PROMSVYAZBANK. Interim Consolidated Condensed Financial Information for the six-month period ended 30 June 2015 (unaudited)

Transcription

1 PROMSVYAZBANK Interim Consolidated Condensed Financial Information for the six-month period ended

2 Interim Consolidated Condensed Financial Information six-month period ended Contents Review Report Interim Consolidated Condensed Statement of Financial Position... 1 Interim Consolidated Condensed Statement of Profit or Loss and Other Comprehensive Income... 2 Interim Consolidated Condensed Statement of Cash Flows... 3 Interim Consolidated Condensed Statement of Changes in Equity... 4 Notes to the Interim Consolidated Condensed Financial Information 1 Background Basis of preparation Significant accounting policies Cash and cash equivalents Financial assets at fair value through profit or loss Loans to customers Investments available for sale Investments in associates Investment property Non-current assets held for sale Deposits and balances due to banks and other financial institutions Current accounts and deposits from customers Debt securities in issue Other borrowed funds Subordinated borrowings Net interest income Fee and commission income Fee and commission expense Net gain/(loss) on financial instruments at fair value through profit or loss and gain on early redemption of Eurobonds General and administrative expenses Earnings per share Analysis by segments Currency and maturity analysis and average effective interest rates Capital management Credit related and capital commitments Fair value of financial instruments Related party transactions Subsequent events... 48

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5 Interim Consolidated Condensed Statement of Profit or Loss and Other Comprehensive Income for the period ended Note Six-month period ended Six-month period ended 30 June 2014 Three-month period ended Three-month period ended 30 June 2014 Interest income Interest expense (38 215) (21 045) (18 717) (10 866) Net interest income Fee and commission income Fee and commission expense 18 (2 440) (2 126) (1 205) (1 161) Net fee and commission income Net gain/(loss) on financial instruments at fair value through profit or loss (2 606) (416) Net foreign exchange gain Loss on revaluation of investments available for sale (40) Net loss on investments in associates (282) - (282) - Net loss on revaluation of investment property 9 (1 393) - (1 072) - Other income Other expenses (485) (441) (212) (313) Operating income Loan impairment charge 6 (19 333) (9 381) (10 705) (2 474) Other impairment charge (157) (48) (195) 18 General and administrative expenses 20 (9 634) (11 281) (4 545) (5 738) (29 124) (20 710) (15 445) (8 194) (Loss)/profit before tax (5 822) 695 (3 504) Income tax credit/(expense) (134) 707 (626) (Loss)/profit after tax (4 777) 561 (2 797) Other comprehensive income/ (loss) Items that may be reclassified subsequently to profit or loss: Translation differences Revaluation of investments available for sale (1 215) (22) (361) (19) Income tax related to revaluation of investments available for sale Other comprehensive loss, net of tax (853) (18) (244) (16) Total comprehensive (loss)/income (5 630) 543 (3 041) (Loss)/profit attributable to: Owners of the parent (4 779) 639 (2 809) Non-controlling interest 2 (78) 12 (49) Total comprehensive (loss)/income attributable to: Owners of the parent (5 632) 621 (3 053) Non-controlling interest 2 (78) 12 (49) Basic and diluted (loss)/income per ordinary share (expressed in RUB per share) 21 (0,004) 0,001 (0,003) 0,002 The notes set out on pages 5 to 48 form an integral part of this interim consolidated condensed financial information. 2

6 Interim Consolidated Condensed Statement of Cash Flows for the period ended Notes Six-month period ended Six-month period ended 30 June 2014 CASH FLOWS FROM OPERATING ACTIVITIES Interest received Fee and commission received Interest paid (38 869) (21 270) Fee and commission paid (2 440) (2 074) Net receipts/(payments) for financial instruments at fair value through profit or loss 369 (2 349) Net receipts from foreign exchange transactions Other income received Other expense (485) (441) General and administrative expenses paid (8 949) (10 133) Decrease/(increase) in operating assets Obligatory reserves with central banks (78) Placements with banks and other financial institutions with original maturity of over one month (2 359) Financial assets at fair value through profit or loss (25 143) Amounts receivable under reverse repurchase agreements (16 786) (4 787) Loans to customers (63 569) Other assets (302) (Decrease)/increase in operating liabilities Financial liabilities at fair value through profit or loss 813 (1 389) Deposits and balances from banks and other financial institutions (15 142) 386 Amounts payable under repurchase agreements (841) Current accounts and deposits from customers (8 065) Promissory notes and certificates of deposit (2 133) Other liabilities 547 (386) Net cash flows (used in)/from operating activities before taxes paid (20 504) Income tax received/(paid) 825 (2 059) Cash flows (used in)/from operations (19 679) CASH FLOWS FROM INVESTING ACTIVITIES Purchases of investments available for sale (3 086) - Disposal of investments available for sale Purchases of investment property 9 (124) (454) Disposal of investment property Purchases of property and equipment (238) (846) Disposals of property and equipment Cash flows used in investing activities (1 374) (939) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issuance of loan participation notes and domestic bonds Repayment and repurchase of senior loan participation notes and domestic bonds (11 160) (24 193) Proceeds from other borrowed funds Repayment of other borrowed funds (1 272) (983) Proceeds from subordinated borrowings Repayment of subordinated borrowings (12 724) (3 284) Contributions from shareholders Cash flows used in financing activities (10 132) (20 902) Net (decrease)/increase in cash and cash equivalents (31 185) Effect of changes in exchange rates on cash and cash equivalents Cash and cash equivalents at the beginning of the period Cash and cash equivalents at the end of the period The notes set out on pages 5 to 48 form an integral part of this interim consolidated condensed financial information. 3

7 Interim Consolidated Condensed Statement of Changes in Equity for the period ended Share capital Share premium Additional paid-incapital Revaluation reserve for property Revaluation reserve for investments available for sale Retained earnings Total Noncontrolling interest Balance at 1 January (21) Profit/(loss) after tax (78) 561 Other comprehensive loss, net of tax (18) - (18) - (18) Total comprehensive income/(loss) (18) (78) 543 Disposal of buildings effect on retained earnings (2) Balance at 30 June (99) Profit/(loss) after tax Other comprehensive income, net of tax Total comprehensive income/(loss) Disposal of buildings effect on retained earnings (1) Balance at 1 January (59) Profit/(loss) after tax (4 779) (4 779) 2 (4 777) Other comprehensive income, net of tax (972) 119 (853) - (853) Total comprehensive income/(loss) (972) (4 660) (5 632) 2 (5 630) Contributions from shareholders (Note 1) Remuneration to the members of the Board (12) (12) - (12) Purchase of subsidiary (Note 10) Balance at (586) Total equity In May 2015, JSC FUTURE, a non-government pension fund has acquired 10% stake in Promsvyazbank, valued at RUB million from Promsvyaz Capital B.V. Also in May 2015, a group of non-government pension funds has acquired 10% stake in Promsvyazbank, valued at RUB million from Promsvyaz Capital B.V. The shares were bought on the Moscow Stock Exchange. Promsvyaz Capital B.V. used all funds from the transactions to inject capital into the bank. The Group received capital in cash and recognised as additional paid-in capital. The notes set out on pages 5 to 48 form an integral part of this interim consolidated condensed financial information. 4

8 1 Background Principal activities Promsvyazbank Group (the Group or Promsvyazbank ) consists of various legal entities formed under the laws of the Russian Federation (the RF ) and other countries (refer to Note 2 for the list of subsidiaries). PAO Promsvyazbank (the Bank ), which is the parent company of the Group, was initially established in the Russian Federation as a limited liability company converting subsequently to a closed joint-stock company in July 2001 then converting to an open joint-stock company in September 2007 and finally to public joint-stock company in December The Bank was granted a banking license for operations in roubles on 12 May The Bank s operations were expanded to include transactions with all types of foreign currencies and transactions in foreign currencies with legal entities and individuals on 30 December 1996 and 31 December 1997, respectively. The activities of the Bank are regulated by the Central Bank of the Russian Federation (the CBR ). The Bank holds a full (general) banking license from the CBR and is also authorised by the CBR to trade in precious metals. In October 2004, the CBR accepted the Bank into the State deposit insurance system. In addition, the Group holds licenses from the Federal Service for Financial Markets (the FSFM ) to act as a broker, dealer, custodian and a securities manager in the Russian securities market. The Group also holds a license from the FSFM as a commodities exchange broker to trade futures and options. The Group s principal activities are in commercial banking. These activities consist of corporate, small and medium size entities ( SME ) and retail banking. Corporate banking includes deposit taking and lending to corporate borrowers, factoring, settlements, cash operations, documentary transactions. Corporate banking services also include trade and project finance. SME banking includes deposit taking and lending to small and medium entities, settlements and cash operations. Retail banking includes deposit taking and retail lending, money transfer and banking card services, foreign exchange and cash operations with individuals and asset management. The Group also offers investment banking services, including corporate finance, debt and equity capital markets, brokerage, repo transactions and securities trading, foreign exchange, precious metals and banknote operations. The table below summarises the information about the branch network. 31 December 2014 Branches 9 9 Full-service sub-branches Retail and SME sub-branches Representative offices 4 4 Total number of offices As at and 31 December 2014 the Bank operated 8 branches located within the Russian Federation and a branch located in Limassol (Cyprus). As at representative offices are located in China, India, Ukraine and Kazakhstan. The Group is currently in the process of a reorganization of the branch network. The Bank s head office is registered at the following address: , Smirnovskaya 10, Moscow, Russian Federation. 5

9 1 Background (Continued) Shareholders as at and 31 December December 2014 Promsvyaz Capital B. V.* 68.25% 88.25% European Bank for Reconstruction and Development 11.75% 11.75% JSC FUTURE 10.00% - NPF European Pension Fund (JSC) 4.91% - NPF Doverie (JSC) 3.81% - NPF Regionfond (CJSC) 1.28% - 100% 100% * - Antracite Investment Limited (United Kingdom) and Urgula Platinum Limited (United Kingdom) are the owners of Promsvyaz Capital BV (Netherlands), each share of the company is 50%. Owner of the Antracite Investment Limited (United Kingdom) is Mr. Ananiev A.N. Owner of the Urgula Platinum Limited (United Kingdom) is Mr. Ananiev D.N. The entity s management have the power to amend the interim consolidated condensed financial information after issue. Russian business environment The recent political and economic turmoil witnessed in the region, in particular the developments in Ukraine, have had and may continue to have a negative impact on the Russian economy, including weakening of the Russian Rouble, higher interest rates, reduced liquidity and making it harder to raise international funding. These events, including international sanctions against Russian companies and individuals and the related uncertainty and volatility of the financial markets, may have a significant impact on the Group s operations and financial position, the effect of which is difficult to predict. The future economic and regulatory situation may differ from management s expectations. Management believes it is taking all necessary measures to support the sustainability and development of the Group s business in the current business and economic environment. The financial markets continue to be volatile and are characterised by frequent significant price movements and increased trading spreads. Subsequent to : as at 27 August 2015 Russian Rouble was RUB per USD and EURO, RTS stock exchange index was 746. Management determined loan impairment provisions using the incurred loss model required by the applicable accounting standards. These standards require recognition of impairment losses that arose from past events and prohibit recognition of impairment losses that could arise from future events, including future changes in the economic environment, no matter how likely those future events are. Refer to Note 6. 2 Basis of preparation Statement of compliance This interim consolidated condensed financial information has been prepared in accordance with IAS 34 Interim Financial Reporting and should be read in conjunction with the annual consolidated financial statements for the year ended 31 December 2014, which have been prepared in accordance with International Financial Reporting Standards ( IFRS ). Basis of measurement This interim consolidated condensed financial information are prepared on the historical cost basis except that the financial instruments at fair value through profit or loss and available for sale investments for which fair value can be reliably measured are stated at fair value, and buildings are revalued periodically. 6

10 2 Basis of preparation (Continued) Consolidated companies The interim consolidated condensed financial information includes the following principal subsidiaries of the Bank: Name Country of Incorporation Main Activity Consolidated as at, % Consolidated as at 31 December 2014, % PSB Finance S.A. Luxembourg Financial Activity 100% 100% OOO UK Promsvyaz Russian Federation Asset management 100% 100% OOO Open Leasing Company Russian Federation Leasing 100% 100% OOO Promsvyazfactoring Russian Federation Factoring 100% 100% OOO Saint-Petersburg International Banking Conference Russian Federation Services 100% 100% CJSC Mortgage Agent PSB 2013 Russian Federation Financial Activity 100% 100% PSB ECP Limited Ireland Financial Activity 100% 100% TOO PromSvyazFactor Republic of Kazahstan Factoring 100% 100% OOO Venture Fund SME Russian Federation Financial Activity 100% 100% Financial Services 100% 100% OOO Business alliance Russian Federation OOO Elitnye doma Russian Federation Property owner 100% 100% ZAO Garazhny kompleks Plastic Russian Federation Property owner 100% 100% OOO Independent leasing Russian Federation Leasing 100% 100% OOO Ug Sibiri Russian Federation Food production 74.99% - OOO AgroSib-Razdolye Russian Federation Food production 74.99% - ZAO Byisk Oil Extracting Plant Russian Federation Food production 74.99% - OOO Prodex-Omsk Russian Federation Food production 74.99% - OOO Ug Sibiri-Trade Russian Federation Food production 74.99% - OOO Invea Russian Federation Property owner 100% - OOO Kourf Russian Federation Property owner 100% - OOO Lirink Russian Federation Property owner 100% - OOO Untir" Russian Federation Property owner 100% - OOO Holzvud Russian Federation Property owner 100% - OOO Limkar Russian Federation Property owner 100% - PSB Finance S.A. is structured entity established to facilitate the issues of debt securities. The entity is not owned by the Group and control arises through the ability of the Group to direct the entity activities and thereby significantly affect its returns. OOO UK Promsvyaz. The principal activity of OOO UK Promsvyaz is asset management. The Group directly controls 100% of this entity. OOO Open Leasing Company was established by the Group in July The Group controls 100% of OOO Open Leasing Company. OOO Promsvyazfactoring. In December 2009 the Group acquired control of OOO Promsvyazfactoring (OOO PSF ) through an option agreement dated 31 December 2009, with its owner who is a related party to the Group s shareholders. Under the terms of this agreement the Group has the unconditional right to buy 100% of the share capital in OOO PSF for cash of RUB 5.5 million till the end of 2017 year. OOO Saint-Petersburg International Banking Conference was established by the Group in December The Group controls 100% of OOO Saint-Petersburg International Banking Conference. CJSC Mortgage Agent PSB 2013 is struсtured entity established to facilitate the issues of mortgagebacked securities. The entity is not owned by the Group and control arises through the ability of the Group to direct the entity activities and thereby significantly affect its returns. PSB ECP Limited is structured entity established to facilitate the issues of debt securities. The company was established by the Group in June The Group controls 100% of PSB ECP Limited. 7

11 2 Basis of preparation (Continued) TOO PromSvyazFactor was established by the Group in September The Group controls 100% of TOO PromSvyazFactor. OOO Venture Fund SME was established by the Group in September The Group controls 100% of OOO Venture Fund SME. OOO Business alliance was established by the Group in February The Group controls 100% of OOO Business alliance. OOO Elitnye doma. During 2014, the Group acquired 100% of the share capital of OOO Elitnye doma, a company incorporated in Moscow, which owns a land plot in Moscow Region. Refer to Note 15. ZAO "Garazhny kompleks Plastic-2000" During 2014, the Group entered into an option agreement which gives the Group the right to purchase 100% of the share capital of ZAO "Garazhny kompleks Plastic-2000", incorporated in Moscow, which owns office building in Moscow. Refer to Note 15. OOO Independent leasing. During 2014 OOO Open Leasing Company acquired 100% of the share capital of OOO Independent leasing, a leasing company incorporated in Moscow. Ug Sibiri Group includes OOO Ug Sibiri, OOO AgroSib-Razdolye, ZAO Byisk Oil Extracting Plant, OOO Prodex-Omsk and OOO Ug Sibiri-Trade. The main activity of this Group is oil manufacture. During the six-month period of 2015 the Group entered into option agreements which give the Group the right to purchase 74.99% of the share capital of the above companies (Note 10). During the six-month period of 2015 the Group acquired in settlement of overdue loans 100% share of OOO Invea, OOO Kourf, OOO Lirink, OOO Untir", OOO Holzvud, OOO Limkar. All the companies are property owners with no other activities. Use of estimates and judgments The preparation of interim consolidated condensed financial information in conformity with IAS 34 requires management to make judgments, estimates and assumptions that affect the application of policies and the reported amounts of assets and liabilities, income and expense. The estimates and associated assumptions are based on historical experience and various other factors, that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. The estimates and judgments applied by the Group in this interim consolidated condensed financial information are the same as those applied by the Group in its consolidated financial statements as at and for the year ended 31 December Although these estimates are based on management s best knowledge of current events and actions, actual results ultimately may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. Judgments that have the most significant effect on the amounts recognised in this interim consolidated condensed financial information include: Loan impairment estimates Note 6; Derivatives; Investments available for sale Note 7; Investments in associates Note 8; Building and investment property revaluation estimates; Deferred tax assets. 8

12 3 Significant accounting policies The accounting policies adopted and methods of computation are consistent with those of the previous financial year. Interim period tax measurement. Interim period income tax expense is accrued using the effective tax rate that would be applicable to expected total annual earnings, that is, the estimated weighted average annual effective income tax rate applied to the pre-tax income of the interim period. There were no new standards and interpretations relevant for the Group that became effective from 1 January Since the Group published its last annual consolidated financial statements, no new standards and interpretations have been issued that are mandatory for the Group s annual accounting periods beginning on or after 1 January 2016 apart from those disclosed in the annual consolidated financial statements of the Group. 4 Cash and cash equivalents 31 December 2014 Cash Placements with banks and other financial institutions with an original maturity less than one month Due from the Central Bank of the RF nostro accounts Deposits with the Central Bank of the RF Total cash and cash equivalents Maturity and currency analysis of cash and cash equivalents and average effective interest rates are disclosed in Note 23. 9

13 5 Financial assets at fair value through profit or loss 31 December 2014 Unpledged Financial assets held for trading Debt and other fixed-income instruments Corporate bonds Russian Government Federal bonds (OFZ) Corporate Eurobonds Russian municipal and regional bonds Foreign Governments bonds and Eurobonds Russian Federation Eurobonds Equity investments Corporate shares 87 - Spot and derivative financial instruments Spot and derivatives contracts Designated at fair value through profit or loss Corporate shares Total unpledged financial assets at fair value through profit or loss Pledged under sale and repurchase agreements Financial assets held for trading Russian Government Federal bonds (OFZ) Corporate eurobonds Russian Federation Eurobonds Corporate bonds Russian municipal and regional bonds Total financial assets at fair value through profit or loss pledged under sale and repurchase agreements Total financial assets at fair value through profit or loss Corporate bonds are securities issued by medium and large Russian companies and banks denominated in Russian Roubles. Russian Government Federal bonds (OFZ) are Russian Rouble denominated government securities issued by the Ministry of Finance of the Russian Federation. Corporate Eurobonds are interest-bearing securities denominated in U.S. Dollars and Euros and issued primarily by large Russian companies. Russian municipal and regional bonds are interest-bearing securities issued by Russian municipal and regional authorities denominated in Russian Roubles. Foreign Governments bonds and Eurobonds are interest-bearing securities denominated in U.S. Dollars issued by Foreign Governments. Russian Federation Eurobonds are interest-bearing securities denominated in U.S. Dollars issued by the Ministry of Finance of the Russian Federation. Maturity and currency analysis of financial assets at fair value through profit or loss effective interest rates are disclosed in Note

14 6 Loans to customers 31 December 2014 Loans to corporate clients Loans to corporate clients not involved in international business Loans to corporate clients involved in international business Factoring loans to corporate customers Total loans to corporate customers Loans to small and medium enterprises (excluding factoring) Factoring loans to small and medium enterprises Loans to small and medium enterprises Loans to individuals Consumer loans Mortgage loans Credit cards Other loans Total loans to individuals Gross loans to customers Impairment allowance (48 575) (37 849) Net loans to customers Mortgage loans include mortgage loans of RUB million (RUB million as at 31 December 2014) securitized in June The Group s management determined that the Group had not transferred majority of risks and rewards with respect to the transferred assets, and, consequently, such transfer was not the ground for their derecognition. Movements in the loan impairment allowance for the six-month period ended and 30 June 2014 were as follows: Six-month period ended Six-month period ended 30 June 2014 Balance at the beginning of the period Net charge for the period Additional charge on loans denominated in foreign currencies Sale of loans (539) (1 680) Write-offs (8 622) (5 399) Balance at the end of the period As at and 31 December 2014 non-performing loans comprise loans with principal or/and interest overdue by more than 90 days. 11

15 6 Loans to customers (Continued) The analysis of non-performing loans as at and 31 December 2014 by loan groups is presented below: 31 December 2014 Loans to corporate clients Loans to small and medium enterprises Loans to individuals Total non-performing loans Credit quality of loans to corporate customers and loans to small and medium enterprises The following table provides information on the credit quality of loans to corporate customers and loans to small and medium enterprises as at : Gross loans Impairment allowance Net loans Impairment allowance to gross loans Loans to corporate customers not involved in international business Total loans for which no impairment has been identified individually (4 974) % Impaired loans: - Impaired, but not overdue (13 658) % - Overdue less than 30 days (1 493) % - Overdue days (680) % - Overdue days (4 986) % - Overdue days (2 645) % - Overdue more than 360 days (1 734) % Total impaired loans (25 196) % Total loans to corporate customers not involved in international business (30 170) % Loans to corporate customers involved in international business Total loans for which no impairment has been identified individually (404) % Impaired loans: - Impaired, but not overdue (1 015) % - Overdue days (1 680) % - Overdue days (424) % - Overdue days 19 (5) % - Overdue more than 360 days 488 (201) % Total impaired loans (3 325) % Total loans to corporate customers involved in international business (3 729) % 12

16 6 Loans to customers (Continued) Gross loans Impairment allowance Net loans Impairment allowance to gross loans Factoring loans to corporate customers Total loans for which no impairment has been identified individually (470) % Impaired loans: - Impaired, but not overdue (1 941) % - Overdue days 50 (21) % - Overdue days 461 (212) % - Overdue more than 360 days 109 (57) % Total impaired loans (2 231) % Total factoring loans to corporate customers (2 701) % Total loans to corporate customers (36 600) % Loans to small and medium enterprises Total loans for which no impairment has been identified individually (671) % Impaired loans: - Impaired, but not overdue 921 (285) % - Overdue less than 30 days 630 (179) % - Overdue days 652 (369) % - Overdue days (1 197) % - Overdue days (1 667) % - Overdue more than 360 days (2 632) % Total impaired loans (6 329) % Total loans to small and medium enterprises (excluding factoring) (7 000) % Factoring loans to small and medium enterprises Total loans for which no impairment has been identified individually (45) % Impaired loans: - Overdue days 14 (7) % - Overdue days 127 (79) % - Overdue days 45 (41) % - Overdue more than 360 days 38 (38) % Total impaired loans 224 (165) % Total factoring loans to small and medium enterprises (210) % Total loans (including factoring) to small and medium enterprises (7 210) % Total commercial loans (43 810) % 13

17 6 Loans to customers (Continued) The following table provides information on the credit quality of loans to corporate customers and loans to small and medium enterprises as at 31 December 2014: Gross loans Impairment allowance Net loans Impairment allowance to gross loans Loans to corporate customers not involved in international business Total loans for which no impairment has been identified individually (4 667) % Impaired loans: - Impaired, but not overdue (8 584) % - Overdue less than 30 days (3 837) % - Overdue days (1 057) % - Overdue days (1 667) % - Overdue days (627) % - Overdue more than 360 days (2 143) % Total impaired loans (17 915) % Total loans to corporate customers not involved in international business (22 582) % Loans to corporate customers involved in international business Total loans for which no impairment has been identified individually (846) % Impaired loans: - Impaired, but not overdue (1 496) % - Overdue days 28 (5) % - Overdue days 109 (19) % - Overdue days 140 (2) % - Overdue more than 360 days 858 (475) % Total impaired loans (1 997) % Total loans to corporate customers involved in international business (2 843) % Factoring loans to corporate customers Total loans for which no impairment has been identified individually (567) % Impaired loans: - Impaired, but not overdue (1 306) % - Overdue less than 30 days % - Overdue days 55 (13) % - Overdue days 88 (33) % - Overdue days % - Overdue more than 360 days 283 (157) % Total impaired loans (1 509) % Total factoring loans to corporate customers (2 076) % Total loans to corporate customers (27 501) % 14

18 6 Loans to customers (Continued) Gross loans Impairment allowance Net loans Impairment allowance to gross loans Loans to small and medium enterprises Total loans for which no impairment has been identified individually (532) % Impaired loans: - Impaired, but not overdue (1 187) % - Overdue less than 30 days 757 (194) % - Overdue days (956) % - Overdue days (839) % - Overdue days (1 030) % - Overdue more than 360 days (1 290) % Total impaired loans (5 496) % Total loans to small and medium enterprises (excluding factoring) (6 028) % Factoring loans to small and medium enterprises Total loans for which no impairment has been identified individually (109) % Impaired loans: - Impaired, but not overdue % - Overdue less than 30 days 227 (25) % - Overdue days 9 (4) % - Overdue days 167 (113) % Total impaired loans 515 (142) % Total factoring loans to small and medium enterprises (251) % Total loans (including factoring) to small and medium enterprises (6 279) % Total commercial loans (33 780) % The credit quality of loans for which no impairment has been identified is not homogeneous due to the variety of industry risks and financial conditions associated with the borrowers. The Group estimates loan impairment for the corporate loan portfolio for which no individual impairment triggers have been identified based on the past loss experience the current economic conditions. Changes in these estimates could affect the loan impairment allowance. For example, to the extent that the net present value of the estimated cash flows the Group would receive on loans granted differs by plus/minus one percent, the loan impairment on loans to corporate customers as of would be RUB million lower/higher (31 December 2014: RUB million lower/higher). The Group estimates loan impairment for loans to small and medium enterprises (excluding loans to medium size enterprises) based on its historic loss migration pattern for the past 12 months and historic actual recovery rate of loans overdue more than 90 days. Changes in these estimates could affect the loan impairment allowance. For example, to the extent that the loss migration pattern parameter differs by plus/minus 6 months, the loan impairment on loans to small and medium enterprises as of would be RUB 28 million lower, RUB 6 million higher, respectively (31 December 2014 would be RUB 47 million lower, RUB 11 million higher, respectively). 15

19 6 Loans to customers (Continued) The Group estimates loan impairment for loans to medium size enterprises for which no individual impairment triggers have been identified based on the past loss experience and the current economic conditions. Changes in these estimates could affect the loan impairment allowance. For example, to the extent that the net present value of the estimated cash flows the Group would receive on loans granted differs by plus/minus one percent, the loan impairment on loans to medium size enterprises as of would be RUB 251 million lower/higher ((31 December 2014: RUB 378 million lower/higher). Impairment allowance for loans for which no impairment has been identified individually, has been collectively assessed based on statistics data. Credit quality of loans to individuals The following table provides information on the credit quality of loans to individuals portfolios as at : Gross loans Provision for impairment Net loans Impairment to gross loans Consumer loans - Not past due (100) % - Overdue less than 30 days (205) % - Overdue days (550) % - Overdue days (1 511) % - Overdue days (1 694) % - Overdue more than 360 days 17 (17) % Total consumer loans (4 077) % Mortgage loans - Not past due % - Overdue less than 30 days % - Overdue days 95 (1) % - Overdue days 54 (2) % - Overdue days 44 (11) % - Overdue more than 360 days 128 (31) % Total mortgage loans (45) % Credit cards - Not past due (23) % - Overdue less than 30 days 294 (28) % - Overdue days 110 (65) % - Overdue days 192 (167) % - Overdue days 158 (152) % Total credit cards (435) % Other loans - Not past due (1) % - Overdue less than 30 days 94 (4) % - Overdue days 17 (5) % - Overdue days 30 (14) % - Overdue days 60 (49) % - Overdue more than 360 days 135 (135) % Total other loans (208) % Total loans to individuals (4 765) % 16

20 6 Loans to customers (Continued) The following table provides information on the credit quality of loans to individuals portfolios as at 31 December 2014: Gross loans Provision for impairment Net loans Impairment to gross loans Consumer loans - Not past due (123) % - Overdue less than 30 days (161) % - Overdue days (469) % - Overdue days (1 220) % - Overdue days (1 478) % - Overdue more than 360 days 13 (13) % Total consumer loans (3 464) % Mortgage loans - Not past due % - Overdue less than 30 days % - Overdue days % - Overdue days 45 (1) % - Overdue days 21 (1) % - Overdue more than 360 days 109 (27) % Total mortgage loans (29) % Credit cards - Not past due (13) % - Overdue less than 30 days 421 (27) % - Overdue days 86 (36) % - Overdue days 116 (84) % - Overdue days 133 (117) % Total credit cards (277) % Other loans - Not past due 830 (1) % - Overdue less than 30 days 29 (2) % - Overdue days 62 (25) % - Overdue days 54 (37) % - Overdue days 110 (98) % - Overdue more than 360 days 136 (136) % Total other loans (299) % Total loans to individuals (4 069) % Other loans category includes the following products: loans to VIP clients, auto loans and express-loans. The Group estimates loan impairment based on its historic loss experience on these types of loans. Management estimates losses based on the historic loss migration pattern for the past 12 months. Changes in these estimates could affect the loan impairment allowance. For example, to the extent that the loss migration pattern parameter differs by plus/minus 6 months, the loan impairment on loans to individuals as of would be RUB 32 million lower, RUB 92 million higher, respectively (31 December 2014: RUB 37 million lower, RUB 107 million higher, respectively). 17

21 6 Loans to customers (Continued) Industry analysis of the loan portfolio Loans to customers as at and 31 December 2014 are issued to customers operating in the following industries: 31 December 2014 Loans to individuals % % Commercial loans Real estate % % Trade % % Finance % % Oil and gas % % Metallurgy % % Food production % % Agriculture % % Chemistry % % Machinery % % Telecommunication and media % % Infrastructure construction % % Transport % % Energy % % Mining % % Construction materials % % Pharmaceutics % % Tourism % % Timber processing % % Jewelry % % Light industry % % Other % % % % Provision for impairment (48 575) (37 849) Total loans to customers Significant credit exposures As at aggregate loans to the 20 largest borrowers (or groups of related borrowers) amounted to RUB million (31 December 2014: RUB million) or 31% (31 December 2014: 28%) of the gross loans to customers. Maturity and currency analysis of loans to customers and average effective interest rates are disclosed in Note 23. The information on related party balances is disclosed in Note Investments available for sale 31 December 2014 Loans to corporate customers available for sale Corporate shares Total investments available for sale

22 7 Investments available for sale (Continued) Loans to corporate customers available for sale include loans to a timber processing company amounting to RUB million (31 December 2014: RUB million). Terms of the loan agreement of this borrower was significantly changed in 4Q 2014 and the borrower was transferred to investments available for sale as the Group believes that the best value can now be obtained through a hold strategy. As at part of the revaluation of the above assets amounting to RUB 995 million net of tax was accounted for in other comprehensive income, as part of Revaluation reserve for investments available for sale. The remainder of the revaluation amounting to RUB 40 million is included in profit or loss. In March 2015 the Group obtained control over a food production group of companies Ug Sibiri and related assets were transferred from investments available for sale. Refer to Note 10. Maturity and currency analysis of investments available for sale are disclosed in Note Investments in associates In July 2014 the Group entered into an option agreement which gives the Bank the right to purchase 30% in a real-estate developer company operating in Moscow City. The Group received the option as a result of the delays in construction of Investment property of the Group (see Note 9) and recognized gain on initial recognition for the full amount of the option. Having entered into this option the Group recognised investment in associate development company and classified gain on this recognition as gain from investment in associate. Option period is ten years. The fair value of 30% share in a real-estate developer company was calculated by an independent professionally qualified valuer who has recent experience of valuing similar properties in the Russian Federation. The fair value was calculated based on future cash flows from rent/sale of property of the entity. The asset was recognized as investments in associates in this interim consolidated condensed financial information. Under the term of this agreement the Group has the unconditional right to exercise option agreement for nominal amount at any time. As at the fair value of investment in associate came to RUB million, the loss on investment in associates amounting to RUB 282 million is accounted for in profit or loss. The adjustments to the future cash flows from rent/sale of property of the Group could affect the value of the investments in associate. For example, to the extent that the adjustments differ by plus/minus five percent, the investments in associate valuation as of would be RUB 647 million higher/lower. Maturity and currency analysis of investments in associates are disclosed in Note Investment property The following table provides information on movements in investment property. 31 December 2014 Investment properties at fair value at 1 January Additions Acquisition of subsidiary Transfer from other assets (repossessed collateral) Transfer from property and equipment Disposals (37) (732) Mark to market adjustment (1 393) (2 741) Total investment property

23 9 Investment property (Continued) The following table provides information on movements in investment property for the six-month period ended 30 June 2014: 30 June 2014 Investment properties at fair value at 1 January Additions 417 Transfer from other assets (repossessed collateral) 539 Transfer from property and equipment 36 Disposals (268) Mark to market adjustment - Total investment property Investment property represents land and buildings held for capital appreciation. During 2014, the Group acquired 100% of the share capital of OOO Elitnye doma owned by a nonperforming borrower of the Group. The company is incorporated in Moscow and owns a land plot in Moscow Region. Total purchase cash consideration amounted to RUB The Group intends to hold land plot for capital appreciation. As at the fair value of investments is RUB (31 December 2014: RUB million). During 2014, the Group entered into an option agreement which gives the Group the right to purchase 100% of the share capital of ZAO Garazhny kompleks Plastic-2000, a non-performing borrower of the Group incorporated in Moscow, which owns office building and auto dealer complex located in Moscow. The Group intends to hold property for capital appreciation. Auto dealer complex is rented out on operating lease agreement. As at the fair value of investments is RUB (31 December 2014: RUB million). The loss on revaluation amounting to RUB 954 million is accounted for in other operating expense of profit or loss. During 2008 and 2010, the Group acquired the investment rights for square meters of an office building under construction by a Russian developer. These investment rights were originally classified as construction in progress as upon completion, the Group intended to use the office building as its new head office. The total amount invested in the construction in progress as at 31 December 2014 is RUB million. At 31 December 2014 the Group recognised in consolidated statement of profit or loss changes in fair value amounting to RUB million. In December 2014 these investment rights were transferred to investment property as the Group intends to keep it for capital appreciation. As at the fair value of the asset is RUB million, the loss amounting to RUB 404 million is accounted for in profit or loss. As at 31 December 2014 the Group recognised investment in associate amounting to RUB million as a fair value of the option agreement which gives the Group the right to purchase 30% in a realestate developer company which develops investment property noted above (Note 8). As at the fair value of investment in associate came to RUB million, the loss on investment in associates amounting to RUB 282 million is accounted for in profit or loss. Transfer from other categories of assets presents repossessed collateral as at amounting RUB million (31 December 2014: RUB 586 million) acquired by the Group in settlement of overdue loans. The Group expects to dispose of the assets in the foreseeable future. The assets do not meet the definition of non-current assets held for sale, and are classified as investment property. The Group intends to hold these assets for capital appreciation. 20

24 10 Non-current assets held for sale In March 2015, the Group entered into certain option agreements. In terms of these agreements, the Group has the presently exercisable right to purchase 74.99% of the share capital of group of companies Ug Sibiri Group for a period of 10 years starting from the date of the option agreements. This Group includes OOO Ug Sibiri, OOO AgroSib-Razdolye, ZAO Byisk Oil Extracting Plant, OOO Prodex-Omsk and OOO Ug Sibiri-Trade. The Group has acquired the options in exchange for settling the obligations of Ug Sibiri Group s shareholders that are guarantors under the impaired loans granted by the Group. As at, the Group classified the investment in Ug Sibiri Group as a subsidiary acquired exclusively for sales and applied a short-cut method of consolidation under IFRS 5 Non-current assets held for sale and discontinued operations. As at, the acquired group is available for sale in its present condition, the management has initiated a programme to locate a buyer and the sale is highly probable to be completed within one year. Total assets and total liabilities of the acquired group as at were as follows: Attributed fair value Total assets Total liabilities Deposits and balances due to banks and other financial institutions 31 December 2014 Term deposits from the Central Bank of the RF Trade finance of foreign banks Term deposits from local banks Vostro accounts Term deposits from foreign banks Long-term finance Total deposits and balances from banks and other financial institutions Trade finance and long-term finance represents funds to be used in documentary credit transactions. Trade finance is used for financing working capital of customers through documentary letters of credit. Long-term finance is used to finance targeted assets of customers through documentary letters of credit. Maturity and currency analyses of deposits and balances from banks and other financial institutions and average effective interest rates are disclosed in Note