Banca de Economii S.A.

According to the 2003 Progress Report of Banca de Economii presented to its shareholders, the bank has achieved a fast growth in all its lines of activity. The bank’s assets have increased by 50%, amounting to 1,592 million lei by the end of the period, which makes up 15.5% of the total assets within the country’s banking system. During the year 2003, the credit portfolio has grown by 2.03 times, against the beginning of the year, compared with the average 44% growth rate within the banking system. The bank’s intense crediting activity has made it possible to increase its market share from 10.1% in 2002 to 13.6% in 2003. The growth of the credit operation volume was accompanied by measures to prevent the risks peculiar to this activity. The portion of reductions related to credit losses among the total credits diminished from 5% in 2002 to 4.98% in 2003, including qualitative changes in the credit portfolio. This fact is also confirmed by an increase in the part of credits classified as standard among the total number of credits, from 84% in 2002 up to 92% in 2003.

The deposit portfolio has grown by 1.5 times against the previous year and, by the end of the period, made up 1.3 billion lei or 19.4% of the total deposits within the banking system. The high-quality services and a flexible tariff policy permitted to triple the funds attracted from economic entities, the number of corporate clients’ accounts increasing by about two thousand. At the end of the period, Banca de Economii served 1.7 million individual and corporate accounts, and 409,000 indexed accounts.

The balance of individual deposits has amounted to 515 million lei as of 31.12.2003 and grown by 20% against 2002. In 2003 the bank offered 15 types of deposits to individuals in lei and 8 types in foreign currencies. Concurrently, intensive issuing of bank cards contributed to a growth of funds attracted by the bank, the balance of money on card accounts rising by 56%, against the year 2002.

In 2003 the bank continued to consolidate its equity without issuing extra shares. The equity balance has grown by 73.3 million lei against 2002 and constituted 206.7 million lei, representing 13% of the total liabilities. In 2003 the bank managed to raise the intrinsic value of its shares by 55% – from 22.8 lei in 2002 to 35.32 lei in 2003. The bank shareholders’ meeting decided for this year that the profit left after payment of the preferential stock dividends will be used to raise the equity capital. This decision was made to assure stability, add credibility, and increase the bank’s capacity to allocate larger amounts of money for funding the needs of economic entities.

The profit earned by the bank in 2003 grew by 89% against the previous year and constituted 73.45 million lei; the income tax paid by the bank was over 16 million lei – a record sum for the local banking system.

The efficiency of the policy adopted by the bank management towards the attainment of its strategic goals resulted in high profitability indicators: 5.58% for ROA and 42.65% for ROE, both values being above the average in the local banking system.

In 2003 the bank continued its project to extend its territorial network, opening a new branch in the town of Falesti and 29 agencies in most of the country district.

The extensive enlargement was supported by a project to enhance the bank’s image in the territory and to improve the employees’ working conditions by transforming subdivisions into modern banking institutions. New premises were built for the branches in Causeni, Cahul, and Anenii Noi; new sites were purchased for the branches in Soroca and Glodeni; major and minor repairs were made to the branches in Chisinau, Ungheni, Rezina, Cantemir, Drochia, Falesti, Ialoveni, Singerei, Hincesti, Donduseni, and to most of the bank’s agencies.

During 2003 the bank intensified the modernization of equipment, information technologies, and application systems, which had a positive impact on the quality of work and client service.

At the same time, the bank’s activity was focused on the development and diversification of the product and service range. Thus, along with the implementation of the bank card program (launching credit cards with time deposits, Visa-StudentCards), Banca de Economii was the first among the local banks to install ATMs – banking and Internet-banking – highly automated products which allow the clients to pay their utility bills using cash dispensers and the Internet.

In 2004, the bank will continue to release new products and services, assure qualitative development of its branch and agency network, furnishing them with equipment and efficient information technologies, diversifying its assets, increasing its revenues and operational profitability.

The shareholders decided that PriceWaterhouseCoopers will be the bank’s audit company for the next year and agreed on the remuneration for the auditing services to be provided.