2 The analysis of methods of financial risk management in the jsc “Forte Bank”

2.1 A general characteristic of the company

Joint-stock company «ForteBank» is one of leading Kazakhstan banks and successfully works in the market of banking services for more than 20 years.

Today, JSC "ForteBank" took the tenth place in the country in terms of assets and is developing as a universal financial institution for all businesses, with primary focus on the retail market, as well as lending to SMEs (small and medium business).

As of May 1, 2015 years, holder of five percent or more of the shares of the total number of outstanding shares of JSC «ForteBank» is Bulat Utemuratov Zhamitovich, wielding 87.27% of placed common shares, of which: 79.79% are presented in the form of placed common shares of the Bank and 7.48 percent in the form of global depository receipts (GDRs), which are the underlying assets the Bank's common shares. Minority shareholders belong to 17.62% of placed common shares of the Bank.

JSC «ForteBank» is a party:

1. Mandatory collective insurance of deposits of natural persons of the Republic of Kazakhstan;

2. Mortgage loan guarantee fund of Kazakhstan;

3. Kazakhstan Stock Exchange (KASE);

4. Association of financiers of Kazakhstan;

5. International interbank telecommunications S.W.I.F.T. and REUTERS;

6. Chamber of Commerce and industry of the Republic of Kazakhstan;

7. A principal member of international payment systems VISA International and MasterCard International.

JSC "ForteBank" is included in a specific list of National Bank of Kazakhstan's second-tier banks, which pension assets management companies, as well as JSC «accumulative pension fund "State trust funds for accommodation on deposits. JSC "ForteBank" has an extensive branch network, which has 19 branches and 150 offices in 39 urban and rural settlements of the Republic of Kazakhstan. As well as an extensive network of acquiring devices, has approximately 800 ATMs, including about 200 ATMs with the function of receiving cash (cash-in), as well as over 200 POS-terminals in the cash advance locations and more than 6000 POS-terminals in retail outlets.

The Bank attributed the following ratings:

1) International rating agency Standard & poor's:

• Long-term credit rating «B»

• Short-term credit rating "B"

• On a national scale Bank assigned rating "kzBB"

• The Outlook: stable

2) Rating of the international rating agency Moody's Investors Service:

• Long-term rating on deposits in local and foreign currency "B3"

• Rating of priority unsecured debt "Caa1"

• Rating of subordinated debt "Caa2"

• Basic creditworthiness assessment (BCA) "Sa1"

• Long-term counterparty risk assessment (CRA) "B2 / NP"

• Long-term rating outlook: "Stable"

2.2 Analysis of the main indicators of financial - economic activity

Next, we will analyze the financial and economic performance of the enterprise.

The management of the enterprise should have a clear idea of ​​the sources and resources it will carry out its activities, and in which areas of activity it will invest its capital. Therefore, the analysis of the availability of sources of formation and allocation of capital is of great importance. In the process of analysis it is necessary:

• To study the composition, structure and dynamics of sources of capital formation of the enterprise;

• To establish the factors of change in their magnitude;

• Determine the cost of individual sources of capital, its weighted average price and the factors of change of the latter;

• Assess the level of financial risk;

• To assess the changes in the passive balance;

• To justify the optimal version of the ratio of own and borrowed capital.

Table 7

Analysis of the dynamics and structure of the capital sources of JSC "ForteBank" for 2014-2016

Capital source	Availability of sources, mln tenge					Source structure, %
	As at 31.12.2014	Asat 31.12.2015	As at 31.12.2016	Average value for 2014-2016	Deviation of 2016 from 2014 (+,-)					Average value for 2014-2016	Deviation of 2016 from 2014 (+,-)
Equity capital	1515	1510	1473	1499,3	-42		72,9	76,1	82,9	77,3	+10
Borrowed capital	562	473	303	446	-259		27,1	23,9	17,1	22,7	-10
TOTAL:	2077	1983	1776	1945,3	-301		100,0	100,0	100,0	100,0	-

Table 8

Dynamics of the structure of equity capital of JSC ForteBank for 2014-2016

Capital source	Availability of funds,mln tenge				Structure of funds, %
	As at 31.12.2014	As at 31.12.2015	As at 31.12.2016	Deviation of 2016 from 2014 (+, -)	As at 31.12.14	As at 31.12.15	As at 31.12.16	Deviation of 2016 from 2014 (+, -)
Authorized capital	1513	1513	1513	-	99,9	100,2	102,7	+2,8
Retained earnings (uncovered loss)	2	-3	-40	-42	0,1	-0,2	-2,7	-2,8
TOTAL:	1515	1510	1473	-42	100,0	100,0	100,0	-

The rate of growth of own capital (the ratio of the amount of reinvested earnings to equity) depends on the following factors:

1. Profitability of sales (PS) - the ratio of net profit to revenue;

2. Capital turnover (CP) - the ratio of revenue to the average annual amount of capital;

3. Capital structure (CS), which characterizes the financial activity of the company in attracting borrowed funds (the ratio of the average annual amount of the balance sheet to the average annual amount of equity);

4. The share of deductions of net profit for the development of production (SDNP) (ratio of reinvested profit to net profit).

To calculate the influence of these factors on changes in the growth rates of own capital, the following model proposed by A.D. Sheremet and R.S. Sayfullin:

(1)

Where GROC - rates of growth of own capital

RE - reinvested earnings

OC – own capital

NP - net profit

R - revenue

TAC - the total amount of capital.

The first two factors reflect the tactical, and the last two - strategic financial policy. Correctly chosen price policy, expansion of sales markets lead to an increase in sales and profit, an increase in the level of profitability of sales and the speed of capital turnover.

Calculation of the influence of these factors can be performed by one of the methods of deterministic factor analysis, using the data of Table 9.

We make the calculation by the method of chain substitution:

GROC1 = -1,75х0,807х1,26х (-7,9) = 14,1% ;

GROC2 = -1,23х0,807х1,26х (-7,9) = 9,9%;

GROC3 = -1,23х1,108х1,26х (-7,9) = 13,6%;

GROC4 = -1,23х1,108х1,23х (-7,9) = 13,2%;

GROC5 = -1,23х1,108х1,23 (-7,3) = 12,2%.

The overall change in the rate of growth of own capital is:

12.2-14.1 = -1.9 (%),

Table 9