Bloomberg News

Serbia’s AIK Banka Lowers Profit Target, Approves Share Buyback

October 12, 2011

Oct. 12 (Bloomberg) -- Shareholders of AIK Banka AD, Serbia’s seventh-biggest bank by assets, approved lowering the 2011 profit target 43 percent to account for the dinar’s stronger-than-forecast performance.

The shareholders also approved funds to buy back shares to “prevent unfounded” stock-price declines.

The bank, 20 percent-owned by Greece’s Agricultural Bank of Greece SA, is now targeting a full-year profit of 4 billion dinars ($54.77 million), down from an originally planned 7.1 billion dinars, board member Djordje Djukic said in a phone interview in Belgrade yesterday.

“We want to make it clear to investors that the adjustment resulted from the dinar’s appreciation because we based our budget and plans on an exchange rate of 115 to the euro,” Djukic said. The amended target calculates the dinar at 105 to the euro for this year.

Economies in the region, including Serbia’s gross domestic product, have been vulnerable to Europe’s sovereign debt crisis, which followed the global financial crisis that led to a recession across the region.

Djukic also cited the slowdown and “stagnating” corporate lending, which was crimped after “overall economic conditions severely deteriorated,” as reasons for the updated forecast.

Shareholders also approved a management plan to buy back 2.88 percent of shares and spend an equivalent of 7.5 million euros in an operation that would take place on the Belgrade Stock Exchange. That would involve only “occasional buying to prevent the price from falling without any particular reason,” he said.

Confident in Fundamentals

“The aim of this decision is to demonstrate that the management is confident of the bank’s fundamentals and that we want to prevent any slump in our share price,” Djukic said. The bank will not “act like a broker, on a daily basis and with small amounts.”

With a 0.7 percent increase, shares of AIK Banka closed at 2,013 dinars per share today, completing the fifth day of gains.

The share buyback needs to be cleared by the central bank and the securities watchdog, with approval expected within a month, he added.

Djukic said gross loan-loss-provisions of 32.4 billion dinars were high enough to keep its capital “well-protected.” The loan-loss provisions for one of its major clients, road builder Nibens Grupa, stood at 4.23 billion dinars, compared with total exposure of 5.54 billion, he said.

--Editor: James M. Gomez

To contact the reporter on this story: Gordana Filipovic in Belgrade at gfilipovic@bloomberg.net

To contact the editor responsible for this story: James M. Gomez at jagomez@bloomberg.net


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