gains or losses arising from derecognition of an intangible
asset, measured as the difference between the net disposal proceeds and the carrying amount
of the asset, are recognised in profit or loss when the asset is derecognised.
2.12 Property, Plant and equipment
Property, plant and equipment held for use in the production or supply of goods or services, or
for administrative purposes are stated at cost, which includes direct and incremental
acquisition costs less accumulated depreciation and any accumulated impairment losses.
Subsequent costs are capitalised if these result in the enhancement to the asset. Freehold land
is not depreciated and is stated at cost less any impairment losses.
Depreciation is recognised so as to write off the cost of assets, other than freehold land and
properties under construction, less their residual values over their estimated useful lives, using
the straight-line method. The estimated useful lives, residual values and depreciation method
are reviewed at the end of each reporting period, with the effect of any changes in estimate
accounted for on a prospective basis.
Assets held under finance leases are depreciated over their expected useful lives on the same
basis as owned assets. However, when there is no reasonable certainty that ownership will be
obtained by the end of the lease term, assets are depreciated over the shorter of the lease term
and their useful lives.
An item of property, plant and equipment is derecognised upon disposal or when no future
economic benefits are expected to arise from the continued use of the asset. Any gain or loss
arising on the disposal or retirement of an item of property, plant and equipment is
determined as the difference between the sales proceeds and the carrying amount of the asset
and is recognised in profit or loss.
Impairment of tangible and intangible assets
At the end of each reporting period, the Bank reviews the carrying amounts of its tangible and
intangible assets to determine whether there is any indication that those assets have suffered
an impairment loss. If any such indication exists, the recoverable amount of the asset is
estimated in order to determine the extent of the impairment loss (if any). Intangible assets
with indefinite useful lives and intangible assets not yet available for use are tested for
Credicom Consumer Finance Bank Notes to the Financial Statements Year ended 2016
36
impairment at least annually, and whenever there is an indication that the asset may be
impaired.
Recoverable amount is the higher of fair value less costs of disposal and value in use. In
assessing value in use, the estimated future cash flows are discounted to their present value
using a pre-tax discount rate that reflects current market assessments of the time value of
money and the risks specific to the asset for which the estimates of future cash flows have not
been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its
carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its
recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the
relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a
revaluation decrease.
When an impairment loss subsequently reverses, the carrying amount of the asset (or a cash-
generating unit) is increased to the revised estimate of its recoverable amount, but so that the
increased carrying amount does not exceed the carrying amount that would have been
determined had no impairment loss been recognised for the asset (or cash-generating unit) in
prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless
the relevant asset is carried at a revalued amount, in which case the reversal of the impairment
loss is treated as a revaluation increase.
2.13 Related parties
Parties are considered to be related if i) an entity that has control over the Bank and entities
controlled, jointly controlled or significantly influenced by this entity, as well as members of its
key management personnel and their close family members, ii) members of key management
personnel of the Bank, their close family members and entities controlled or jointly controlled
by the abovementioned persons, iii) associates and joint ventures and iv) fellow subsidiaries.
Transactions of similar nature are disclosed on an aggregate basis. All banking transactions
entered into with related parties are in the normal course of business and are conducted on an
arm's length basis.
2.14 Cash and cash equivalents
Cash and cash equivalents include cash in hand, unrestricted deposits with central banks, due
from credit institutions and other short-term highly liquid investments with original maturities
of three months or less.
2.15 Share capital
Ordinary shares and preference shares are classified as equity. Incremental costs directly
attributable to the issue of new shares or options are shown in equity as a deduction from the
proceeds, net of tax.
Dividend distribution on shares is recognized as a deduction in the Bank’s equity when
approved by the General Meeting of shareholders. Interim dividends are recognized as a
deduction in the Bank’s equity when approved by the Board of Directors.
Credicom Consumer Finance Bank Notes to the Financial Statements Year ended 2016
37
2.16 Leases
Leases are classified as finance leases whenever the terms of the lease transfer substantially all
the risks and rewards of ownership to the lessee. All other leases are classified as operating
leases
The Bank as lessor
Finance leases
Amounts due from lessees under finance leases are recognised as receivables at the amount of
the Bank's net investment in the leases. Finance lease income is allocated to accounting
periods so as to reflect a constant periodic rate of return on the Bank's net investment
outstanding in respect of the leases.
Operating leases
Rental income from operating leases is recognised on a straight-line basis over the term of the
relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are
added to the carrying amount of the leased asset and recognised on a straight-line basis over
the lease term.
The Bank as lessee
Finance leases
Leases of property, plant and equipment where the Bank has substantially all the risks and
rewards of ownership are classified as finance leases. Finance leases are recognized, at the
inception of the lease term, at the lower of the fair value of the leased asset or the present
value of the minimum lease payments. The corresponding liability to the lessor is included in
the consolidated statement of financial position as a finance lease obligation
Lease payments are apportioned between finance expenses and reduction of the lease
obligation so as to achieve a constant rate of interest on the remaining balance of the liability.
Finance expenses are recognised immediately in profit or loss, unless they are directly
attributable to qualifying assets, in which case they are capitalised. Contingent rentals are
recognised as expenses in the periods in which they are incurred The property, plant and
equipment acquired under finance leases is depreciated over the shorter of the useful life of
the asset or the lease term.
Operating leases:
Operating lease payments are recognised as an expense on a straight-line basis over the lease
term, except where another systematic basis is more representative of the time pattern in
which economic benefits from the leased asset are consumed. Contingent rentals arising under
operating leases are recognised as an expense in the period in which they are incurred.
In the event that lease incentives are received to enter into operating leases, such incentives
are recognised as a liability. The aggregate benefit of incentives is recognised as a reduction of
rental expense on a straight-line basis, except where another systematic basis is more
representative of the time pattern in which economic benefits from the leased asset are
consumed
Credicom Consumer Finance Bank Notes to the Financial Statements Year ended 2016
38
3. Financial Risk Management
The Bank is exposed to financial risks such as credit risk, liquidity risk and market risks, mainly
interest rate risk. The Bank’s risk management strategy aims at dealing effectively with the
existing uncertainty in the domestic and international financial markets and also seeks to
minimize any potential adverse effect on its financial performance. The Bank, as part of the
CASA group, in 2016 followed the risk management guidelines of the group.
The responsibility for the implementation of the risk management framework, besides credit
risk management, lies with central treasury unit, which reports directly to the Finance
Department, and operates according to policies and procedures set and approved by the
Board Of Directors. Credit risk management is performed by the Credit Policy Committee, who
is responsible for the development and overseeing of Bank’s credit policy strategy. Financial
risks are identified and evaluated by the Risk Management Department in cooperation with
other departments facing those risks. The Bank’s management sets the general guidelines for
risk management and precise guidelines for dealing with specific risks such as foreign
exchange risk, interest risk and credit risk.
The Bank’s new management is currently building on the existing infrastructure in order to
develop a ‘3 lines of defense’ model.
3.1 Credit risk
Credit risk, is defined as the potential risk that a Bank’s borrower or counterparty will fail to
meet its obligations. The Bank has developed credit rating models to assess credit risk per
category of loan portfolios. Furthermore, the Bank, based on prior experience loan portfolio
evaluation, is able to establish policies in order to limit credit risk.
Management has a comprehensive
framework to steer the evolution of the
Bank’s corporate governance, risk
management and control functions. The
main objectives of this framework are:
- Effective board/senior management
line of sight into and ability to limit
risk taking
- Alignment of risk and strategic
objectives
- Consistent understanding of key
drivers and levels of material risks
across the Bank
- Risk / returns trade offs analysis and
- Interconnection of business and risk
management tools.
Credicom Consumer Finance Bank Notes to the Financial Statements Year ended 2016
39
To analyze the credit risk, the Bank on a monthly basis monitors the ageing analysis of the total
loan portfolio as well as the collectability of defaulted loans. The Bank has developed an
impairment loss provision model based on historical performance of the loan book and the
actual data of recoveries. The booked impairment allowances cover the expected/estimated
credit losses as calculated by the provisioning model.
In the context of the alignment with the Basel supervisory requirements and the reinforcement
of credit risk management processes the Bank has started to design and develop new models
of credit risk management.
The Board of Directors and the Management of the Bank, is responsible for setting up and
operating appropriate management structures that will improve Bank’s Corporate Governance.
In that context, and for managing credit risk, the Bank has established the Credit Committee.
The Credit Committee is responsible for Corporate and Retail Credit, including purchases of
loan portfolios and other products, as well as for the renewals or amendments in the existing
credit limits in accordance with its approval authority level set by the shareholders, the Board
of Directors and the Management of the Bank.
The main responsibilities of the Credit Committee are:
Approval of new credit requests within its approval authority level
Forming and submitting for approval to senior executives and authorized Committees new
credit requests
Monitoring the credit quality of loan portfolios approved under its authority and taking
corrective actions and decisions for past due loans
Monitoring the credit quality of loan portfolios granted by senior executives and proposing
corrective actions for the exposures that are past due.
Monitoring Bank’s total loan exposure.
Credit Risk Management
All credit transactions require in-depth analysis of the customer’s ability to repay the debt and
the most efficient way of structuring the transaction, particularly in terms of security and
maturity. This analysis must comply with the risk strategy of the business line or entity
concerned and with all limits in force, both individual and aggregate. The final lending decision
is based on an internal rating and is taken by the commitment units or by the Credit
Committees, on the basis of an independent opinion given by a representative of the Risk
Management and Permanent Controls function as part of the authorization system in place.
The Risk Management Committee and its Chairman constitute the Group’s ultimate decision-
making authority.
Each lending decision requires a risk-return analysis. In the case of the Corporate and
investment banking business line this means an ex ante calculation of the profitability of the
transaction. In addition, the principle of an individual risk limit applies to all types of
counterparty, whether corporates, banks, financial institutions, public sector or semi-public
sector entities.
Credit risk is mitigated by the use of collaterals or guarantees, which are intended to provide
full of partial protection against credit risk. For the consumer financing portfolio, the Bank has
retained the license of the car until full repayment of the loan, as a guarantee.
Credicom Consumer Finance Bank Notes to the Financial Statements Year ended 2016
40
The Bank’s Write off committee has established 2 criteria for write offs:
Proactive discount policy (see section on forbearance) and
24 months in litigation status without any payment.
3.1.1 Maximum credit risk exposure
The maximum exposure to credit risk coincides with the balance sheet carrying amounts, since
there are no undrawn facilities and commitments.
3.1.2 Loans and advances to customers by asset quality
Impaired loans include exposures which are in arrears for more than 90 days or earlier in case
there is an objective evidence of impairment and carry a collective impairment allowance.
Furthermore, impaired retail loans under forbearance measures may include loans in arrears
less than 90 days. Accrued interest is included in the balance of each exposure category.
Loans and advances to customers by asset quality
As at 31.12.2016
Non impaired loans and
advances
Impaired loans
and advances
Impairment
loss reserves
amounts in € thousands
Neither past
due nor
impaired
Past due but
not impaired
Collectively
assessed Gross value
Collective
assessment
Carrying
amount
Retail
Consumer Loans 11.342 4.446 6.770 22.558 8.169 14.389
Credit cards 1.040 697 3.583 5.320 1.927 3.393
Other 665 364 1.078 2.107 763 1.344
Wholesale
SME (stockfinancing) 145 57 3.534 3.736 3.736 0
Total 13.191 5.565 14.965 33.721 14.595 19.126
As at 31.12.2015
Non impaired loans and
advances
Impaired loans
and advances
Impairment
loss reserves
amounts in € thousands
Neither past
due nor
impaired
Past due but
not impaired
Collectively
assessed Gross value
Collective
assessment
Carrying
amount
Retail
Consumer Loans 28.889 11.192 14.054 54.135 21.496 32.639
Credit cards 3.638 1.918 7.654 13.210 5.246 7.965
Other 1.354 619 2.012 3.985 1.582 2.402
Wholesale
SME (stock financing) 586 284 4.374 5.244 2.082 3.162
Total 34.467 14.012 28.095 76.575 30.406 46.168
Credicom Consumer Finance Bank Notes to the Financial Statements Year ended 2016
41
3.1.3 Analysis of neither past due nor impaired loans and advances to customers
The geographical concentration of loan exposures is in Greece.
Analysis of neither past due nor impaired loans and advances
to customers As at 31.12.2016
amounts in €
thousands Satisfactory
Total neither past
due nor impaired
Retail
Consumer Loans 11.342 11.342
Credit cards 1.040 1.040
Other 665 665
Wholesale
SME (stock
financing) 145 145
Total 13.191 13.191
As at 31.12.2015
amounts in €
thousands Satisfactory
Total neither past
due nor impaired
Retail
Consumer Loans 28.889 28.889
Credit cards 3.638 3.638
Other 1.354 1.354
Wholesale
SME (stock
financing) 586 586
Total 34.467 34.467
3.1.4 Aging Analysis of past due but not impaired loans and advances to customers by
product line
Aging Analysis of past due but not impaired loans and
advances to customers by product line
As at 31.12.2016
Retail Wholesale
amounts in € thousands Consumer
Loans
Credit
cards
Other retail
loans
SME
(stock
financing)
Total past
due but not
impaired
1-29 days past due
3.064
440
229
34
3.767
30-59 days past due
969
165
93
8
1.235
60-89 days past due
413
92
42
16
563
90-179 days past due
-
-
-
-
-
180-360 days past due
-
-
-
-
-
>360 days past due
-
-
-
-
-
Total
4.446
697
364
57
5.565
Credicom Consumer Finance Bank Notes to the Financial Statements Year ended 2016
42
As at 31.12.2015 Retail Wholesale
amounts in € thousands Consumer
Loans
Credit
cards
Other retail
loans
SME
(stock
financing)
Total past
due but not
impaired
1-29 days past due
7.571
1.190
423
211
9.394
30-59 days past due
2.582
521
124
67
3.294
60-89 days past due
1.039
206
72
6
1.324
90-179 days past due
-
-
-
-
-
180-360 days past due
-
-
-
-
-
>360 days past due
-
-
-
-
-
Total
11.192
1.918
619
284
14.012
3.1.5 Movement in impaired loans and advances to customers by product line
Impaired loans and advances to customers
As at 31.12.2016 Retail Wholesale
amounts in € thousands Consumer
Loans
Credit
cards
Other
retail
loans
SME
(stock
financing)
Total
impaired
Opening balance
14.054
7.654
2.012
4.374
28.095
New impaired loans during the
year
514
364
62
(46)
894
Transfers to non impaired
(229)
(50)
(7)
(12)
(298)
Repayments from impaired
loans
(1.503)
(838)
(112)
(150)
(2.603)
Write offs
(6.066)
(3.547)
(877)
(633)
(11.123)
Gross value of impaired
loans
6.770
3.583
1.078
3.534
14.965
Impairment loss reserves
(2.930)
(1.551)
(467)
(3.534)
(8.481)
Carrying amount of
impaired loans
3.840
2.032
611
0
6.484
Credicom Consumer Finance Bank Notes to the Financial Statements Year ended 2016
43
As at 31.12.2015 Retail Wholesale
amounts in € thousands Consumer
Loans
Credit
cards
Other
retail
loans
SME
(stock
financing)
Total
impaired
Opening balance
27.994
14.759
3.086
5.244
51.083
New impaired loans during the
year
2.785
1.577
432
94
4.887
Transfers to non impaired
(169)
(55)
(12)
(19)
(255)
Repayments from impaired
loans
(4.268)
(2.396)
(219)
(220)
(7.102)
Write offs
(12.289)
(6.231)
(1.274)
(725)
(20.519)
Gross value of impaired
loans
14.054
7.654
2.012
4.374
28.095
Impairment loss reserves
(5.581)
(3.039)
(799)
(1.737)
(11.156)
Carrying amount of
impaired loans
8.474
4.615
1.213
2.637
16.939
3.1.6 Aging Analysis of impaired loans and advances to customers by product line
Aging Analysis of impaired loans and advances to
customers by product line
As at 31.12.2016
Retail Wholesale
amounts in € thousands Consumer
Loans
Credit
cards
Other
retail
loans
SME (stock
financing)
Total
impaired
1-29 days past due
-
-
-
-
-
30-59 days past due
-
-
-
-
-
60-89 days past due
-
-
-
-
-
90-179 days past due
126
37
5
-
168
180-360 days past due
172
49
12
-
233
>360 days past due
3.541
1.947
595
-
6.083
Total 3.840 2.032 611 - 6.484
Credicom Consumer Finance Bank Notes to the Financial Statements Year ended 2016
44
As at 31.12.2015 Retail Wholesale
amounts in € thousands Consumer
Loans
Credit
cards
Other
retail
loans
SME (stock
financing)
Total
impaired
1-29 days past due
-
-
-
-
-
30-59 days past due
-
-
-
-
-
60-89 days past due
-
-
-
-
-
90-179 days past due
587
165
53
1.981
2.786
180-360 days past due
503
168
139
9
819
>360 days past due
7.383
4.282
1.020
648
13.333
Total 8.474 4.615 1.213 2.637 16.939
3.1.7 Repossessed collaterals
During the year the Bank has repossessed 91 cars (2015: 400) while 127 cars have been sold
during 2016 (2015: 398).
3.1.8 Interest income recognized by quality of loans and advances to customers by
product line
Interest income includes the “unwinding” of Loan Loss Allowances i.e. the time effect related to
the discounting of the expected recovered values (2016: -€680 thousand; 2015: €286
thousand).
3.1.9 Forbearance
Responding to the challenges of the current economic environment, the Bank has several
forbearance measures in place align with Banking Code of Conduct to manage its loan
exposure.
Such measures include:
interest-only payments;
grace period;
capitalization of arrears whereby arrears are added to the principal balance;
reduced payment plans;
arrears repayment plan;
loan term extensions;
interest rate reduction;
collateral’s voluntary surrender
partial debt forgiveness and
combination of several of the above measures.
Since December 2015, the Bank has initiated a ‘Proactive Discount Policy’ which is applicable to
loan exposure with payment delay of more than 90 days. This policy has significantly increased
the amount of loan write offs, but has also improved recovery rates. The Bank also monitors
the historical evolution of acceptance of this policy by clients and per portfolio category (i.e.
Buckets 3, 4, litigated and write off). In parallel, the Bank is actively implementing the
framework created by the Bank of Greece and has stratified its portfolio into cooperative and
non-cooperative clients.
Credicom Consumer Finance Bank Notes to the Financial Statements Year ended 2016
45
3.1.9.1 Forborne loans and advances to customers by type of forbearance measure
Forborne loans and advances to customers by type of
forbearance measure
amounts in €
thousands 31.12.2016 31.12.2015
Measures
Repayment plan
-
-
Reduced payments
-
-
Grace period
-
-
Loan term extension
10
52
Capitalisation of arrears
121
49
Partial debt forgiveness
91
247
Combination of the
above
-
-
Total 222 348
3.1.9.2 Credit quality of forborne loans and advances to customers
Credit quality of forborne loans and advances to customers
As at 31.12.2016
amounts in € thousands
Total loans and
advances to
customers
out of which
Forborne % of forborne
Neither past due nor
impaired
13.191
77 0,6%
Past due but not impaired
5.565
265 4,8%
Impaired loans
14.965
49 0,3%
Gross values
33.721
392 1,2%
Impairment loss reserves
(14.595)
(169) 1,2%
Carrying amount
19.126
222 1,2%
Credicom Consumer Finance Bank Notes to the Financial Statements Year ended 2016
46
As at 31.12.2015
amounts in € thousands
Total loans and
advances to
customers
out of which
Forborne % of forborne
Neither past due nor
impaired
34.467
166 0,5%
Past due but not impaired
14.012
325 2,3%
Impaired loans
28.095
86 0,3%
Gross values
76.575
577 0,8%
Impairment loss reserves
(30.406)
(229) 0,8%
Carrying amount
46.168
348 0,8%
3.1.9.3 Reconciliation of forborne loans and advances to customers
Reconciliation of forborne loans and advances to customers
amounts in € thousands 31.12.2016 31.12.2015
Opening balance (carrying
amount)
348
1.369
Forbearance during the
years
392
582
Accrued interest
49
13
Repayments
(373)
(154)
Transfers out of
forbearance status during
the year
(179)
(1.448)
Impairment losses
(14)
(14)
Total
222
348
3.1.9.4 Forborne loans and advances to customers by product line
Forborne loans and advances to customers by product line
amounts in € thousands 31.12.2016 31.12.2015
Retail
Consumer Loans
186
303
Credit cards
11
17
Other
22
20
Wholesale
SME (stock financing)
4
8
Total
222
348
Credicom Consumer Finance Bank Notes to the Financial Statements Year ended 2016
47
3.2 Market Risk
Market risk is the risk that movements in market factors, such as foreign exchange rates,
interest rates, credit spreads, equity prices and commodity prices, will reduce the income or the
value of the Bank’s portfolios.
Interest rate risk
The Bank is mainly exposed to interest rate risk, which is monitored on a regular basis, with the
use of appropriate measures/ratios and the results are communicated on a monthly basis to
the shareholders and Asset Liability Committee (ALCO). The Bank has minimal interest rate risk
which is limited to the repricing of interest bearing assets, since loans have been fully repaid
during 2016 and the largest part of the loan book includes fixed rate loans.
The repricing of assets and liabilities are presented in the table below.
Interest rate risk
December 31st, 2016
amounts in € thousands Up to 1
month
from 1 to
3 months
from 3 to
12 months
Over 12
months
Non
interest
bearing
Total
Cash & cash equivalents
17.540
-
-
-
-
17.540 Loans & advances to
customers
2.558
565
4.299
11.704
-
19.126
Other assets
-
-
-
-
1.177
1.177
Total assets
20.098
565
4.299
11.704
1.177
37.843
Due to customers
591
-
-
-
-
591
Other liabilities
-
-
-
-
1.563
1.563
Total liabilities
591
-
-
-
1.563
2.153
Repricing gap
19.508
565
4.299
11.704
(386)
35.690
December 31st, 2015
Total assets
5.354
981
10.350
60.502
(24.390)
52.797
Total liabilities
577
-
-
11.000
5.002
16.579
Repricing gap
4.777
981
10.350
49.502
-
65.610
Foreign exchange risk
The Bank is not exposed to foreign exchange risk as all its transactions are in Euro.
Price risk
The Bank is not exposed to equity securities price risk as the Bank does not hold any equity
securities at fair value. The Bank is not exposed to commodity price risk either.
Credicom Consumer Finance Bank Notes to the Financial Statements Year ended 2016
48
Liquidity management
Liquidity risk is the risk that the Bank does not have sufficient financial resources to meet its
obligations as they fall due or that it can only do so at an excessive cost. Funding risk is the risk
that funding considered to be sustainable, and therefore used to fund assets, is not sustainable
over time.
Liquidity risk arises from mismatches in the timing of cash flows, whereas funding risk arises
when illiquid asset positions cannot be funded at the expected terms and when required.
The Bank’s liquidity profile is presented in the table below. In the table are presented the cash
outflows resulting from financial liabilities as of the reporting dates. The amounts presented in
the table are the contractual undiscounted cash flows.
Liquidity risk
December 31st, 2016
amounts in €
thousands
Up to 1
month
from 1 to
3 months
months
months
from 3 to
12 months
Over 12
months Total
Due to customers
591
-
-
-
591
Other liabilities
239
344
6
974
1.563
Total liabilities
830
244
6
974
2.153
December 31st, 2015
Due to banks
-
-
-
11.173
11.173
Due to customers
577
-
-
-
577
Other liabilities
230
375
879
534
2.017
Total liabilities
807
375
879
11.707
13.767
As at 31/12/2016 the Bank has cash and cash equivalents of 18mln and during the years 2015
and 2016 the Bank has fully repaid its debt obligations amounting to 81mln and for the 2 year
period. The Bank is currently comfortably above the Bank of Greece Ratio A and B liquidity
thresholds and LCR.
4. Capital management
The regulatory framework regarding minimum capital adequacy requirements is described by
Directive 2013/36/EU (CRD IV) and Regulation EU 575/2013 (CRR).
Regulation EU 575/2013 (Pillar 1) sets the minimum capital requirements, whereas Directive
2013/36/EU provides Competent Authorities, at their discretion and following the Supervisory
Review and Evaluation Process (‘SREP’), the right to set additional capital and liquidity
requirements, based on the Bank’s profile.
Credicom uses the standardized approach for the measurement of its Risk Weighted Assets. As
presented in the below table, the Bank’s capital adequacy ratio is above the minimum
threshold of 8%.
Credicom Consumer Finance Bank Notes to the Financial Statements Year ended 2016
49
5. Critical estimates and judgements
The preparation of the financial statements requires the use of estimates and assumptions
which affect the reported assets and liabilities, the recognition of contingent liabilities, as well
as the recognition of income and expenses in the financial statements, as well as items
recognized in the financial statements of the next financial year, including relevant disclosures.
The areas below involve a high degree of uncertainty and have a material impact on the
financial statements:
5.1 Impairment losses on loans and advances to customers
Loan impairment allowances represent management’s best estimate of losses incurred in the
loan portfolios at the balance sheet date. Management is required to exercise judgment in
making assumptions and estimates when calculating loan impairment allowances on both
individually and collectively assessed loans and advances.
Collective impairment allowances are subject to estimation uncertainty, in part because it is not
practicable to identify losses on an individual loan basis due to the large number of individually
insignificant loans in the portfolio. The estimation methods include the use of statistical
analyses of historical information, supplemented with significant management judgement, to
assess whether current economic and credit conditions are such that the actual level of
incurred losses is likely to be greater or less than historical experience. Management has
performed ‘look back’ procedures to calibrate the existing roll rate methodology.
Risk factors include unemployment rates and bankruptcy trends, account management policies
and practices, changes in laws and regulations, and other influences on customer payment
patterns. The methodology and the assumptions used in calculating impairment losses are
reviewed regularly in the light of differences between loss estimates and actual loss experience.
In this context, management has changed its estimates regarding the recoveries time window
used for the calculation of Loss Given Defaults (LGDs), from 36 months to 12 months and
based on monthly weighted average basis. The rationale for this change is:
a. The calibration of the model parameters to be compatible to the results of ‘look back’
procedures performed for 31/12/2016,
b. The continuing decrease of sensitive loan book outstandings,
c. The positive effect of the Proactive Discount Policy in the recovery rates
d. The stabilization of the economy and the need to use representative recoveries/LGDs,
which do not include the turbulent period of 2015, and
e. The removal of political/macro risk parameter from the loan loss provision
methodology, initially factored in the model during Q4 of 2014.
The effect of this change is presented in the below table:
Capital management
amounts in € thousands
Year
ended
31.12.2016
31.12.2016
Year
ended
31.12.2015
Risk Weighted Assets
40.765
68.922
Tier 1 Capital
37.376
35.699
Tier I and Tier II ratio 91,7% 51,8%
Credicom Consumer Finance Bank Notes to the Financial Statements Year ended 2016
50
Effect of changes in accounting estimates
New Previous
amounts in € thousands
Year
ended
31.12.2016
Year
ended
31.12.2016
Reversals of impairment and impairment
losses on loans and advances to customers
4.062
816
Loan loss reserves (Balance Sheet)
14.595
17.843
Gross loans
33.721
33.721
Gross loans coverage ratio (cash
coverage) 42,5% 50,3%
Loans in arrears for over 90dpd: coverage
by Loan Loss Reserves 90,6% 103,4%
A 5% decrease in the overall recovery rates would increase the loan loss reserves for loans and
advances to customers by 1.7mln.
5.2 Tax
Income tax comprises current tax and deferred tax. Income tax is recognized in the income
statement except to the extent that it relates to items recognized in other comprehensive
income or directly in equity, in which case the tax is recognized in the same statement as the
related item appears. Current tax is the tax expected to be payable on the taxable profit for the
year and any adjustment to tax payable in respect of previous years. Credicom provides for
potential current tax liabilities that may arise on the basis of the amounts expected to be paid
to the tax authorities.
Deferred tax is recognized on temporary differences between the carrying amounts of assets
and liabilities in the balance sheet, and the amounts attributed to such assets and liabilities for
tax purposes. Deferred tax is calculated using the tax rates expected to apply in the periods in
which the assets will be realized or the liabilities settled. Current and deferred tax is calculated
based on tax rates and laws enacted, or substantively enacted, by the balance sheet date.
The recognition of a deferred tax asset relies on an assessment of the probability and
sufficiency of future taxable profits, future reversals of existing taxable temporary differences
and ongoing tax planning strategies. In the absence of a history of taxable profits, the most
significant judgements relate to expected future profitability.
In this context and considering management’s assessment of the going concern assumption,
the approved by the competent authorities Business Plan has been used in order to estimate
future taxable profits.
The approved Business Plan includes the following revenue streams:
o Lending activities (wholesale, retail)
o Investment advisory services and
o NPLs servicing fees.
According to the Business Plan, the Bank will change its operating model to a “Challenger”
Bank, based on the successful examples of other European countries. The Bank’s
transformation process is expected to mature by 2020-2021.
Credicom Consumer Finance Bank Notes to the Financial Statements Year ended 2016
51
Management has followed a prudent approach based on which deferred tax assets have been
recognized only on temporary differences that relate to loan loss reserves and accounting write
offs, which under the current legislation expire within 20 years. No deferred tax assets have
been calculated on temporary differences and tax losses that expire within the next 5 years.
Management will revisit this approach as the business plan is implemented.
Based on management's assessment as at 31 December 2016 the recognition of deferred tax
assets was restricted to Euros 12m at that date which represents future deductible temporary
differences relating to loan impairment losses as more fully described in Note 12.
5.3 Provisions
Provisions are recognized when it is probable that an outflow of economic benefits will be
required to settle a present legal or constructive obligation that has arisen as a result of past
events and for which a reliable estimate can be made.
Judgement is involved in determining whether a present obligation exists and in estimating the
probability, timing and amount of any outflows. Professional expert advice is taken on the
assessment of litigation, property (including onerous contracts) and similar obligations.
Provisions for legal proceedings and regulatory matters typically require a higher degree of
judgement than other types of provisions. When matters are at an early stage, accounting
judgements can be difficult because of the high degree of uncertainty associated with
determining whether a present obligation exists, and estimating the probability and amount of
any outflows that may arise.
As a result, it is often not practicable to quantify a range of possible outcomes for individual
matters. It is also not practicable to meaningfully quantify ranges of potential outcomes in
aggregate for these types of provisions because of the diverse nature and circumstances of
such matters and the wide range of uncertainties involved.
6. Interest income and interest expense
The composition of net interest income is presented below:
Interest Income and expense
amounts in € thousands Period
1.1.2016 -
31.12.2016
Period
1.1.2015 -
31.12.2015 Interest income
Interbank placements
6
13
Bond loan interest income
2
8
Loans and advances to
customers
1.670
5.648
Total
1.678
5.669
Credicom Consumer Finance Bank Notes to the Financial Statements Year ended 2016
52
Interest Expense
Interbank placements
(253)
(1.380)
Time deposits
(16)
(13)
Other interest
(84)
(108)
Total
(353)
(1.501)
Net interest income
1.325
4.168
The reduction in interest income from Loans and advances to customers, is in line with the
decrease of the loan book during 2016 and the lower interest expense relates to the repayment
of the intragroup funding from Credit Agricole.
7. Fee and commission income
The Bank earns fees from the administration of loans.
Commission income
amounts in € thousands Period 1.1.2016
- 31.12.2016
Period
1.1.2015 -
31.12.2015
Subscriptions and cash withdrawals via credit
cards
-
-
Lending related fees and commissions
305
1.367
Insurance fees and commissions
-
-
Total fee income
305
1.367
The reduction of net fee income is due to the significant decrease of the loan book during the
period.
8. Dividend income
Dividend income
amounts in € thousands Period
1.1.2016 -
31.12.2016
Period
1.1.2015 -
31.12.2015
Income from shares and other variable-
yield securities
-
107
Total dividend income
-
107
The amount recorded in period 1.1.2015 – 31.12.2015 relates to dividend received from the
former subsidiary Credicom Insurance Brokers SA, upon the completion of its liquidation.
Credicom Consumer Finance Bank Notes to the Financial Statements Year ended 2016
53
9. Other operating income
The analysis of other income is as follows:
Other operating income
amounts in € thousands Period 1.1.2016
- 31.12.2016
Period 1.1.2015
- 31.12.2015
Rental income
29
39
Other income
1.809
2.812
Total net other income
1.838
2.851
Other Income includes mainly cash recoveries of the written-off portfolio amounting €1,6mln in
2016.
10. Personnel cost
The analysis of personnel cost is as follows:
Personnel costs
amounts in € thousands Period 1.1.2016
- 31.12.2016
Period 1.1.2015
- 31.12.2015
Wages, salaries and
performance
remuneration
3.102 3.121
Social security costs 550 609
Termination benefits (205) (906)
Other benefits 201 181
Total personnel costs 3.648 3.005
The number of personnel employed as at 31 December 2016 was 55 (2015: 64).
The positive effect on the Termination benefits relates to the movement of the Voluntary Exit
Plan provision (see note 20).
11. Other Operating Expenses
The analysis of operating expenses is as follows:
Credicom Consumer Finance Bank Notes to the Financial Statements Year ended 2016
54
Other Operating Expenses
amounts in € thousands Period 1.1.2016
- 31.12.2016
Period 1.1.2015
- 31.12.2015
Third parties fees and
expenses
1.743
3.448
Service Providers' fees
1.140
1.297
Fees and taxes
346
474
Other Expenses
527
618
Total
3.756
5.837
The evolution of operating expenses is in line with the decline in the business activity. During
2016, there have been no advertising and other promotion expenses, which have to be
disclosed under the provisions of art.4, L.4374/2016.
12. Income tax and deferred tax
In accordance with the provisions of the enacted Greek Tax Law (Law 4172/2013), as amended
by Law 4334/2015 (Gazette Α΄80/16.07.2015) and being in effect today, the income tax rate for
Greek legal entities increased from 26% to 29% from the tax year 2015 and thereon. A tax rate
of 10% is imposed on dividend income acquired until 31.12.2016, whereas from 1.1.2017 and
thereon, the tax rate increases to 15% after the voting of Law 4389/2016.
Income tax
amounts in € thousands 31.12.2016 31.12.2015
Current tax
-
-
Deferred tax
12.007
-
Total income tax
12.007
-
The tax obligation for the year ended 31/12/2016 is zero. The reconciliation of the income tax
expense is presented below:
amounts in € thousands 31.12.2016 31.12.2015
Loss before tax 2.425 2.237
Tax at the applicable tax rate 29% 703 649
Tax effect of the following items:
- non deductible expenses (471) (17)
- unrelieved tax losses for the year (987) (488)
- unrecognised net deductible/taxable temporary differences 755 (211)
- deferred tax assets on previously unrecognised deductible
temporary differences 12.007 -
- change in tax rate - 67
Total relief / (charge) 12.007 0
Credicom Consumer Finance Bank Notes to the Financial Statements Year ended 2016
55
Deferred income taxes are calculated on all deductible temporary differences under the liability
method as well as for unused tax losses at the rate in effect at the time the reversal is expected
to take place.
As explained in section “Critical Estimates and judgments” the Bank has recognized deferred
tax assets of €12mln as at 31st December 2016 on the basis that the Bank is a going concern,
based on the approved by the competent authorities Business Plan.
Deferred tax assets comprise:
amounts in € thousands 31.12.2016 31.12.2015
Total deferred tax assets
31.638
18.471
less: deferred tax assets not recognised
(19.631)
(18.471)
Deferred tax asset recognised
12.007
-
The deferred tax asset recognised relates to the following temporary differences:
amounts in € thousands | DTA / (DTL) 31.12.2016 31.12.2015
Loan impairment and accounting write
offs
12.007
-
According to L.4172/2013 Art.27 par. 3, the write off of debtors’ debts resulting from a final
write off or a debt settlement agreement of debtors’ loans or credits, is tax deductible in 20
annual and equal installments, starting from the tax year in which the final write-off of the debt
or the transfer of the loan or credit was performed, respectively. The total amount of the debit
difference cannot exceed the amount of the aggregated provisions of credit risk, which have
been formed for accounting purposes by June 30, 2015, which amounted to €41.8mln.
Under the provisions of Law 4456/2017, Art.43 par.1, the Bank is eligible to amortize over the
20-year period, the losses incurred in cases where they relate to transfers or write-offs of debts
either due to a court or an out of court settlement or contractual arrangement of the loan
existing in the balance sheet as of June 30, 2015. The tax benefit of the 20-year amortization
period is granted only to realized losses.
The total eligible amount of credit risk provisions for the Bank amounts to €41.4 mln as at
31/12/2016 that give rise to deferred tax asset on loan impairment and accounting write offs of
€12mln.
The Bank has not recognized deferred tax assets of 19.6mln on other temporary differences
and unused tax losses of 68mln, which expire within the next 5 years.
Audit Tax certificate
For the fiscal years 2011, 2012 and 2013 the Bank and all Greek Societe Anonyme Companies
were subject to compulsory tax audit in accordance with L. 2238/1994 art.82, which was
conducted by the same statutory auditor that issues the audit opinion on the statutory financial
statements. Credicom has been issued with an unqualified "Tax Compliance Report" for each
year respectively. This report is submitted to the Ministry of Finance. In case of a non-qualified
Tax Compliance Report, a tax audit by the regulatory authorities is not initially performed, but
only if certain criteria defined by the Ministry of Finance, are met.
Credicom Consumer Finance Bank Notes to the Financial Statements Year ended 2016
56
For fiscal years 2014 and 2015, all Greek Societe Anonyme and Limited Liability Companies that
were required to prepare audited statutory financial statements were obliged to obtain
additionally an “Annual Tax Certificate” as provided by article 65A of Law 4174/2013. Credicom
has been issued with an unqualified tax certificate for both years.
Regarding 2016, L.4174/2013 was amended after the voting of Law 4410/2016, which stated
that from 2016 and thereon the issue of the “Annual Tax Certificate” is optional. The Tax
Administration retains its right to proceed with a tax audit, within the applicable statute of
limitations in accordance with article 36 of Law 4174/2013. Credicom engaged the tax auditors
to audit the fiscal year 2016 and the relevant unqualified tax audit certificate was issued on July
26, 2017.
13. Loans and advances to customers
Loans and advances to customers include mainly consumer financing and wholesale lending.
Since 2013, the Bank has been in a Stop Any New Financing Activity process, following the
previous shareholders’ strategy to disinvest from Greece. This strategy has led to a significant
decrease in the loan book outstanding of approximately 88% for the period 2013-2016, out of
which an amount of 134mln relates to write offs and an amount of approximately 113mln
relates to repayments.
The analyses of the loan portfolios and the respective impairment loan loss reserves are
presented below:
Loans & advances to customers
amounts in € thousands 31.12.2016 31.12.2015
Retail lending
Credit cards 5.316 13.198
Consumer loans 22.498 53.988
Other retail loans 2.103 3.976
Total retail
29.917 71.162
Wholesale
Stock financing 3.735 5.241
Bond loans - 800
Total wholesale 3.735 6.041
Accrued interest 69 173
Gross Loans & advances to customers 33.721 77.376
Less: Impairment loan loss reserves (14.595) (30.406)
Carrying amount of Loans and advances to customers 19.126 46.969
Floating rate loans 4.803 11.485
Fixed rate loans 28.918 65.890
Credicom Consumer Finance Bank Notes to the Financial Statements Year ended 2016
57
The fair value of the loans outstanding does not vary significantly to their book values due to
the fact that the remaining loans outstanding relate to recent vintages with relatively high
credit spreads.
The movement of the impairment loss reserves per product line is presented below.
Impairment allowance for loans and
advances to customers
amounts in € thousands 31.12.2016 31.12.2015
Retail and wholesale
Balance at 1 January
30.406
51.177
Reversal of impairment loss for the year
(4.062)
1.234
Amounts written off
(11.749)
(22.004)
Balance at 31 December
14.595
30.406
Retail
Balance at 1 January
28.324
48.729
Impairment loss for the year
(3.449)
739
Amounts written off
(10.668)
(21.144)
Balance at 31 December
14.206
28.324
Wholesale
Balance at 1 January
2.082
2.448
Impairment loss for the year
(613)
495
Amounts written off
(1.081)
(860)
Balance at 31 December
388
2.082
The reversal of the impairment loss for 2016 amounting to 4.1mln reflects mainly the retail
portfolio (3.4mln) in line with the better macro environment and the improved recoveries
compared to 2015 (see note 5.1).
14. Cash and cash equivalents
The Bank’s cash and cash equivalents comprise of cash in hand and cash in central banks, as
well as deposits in other credit institutions.
Credicom Consumer Finance Bank Notes to the Financial Statements Year ended 2016
58
Cash and balances with central banks
amounts in € thousands 31.12.2016 31.12.2015
Cash in hand
24
18
Balances with the central bank
7.488
1
Total cash and balances with central banks
7.512
19
Due from credit institutions
amounts in € thousands 31.12.2016 31.12.2015
Placements and other receivables from domestic
banks
9.936
694 Placements and other receivables from banks
abroad
92
165
Total due from credit institutions
10.028
860
During Q1 2016, the Bank has fully repaid its debt obligation to the Credit Agricole group and
since then, excess liquidity from the loan cash receipts have been placed mainly in Alpha Bank,
a Greek systemic bank, and the Central Bank of Greece.
For the purpose of the cash flow statement, cash and cash equivalents comprise the following
balances with less than 90 days maturity from the date of their acquisition.
Cash and cash equivalents
amounts in € thousands 31.12.2016 31.12.2015
Cash and balances with central banks
7.512
19
Due from credit institutions
10.028
861
Total cash and cash equivalents
17.540
880
15. Investment in E-Rent
As at 31/12/2016 the Bank had only one investment, 100% of the issued shares of E-Rent.
Investment in E-Rent
Name
Country of
Recommendation
% Ownership
31.12.16
Balance
31.12.2016
in €
% Ownership
31.12.15
Balance
31.12.2015
in €
E-Rent
(ΕΜΠΟΡΙΚΗ RENT
ΜΑΚΡΟΧΡΟΝΙΕΣ
ΜΙΣΘΩΣΕΙΣ
ΟΧΗΜΑΤΩΝ Α.Ε.)
GREECE 100,0% 1 100,0% 2.068.250
Total carrying
amount
1
2.068.250
Credicom Consumer Finance Bank Notes to the Financial Statements Year ended 2016
59
Subsidiary companies
Affiliates
amounts in €
thousands 31.12.2016 31.12.2015
31.12.2016 31.12.2015
Balance at the beginning
of the period
2.068
2.128
-
-
Investments Additions - -
- -
Impairement of
Investments
(2.068)
(60)
-
-
Balance at period end 0 2.068
- -
Following the acquisition of Credicom by AMC and the designation of E-Rent as non core
activity, management has decided to disinvest from E-Rent. On 23/3/2017 a SPA was signed
between the Bank and the unrelated entity ‘Atithasos Shipping and Trading S.A.” whereby E-
Rent was sold for €1. This transaction has been considered as an impairment indication for the
31/12/2016 carrying amount of the investment in the Bank’s books and therefore, an adjusting
post balance sheet event. As at 31/12/2016 the Bank’s investment in E-Rent has been written
down to the value of the consideration received and the impairment loss has been debited to
the profit and loss item “Other impairment losses and provisions”.
16. Property, Plant & equipment and intangible assets
As at 31.12.2016, property, plant & equipment and intangible assets are as follows.
Property, plant & equipment and
intangible assets
Intangible
Assets Tangible Assets
amounts in € thousands Software
Properties Plant &
Equipement Total
Cost 31.12.2015 8.697
721
3.378 4.098
Accumulated depreciation 31.12.2015
(8.178)
(268)
(3.080)
(3.348)
Net Book Value 31.12.2015 519
452
298
750
Cost :
Balance at 1.1.2016 8.697
721
3.378 4.098
Additions -
-
-
-
Disposals and write-offs -
-
(44)
(44)
Balance at 31.12.2016 8.697
721
3.334
4.054
Credicom Consumer Finance Bank Notes to the Financial Statements Year ended 2016
60
Accumulated depreciation:
Balance at 1.1.2016
(8.178)
(268)
(3.080)
(3.348)
Charge for the year
(326)
(29)
(128)
(157)
Disposals and write-offs -
-
44 44
Balance at 31.12.2016
(8.504)
(297)
(3.163)
(3.461)
Net Book Value 31.12.2016 193
423
170
594
Depreciation expense for 2016 amounts to 0.5mln, out of which 0.3mln relate to intangible
assets and 0.2mln relates to property, plant & equipment. Depreciation expense is included in
line item “Operating Expenses” of the income statement.
17. Other assets
Other assets include the following items.
Other assets
amounts in € thousands 31.12.2016 31.12.2015
Prepaid expenses and accrued income
163
141
Other receivables and advances
1.014
1.470
Total Other assets
1.177
1.611
The line items “Other receivables and advances” involve transactions that take place during the
normal course of business and which are settled within a short time period.
18. Due to customers
The line item “Blocked deposits, guarantee deposits and other accounts (ΤΕΚΕ)“ refers to
mandatory float rating deposits to Hellenic Deposits and Investment Guarantee Fund ( TEKE ),
in accordance with the Bank of Greece ‘s regulatory framework.
Due to customers
amounts in € thousands 31.12.2016 31.12.2015
Savings and current accounts (ΤΕΚΕ)
591
577
Total
591
577
Credicom Consumer Finance Bank Notes to the Financial Statements Year ended 2016
61
19. Due to Banks
The analysis of line item “Due to banks” is as follows.
Due to banks
amounts in € thousands 31.12.2016 31.12.2015
Borrowings from international
financial and other institutions
-
11.000
Accrued interest due to credit
institutions
-
173
Total
-
11.173
During Q1 2016, the Bank proceeded to full repayment of interbank loans originally obtained
from CASA and CACF.
20. Voluntary Exit Plan provision
The Bank has not calculated personnel retirement obligations based on an actuarial report,
since a voluntary exit plan provision has been calculated for all the personnel up to 21 February
2017.
Voluntary exit plan
provision
amounts in € thousands 31.12.2016 31.12.2015
Balance at 1 January
2.811
3.608
Cost for the current year
250
(378)
Usage of provisions
(455)
(528)
Remeasurements
84
108
Balance at 31 December
2.690
2.811
21. Other liabilities
The analysis of accruals and other liabilities is as follows.
Other liabilities
amounts in € thousands 31.12.2016 31.12.2015
Deferred income and accrued expenses
746
665
Suppliers
244
375
Tax payables
134
99
Standard legal personnel retirement indemnity
obligations
105
121
Other liabilities
333
757
Total other liabilities
1.563
2.017
Credicom Consumer Finance Bank Notes to the Financial Statements Year ended 2016
62
22. Share capital and share premium
- On 18.05.2007, the Extraordinary General Meeting of Shareholders decided an increase of
the share capital of € 1.500.000. A total of 500,000 new registered shares of nominal value
€ 3 and a disposal price of € 30 each were issued. The total amount paid amounted to €
15,000,000. The total share capital of the Bank after the aforementioned increase
amounted to € 38.700.000.
- On 23.07.2007, the Extraordinary General Meeting of Shareholders decided an increase of
the share capital of € 1.800.000. A total of 600,000 new registered shares of nominal value
€ 3 and a disposal price of € 30 each were issued. The total amount paid amounted to €
18,000,000. The total share capital of the Bank after the aforementioned increase
amounted to € 40.500.000.
- On 26.11.2007, the Extraordinary General Meeting of Shareholders decided an increase of
the share capital of € 900.000. A total of 500,000 new registered shares of nominal value €
3 and a disposal price of € 30 each were issued. The total amount paid amounted to €
9,000,000. The total share capital of the Bank after the aforementioned increase amounted
to € 41.400.000.
- On 23.05.2008, the Extraordinary General Meeting of Shareholders decided an increase of
the share capital of € 1.800.000. A total of 600,000 new registered shares of nominal value
€ 3 and a disposal price of € 30 each were issued. The total amount paid amounted to €
18,000,000. The total share capital of the Bank after the aforementioned increase
amounted to € 43.200.000.
- On 17.02.2010, the Extraordinary General Meeting of Shareholders decided an increase of
the share capital of € 5.499.000. A total of 1.833.333 new registered shares of nominal
value € 3 and a disposal price of € 30 each were issued. The total amount paid amounted
to € 54.999.990. The total share capital of the Bank after the aforementioned increase
amounted to € 48.699.999.
The composition of share capital is as follows.
Share capital
31.12.2016 31.12.2015
Number of shares
16,233,333
16,233,333
Nominal value per share
3
3
Share capital in €
48.699.999
48.699.999
23. Related party transactions
Related parties as at 31/12/2016 include CACF and CASA, which mainly provided funding as
mentioned in note “Due to Banks”.
Credicom Consumer Finance Bank Notes to the Financial Statements Year ended 2016
63
Related Party Transactions
Interest expense attributable to
shareholders and other related parties
amounts in € thousands Year ended
31.12.2016
Year ended
31.12.2015
CACF
158
1.170
CASA
-
-
Total
158
1.170
a) Transactions with key management personnel
Short term benefits for key management personnel as at 31.12.2016 amount to €0.8mln (2015:
0.6mln).
b) Transactions & balances with subsidiaries and associate companies
Subsidiaries
amounts in € thousands 31.12.2016 31.12.2015
Assets
Loans and advances to customers
-
801
Other assets
102
120
Total
102
921
Liabilities
Other liabilities
19
47
Total
19
47
Income
Net interest income
2
8
Dividend income
-
107
Property rentals
29
31
Support services
82
92
Total 113 238
Credicom Consumer Finance Bank Notes to the Financial Statements Year ended 2016
64
Expenses
Other operating expenses
70
90
Total 70 90
Associate Companies
amounts in € thousands 31.12.2016 31.12.2015
Assets
Fee Receivable 0 0
Other assets 36 0
Total 36 0
Liabilities
Other liabilities 0 0
Total 0 0
Income
Management fees 0 0
Total 0 0
Expenses
Management fees - CACF 48 118
Software Licenses - GECICA 53 62
Total 101 180
24. Contingent liabilities and other commitments
There are some legal proceedings against the Bank in the normal course of business. Against
these exposures, the Bank has booked provisions of 0.2mln as at 31st December 2016. The final
outcome of these legal proceedings is not expected to have a significant impact on the Bank’s
financial position.
Regarding other commitments, as at 31st December 2016 the Bank has booked provisions of
0.1mln.
25. Subsequent events
Management has identified the following subsequent events:
1. As at 17/2/2017 and following the approval by the European Competent Authorities
(ECB/SSM and Bank of Greece), the Bank has been fully acquired by Atlas Merchant
Capital LLC through its affiliate AMC Oak Sarl, a Luxembourg entity. The ultimate
purchaser is Atlas Merchant Capital Fund LP (‘AMC’) which is an investment fund
specializing in the financial services industry, particularly in areas of growth and
opportunity with a focus on investment management.
2. On 23/3/2017 the subsidiary E-Rent was sold for Euro 1 to the unrelated entity ”Atithasos
Shipping and Trading S.A.”. This has been evaluated as an adjusting post balance sheet
Credicom Consumer Finance Bank Notes to the Financial Statements Year ended 2016
65
event and the investment in E-Rent as at 31/12/2016 has been written down to the value
of the consideration received.
3. On 23/6/2017, Moody's upgraded Greece's sovereign bond rating to Caa2 and changed
the outlook to positive. The drivers were the successful conclusion of the 2nd review under
the 3rd Program, the improved fiscal prospects for the coming years and reversal in the
debt trend and the tentative signs of a stabilization of the economy.
4. On 25/7/2017 the Hellenic Republic sold €3bn worth of its new five-year bond, at a
coupon of 4.625%, lower than 4.95% which was the coupon of the last bond sale in 2014.
5. During May and June 2017, the Bank has proceeded with purchases of Greek Treasury Bills
of nominal value of 15mln.
6. On 18 August 2017, Fitch Ratings upgraded Greece's long-term foreign-currency issuer
default ratings to 'B-' from 'CCC', citing reduced political risk and sustained GDP growth.
London, 5 September 2017
Chairman of the Board Chief Executive Officer Chief Operating Officer Chief Accountant
Matthew Hansen Anastasia Sakellariou Anastasios Karkazis Panagiotis Tsichlis
Credicom Consumer Finance Bank Notes to the Financial Statements Year ended 2016
66
Independent auditors’ report
Credicom Consumer Finance Bank Notes to the Financial Statements Year ended 2016
67
[Translation from the original text in Greek]
Independent Auditors’ Report
To the Shareholders of “Credicom Consumer Finance Bank SA”
Report on the Audit of the Financial Statements
We have audited the accompanying financial statements of Credicom Consumer Finance Bank SA which comprise the statement of financial position as of 31 December 2016, and the statement of comprehensive income, statement of changes in equity and cash flow statement for the year then ended and a summary of significant accounting policies and other explanatory information.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards, as adopted by the European Union, and for such internal control as management determines is necessary to enable the preparation of separate and consolidated financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing which have been transposed into Greek Law (GG/B’/2848/23.10.2012). Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our audit opinion.
Credicom Consumer Finance Bank Notes to the Financial Statements Year ended 2016
68
Opinion
In our opinion, the financial statements present fairly, in all material respects, the financial position of Credicom Consumer Finance Bank SA as of December 31, 2016, and its financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards, as adopted by the European Union.
Report on Other Legal and Regulatory Requirements
Taking into consideration, that management is responsible for the preparation of the Board of Directors’ report and Corporate Governance Statement that is included in this report according to provisions of paragraph 5 article 2 of Law 4336/2015 (part B), we note the following: a) In our opinion, the Board of Directors’ report has been prepared in accordance with the
legal requirements of articles 43a of the Codified Law 2190/1920 and the content of the Board of Directors’ report is consistent with the accompanying financial statements for the year ended 31/12/2016.
b) Based on the knowledge we obtained from our audit for the Company “Credicom
Consumer Finance Bank SA” and its environment, we have not identified any material misstatement to the Board of Directors report.
Athens, 8 September 2017
The Certified Auditor
PricewaterhouseCoopers S.A
Certified Auditors
268 Kifisias Avenue
152 32 Halandri Konstantinos Michalatos
SOEL reg. no. 113 SOEL reg. no. 17701