2004 year


TABLE OF CONTENTS
Statement of the Chairperson of the Board
Supervisory Council
The Board
Economy of the Republic of Belarus in 2004
Standing of the bank. Basic indicators of activity
Corporate business
Lending
International Cooperation and foreign credit lines
Correspondent banking, international and interbank settlements,
documentary operations

Stock market operations
Retail business
Information technologies
Human resources
Strategy of the Bank's development for 2005

Independent auditors' report
Profit and loss account as of January 1, 2005
Balance sheet as of January 1, 2005
Statement of shareholder's equity for 2004
Statement of cash flows

Dear shareholders, clients and partners of JSSB Belarusbank

Presenting JSSB Belarusbank's Annual Report for the year 2004 on behalf of the Board I would like to note that we managed to strengthen achieved positions, maintain the tendencies of dynamically developing financial institution of the country. We succeeded in ensuring fulfillment of predictive indices of development, fixed in the Activities Strategy, in implementation of a number of major projects and programs in different branches of economy. In the reporting year the Bank provided real support to the major companies, developed its corporate and retail business.
High rates of growth showed retail business deposits, retail lending, banking plastic cards emission. Considerable attention was paid to the problem of bringing banking services to the client as close as possible, widening their range and raising their quality, development and enhancement of information and consulting servicing.
Continued improvement of organization of servicing of legal entities, delivery of high quality services to them, providing them with full range of banking products and services.
Active policy of information technologies update has been implemented, comprising work over the passage to the centralized automated banking system, renovation and modernization of computer aids.
Successful performance of the bank is confirmed by the higher individual rating, positive growth of revenues, equity, assets, clients' deposits. As before the Bank relies in its activities on such principles as transparency and openness, responsibility and purposefulness.
I am sure, that existing mutually beneficial relationship between the Bank and its shareholders, clients and partners, our business cooperation will be further efficiently developed and strengthened.

Chairperson of the Board N. Ermakova



Supervisory Board

Nickolay Korbut
Chairperson of the Supervisory Board,
Minister of Finance of the Republic
of Belarus

Vladimir Belokhvostov
Deputy Chairperson of the Supervisory
Board, Minister of Housing and Communal
Services of the Republic of Belarus

Members
of the Supervisory Board:

Valentina Shurak
Chief Accountant,
RUE Beltelekom

Vera Tarasova
Chief Accounting and Finance Officer,
Belarusian railways

Alexander Kernozhitsky
Head of Financial Department,
Minsk Executive Committee

Andrey Poznyak
Deputy Chairperson,
Minsk Regional Executive Committee

Ivan Vabishchevich
Head of Financial Department,
Brest Regional Executive Committee

Vladimir Novatsky
Deputy Chairperson,
Vitebsk Regional Executive Committee

Vladimir Majorov
Deputy Chairperson,
Gomel Regional Executive Committee

Alexander Radevich
Deputy Chairperson,
Grodno Regional Executive Committee

Vladimir Kravtsov
Deputy Chairperson,
Mogilev Regional executive Committee

Management Board of the Bank

Nadezhda Ermakova
Chairperson of the Board

Valentina Lukianenko
First Deputy Chairperson of the Board

Sergey Rumas
First Deputy Chairperson of the Board

Liudmila Lustova
Deputy Chairperson of the Board

Galina Tyshkevich
Deputy Chairperson of the Board

Valentina Nazarenko
Deputy Chairperson of the Board

Vladimir Novik
Deputy Chairperson of the Board

Vladislav Gorozhankin
Deputy Chairperson of the Board

Gennadi Gospodarik
Deputy Chairperson of the Board,
Head of Operational Department

Vladimir Zanko
Deputy Chairperson of the Board,
Head of Personnel Dept

Grigory Grudnitsky
Head of Security Dept

Vladimir Drushchits
Head of Audit Dept

Economy of the Republic of Belarus in 2004

There has been sufficient speeding-up of the economic growth in 2004 based upon the production potential of the country which is export oriented and is capable of manufacturing of relevant competitive products.
As the result of the increase in production in the main sectors of the national economy and its operation quality parameters improvement the GDP growth in the year 2003 made up 111%. The biggest contribution to GDP has been made by such branches as industry, transport and communication, trade and catering, agriculture, construction.
Technical re-equipment and modernization of the production potential of the country continued in 2004. Capital investments growth was at the rate of 120.2 %. At the same time more than 65% of the total volume of investments were utilized in the production facilities.
One of the priority project of social and economic development policy of the country - housing construction - has been successfully implemented. At the expense of all investment sources 3.5 million square meters of the total housing area have been put into operation that equals to 15.7 % growth in respect to the year 2003.
Friendly foreign markets environment and work on export and foreign trade development contributed in 2004 to sufficient growth of commodity and services export and foreign trade volumes growth.
Sufficient inflation reduction has been registered in the country. Consumer prices increased by 14.4 % compared to 25.4 % in 2003. It is the first time (August 2004) that consumer prices reduce within the years of observation period.
The economic growth observed together with the fall of the inflation rate had a positive effect on the real cash income of the population and employee wages growth. Real cash income of the population in 2004 grew by 13.6 % compared to 2003, the average nominal wages grew by 37.9 %.
The income growth stated as well as the reduction of the inflation rates stimulated the growth of domestic demand for goods and services and formed positive tendencies of their sales in the consumer market of the country: retail turnover growth through all market outlets in 2004 was 12.1 % compared to the year 2003.
The implemented monetary and credit policy promoted higher economy growth rates and its targets were fully achieved in 2004.

Major macroeconomic indicators

1998

1999

2000

2001

2002

2003

2004

Balance of payments, USD million

- - - - - -13,8 255,8

Aggregate external debt, USD million

- - - 2447,0 3067,0 3369,1 4349,1

GDP, % growth

8,4 3,4 5,8 4,7 5,0 6,8 11,0

Consumer prices index, %

181,7 251,2 107,5 46,1 34,8 25,4 14,4

Current account, USD million

-1,0165 -193,7 -338,4 -434,9 -336,5 -423,5 -1042,9

Consolidated budget deficit, % of GDP

-1,4 -2,9 -0,6 -1,6 -0,4 -1,3 0,1

Trade balance, USD million

-1,4796 -255,5 -446,4 -546,2 -481,5 -670,7 -1353,1

Direct foreign investment, USD million

203,2 443,2 118,6 95,5 453,3 170,3 168,1

External debt, USD million

1,171 1,154 982 950 813 736,4 741,1

Unemployment rate, %

2,3 2,1 2,1 2,3 3,0 3,1 1,9

Gross reserve (excluding gold), USD million

702,8 294,3 350,5 380 417,4 461,5 690,8

Exchange rate at the year end, BYR/EUR

- 322,7 1,097 1,392 1,994 2,695 2,955

Exchange rate at the year end, BYR/USD

107 320 1,180 1,580 1,920 2,156 2,170

Standing of the bank. Basic indicators of activity

In 2004 JSSB Belarusbank consolidated its standing in the banking system. Its share in the gross lending to the economy of the country made up 44 per cent. 62 per cent of all savings of the population, 42 per cent of the resource base, 50.0 per cent of the customers' funds is deposited here (2003: 50,3 per cent). The shareholders' equity made up 29 per cent of the aggregate capital of the banking system and the authorized fund totaled 36 per cent. JSSB Belarusbank has achieved outrunning development rates comparing to the average indicators of the banking system of the country. This also refers to attracting the funds of individuals, issuing bank plastic cards and credit investments.
The basic forecast indicators defined by the strategy of the bank have been fulfilled: the resource base grew by 46 per cent, the funds of the population grew by 63 per cent and by 92 per cent in the national currency, gross loans to economy grew by 50 per cent; the share of problem loans in the loan portfolio dropped from 4.9 at the beginning of the year 2004 down to 3.8 per cent as of January 1, 2005, the authorized fund grew by 40 per cent and the shareholder's equity grew by 46 per cent. The credit portfolio amounted to 4.5 trillion rubles and grew by 47 per cent as of January 1, 2005.


Basic indicators of activity of JSSB Belarusbank

Indicators

01.01.2002

01.01.2003

01.01.2004

01.01.2005

Equity capital (bank equity), BYR mln. 138884,9 385359,7 679290,2 848479,9
Authorized fund, BYR mln. 100694,8 304666,9 546555,7 766358,8
Total attracted funds, BYR mln. 1672368,7 2473855,2 3706118,7 5302105,8
Deposits of the population, BYR mln. 457456,5 805177,6 1405372,1 2265716,3
Total assets, BYR mln. 1843451,9 2862130,9 4388563,5 6266766,4
Earning assets, BYR mln. 1478123,9 2407553,3 3661941,3 5213000,4
Total loan investments 1190900,5 1941109,2 3068969,3 4503807,4
including loans to population, BYR mln. 258761,4 470851,6 903470,1 1602970,3
Investments in securities, BYR mln. 259090,0 429382,7 502364,2 637206,8
Number of subsidiaries 168 153 146 137
Number of employees 25013 23500 23355 23906
Number of customers (legal entities) 43057 44643 51260 59078
Number of retail accounts, thousands. 14516 14486 15403 16616

Corporate Business

During the year 2004 the corporate client servicing programme was implemented by the Bank on the basis of the mutual trust, joint problem solving, and bank services new quality. The individual and integrated approach to every client enables to maintain and increase the customers' base. The number of entities and individual entrepreneurs, served by the Bank, increased and reached 59 thousands within the reporting period. The Bank served enterprises of all forms of ownership in all sectors of the national economy. The corporate customers are presented by the largest Belarussian enterprises, oriented towards production of competitive goods.
The following practical steps in reforming the corporate business service system were undertaken: the corporate business centres were founded in large branches, in others the units. The Bank also defined the system of interaction of personal managers with the customer-oriented services. The practice of conclusion of package (general) association agreements with the major bank clients was applied in the Bank. 105 such agreements have been concluded. Package services such as "Client-Bank" system, payroll payment via the plastic cards with overdraft, corporate cards issue were also used extensively. As of January 01, 2005 such service packages were used by more than 50% of the Bank's corporate clients (at the beginning of 2004 this figure was 12%).

Lending

 

As before, the Bank's policy in lending to corporate customers is aimed at active support of the home producers, implementation of import substitution programs, development of export potential. Within the framework of implementation of the state programs lending to solvent clients of the Bank and to manufacturing industry enterprises including small business was performed. Granting of investment (long-term) credits, financial leasing transactions are performed by the Bank for creation, re-equipment of operating part of fixed assets, including acquisition of equipment outside the Republic of Belarus at the expense of foreign credit lines.
As of January 1, 2005 the loan portfolio amounted to BYR 4.5 bln., increasing by 47% during the year. The share of lending to corporate customers made up 62.7%.
The Bank takes part in implementation of 42 decrees of the President of the Republic of Belarus, government regulations on rendering of loan support and development of 94 enterprises of the national economy. As in former years, in 2004 the Bank followed the conservative policy in lending, constructed on reasonable proportion of the loan share in asset, diversification of credit risks, availability of credit resources to the clients of the Bank. The whole range of operational transactions is present in the loan portfolio breakdown: lending (short-term and long-term), factoring, financial leasing, and transactions with use of promissory notes. Investments in industry account for the largest share of the granted loans to clients. The clients of the Bank use actively the possibility of obtaining banking guarantees.

International cooperation and foreign credit lines

Confirming the status of the state agent for foreign credit lines servicing, the Bank paid much attention to the problem of boosting foreign investments attraction to the republic. In the reporting year JSSB Belarusbank served 6 foreign credit lines under which the Bank concluded 34 loan agreements. As of January 1, 2005 indebtedness amounted to USD 76 mln.
Cooperation with foreign banks continued primarily with Bayerische Hipo-und-Vereinsbank AG (Germany), Commerzbank AG, BRE BANK SA (Poland), German banking syndicate AKA Ausfuhrkredit Gesellschaft mbH (Germany), Bank Handlowy w Warszawie SA (Poland), Czech Export Bank (Czech Republic), Turk Eximbank (Turkey), etc. With the funds of attracted foreign credit lines Gorodeya Sugar Refinery was modernized, equipment for Belurusian Railway and Orsha meat processing plant was purchased, laminboard processing line in JSC "Ivazevichdrev" was put into operation, equipment for aerated concrete production was purchased for JSC "Grodno KSM", etc.
The representative offices of the Bank in Poland and Germany do much work on establishment of cooperation with foreign financial institutions. Limits for transactions with the insurance companies Hermes and Kuke amounted to EUR 100 mln. Debts on current operations with corporate customers using foreign credit lines amounted to EUR 30.8 mln and USD 34.4 mln.
Trust of international financial institutions and first class foreign banks is achieved due to increasing international rating of the Bank, as well as to the audit of annual statements, conforming to the international standards, conducted by international auditing company "Deloitte & Touche". In 2004 experts noted that the Bank strengthened considerably its position in the banking services market, introduced new technologies and was aiming not only at maintaining of the current positions, but at the increasing of the Bank's share in the market.
In 2004 the Bank took part at annual meetings of the International Monetary Fund and World Bank, in a number of prominent international conferences devoted to international cooperation development.

Correspondent Banking, International
and Interbank Settlements, Documentary Operations

Cooperation with the financial organizations remains one of the most important line's of JSSB Belarusbank activities, ensuring the efficient and competitive development of corporate business servicing, including trade financing of foreign-economic agreements.
Today the correspondent system of JSSB Belarusbank is one of the most ramified among the Belarussian banks. This fact enables the Bank to make national and international settlements on behalf of clients promptly and efficiently. As of January 01, 2005 the Bank was in correspondent relations with more than 500 banks in 84 countries worldwide.
The Bank opened 60 Nostro accounts (in 15 foreign currencies) with 30 correspondent banks in 13 countries. It operates 92 Loro accounts, comprising 69 resident banks accounts and 23 non-resident banks accounts. The Bank opens correspondent Loro accounts and makes transactions with the partner banks on the differentiated tariff policy basis and under the '"know your client" principle.
Together with its clients the Bank searches for the optimal schemes of the most beneficial and secure terms for settlements and financing under foreign trade contracts. Total amount of international settlements made by the clients through JSSB Belarusbank in 2004 exceeded the level of 2003 by 54 per cent, making up USD 4.4 bln.
In 2004, the volume of the Bank's documentary operations increased significantly, both in quantitative and money terms. This is mostly due to the high quality and complexity of the offered services in trade financing. The volume of documentary operations reached USD 459 mln., which is 67% higher than in the previous year.
The Bank has a significant number of foreign banks credit lines, amounting to USD 78 mln. as of the end of 2004, for conducting the documentary operations without the cover.
As of January 01, 2004 the amount of the attracted foreign banks credit lines for interbank operations reached USD 109 mln., which was 2.4 times more than in 2003.

Stock market operations

In the reporting year JSSB Belarusbank was the first among the banks of the Republic of Belarus to offer to the population a new form of savings - bank bonds. The Bank has registered four bond issues for the total amount of BYR 20 bln. and USD 8 mln. Placement of all issues of bonds started in September 2004.
JSSB Belarusbank traditionally holds the leadership among the belarusian banks by the amount and number of operations with government notes. The amount of operations at primary and secondary markets of government notes in 2004 exceeded BYR 4.6 trln., growing more than two times as compared with 2003. Bank's share at the government notes market went beyond 53 percent. At that the Bank trades in the government notes not only with its own funds, but also delivers intermediary services to the clients and effects REPO transactions.
High liquidity and reliability of the Bank's promissory notes combined with exemplary respect by the Bank of its obligations secured firm demand for promissory notes of JSSB Belarusbank, allowing it to retain its leading position in this market. In 2004 the Bank issued promissory notes for the amount of BYR 274 bln., including notes with deferred payment for the amount of BYR 175 bln.
The Bank's depository served 535 joint stock societies, being the major depository in the Republic of Belarus. Total assets, stored in the depository, exceeded BYR 1 trln.
In 2004 JSSB Belarusbank developed trust management operations. As of January 01, 2005, the Bank has concluded 3 thousand trust management agreements. Securities handed for trust management amounted at more than BYR 1.5 bln.
Long term investment portfolio of the Bank grew to BYR 8 bln. In 2004 the Bank founded its own leasing company.
The Bank performed functions of agent of the Ministry of Finance of the Republic of Belarus for placement of state currency premium and savings bonds.

Retail business

One of the priority directions of the activities of JSSB Belarusbank is the development of retail business. The implementation of the Program of Comprehensive Servicing of Population has been carried out in 2003-2005. This program provided for stable activity on the improvement of savings activities, extension of the range of services rendered to retail customers and improvement of service quality. Special attention has been paid to the establishment of self-service centers having relevant infrastructure. As of January 1, 2005 there were 397 ATMs and 201 ADMs operating. 875 merchants accepted cards for payment. 614 thousand cards have been issued and the total number of cards in circulation made up more than 1 million 240 thousands. The Bank's share of the card market of the Republic of Belarus constitutes 56%. Card business infrastructure has been developing. More than 930 cash advance points were in operation. 568 subsidiaries now render services on payments for public utilities and mobile phone services. The card-to-card money transfer service has been implemented as well as the service on credit repayment in belarusian rubles.
Deposit operations have been actively developing. The amount of funds of individuals attracted has grown almost by one trillion rubles and has reached 2.4 trillion rubles which is 62 per cent of the total amount of the funds owned by the population accumulated in the banking system. 16.2 per cent of pensioners of the country received their pensions through deposit and card accounts. The Bank has actively cooperated with RUE "Belarusian lotteries" on selling the tickets "Your loto" which allowed to acquire a new type of revenue. Cooperation with Belgosstrakh on selling insurance policies on auto-civil liability was also efficient. Work is carried out by the Ministry of municipal housing economy of the Republic of Belarus and its structural divisions on organization of municipal payments acquiring based on electronic databases of the payers. 32 Western Union service units have been opened. The Bank's share of such units comprises 52 per cent. The usage of American Express cheques became wider, the number of trade operations grew by 48 per cent, and for purchase operations more than two times. 828 servicing units of the fast money transfer system "Strizh" have been opened and are functioning.


The number of individuals receiving salaries through deposit and card accounts grew in 2004 almost by 9 per cent and reached 1.9 million, in another words 54.5 per cent of citizens involved in the real sector of economy.
The Bank took the lead in the retail lending market with the share of 83.2 per cent.
The range of loan services of the Bank includes various types of loans: for construction and purchase of accommodation, for its reconstruction and maintenance, for recreation, for medical cures, for education, for purchasing of household items, for other consumer needs. Loans are issued both in belarusian rubles and foreign currency.
In order to improve service quality 97 branches of 136 operate without a lunch break, 70 work on Saturdays, 68 have their working hours extended, 74 sub-branches have employees in charge of loans at their disposal and provide loans for consumer needs.


Information technologies

Considering growing requirements in the field of information technologies the Bank continued preparatory work directed at passage to the centralized automated banking system (CBS). The main element of this work consisted in implementation of hardware and software systems, securing centralized processing of banking operations such as centralized data warehouse of physical persons accounts information, depository record keeping etc. In connection with the adopted decision to implement CBS, requirements for selection of IT-solution have been worked out. These requirements underwent exterior examination, and CBS selection tender was opened.
Corporate network was built with the perspective of development of fiber-optic communication lines, cashless settlements with the use of plastic cards. By now 63 branches and 487 sub-branches of the Bank have fiber-optic communication lines. Continuous operation of software and hardware was secured. Higher quality of home developed software was achieved. IAS Forward was further developed, several software subsystems have been worked out, infobase for operational analysis and control of banking activities and making strategic resolutions was growing.
Respective software has been updated in order to improve receipt and transfer of payments in favor of mobile operators. Technological solution has been prepared and transfer to the secure channel of communication with JSC National Processing Center was done.
According to the Bank's investment program renovation and modernization of computer aids, telephone-communication system, office equipment was carried out.

Human Resources

Work on personnel management was aimed at staffing of structural subdivisions of the Bank with human resources of required specialization and professional qualification, increasing of educational level and professional acquirements, creation and training of efficient reserve, forming and development of information-ideological activity, upgrading of corporate culture, psychological support of labor activity of the personnel.
Choice and disposal of human resources was conducted in accordance with the regulation on qualifying requirements that allowed to increase considerably the educational and professional level of managers and specialists.
Management structure of the Bank ensures well-coordinated work of all subdivisions. Professionalism, purposefulness and creative approach of the whole team built the foundation for business success and trust relationship with the clients.
Work on optimization of the branch network was continued. Along with liquidation and opening of sub branches the reorganization of branches to sub-branches was conducted. Total number of branches was reduced by 9 and amounted to 137. 142 sub-branches were closed, new 40 - were opened (from which 9 on the base of the reorganized branches). Herewith the accent was made on improvement of the client servicing quality.

Strategy of the Bank's development for 2005

The bank's mission is to render full range of banking services on commercial basis to clients (retail and corporate customers) at international standards level, maintain crediting of priority branches of economy special state development programs, attract additional funds for investment in social sphere and national economy with acceptable levels of market risks, ensuring protection of deposits of population and funds on the accounts of corporate clients from bank's insolvency risk.
Strategic aim of the Bank is to maintain financial stability, preserve its leading position in the national banking market and its competitive strength by the choice of optimal sales strategy, raise of the quality of client servicing, updating banking information technologies, ensuring growth of sales of banking services, increase of Bank's profitability.
To achieve these aims the bank plans to solve the following main task:
- Raising financial stability by achieving revenues level, sufficient for Bank's development, on the condition of securing liquidity, solvency and compensation of assumed risks;
- Growth of equity to the level adequate to the widening of active operations of the Bank;
- Growth of bankroll potential of the Bank also by attracting for servicing major resource-intensive and financially sound clients, raising the amount obtained through foreign credit lines, prolongation of periods for which funds are attracted;
- Raising the amount of loan support of economy with priority direction of the funds to finance investment crediting of real sector and dwellings construction, ensuring forming of quality loan portfolio of the Bank;
- Further development of retail business by physical development and implementation of new cutting edge and required by the population banking products and services, growth of crediting of persons, who solve their housing and social problems, creation of attractive tariff conditions for the growth of population's savings;
- Preserving leading position of the Bank in the banking plastic cards market by means of growth of emission of the cards, raising the number of infrastructure elements, widening range of use of the cards for making cashless transactions, as well as raising of the amount and share of cashless settlements;
- Continuation of work on the passage of the Bank to the automated banking system, ensuring centralized data processing;
- perfection of the system of risk management and internal control in order to guarantee safe banking;
- continuation of step-by-step passage of the Bank to the international accounting standards;
- implementation of the Bank's personnel policy, based on the development of business activity and growth of professional skills of regular employees, raise of corporate solidarity and responsibility of the Bank's employees for the results of collective activity.

Independent auditors' report

Deloitte & Touche
2 Gertsena Street
Minsk 220030 Belarus
Tel: +375(0)17211 0329/92
Fax: +375(0)17211 0344
www. deloitte. by

To the Shareholders and Board of Directors of the Joint Stock Savings Bank "Belarusbank":

We have audited the accompanying balance sheet of the Joint-Stock Savings Bank "Belarusbank" (hereinafter - "the Bank") as of 31 December 2004 and the related profit and loss account and statements of cash flows and changes in shareholders' equity for the year then ended (hereinafter referred to as "financial statements"). These financial statements are the responsibility of the Bank's management. 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. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Bank as of 31 December 2004, and the results of its operations and its cash flows for the year then ended, in accordance with International Financial Reporting Standards.

Without qualifying our opinion, we draw attention to the following matters:

- as described in Note 31, at present there is a considerable degree of uncertainty in the Republic of Belarus;

- as shown in the Note 32, the corresponding figures as of 31 December 2003 were restated.

23 May 2005

Profit and loss account as of January 1, 2005

OPEN JOINT STOCK SAVINGS BANK "BELARUSBANK"

PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 31 DECEMBER 2004

(in millions of Belarusian Roubles)

Notes

2004

2003
(restated)

Interest income

4,27

604,494

573,599

Interest expense

4,27

(375,058)

(371,233)

NET INTEREST INCOME BEFORE PROVISION FOR LOAN LOSSES

229,436

202,366

Provision for loan losses

5

(10,236)

(82,863)

NET INTEREST INCOME

219,200

119,503

Net gain on trading securities

42,655

48,080

Net gain on foreign exchange operations

53,890

54,094

Fees and commisions income

6

160,109

148,258

Fees and commisions expense

6

(16,957)

(14,614)

Dividend income

53

25

Net gain on investment securities

7

5,711

20,027

Other income

8

35,215

38,138

NET NON-INTEREST INCOME

280,676

294,008

OPERATING INCOME

499,876

413,511

OPERATION EXPENSES

9

(381,582)

(346,268)

NET OPERATING INCOME

118,294

67,243

Impairment of fixed assets

17

(21,240)

-

Recovery of provision /(provision) for losses on other transactions

5

(1,894)

(1,241)

PROFIT BEFORE INCOME TAXES AND LOSS ON NET MONETARY POSITION

98,948

66,002

Income taxes expense

10

(65,060)

(47,601)

PROFIT BEFORE LOSS ON NET MONETARY POSITION

33,888

18,401

Loss on net monetary position due to inflation effect

(13,612)

(5,067)

NET PROFIT
20,276
13,334


On behalf of the Board:

Chairman

Chief Accountant



The Notes on pages 7 to 45 form an integral part of these financial statements. The Independent Auditors' Report is on page 1.

Balance sheet as of January 1, 2005

OPEN JOINT STOCK SAVINGS BANK "BELARUSBANK"

BALANCE SHEET
FOR THE YEAR ENDED 31 DECEMBER 2004
(in millions of Belarusian Roubles)

Notes

2004

2003
(restated)

ASSETS:

Cash and balances with the National Bank of the Republic of Belarus

11

446,191

340,857

Loans and advances to banks, less allowance for loan losses

12

106,666

122,675

Trading securities

13

253,514

182,251

Securities purchased under agreement to resell

14

18,460

5,807

Loans and advances to customers, less allowens for loan losses

15

3,956,146

2,850,158

Investment securities

16

294,747

368,387

Fixed and intangible assets, less accumulated depreciation

17

284,134

304,559

Other assets

18

54,005

50,749

TOTAL ASSETS

5,413,863

4,225,443

LIABILITIES AND SHAREHOLDERS' EQUITY

LIABILITIES:

Deposits from banks

19

501,571

460,421

Securities sold under agreements to repurchase

20

37,932

15,572

Customer accounts

21

4,275,147

3,228,651

Debt securities issued

22

28,244

60,561

Government loans

3,548

10,055

Income tax liabilities

6,832

7,818

Other liabilities

23

39,878

46,035

Total liabilities

4,893,152

3,829,113

SHAREHOLDERS' EQUITY:
Share capital

24

451,388

343,747

Treasury stock

(3,100)

(3,100)

Retained earnings
72,423
55,683
Total shareholders' equity
520,711
396,330
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
5,413,863
4,225,443


On behalf of the Board:

Chairman

Chief Accountant





The Notes on pages 7 to 45 form an integral part of these financial statements. The Independent Auditors' Report is on page 1.

Statement of shareholder's equity for 2004

OPEN JOINT STOCK SAVINGS BANK "BELARUSBANK"

STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2004
(in millions of Belarusian Roubles)

Note

Share
capital

Treasury
stock
Retained
earnings

Total
shareholders'
equity

Balance as of 31 December 2002 according to the financial statements for 2003 and inflated for 2004
250,842
(3,102)
84,401
332,141

Effect of restatement (Note 32)

-

-
(29,552)

(29,552)

Balance as of 31 December 2002 (restated)

250,842

(3,102)
54,849

302,589

Net profit (after loss on net monetary position), as restated

32

-

-
13,334

13,334

Share capital increase

80,408

-
-

80,408

Capitalization of statutory reserves

24

12,497

-
(12,497)

-

Sale of treasury shares

-

2
-

2

Dividends declared and paid

-

-
(3)

(3)

Balance as of 31 December 2003 (restated)

343,747

(3,100)
55,683

396,330

Net profit (after loss on net monetary position)

-

-
20,276

20,276

Share capital increase

104,115
-
-
104,115

Capitalization of statutory reserves

24

3,526

-
(3,526)

-

Dividends declared and paid

-

-
(10)

(10)

Balance as of 31 December 2004

451,388

(3,100)
72,423

520,711




On behalf of the Board:

Chairman

Chief Accountant





The Notes on pages 7 to 45 form an integral part of these financial statements. The Independent Auditors' Report is on page 1.

Statement of cash flows

OPEN JOINT STOCK SAVINGS BANK "BELARUSBANK"

STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2004
(in millions of Belarusian Roubles)

Notes

2004

2003
(restated)

CASH FLOWS FROM OPERATING ACTIVITIES:
Profit before income taxes and loss on net monetary position

98,948

66,002

Adjustments for:
Provision for loan losses

5

10,236

82,863

Provision for impairment of investment securities

5

211

-

(Recovery)/provision for losses on guarantees and other commitments

5

(2,105)

1,241

Fair value adjustment on investment securities available for sale

(1,876)

(17,740)

Effect of discounting, unwinding of interest income and income due to early repayment of loans at other than market terms, net

(29,620)

(33,126)

Depreciation and amortization
9,17
51,073
38,515
Loss on disposal of fixed and intangible assets
804
10,952
Loss on fixed assets impairment
21,240
-
Net change in interest accruals
(11,911)
(7,113)
Net change in other accrued income
(77)
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