UNIVERSITY AMERICAN COLLEGE SKOPJE

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SEMESTER 1-st SESSION

ASSIGNMENT NUMBER  3 SUBMISSION DATE DUE

ASSIGNMENT TITLE Foreign company in Macedonia  

INSTRUCTOR’S NAME Dr. Irena Nikolovska  

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Student (Name and Surname) Stefan Zivkovic ID: 10105

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Overview

Sparkasse Bank in Macedonia is a member of the Erste Groupation, one of the biggest groupations in
Europe. Sparkasse is one of the biggest banks and credit institution in south Austria with: 189 years of
tradition, value of 14,2 billion euros, 487 regional centers, 6137 employees and 2,4 million clients. It
focuses on efficiency and transparency with clients, using the gains from its groupation experience. In its
focus are the customers as well as creating modern products and services with which it hopes to satisfy
a large number of both current and potential clients. It offers financial support and professional financial
counseling for clients and numerous advantages for long term, loyal customers. Sparkasse also works
with other companies and it strives to identify and win over the successful companies by offering
products and services specifically tailored to serve the company’s needs.

Strategy

Sparkasses long term strategy is to maximize the value of all key interests and to secure the best
solutions for the needs of the clients. Its interests include actioners, clients and employees in the local
community. The corporate working model and its decision for corporate-societal responsibility are
adequately adjusted I steered toward realizing the banks long term strategy.
The mission of the bank is to maintain price stability and financial stability and to contribute to the
increase of economic welfare and living standard of citizens,

The vision of the bank is to be recognized as an independent, responsible, professional and transparent
institution that enjoys high credibility and public confidence.

The current main focus of Sparkasse is on perfecting internal processes and procedures, improving
internal organization and credit portfolio as a basis for a quality long term bank growth.

Competition

In total, there are 17 banks currently operating in Macedonia. Out of all the 17, Sparkasse is currently
ranked 13th. Since they have a lot of work to do to even challenge the first ranked banks, Sparkasse
should focus on challenging those that are more akin to its stature, in order to move up in rank. Thus, its
closest competitors are Procredit Bank and NLB Bank.

The NLB Bank operates similarly to Sparkasse. It’s place of origin ins Slovenia. It relies on modern
technology and experienced employees to reach its status as the third rated bank by monetary net
activity. They take pride in their tradition and high tech services which in turn bring them profit.

Procredit bank, on the other hand, is similar to Sparkasse as it also traces its origins from Germany. Their
mission differs from NLB since they focus on being the primary bank of small to medium enterprises
which produce workplaces and improve economic growth. For common people, they prefer financial
counseling for saving up money, instead of offering credit. Procredit is significantly younger than
Sparkasse, and lacks the “tradition” advantage that both NLB and Sparkasse enjoy.

Life cycle

Sparkasse, being a bank with tradition and operating for more than a century, has reached maturity. In
this stage, they seek to maintain current customers and entice new potential customers to use their
services. Since it is a bank, a mature stage is beneficial as it offers much needed security and provokes
trust from the customers. In contrast, new banks struggle to make a name for themselves as they are
still not seen as a trustworthy and safe place for people to give their hard earned money.
There are still some pitfalls and shortcomings that should be avoided, though. Competition is fierce and
other banks offer more or less the same services as Sparkasse. Differentiation is difficult as far as banks
go, and other banks have incorporated technology in their services which differs from Sparkasse. The
current strategy of Sparkasse focuses on internal issues, and improving services and customer relations,
which is something that is imperative to maintain a competitive position in the marketplace.

Financial data

Balance sheet in euro million 2013 2012

Total assets 14 572 14 291
Loans and advances to customers 10 357 10 496
Financial assets 1692 1513
Customer deposits 8381 8290
Thereof savings deposits 5841 5819
Thereof other deposits 2540 2471
Debt securities in issue 2104 1923

Income statement in euro million 2013 2012

Operating result 171 194
Group net profit 76 64

Key financial data 2013 2012

Post tax return on equity 8.1% 7.5%
Cost/income ration 56.5% 53.1%
Net interest margin in percent of average interest bearing assets 2.0% 2.2%

Employees 2331 2323

Branches and regional service centers 261 269

Together with their subsidiaries, Steiermärkische Sparkasse was able to strengthen its position as a
leading financial institution in the south of Austria with a positive balance for 2012. As a result of a
historically low interest margin of 12 %, the lower net interest income of the Steiermärkische Sparkasse
Group decreased the operating profit to EUR 170.7 million. The consolidated net income increased
significantly in 2012 by 19.2 % to EUR 75.9 million. Important success factors for 2012 can be attributed
to exceptionally low risk cost as well as cost discipline in operating and personnel expenses. The Cost-
Income-Ratio (CIR) was 56.5 % and the Return on Equity (ROE) respectably 8.1 %
Sparkasse financial statement in Macedonia, in thousand denars:

Year 2013 Year 2012

Income from interest 827 873 1017 644
Expenditure from interest 258 964 424 174
Net income from interest 568 909 593 470

Income from provisions 182 286 189 302

Expenditure from provisions 57 123 67 746
Net income from provisions 125 163 121 556

Net income from currency difference 26 322 31 584

Other income 98 002 88 206

Value of financial means, on a net basis 204 757 184 582

Loss from damages of non-financial means, on a net basis 19 788 80 196
Expenditures for employees 220 841 205 826
Amortization 36 284 42 173
Other expenditures 287 653 308 669
Profit/loss before tax 49 083 13 370

Tax on revenue 4 319 12 122

Profit/loss for the financial year 44 764 1 248

Profit from having stocks 104 3

The data for 2012 is as follows:

Revenue = 740 386

Fixed costs = 422 331

Variable costs = 268 912

Total costs = 691 243

Contribution Margin = 740 386 – 268 912 = 471 474

% Contribution Margin = 0,636 x 100 = 63,6%

Profit = 740 386 – 691 243 = 49 143

The data for 2013 is as follows:

Revenue = 825 831

Fixed costs = 486 001

Variable costs = 268 786

Total costs = 754 787

Contribution Margin = 825 831 – 268 786 = 557 045

% Contribution Margin = 0,674 x 100 = 67,4%

Profit = 71 044

Conclusion:

From the calculations we can deduce that Sparkasse has increased profits in the year 2013 due to an
increase in revenue. The contribution margin has slightly increased as well as profits. The high costs of
operating as well as the variable costs support the strategy that Sparkasse should improve internal
operations as reducing the costs can significantly improve profits.