Otkritie Holding Joint Stock Company Interim condensed consolidated financial statements

Transcription

1 Otkritie Holding Joint Stock Company Interim condensed consolidated financial statements

2 Interim Contents Report on review of interim Interim Interim condensed consolidated statement of financial position... 1 Interim condensed consolidated income statement... 2 Interim condensed consolidated statement of comprehensive income... 3 Interim condensed consolidated statement of changes in equity... 4 Interim condensed consolidated statement of cash flows... 5 Selected explanatory notes to the interim 1. Principal activities Basis of preparation Cash and cash equivalents Precious metals Amounts due from credit institutions Financial assets at fair value through profit or loss Loans to customers Available-for-sale investment securities Held-to-maturity investment securities Taxation Other impairment Other assets Amounts due to credit institutions Amounts due to customers and borrowings Debt securities issued Other liabilities Subordinated debt Equity Commitments and contingencies Gains and losses from operations with financial instruments Net fee and commission income Other income Personnel and administrative expenses Fair value of assets and liabilities Major subsidiaries and associates Business combinations and disposals Segment analysis Related party transactions Events after the reporting period... 52

3

4

5 Interim Interim condensed consolidated income statement For the six months ended 30 June 2014 Notes Interest income Loans to customers 124,277 70,139 Amounts due from credit institutions 8,440 2,197 Investment securities 15,736 3, ,453 75,376 Financial assets at fair value through profit or loss 9,577 6, ,030 81,454 Interest expense Borrowings (9,659) (11,087) Amounts due to customers (52,588) (23,979) Amounts due to credit institutions (34,570) (7,851) Debt securities issued (16,754) (8,005) Other (190) (113,571) (51,112) Net interest income 44,459 30,342 Allowance for impairment of interest bearing assets 5, 7 (34,222) (14,456) Net interest income after allowance for impairment of interest bearing assets 10,237 15,886 Net fee and commission income 21 8,220 6,327 Net gains from trading securities 20 14,032 4,038 Net gains from foreign currencies 20 13, Net gains/(losses) from precious metals (27) Net gains/(losses) from other derivative instruments 20 (960) 2,108 Net losses from available-for-sale investment securities (484) (134) Gain from disposal of subsidiaries 4, Share in profit/(loss) of associates 23 (4) Other income 22 3,194 3,406 Non-interest income 42,210 16,195 Personnel and administrative expenses 23 (27,727) (19,565) Depreciation and amortization (3,833) (3,448) Other impairment 11 (2,011) (784) Non-interest expense (33,571) (23,797) Change in non-controlling interest in mutual funds (1) (5) Profit before tax 18,875 8,279 Income tax expense 10 (2,630) (1,942) Net profit 16,245 6,337 Net profit attributable to: - shareholders of the Group 16,005 4,697 - non-controlling interests 240 1,640 The accompanying notes 1 to 29 are an integral part of these interim. 2

6 Interim Interim condensed consolidated statement of comprehensive income For the six months ended Notes 30 June 2014 Profit for the period 16,245 6,337 Other comprehensive income Other comprehensive income to be reclassified to profit or loss in subsequent periods: Unrealized gains on available-for-sale investment securities 2,741 1,080 Realized gains on disposal of available-for-sale investment securities reclassified to the income statement Currency translation differences (1,013) (69) Income tax effect 10 (1,069) (240) Net other comprehensive income to be reclassified to profit or loss in subsequent periods 1, Other comprehensive income for the period, net of tax 1, Total comprehensive income for the period 17,388 7,242 Attributable to: - shareholders of the Group 14,523 5,522 - non-controlling interests 2,865 1,720 The accompanying notes 1 to 29 are an integral part of these interim. 3

7 Interim Interim condensed consolidated statement of changes in equity For the six months ended Share capital Share premium Treasury shares Attributable to shareholders of the Group Unrealized gains/(losses) Revaluation on revaluation reserve for of available-forsale property and securities equipment Retained earnings Foreign currency translation reserve Total Non-controlling interests Total equity As of 31 December ,235 45,365 (1,524) 1,191 1,330 10,741 1,117 59,455 17,990 77,445 Profit for the period 4,697 4,697 1,640 6,337 Other comprehensive income/(loss) 890 (65) Total comprehensive income 890 4,697 (65) 5,522 1,720 7,242 Depreciation of revaluation reserve for real estate (41) 41 Additional issue (Note 18) ,697 16,003 16,003 Effect of increase/(decrease) of the Group's interest in subsidiaries (227) 361 (478) (344) Cessation of mandatory offer to minority shareholders of a subsidiary bank (6,106) (6,106) 32,275 26,169 Dividends (Note 18) (500) (500) (500) As of 30 June ,541 61,062 (1,524) 1,854 1,650 8,395 1,052 74,030 52, ,796 As of 31 December ,541 60, ,791 16,288 9,962 90,418 67, ,803 Profit for the period 16,005 16, ,245 Other comprehensive income/(loss) (476) (1,006) (1,482) 2,625 1,143 Total comprehensive income (476) 16,005 (1,006) 14,523 2,865 17,388 Depreciation of revaluation reserve for real estate (14) 14 Acquisition of a subsidiary Effect of increase/(decrease) of the Group's interest in subsidiaries (4,929) (4,929) 5, As of 1,541 60,753 (393) 1,777 27,378 8, ,012 75, ,427 The accompanying notes 1-29 are an integral part of these consolidated financial statements. 4

8 Interim Interim condensed consolidated statement of cash flows For the six months ended 30 June 2014 Notes Cash flows from operating activities Interest received 123,374 74,843 Interest paid (103,016) (46,937) Fees and commissions received 11,411 8,523 Fees and commissions paid (3,648) (2,365) Gains less losses from trading securities 10,640 7,098 Gains less losses from foreign currencies 14,842 1,379 Gains less losses from precious metals Gains less losses from other derivative instruments (1,245) Other income received 1,687 3,795 Personnel expenses paid (16,439) (10,912) Other operating expenses paid (10,038) (9,047) Cash flows from operating activities before changes in operating assets and liabilities 28,316 26,567 Net (increase)/decrease in operating assets Precious metals (5,565) 445 Amounts due from credit institutions (415,259) (4,000) Financial assets at fair value through profit or loss (24,631) 84,988 Loans and borrowings 61,969 (81,011) Other assets 1,336 3,166 Net increase/(decrease) in operating liabilities Amounts due to credit institutions 440,098 (15,369) Amounts due to customers and borrowings 115,422 (25,384) Promissory notes and certificates of deposit issued (51,926) 31,488 Other liabilities (247) 1,329 Net cash flows from operating activities before income tax 149,513 22,219 Income tax paid (603) (3,175) Net cash from operating activities 148,910 19,044 Cash flows from investing activities Purchase of available-for-sale investment securities (630,902) (91,617) Proceeds from sale and redemption of available-for-sale investment securities 93,385 42,133 Purchase of held-to-maturity investment securities (78) (16,576) Proceeds from redemption of held-to-maturity investment securities 2,637 Prepayment for shares acquired (16,356) Acquisition of subsidiaries, net of cash received 26 25, Disposal of subsidiaries, net of cash disposed 26 (3,215) 249 Purchase of property and equipment and intangible assets (1,145) (937) Proceeds from sale of property and equipment and intangible assets Purchase of investment properties (1,908) (913) Proceeds from sale of investment property 3, Net cash used in investing activities (510,748) (83,456) Cash flows from financing activities Proceeds from increase in share capital 18 16,003 Subordinated loans received Subordinated loans repaid (22,649) (2) Proceeds from bonds and loan participation notes issued 36,228 10,984 Repurchase of bonds and loan participation notes of the Group (20,471) (11,407) Proceeds from other borrowings 38 Acquisition of non-controlling interests (4,234) Proceeds from sale of interests in subsidiaries Redemption of interests in mutual funds controlled by the Group (3) (82) Dividends of subsidiaries paid to non-controlling shareholders (20) Net cash flows from/(used in) financial activities (6,030) 12,003 Effect of exchange rate changes on cash and cash equivalents (3,772) (1,210) Net decrease in cash and cash equivalents (371,640) (53,619) Cash and cash equivalents, beginning 3 650, ,037 Cash and cash equivalents, ending 3 279, ,418 The accompanying notes 1-29 are an integral part of these consolidated financial statements. 5

9 Selected explanatory notes to the interim 1. Principal activities These consolidated financial statements of Otkritie Holding JSC (hereinafter, the "Company") and its subsidiaries (hereinafter, the "Group") have been prepared in accordance with International Accounting Standard (IAS) 34 Interim Financial Reporting for the six-month period ended. The interim do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Group s annual financial statements for the year ended 31 December Otkritie Holding JSC is the ultimate parent of the Group. It was formed on 17 March 2004 as a limited liability company Investment Group Otkritie under the laws of the Russian Federation. In February 2007, Investment Group Otkritie Ltd. was renamed into Financial Corporation OTKRITIE Ltd. In December 2010, the Company was reorganized into an open joint-stock company. In May 2014, Financial Corporation OTKRITIE JSC was renamed into Otkritie Holding Joint Stock Company. The Company s registered office is Russia, Moscow, ul. Letnikovskaya, 2, bld. 4. The Company s head office is located at Russia, Moscow, ul. Letnikovskaya, 2, bld. 4. A list of major subsidiaries and associates included in these consolidated financial statements is provided in Note 25. The Group's activities comprise providing a wide range of banking, investment, insurance and pension solutions to private, corporate and institutional clients in five principal areas of business: commercial and investment banking, brokerage, management and insurance services. As a result of reorganization performed in September 2010 by merger of Petrovsky Bank OJSC and OTKRITIE Investment Bank JSC with OTKRITIE Bank JSC (before merger OTKRITIE Commercial Bank CJSC), the Group's commercial banking and major part of investment banking operations were performed through one legal entity OTKRITIE Bank JSC, a Company's subsidiary. In June 2013, the Group obtained control over NOMOS-BANK OJSC group of companies, including subsidiary banks of NOMOS-BANK OJSC: BANK OF KHANTY-MANSIYSK and Novosibirsk Municipal Bank OJSC. In June 2014, NOMOS-BANK OJSC changed its name to Bank OTKRITIE Financial Corporation OJSC, in November 2014 the Bank was reorganized into a public joint-stock company. The full corporate name of the Bank is Public Joint-Stock Company "Bank Otkritie Financial Corporation", the short name is "Bank Otkritie Financial Corporation" (Public Joint-Stock Company). In November 2014, BANK OF KHANTY-MANSIYSK was reorganized through merger with OTKRITIE Bank JSC and Novosibirsk Municipal Bank OJSC. The Bank is a legal successor of OTKRITIE Bank JSC and Novosibirsk Municipal Bank OJSC in terms of all of their liabilities to debtors and creditors, including those challenged by the parties. The full corporate name of the Bank was changed to Public Joint-Stock Company "Khanty-Mansiysk bank Otkritie", the short corporate name is defined as "Khanty-Mansiysk bank Otkritie" (PJSC). The Bank is regulated by the Central Bank of the Russian Federation under license number According to the development strategy of the Group, "Bank Otkritie Financial Corporation" (Public Joint-Stock Company) is mainly involved in corporate clients services, "Khanty-Mansiysk bank Otkritie" (PJSC) focuses on services to retail clients and small and medium sized enterprises. Commercial banking operations performed by the Group include lending, raising RUB-denominated deposits and deposits in freely convertible currencies, settlement and currency exchange operations. Investment banking operations include securities trading and trading in derivative financial instruments, operations on the equity share and debt capital markets, services related to mergers and acquisitions and operations on the money market, including interbank loan and foreign exchange markets. The Group provides brokerage services and performs securities trading and trading in derivative financial instruments primarily through OTKRITIE Brokerage house JSC and Otkritie Capital International Limited, wholly owned subsidiaries of the Company. Asset management services are provided primarily through OTKRITIE Asset Management LLC (a wholly owned subsidiary of the Company) and include management of collective investments, fiduciary management of cash and securities in the interests of individuals and legal entities. The Group s operations are conducted on both Russian and international markets. "Bank Otkritie Financial Corporation" (Public Joint-Stock Company) holds general banking license No issued by the Central Bank of the Russian Federation, licenses for carrying out transactions with precious metals, general license of the Ministry of Economic Development and Trade of the Russian Federation for exporting gold and silver, licenses for securities trading and trading in derivative financial instruments, including brokerage, dealing and custody services, as well as for securities management and special depositary services on investment funds, mutual funds and non-state pension funds. "Bank Otkritie Financial Corporation" (Public Joint-Stock Company) is a member of the obligatory deposit insurance system of the Russian Federation. 6

10 Selected explanatory notes to the interim 1. Principal activities (continued) On 16 April 2015, the Group acquired control over National Bank TRUST as a result of acquisition of the additional issue (100%) of ordinary shares of National Bank TRUST, which is % of the Bank's share capital. Acquisition details are provided in Note 26. The Bank operates under general banking license No issued by the Central Bank of the Russian Federation on 20 October 2006, a license for operations with precious metals, a license for securities trading and a license for custody services. The Bank is a member of the obligatory deposit insurance system of the Russian Federation. The Bank is primarily engaged in attracting deposits, granting loans, cash management in Russia and abroad, foreign currency operations, brokerage services and securities trading and providing other banking services to legal entities and individuals. OTKRITIE Brokerage house JSC holds the FSFM's licenses for brokerage, dealing and custody services, as well as for securities management. Otkritie Asset Management LLC holds the FSFM's licenses for securities management and operating investment funds, mutual funds and non-state pension funds. Otkritie Capital International Ltd. (UK) and Otkritie Capital Cyprus Ltd. (Cyprus) hold respective licenses issued by local regulators. OTKRITIE Insurance JSC is a universal insurance company offering a range of key insurance products: voluntary medical insurance; accident and health insurance; international travel insurance; auto insurance; property insurance; insurance for explosion-hazard production facilities; liability and professional indemnity insurance; financial risk insurance. The Company possesses insurance license for 13 types of insurance and a license for reinsurance. In April 2014, the Group launched a new insurance direction, in particular, a long-term cumulative and unit-linked life insurance. This direction is developed within the framework of Otkritie Life Insurance LLC. The Group has a large network of offices in the Russian Federation, which comprises more than 700 offices in economically important regions of Russia. The Group is also represented on international markets and has offices in London, New York and Limassol. The Group's ultimate beneficiaries are as follows: Beneficiary 31 December 2014 % % Belyaev Vadim Stanislavovich Fedun Leonid Arnoldovich, Alekperov Vagit Yusufovich VTB Bank OJSC 9.99 Aganbegyan Ruben Abelovich N-S PF Lukoil Garant Mamut Aleksandr Leonidovich Nesis Aleksandr Natanovich Gordeev Sergey Eduardovich 6.38 Other Total Other beneficiaries include beneficiaries whose interest is below 5.00%. 2. Basis of preparation General These interim have been prepared in accordance with International Financial Reporting Standards ("IFRS"). The Company is required to maintain its records and prepare its financial statements for regulatory purposes in Russian rubles in accordance with Russian accounting and banking legislation and related instructions ("RAL"). Subsidiaries are required to maintain their records in accordance with local legislation and regulatory acts of the country of incorporation and prepare their financial statements in local currency. These consolidated financial statements are based on the Group's local books and records, as adjusted and reclassified in order to comply with IFRS. The consolidated financial statements have been prepared under the historical cost convention except as disclosed in the accounting policies below. For example, trading securities and available-for-sale securities, derivative financial instruments, investment property, land and buildings have been measured at fair value. These consolidated financial statements are presented in millions of Russian rubles ("RUB million"), unless otherwise indicated. 7

11 Selected explanatory notes to the interim 2. Basis of preparation (continued) Changes in accounting policy The accounting policies adopted in the preparation of these interim are consistent with those followed in the preparation of the Group's annual financial statements for the year ended 31 December 2014, except for the adoption of new standards as of 1 January 2015, noted below. The Group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective. The nature and the effect of these changes are disclosed below. Although these new standards and amendments apply for the first time in 2015, they do not have a material effect on the interim condensed consolidated statements of the Group. The nature and the effect of each new standard or amendment are described below: Amendments to IAS 19 Defined Benefit Plans: Employee Contributions IAS 19 requires an entity to consider contributions from employees or third parties when accounting for defined benefit plans. Where the contributions are linked to service, they should be attributed to periods of service as a negative benefit. These amendments clarify that, if the amount of the contributions is independent of the number of years of service, an entity is permitted to recognize such contributions as a reduction in the service cost in the period in which the service is rendered, instead of allocating the contributions to the periods of service. The amendments are effective for annual periods beginning on or after 1 July This amendment is not relevant to the Group, since none of the entities within the Group has defined benefit plans with contributions from employees or third parties. Annual IFRS improvements: These improvements are effective from 1 July 2014 and the Group has applied these amendments for the first time in these interim. They include: IFRS 2 Share-based Payment This improvement is applied prospectively and clarifies various issues relating to the definitions of performance and service conditions which are vesting conditions, including: A performance condition must contain a service condition; A performance target must be met while the counterparty is rendering service; A performance target may relate to the operations or activities of an entity, or to those of another entity in the same group; A performance condition may be a market or non-market condition; If the counterparty, regardless of the reason, ceases to provide service during the vesting period, the service condition is not satisfied. IFRS 3 Business Combinations The amendment is applied prospectively and clarifies that all contingent consideration arrangements classified as liabilities (or assets) arising from a business combination should be subsequently measured at fair value through profit or loss whether or not they fall within the scope of IFRS 9 (or IAS 39, as applicable). This is consistent with the Group s current accounting policy, and thus this amendment does not impact the Group s accounting policy. IFRS 8 Operating Segments The amendments are applied retrospectively and clarify that: An entity must disclose the judgments made by management in applying the aggregation criteria in paragraph 12 of IFRS 8, including a brief description of operating segments that have been aggregated and the economic characteristics (e.g., sales and gross margins) used to assess whether the segments are 'similar'; The reconciliation of segment assets to total assets is only required to be disclosed if the reconciliation is reported to the chief operating decision maker, similar to the required disclosure for segment liabilities. The Group did not apply the aggregation criteria provided in paragraph 12 of IFRS 8. IFRS 13 Short-term Receivables and Payables Amendments to IFRS 13 This amendment to IFRS 13 clarifies in the Basis for Conclusions that short-term receivables and payables with no stated interest rates can be measured at invoice amounts when the effect of discounting is immaterial. This is consistent with the Group s current accounting policy, and thus this amendment does not impact the Group s accounting policy. 8

12 Selected explanatory notes to the interim 2. Basis of preparation (continued) Changes in accounting policies (continued) IAS 16 Property, Plant and Equipment and IAS 38 Intangible Assets The amendment is applied retrospectively and clarifies in IAS 16 and IAS 38 that the asset may be revalued by reference to observable data on either the gross or the net carrying amount. In addition, the accumulated depreciation or amortization is the difference between the gross and carrying amounts of the asset. During the current interim reporting period, the Group did not recognize the adjustments to the value of assets made as a result of revaluation. IAS 24 Related Party Disclosures The amendment is applied retrospectively and clarifies that a management entity (an entity that provides key management personnel services) is a related party subject to the related party disclosures. In addition, an entity that uses a management entity is required to disclose the expenses incurred for management services. This amendment is not relevant for the Group as it does not receive any management services from other entities. Annual IFRS improvements: These improvements are effective from 1 July 2014 and the Group has applied these amendments for the first time in these interim. They include: IFRS 3 Business Combinations The amendment is applied prospectively and clarifies that for the purpose of exceptions from the scope of IFRS 3: Joint arrangements, not only joint ventures, are outside the scope of IFRS 3; This scope exception applies only to the accounting in the financial statements of the joint arrangement itself. The amendment is not relevant to the Group and its subsidiaries. IFRS 13 Fair Value Measurement The amendment is applied prospectively and clarifies that the portfolio exception in IFRS 13 can be applied not only to financial assets and financial liabilities, but also to other contracts within the scope of IFRS 9 (or IAS 39, as applicable). The Group does not apply the exception provided in IFRS 13 for companies holding a group of financial assets and liabilities (portfolio) and managing this group as a whole. IAS 40 Investment Property The description of ancillary services in IAS 30 differentiates between investment property and owner-occupied property (i.e., property, plant and equipment). The amendment is applied prospectively and clarifies that IFRS 3, and not the description of ancillary services in IAS 40, is used to determine if the transaction is the purchase of an asset or business combination. The Group has relied on IFRS 3, not IAS 40, in determining whether the transaction is the purchase of an assets or business combination. Therefore, these amendments had no impact on the Group s accounting policies. Meaning of effective IFRSs Amendments to IFRS 1 The amendment clarifies in the Basis for Conclusions that an entity may choose to apply either a current standard or a new standard that is not yet mandatory, but permits early application, provided that either standard is applied consistently throughout the periods presented in the entity's first IFRS financial statements. This amendment had no impact on financial statements of the Group, since the Group is an existing IFRS preparer. 9

13 Selected explanatory notes to the interim 3. Cash and cash equivalents Cash and cash equivalents comprise: 31 December 2014 Settlement and correspondent accounts with banks 74,175 36,496 Correspondent account with the CBR 55,371 23,847 Amounts at stock exchanges' clearing houses 52,257 39,809 Cash on hand 35,558 49,130 Deposits with credit institutions up to 90 days 32,637 51,564 Deposits with the CBR up to 90 days 13,600 37,001 Amounts on brokerage accounts 8,221 41,008 Reverse repurchase agreements with credit institutions up to 90 days 7, ,753 Amounts under trust management Total cash and cash equivalents 279, ,669 Correspondent accounts with the CBR represent balances with the Central Bank of the Russian Federation used for settlement operations. Amounts with stock exchanges' clearing houses represent the Group's unrestricted cash balances on stock exchanges' accounts. Amounts on brokerage accounts represent the Group's balances on accounts with brokerage houses, which the Group transferred under brokerage services agreements to enter into securities and derivatives contracts. The amounts transferred under reverse repurchase agreements and the value of securities received as collateral are as follows: Carrying amount of funds transferred 31 December 2014 Fair value of Carrying amount of collateral funds transferred Fair value of collateral Corporate bonds 4,944 4, , ,499 Corporate shares 2,050 2,101 3,374 3,768 Russian state bonds (OFZ) Corporate Eurobonds 8,052 9,381 Municipal and subfederal bonds Total 7,148 7, , ,408 Securities received under reverse repurchase agreements with credit institutions with the fair value of RUB 298 million (31 December 2014: RUB 231,882 million) were transferred under direct repurchase agreements in the amount of RUB 287 million (31 December 2014: RUB 183,528 million). 4. Precious metals Precious metals comprise: 31 December 2014 Gold in vault 6,561 1,878 Gold in transit Silver in vault Silver in transit Other precious metals in vault Precious metal coins Total precious metals 8,084 2,312 10

14 Selected explanatory notes to the interim 5. Amounts due from credit institutions Amounts due from credit institutions comprise: 31 December 2014 Reverse repurchase agreements with credit institutions over 90 days 405,872 Restricted cash at stock exchanges 30,418 22,502 Term deposits with credit institutions over 90 days 16,952 18,945 Obligatory reserves with the CBR 15,857 10,541 Current restricted amounts with credit institutions 10,301 4,741 Other amounts Total due from credit institutions, gross 480,015 56,984 Less: allowance for impairment (559) (10) Total due from credit institutions 479,456 56,974 Term deposits over 90 days are the time placement of the Group's funds in resident and non-resident banks. Credit institutions are required to maintain a non-interest earning cash deposit (obligatory reserve) with the CBR, the amount of which depends on the level of funds attracted by the credit institution. The Group s ability to withdraw such deposit is significantly restricted by the statutory legislation. Restricted cash at stock exchanges represents cash balances provided by the Group to secure positions opened by the Group and its customers at Futures and Options on RTS (FORTS), National Clearing Center СJSC and foreign stock exchanges as of the end of the reporting period, as well as contributions to the insurance fund at Futures and Options on RTS (FORTS). The movements in the allowance for impairment of amounts due from credit institutions were as follows: 30 June 2014 At the beginning of the period 10 1 Allowance/(reversal of allowance) for impairment At the end of the period The amounts transferred under reverse repurchase agreements and the value of securities received as collateral are as follows: Carrying amount of funds transferred Fair value of collateral Corporate bonds 395, ,049 Corporate Eurobonds 4,922 5,496 Mortgage participation certificates 4,740 5,007 Corporate shares Mutual funds units Total 405, ,523 11

15 Selected explanatory notes to the interim 6. Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss comprise: 31 December 2014 Debt securities issued by state and municipal authorities Russian state bonds (OFZ) 47,351 6,889 Municipal and subfederal bonds 11,037 1,533 Bonds of foreign governments 1,380 1,411 Eurobonds of the Russian Federation Corporate debt securities Corporate Eurobonds 90,468 40,018 Corporate bonds 69,791 12,932 Total trading debt securities 220,288 62,945 Corporate equity securities Corporate shares 12,337 12,074 Total trading equity securities 12,337 12,074 Financial assets at fair value through profit or loss Derivative financial instruments 52, ,200 Corporate shares Total financial assets at fair value through profit or loss 53, ,091 Total financial assets at fair value through profit or loss 285, ,110 Blocked as collateral against borrowings from the CBR 14, Financial assets at fair value through profit or loss pledged under repurchase agreements comprise: 31 December 2014 Debt securities issued by state and municipal authorities Eurobonds of the Russian Federation Municipal and subfederal bonds 8,167 Russian state bonds (OFZ) 581 Corporate debt securities Corporate Eurobonds 25,015 47,359 Corporate bonds 63,879 Total trading debt securities pledged under repurchase agreements 25, ,007 Corporate equity securities Corporate shares 9, Mutual funds units 64 Total trading equity securities pledged under repurchase agreements 9, Total financial assets at fair value through profit or loss pledged under repurchase agreements 34, ,082 Russian state bonds (OFZ) are represented by RUB-denominated debt securities issued by the Ministry of Finance of the Russian Federation. Municipal and subfederal bonds are represented by RUB-denominated debt securities issued by regional and municipal authorities of the Russian Federation. Bonds of foreign governments are represented by USD-denominated treasury bonds issued by the United States Department of the Treasury. Eurobonds of the Russian Federation are represented by debt securities denominated in USD issued by the Ministry of Finance of the Russian Federation. 12

16 Selected explanatory notes to the interim 6. Financial assets at fair value through profit or loss (continued) Corporate Eurobonds are debt securities issued by major Russian and foreign finance, metals, oil and gas and energy companies. Corporate bonds are represented by RUB-denominated debt securities issued by major Russian and international finance, telecom, metals, oil and gas, transport and other companies. Derivative financial instruments are mainly represented by swaps and forwards for underlying assets including foreign currencies, precious metals or securities. As of, the Group attracted funds collateralized by trading securities totaling RUB 19,614 million (31 December 2014: RUB 104,314 million) under direct repurchase agreements with the CBR, RUB 3,310 million (31 December 2014: nil) under repurchase agreements with credit institutions recorded as amounts due to credit institutions, and RUB 8,889 million (31 December 2014: RUB 962 million) under repurchase agreements with legal entities recorded as amounts due to customers and borrowings (Notes 13, 14). As of, trading securities with the fair value of RUB 14,572 million (31 December 2014: RUB 790 million) were blocked as collateral against the credit line with the CBR. As of and 31 December 2014, the Group did not utilize the credit facility. Analysis of debt financial assets at fair value through profit or loss by credit quality as of is as follows: Investment rating Speculative rating No rating Total Debt securities issued by state and municipal authorities Municipal and subfederal bonds 6 4,906 6,125 11,037 Russian state bonds (OFZ) 47,351 47,351 Bonds of foreign governments 1,380 1,380 Eurobonds of the Russian Federation Corporate debt securities Corporate Eurobonds 5, ,072 1, ,483 Corporate bonds 9,512 50,881 9,398 69,791 Total debt financial assets at fair value through profit or loss 63, ,859 16, ,558 Analysis of debt financial assets at fair value through profit or loss by credit quality as of 31 December 2014 is as follows: Investment rating Speculative rating No rating Total Debt securities issued by state and municipal authorities Municipal and subfederal bonds 9,700 9,700 Russian state bonds (OFZ) 7,470 7,470 Bonds of foreign governments 1,411 1,411 Eurobonds of the Russian Federation Corporate debt securities Corporate Eurobonds 40,241 46, ,377 Corporate bonds 16,037 59,317 1,457 76,811 Total debt financial assets at fair value through profit or loss 65, ,992 1, ,952 The ratings in the tables above are determined based on the rating scales of international rating agencies. Following the amendments to IAS 39 and IFRS 7 Reclassification of Financial Assets, during 2014, the Group reclassified certain items. 13

17 Selected explanatory notes to the interim 6. Financial assets at fair value through profit or loss (continued) The Group reclassified certain financial assets out of held for trading category to amounts due from credit institutions and loans to customers as they were no longer held for the purpose of selling them in the near future and they ceased to be actively traded. As of the reclassification date, these financial assets meet the definition of loans and receivables and were not classified as held for trading at initial recognition. The Group has an intention and ability to hold these assets for the foreseeable future until maturity. Additionally, during 2014, the Group reclassified certain financial assets from investment securities available for trading to investments securities available for sale and held-to-maturity investment securities due to a rare case. The Group defines a rare case as rare circumstances arising from a single event that is unusual and highly unlikely to recur in the near future. The Group's management believes that a combination of several events during 2014, inducing economic sanctions imposed by certain countries on Russia, rapid decline in oil prices resulting in decrease and significant volatility of RUB to other currencies, increase in RUB interest rates and liquidity deficit in the Russian market, meets the definition of a rare case according to IFRS 39 (see Note 24 for details). The Group has the intention and ability to hold financial assets reclassified to held-to-maturity investments securities until maturity. Such securities are measured at amortized cost using the effective interest method less any allowance for impairment. Unwinding of the discount is recorded in the interest income over the period to maturity using the effective interest method. The impact of reclassifications is as follows: Amounts due from credit institutions Loans to customers Available-for-sale investment securities Held-to-maturity investment securities Fair value at the date of reclassification 2,274 3,748 18,217 20,881 Disposal of securities (347) (627) (2,161) (17,324) Carrying amount of reclassified assets as of 2,233 3,107 16,300 24,022 Fair value of reclassified assets as of 2,216 3,017 16,300 23,585 Fair value gain/(loss) recognized in equity on reclassified assets before reclassification for the six months ended Fair value gain/(loss) that would have been recognized on the assets reclassified for the six months ended if the reclassification had not been made (17) (90) 772 (747) Gain/(loss) recognized after reclassification in the income statement for the six months ended, including: Effect of exchange rate changes (7) (527) Net interest income ,124 Average effective interest rate at the date of reclassification 9.12% 9.73% 0.00% 6.60% Cash flows expected to be recovered at the date of reclassification 2,753 4,150 22,630 14

18 Selected explanatory notes to the interim 7. Loans to customers Loans to customers comprise: 31 December 2014 Corporate lending 898, ,992 Reverse repurchase agreements 420, ,943 Consumer lending 158, ,458 Residential mortgages 74,657 68,677 Small and medium business lending 43,842 44,061 Factoring 24,869 13,950 Credit cards 18,400 9,246 Margin lending 8,586 6,566 Car loans 4,886 6,006 Claims under letters of credit 1,132 5,051 Net investment in finance leases Total loans to customers before allowance for impairment 1,654,518 1,530,010 Less: allowance for impairment (77,605) (44,245) Total loans to customers 1,576,913 1,485,765 Corporate lending represents loans to legal entities, individual entrepreneurs, municipal and regional authorities usually in the form of standard loan facilities, overdrafts and note-backed lending. Reverse repurchase agreements represent the Group's securities reverse repurchase transactions. From the economic standpoint, reverse repurchase is similar to issuing loans collateralized by securities. Consumer lending represents loans to individuals to finance their current needs. Residential mortgages are loans issued to individuals for purchasing or building residential properties secured by acquired or other owned property. Small and medium business lending includes loans to legal entities and individual entrepreneurs. Loans are issued for current purposes (increase in commodity turnover, acquisition of movable and immovable property, investments in securities, etc.). Factoring is a complex of financial services that the Group provides to a client in exchange for assignment of receivables, which helps companies operating on deferred payment terms to receive cash under concluded agreements before the customer pays for goods and services. Credit cards are general-purpose loans to individuals in the form of revolving credit facilities. Margin lending includes loans issued by broker companies to legal entities, individuals and individual entrepreneurs to acquire securities against the present value of the securities acquired. Car loans are loans issued to individuals for purchasing vehicles produced either in Russia or abroad. Letters of credit are the Group's claims to parties of sales transactions settlements (performance of work/provision of services transactions) based on documents stipulated by the terms of letter of credit. Net investment in financial leases is gross investment of the Group in leases less finance income received. 15

19 7. Loans to customers (continued) Allowance for impairment of loans to customers A reconciliation of the allowance for loan impairment by class is as follows: Corporate lending Consumer loans Small and medium business lending Car lending Residential mortgages Margin lending Reverse repurchase agreements Credit cards Net investment in finance leases Factoring Total As of 31 December ,893 13,437 3, , ,245 Charge/(reversal) of allowance for impairment during the period 19,229 10,667 1, , (69) 33,673 Amounts written off (268) (12) (1) (25) (306) Disposal from loans and borrowings (900) 16 (421) (2) (10) (1,317) Disposal of subsidiaries (175) (175) Redemption and reversal of loans and borrowings previously written off 1, ,899 Translation difference (421) 11 (3) (1) (414) As of 43,327 23,915 4,888 1,053 1, , ,605 Individual impairment 33, , ,378 Collective impairment 10,209 23,808 2,219 1,053 1, , ,227 Amount of loans individually determined to be impaired before impairment allowance 141, ,691 2, , June 2014 As of 31 December ,185 6,051 1, ,100 Charge/(reversal) of allowance for impairment during the period 6,169 5,721 1, (2) 14,447 Amounts written off (3,351) (444) (662) (40) (8) (53) (62) (4,620) Disposal from loans and borrowings (1,594) (1,670) (40) (1) (3) (268) (3,576) Disposal of subsidiaries (91) (225) (316) Redemption and reversal of loans and borrowings previously written off Translation difference 113 (2) As of 30 June ,859 9,718 2, , ,707 Individual impairment 7,943 1, ,303 Collective impairment 8,916 9,718 1, , ,404 Amount of loans, individually determined to be impaired, before deducting any individually assessed impairment allowance 43,646 2, ,275 Claims under letters of credit 16

20 7. Loans to customers (continued) Allowance for impairment of loans to customers (continued) In accordance with the CBR requirements, loans may only be written off with the approval of the authorized body and, in certain cases, with the respective court decision. In the reporting period, the Group granted corporate loans to third parties and loans to small and medium businesses in the amount of RUB 10,935 million, less allowance, and retail loans in the amount of RUB 212 million, less allowance for consideration of RUB 11,227 million and RUB 246 million, respectively. The Group has determined that all the risks and benefits associated with the respective loans were transferred; therefore the Group derecognized these loans. The respective financial result was recorded as income from repayment and sale of the acquired claims and loan agreements in other income line of the consolidated income statement (Note 22). Collateral and other credit enhancements The amount and type of collateral required by the Group depends on an assessment of the credit risk of the counterparty. Guidelines are implemented regarding the acceptability of types of collateral and valuation parameters. The main types of collateral obtained are as follows: For reverse repurchase transactions securities; For corporate lending pledge of real estate, equipment, stock of merchandise; For margin lending securities acquired; For consumer lending pledge of residential properties, vehicles, guarantees and warranties. As of, loans to customers in the amount of RUB 581 million (31 December 2014: RUB 806 million) were secured by debt securities issued by the Group in the amount of RUB 354 million (31 December 2014: RUB 313 million). The Group monitors the market value of collateral, requests additional collateral in accordance with the underlying agreement, and monitors the market value of collateral obtained during its review of the adequacy of the allowance for loan impairment. Reverse repurchase agreements The loans issued under reverse repurchase agreements and the value of securities received as collateral are as follows: Carrying amount of funds transferred 31 December 2014 Carrying amount Fair value of of funds collateral transferred Fair value of collateral Corporate shares 201, , , ,807 Corporate Eurobonds 100, ,514 90,096 92,882 Corporate bonds 60,698 82,666 33,262 49,510 Mutual funds units 16,591 22,286 13,732 19,304 Eurobonds of the Russian Federation 16,066 17,487 11,886 14,014 Russian state bonds (OFZ) 14,583 18,932 2,684 2,547 Bonds of foreign governments 10,233 13,653 4,605 5,621 Municipal and subfederal bonds Total 420, , , ,685 As of, loans and borrowings under reverse repurchase agreements in the amount of RUB 26,934 million (31 December 2014: RUB 42,564 million) were collateralized by bonds issued by the Group with the fair value of RUB 31,629 million (31 December 2014: RUB 38,631 million). As of, securities received under repurchase agreement with the fair value of RUB 892,529 million (31 December 2014: RUB 192,074 million) were transferred under direct repurchase agreements in the amount of RUB 765,453 million (31 December 2014: RUB 129,786 million). 17

21 7. Loans to customers (continued) Loans to customers pledged under repurchase agreements As of, corporate loans to legal entities in the amount of RUB 1 million were pledged under repurchase agreements. In the course of the assessment of credit risk exposure related to these financial assets no indicators of impairment were identified, thus, no provision was recognized. As of 31 December 2014, loans and borrowings pledged under reverse repurchase agreements totaled RUB 5,943 million. 8. Available-for-sale investment securities Available-for-sale investment securities comprise: 31 December 2014 Debt securities issued by state and municipal authorities Eurobonds of the Russian Federation 32,093 16,429 Russian state bonds (OFZ) 6,950 5,349 Municipal and subfederal bonds 6, Bonds of foreign governments 1,059 6,752 Corporate debt securities Corporate bonds 28,150 11,378 Corporate Eurobonds 26,169 22,420 Corporate promissory notes 2, Total available-for-sale debt securities 103,042 63,563 Corporate equity securities Corporate shares 22,550 13,318 Mutual funds units 2, Total available-for-sale equity securities 25,530 14,118 Total available-for-sale investment securities 128,572 77,681 Blocked as collateral against borrowings from the CBR 14,642 3,245 Available-for-sale investment securities pledged under repurchase agreements comprise: 31 December 2014 Debt securities issued by state and municipal authorities Eurobonds of the Russian Federation 560,876 Municipal and subfederal bonds 5,635 Russian state bonds (OFZ) 3,632 Corporate debt securities Corporate Eurobonds 4,092 8,740 Corporate bonds 22,258 Total available-for-sale debt securities 564,968 40,265 Total available-for-sale securities pledged under repurchase agreements 564,968 40,265 Eurobonds of the Russian Federation are represented by debt securities denominated in USD issued by the Ministry of Finance of the Russian Federation. Russian state bonds (OFZ) are represented by RUB-denominated debt securities issued by the Ministry of Finance of the Russian Federation. Municipal and subfederal bonds are denominated in Russian rubles. As of, bonds issued by foreign countries are represented by Argentinian warrants (31 December 2014: USD-denominated treasury bonds issued by the United States Department of the Treasury and Argentinian warrants). Corporate bonds are represented by RUB-denominated bonds issued by Russian companies and banks. 18

22 8. Available-for-sale investment securities (continued) Corporate Eurobonds are RUB-denominated, EUR-denominated and USD-denominated interest-bearing securities issued by large Russian and foreign companies and credit institutions, freely tradable in Russia and internationally. Corporate shares are represented by investments in shares of major Russian and foreign companies and banks. As of, the Group raised RUB 540,576 million (31 December 2014: RUB 36,552 million) under direct repurchase agreements with the CBR collateralized by available-for-sale investment securities recorded as amounts due to credit institutions and RUB 1,906 (31 December 2014: nil) under direct repurchase agreements with legal entities recorded as amounts due to customers and borrowings (Note 13). As of, available-for-sale investment securities with the fair value of RUB 14,642 million (31 December 2013: RUB 3,245 million) were blocked as collateral against the credit line with the CBR. As of 30 June 2015 and 31 December 2014, the Group did not utilize the credit facility. Analysis of debt available-for-sale investment securities by credit quality as of is as follows: Investment rating Speculative rating No rating Total Debt securities issued by state and municipal authorities Eurobonds of the Russian Federation 592, ,969 Russian state bonds (OFZ) 6,950 6,950 Bonds of foreign governments 1,059 1,059 Municipal and subfederal bonds 2,252 1,619 2,172 6,043 Corporate debt securities Corporate Eurobonds 26,398 3,863 30,261 Corporate bonds 3,827 22,435 1,888 28,150 Promissory notes 2,578 2,578 Total available-for-sale debt investment securities 605,998 54,089 7, ,010 Analysis of debt available-for-sale investment securities by credit quality as of 31 December 2014 is as follows: Investment rating Speculative rating No rating Total Debt securities issued by state and municipal authorities Eurobonds of the Russian Federation 16,429 16,429 Russian state bonds (OFZ) 8,981 8,981 Bonds of foreign governments 5,733 1,019 6,752 Municipal and subfederal bonds 3,065 3,331 6,396 Corporate debt securities Corporate Eurobonds 18,866 7,770 4,524 31,160 Corporate bonds 3,665 29, ,636 Promissory notes Total available-for-sale securities 56,739 41,406 5, ,828 The credit quality in the above tables is based on ratings assigned by international rating agencies. Following the amendments to IAS 39 and IFRS 7 Reclassification of Financial Assets, during 2014 the Group reclassified certain financial assets from available-for-sale investment securities to amounts due from credit institutions and loans to customers, as the Group no longer has the intention and ability to hold them for the purpose of selling in the near future and these financial assets ceased to be actively traded. As of the reclassification date, these financial assets meet the definition of loans and receivables. The Group has an intention and ability to hold these assets for the foreseeable future or until maturity. 19