Reflecting a dynamic operational and financial performance over recent years and to support the tracking of strategic implementation, the 2007 Strategic Portfolio Review (SPR) provides an assessment of relevant strategic portfolio development trends from an integrated perspective covering transition, operational, risk and financial factors.
The 2007 SPR contains a review of overall portfolio development trends in a similar format as in previous SPRs. This allows for cross-temporal trend analysis along a fixed set of parameters over a long time period. This analysis shows that the Bank is overall implementing actively the CRR3 strategy being ahead of objectives in relation to a number of parameters.
The 2007 SPR also reflects innovation with the introduction of a new approach to assess the strategic fit of Bank activities relative to transition gaps. In line with previous practice, the 2007 SPR develops a set of specific analyses which change from year to year reflecting evolving issues and priorities. The specific topics of analysis for the 2007 SPR include:
- reflow trends are examined in detail for each main reflow parameter taking account of rising volatility and liquidity issues in the financial markets;
- in light of the strong increase in equity activity in 2007 and of the importance of realised equity gains to the net income of the Bank, this SPR contains a detailed analysis of operational and financial trends of the equity portfolio; and
- considering their importance to the strategic agenda and performance of the Bank, the 2007 SPR provides a detailed quantitative analysis of results since their launch for the three major strategic initiatives of the Bank which include the Early Transition Countries Initiative, the Western Balkans Initiative, and the Sustainable Energy Initiative.
Main points emerging from the analysis of these special topics are:
- Reflecting the global tightening of liquidity, prepayments and divestments have decreased relative to previous levels. Combined with a reduction of repayments in 2007, this results in a decrease in reflows. The analysis of reflows in this document is useful to the updating of the medium term operational projections of the Bank.
- Current conditions in the financial markets have reduced the fair value of the Bank’s listed equity portfolio and increased the uncertainty in the timing of divestments and hence the realisation of gains. Furthermore, the combination of growth in equity and high EURIBOR rates increases the holding cost of equity. Considering the importance of realised equity gains to the Bank’s net income, this analysis is relevant to the updating of the medium term financial projections of the Bank.
- The assessment of the operational results of the Bank’s strategic initiatives shows that the Bank has been meeting, and in most cases exceeding, stated objectives. For example this is the case for the ETCI in terms of the growth in the number of operations. It is also the case for the Sustainable Energy Initiative with the three year objective of €1.5 billion of EBRD SEI financing being met within two years. The strong results achieved under these initiatives reflects the Bank’s capacity to implement ambitious strategic objectives in complex and innovative areas. These results will need to be sustained during the remaining period of the CRR3.
