PAREX BANKA: ISSUING A 200

MILLION BOND

Alvin Augusto Saputra (29112312)

Graha Noviana (29112460)
Dira Illanoor (29112471)
Cecep Safaatul Barkah (29112504)
Reska Putri Praslita (29112512)
Fitria Kurniawati Susilo (29112577)
 OBJECTIVE
appraisal the bank’s financing needs
recommending, which is Parex executives were
considering whether issuing the 200 million bond or
not
If issued 200 million bond, the bond would be
denominated in euros or US dollar
 ANALYSIS
Comparison between Hansabanka, SEB and PAREX
Bank Assets Deposits Loans ROA ROE LDR
Hansabanka 2,235,391 1,196,283 1,707,954 2.38% 26.83% 76.4%
SEB 1,898,768 822,255 1,573,785 2.66% 34.30% 82.9%
PAREX 1,784,785 1,227,171 831,375 1.68% 18.70% 46.6%

Parex include to the three major banks in Latvia, based on the above
data it can be seen that the Parex LDR ratio compared to its
competitors is very low even under the standard, with a composition of
46.6% LDR Parex lending remains low so that the burden of high
interest to a third party.
 ANALYSIS (cont)
YOY Growth
Interest 2004 2005 Yoy Growth
Interest Income 58,518 78,899 34.8%
Interest expense 19,848 32,425 63.4%
Total 38,670 46,474 20.2%
Based on that table, its can be indicated that YOY growth in net
interest income from 2004 to 2005 was only 20%, it is in the trigger by
its high-interest expense growth of 63.4%.
 ANALYSIS (cont)
Comparation based on Income Structure

Comp (%)
Income Structure 2004 2005 Yoy Growth
2004 2005
Net Interest Income 38,670 46,474 20.18% 53.2% 51.7%
Fee Based Income 18,823 25,734 36.72% 25.9% 28.6%
Trading 13,227 15,484 17.06% 18.2% 17.2%
Others 1,920 2,135 11.20% 2.6% 2.4%

In the composition of the income generated by Parex was the highest

from loans of 53.2% in 2004 and decreased to 51.7% in 2005, an
increase occurs in fee based income.
 ANALYSIS (cont)
Market share

Market Share of
Deposits Market Share
Hansabanka
ofSEB
Loans
Latvijas
Unibanka
Hansabanka Parex Banka AS NORD/LB
15% SEB Latvijas
4%
30% 13% 5% Latvija
Unibanka 34% AS Rietumu
17%
Parex Banka Banka
31% 20% 32%
AS
NORD/LB
Latvija

As at the end of the first half 2006, Parexbanka was the second largest
commercial bank inLatvia by deposits with 18.0% market share. The market
share in terms of assets comprised16.2%, in terms of loans –11.8% and by capital
and reserves – 14.8%.
 ANALYSIS (cont)
 Analysis of Earnings

In 2005, the profit of Parexbanka reached 33,214 million lats. In

comparisonwith the corresponding period of 2004, net operating
income increased by 11% and reached 46,474 million lats mainly due to
the rises in net interest income (20%), net commission and fee income
(36%).

 Analysis of Balance sheet

In 2005, Parexbanka’s assets grew by 29%, comprising 1,424 billion lats;

the amount of the issued loans grew by 19% from the previous year;
deposits increased by 19%.
 ANALYSIS (cont)
Analysis of Growth areas
Parex Group sees its main development and growth areas in
the following sectors – Retailbanking, Capital markets,
Corporate banking and Asset management with the bank
strategy hinged on four central aims:
a. Expanding and diversifiying the range of commercial and
investment banking products and services offered.
b. Expanding and strengthening its pan-Baltic and
international presence
c. Expanding its asset management activities
d. Diversifiying and strengthening its funding base.
CONCLUSION AND RECOMMENDATION
Parex still has strong funding from third-party funds,
third-party interest expense increased its expense has
made a fairly high from 2004 to 2005.
PAREX BANKA should issue the bond worth of 200
million
PAREX BANKA should issue the 200 million bond in
US$ currency