This presentation provides an overview of Altum, Latvia's national development finance institution. It discusses Altum's business model, portfolio, and funding sources. Altum provides loans, guarantees, and venture capital to priority sectors in Latvia to promote economic development. As of December 2017, Altum had a diverse portfolio of €441 million consisting of loans, guarantees, and venture capital investments. It maintains a strong liquidity position with a liquidity ratio over 500% and diversified funding sources.
2. DISCLAIMER
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4. KEY CREDIT STRENGHTS
Ownership by The Republic of Latvia rated A3/A-/A- by Moody’s,
S&P and Fitch respectively and clearly expressed support
Long-term issuer credit rating Baa1 assigned by Moody’s
Solid equity position (49.3% of total assets*)
Strong liquidity and secured long term funding
Track record of improving operational efficiency
Prudent corporate governance and professional management team
Corporate and Social Responsibility agenda
Modern risk management system
*Total capital and reserves/Total assets at 31 Dec 2017
6. GENERAL INFORMATION
100% state-owned financial institution
Provides access to finance in the areas prioritized by the
government
Implements the state policy in the national economy
Ministry of
Economics
30%
Ministry of
Agriculture
30%
Shareholders of
Development Finance Institution ALTUM
Ministry of
Finance
40%
7. HISTORY AND LEGAL BACKGROUND
Latvian Guarantee Agency
Rural Development Fund
Altum
JSC Development
Finance Institution Altum
Established by the decision of the Cabinet of Ministers
Special Law on the Single Development Institution
European Commission`s decision
8. Source: Pixabay.com
We help Latvia grow
MISSION
To be a partner
and financial expert
in economic development
VISION
Team
Excellence
Responsibility
VALUES
9. BUSINESS MODEL
Long-term profitability
Extra credit risk covered by public funding – Risk
coverage reserve and Portfolio loss reserve
Guarantees issued by ALTUM have 250 MEUR back-up
guarantee from the Latvian state
No dividend payments by law
Total assets 451.7* MEUR
Number of outstanding contracts 14,402*
Loans
207.6* MEUR
Guarantees
182.4* MEUR
VC
51.3* M
* 31 Dec 2017
MID TERM
TENDENCIES
LOANS
VENTURE CAPITAL
GUARANTEES
10. BUSINESS OVERVIEW: CLIENT SEGMENTS
Portfolio increased by 18.1 MEUR in
2017.
The portfolio structures of the loan and
guarantee financial instruments echo
the state aid implementation priorities of
the Latvian government.
Major segments by volume – SMEs &
Midcaps and Agriculture.
The fastest growing segment – SMEs &
Midcaps, +9% in year 2017.
In 2017 total volumes are 123.1 MEUR (56% - guarantees,
42% - loans and 2% -venture capital investments).
During 2017 volume of guarantees had steep growth
compared with 2016 (by 22%).
4,697 projects were supported, incl.: SMEs & Midcaps 751
(+11% vs 2016), Agriculture 717 (-9%), Individuals 3,219
(+9%), Financial intermediaries 10 (-75%).
Financial intermediaries segment decreased due to the end
of venture capital fund Investment period. Expected to
increase in 2018 when recently signed Fund
management agreeaments become effective
* Gross value
11. The Development
Finance
Institution Law
and other
legislative acts
CORPORATE GOVERNANCE
SHAREHOLDERS’MEETING
COUNCIL
CABINET OF
MINISTERS
MANAGEMENT BOARD
(5 board members)
Internal
audit unit
Audit
committee
12. DECISION MAKING BODIES
Jēkabs Krieviņš
Member of the Board
State support programs
and the Latvian Land
Fund
Reinis Bērziņš
Chairman of the Board
Finances and
administration
Inese Zīle
Member of the Board
Business growth,
marketing and customer
service
Juris Vaskāns
Member of the Board
Venture capital financial
instruments and
Stressed assets workout
Members of all committees are appointed by the Management Board
Credit committee (12 members)
Stressed Assets management committee (12 members)
Risk and Liquidity management committee (7 members)
Information Systems (IT) management committee (6 members)
BOARD
Aleksandrs Bimbirulis
Member of the Board
Risk Management and
Credit processes
Program management committee (8 members)
13. FOCUS
AREAS
leading to
efficiency
New
products
Funding
Core
business
Improve
customer
service
Operational
efficiency
New products:
- delegated guarantees;
- export credit guarantees to EU countries up to
EUR 2 mln;
- Land Fund`s reverse rent.
Internal processes streamlined and more
efficient:
- The guarantee maximum limit increased from the
EUR 1.5 mln to EUR 3 mln;
- The signed agreement on the counter-guarantees
of InnovFIN Facility allows to issue guarantees to
innovative projects at lower rates.
Strategic shift in funding sources to decrease
administrative burden for the staff.
Limitation of non-core business activities
- Sales of investment properties in 2017-2018.
Installation of new IT infrastructure in 2018 will
lead to a substantial decrease of IT costs.
NEW PRODUCTS & EFFICIENCY
15. In 2017 the financial instruments portfolio has been augmented by 4.3% with reduced management
costs to 2.5% (2016: 3.0%)
Costs are expected to decline gradually In the coming years
IT and communications-related costs will be substantially lower after IT infrastructure upgrade
IMPROVING OPERATIONAL EFFICIENCY
16. WELL DIVERSIFIED PORTFOLIOS
• Portfolios are diversified across
economic sectors
• Thus the institution is well
positioned to withstand macro-
level risk events
• The composition of both
portfolios reflects Latvian
government’s strategic priorities
in implementing its growth
strategy
17. Funding term structure corresponds to the portfolio term structure
The aim is to reduce the dependence on Structural Funds by replacing it with
loans from international financial institutions and proceeds from bond
issuance
31 Dec 2017
18. EXCEPTIONALLY STRONG LIQUIDITY POSITION
High liquidity ratio – maintained over
350%*
Diversified exposure
Current buffer – in accordance with the
programme rules and agreements with the
State Treasury, Altum has unused credit lines
from the State Treasury to finance the
support programmes (~55 MEUR)
* Liquidity ratio: Due from other credit institutions and Treasury with maturity up to 1 month +
Investment securities (available for sale)/ Liabilities with the contractual maturity dates up to 6 months +
Financial commitments with the contractual maturity dates up to 6 months
Cash at Banks
(Aa1-Aa3);
21.1
Cash at Banks
(A1-A3);
Cash at
Banks (Ba1-
Ba3);
3.2
Cash at State
Treasury;
61.8
Bonds issued by
the Republic of
Latvia ;
Liquidity portfolio MEUR
19. VENTURE CAPITAL: PROFESSIONAL
SELECTION AND BALANCED RISKS
Business
idea
Business
start-up
Early
growth
Expansion
growth
Stable
growth
Risk
HighLow
Portfolio 51.3 M EUR,
189 projects, 11 funds
Investment decisions made by professional
fund managers – publicly procured
Ticket size within diversified range
up to 11%
Medium
Expansion Capital Funds (5)
36.6 MEUR, 76 projects
(Additional 1 contracted Q1 2018)
Venture Capital Funds (3)
10.2 MEUR, 22 projects
(Additional 2 contracted Q1 2018)
Seed Capital Funds (2)
4.5 MEUR, 91 projects
(Additional 4 contracted Q1 2018)
Acceleration Funds (1)
0 MEUR, 0 projects
(Additional 2 contracted Q1 2018)
20. KEY FINANCIAL AND PERFOMANCE INDICATORS (1)
Key Financial data 2017 2016 2015
Net income from interest, fees and commissions, TEUR 11,374 11,024 16,419
Profit for the period, TEUR 6,945 2,170 4,924
Cost to income Ratio (CIR) 54.7% 88.4% 55.8%
Employees 230 242 282
Total assets, TEUR 451,686 443,126 406,918
Tangible Common Equity(TCE)/Tangible Managed Assets (TMA) 35.6% 35.2% 37.3%
Equity, TEUR 222,486 210,094 199,610
Total risk coverage: TEUR 65,002 67,705 41,021
- Risk coverage reserve 60,060 64,833 40,662
- Risk coverage reserve used for provisions -4,753 -4,323 -1,276
- Portfolio loss reserve within Reserves (specific reserve capital) 9,695 7,195 1,635
Liquidity Ratio 180 days 507% 449% 352%
21. Financial instruments (gross value) 2017 2016 2015
Outstanding (TEUR) (by financial instrument)
Loans 207,585 217,429 218,562
Guarantees 182,376 147,175 131,120
Venture capital funds 51,310 58,541 39,929
Total 441,271 423,145 389,611
Number of contracts 14,402 11,449 8,901
Volumes granted (TEUR) (by financial instrument)
Loans 51,869 59,465 52,329
Guarantees 68,615 56,109 50,065
Venture capital funds 2,638 21,356 18,798
Total 123,122 136,929 121,192
Number of contracts 4,697 4,461 2,819
Leverage for raised private funding 185% 162% 104%
KEY FINANCIAL AND PERFOMANCE INDICATORS (2)