TCS Group Holding PLC. International Financial Reporting Standards Consolidated Condensed Interim Financial Information (Unaudited) 30 June 2015

Transcription

1 International Financial Reporting Standards Consolidated Condensed Interim Financial Information (Unaudited)

2 CONTENTS CONSOLIDATED CONDENSED INTERIM FINANCIAL INFORMATION Consolidated Condensed Interim Statement of Financial Position... 1 Consolidated Condensed Interim Statement of Profit or Loss and Other Comprehensive Income... 2 Consolidated Condensed Interim Statement of Changes in Equity... 3 Consolidated Condensed Interim Statement of Cash Flows... 4 NOTES TO THE CONSOLIDATED CONDENSED INTERIM FINANCIAL INFORMATION 1 Introduction Operating Environment of the Group Summary of Significant Accounting Policies Critical Accounting Estimates and Judgements in Applying Accounting Policies New Accounting Pronouncements Cash and Cash Equivalents Loans and Advances to Customers Investment Securities Available for Sale Repurchase Receivables Due to Banks Customer Accounts Debt Securities in Issue Subordinated Debt Share Capital Interest Income and Expense Customer Acquisition Expenses Income from Insurance Operations Fee and Commission Expense Administrative and Other Operating Expenses Income Taxes Segment Analysis Maturity Analysis Management of Capital Contingencies and Commitments Financial Derivatives Fair Value of Financial Instruments Related Party Transactions Events after the End of the Reporting Period... 34

3 pwc Report on review of Interim Financial. Information To TCS Group Holding PLC Introduction We have reviewed the accompanying consolidated condensed interim statement of financial position of TCS Group Holding PLC and its subsidiaries (the 'Group') as of June 3o, 2015 and the related consolidated condensed interim statements of profit or loss and other comprehensive income for the three-month and six-month periods then ended, changes in equity and cash flows for the six-month period then ended and other explanatory notes. Management is responsible for the preparation and fair presentation of this consolidated condensed interim financial information in accordance with International Accounting Standard 34, "Interim Financial Reporting" as adopted by the European Union. Our responsibility is to express a conclusion on this condensed consolidated interim financial information based on our review. Scope of Review We conducted our review in accordance with International Standard on Review Engagements 24io, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity." A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Conclusion Based on our review, nothing has come to our attention that causes us to believe that the accompanying consolidated condensed interim financial information is not prepared, in all material respects, in accordance with International Accounting Standard 34, "Interim Financial Reporting" as adopted by the European Union. n - 0 PricewaterhouseCoopers Limited Chartered Accountants Limassol, August 26, 2015 PricewaterhouseCoopers Ltd, City House, 6 Karaiskakis Street, CY-3o32 Limassol, Cyprus P 0 Box 53034, CY-3300 Limassol, Cyprus T: , F: , PricewaterhouseCoopers Ltd is a member firm of PricewaterhouseCoopers International Ltd, each member firm of which is a separate legal entity. PritewaterhouseCoopers Ltd is a private company registered in Cyprus (Reg. No ). A list of the company's directors including for individuals the present name and surname, as well as any previous names and for legal entities the corporate name, is kept by the Secretary of the company at its registered office at 3 Themistodes Dervis Street, 1066 Nicosia and appears on the company's web site. Offices in Nicosia, Limassol, Larnaca and Paphos.

4 Consolidated Condensed Interim Statement of Financial Position Note (Unaudited) 31 December 2014 ASSETS Cash and cash equivalents 6 15,959,588 10,699,577 Mandatory cash balances with the CBRF 907, ,510 Due from other banks 356,951 Loans and advances to customers 7 75,570,919 74,579,998 Financial derivatives 25 8,763,689 8,879,972 Investment securities available for sale 8 11,844, ,535 Repurchase receivables 9 1,629,259 5,366,280 Current income tax assets 1,107,313 1,094,088 Guarantee deposits with payment systems 2,569,621 2,967,132 Tangible fixed assets 449, ,348 Intangible assets 1,277,754 1,125,307 Other financial assets 1,260,376 1,890,667 Other non-financial assets 544, ,860 TOTAL ASSETS 122,241, ,806,274 LIABILITIES Due to banks 10 3,898,411 10,331,216 Customer accounts 11 71,700,219 43,366,434 Debt securities in issue 12 11,000,623 19,414,780 Current income tax liabilities 12,593 Deferred income tax liabilities 1,164,661 1,039,795 Subordinated debt 13 11,109,931 11,250,686 Other financial liabilities 1,422,543 1,822,270 Other non-financial liabilities 820, ,432 TOTAL LIABILITIES 101,117,269 87,837,206 EQUITY Share capital , ,112 Share premium 14 8,622,919 8,622,919 Treasury shares 14 (327,718) (4,474) Share-based payment reserve , ,200 Retained earnings 12,069,379 11,800,358 Revaluation reserve (11,845) (225,047) TOTAL EQUITY 21,124,251 20,969,068 TOTAL LIABILITIES AND EQUITY 122,241, ,806,274 Approved for issue and signed on behalf of the Board of Directors on 26 August of Directors, M erector ithio o The notes set out on pages 5 to 34 form an integral part of this Consolidated Condensed Interim Financial Information 1

5 Consolidated Condensed Interim Statement of Profit or Loss and Other Comprehensive Income Note Six months ended (Unaudited) Three months ended (Unaudited) Six months ended (Unaudited) Three months ended (Unaudited) Interest income 15 19,109,761 9,722,610 19,539,563 9,875,596 Interest expense 15 (6,193,184) (3,297,424) (4,344,578) (2,124,301) Net interest income 12,916,577 6,425,186 15,194,985 7,751,295 Provision for loan impairment 7 (7,999,036) (3,858,497) (8,543,047) (4,171,683) Net interest income after provision for loan impairment 4,917,541 2,566,689 6,651,938 3,579,612 Customer acquisition expense 16 (1,501,441) (784,542) (1,738,533) (667,026) Gains less losses from operations with foreign currencies 112, , , ,954 Income from insurance operations , , , ,842 Gain from sale of impaired loans 7 6,346 6,346 17,004 - Fee and commission income 355, ,277 84,564 56,640 Fee and commission expense 18 (628,698) (334,599) (459,217) (229,825) Administrative and other operating expenses 19 (3,430,897) (1,730,000) (2,931,838) (1,527,134) Other operating income/(loss) 35,154 (467) 92,467 69,044 Profit before tax 290, ,554 2,238,358 1,757,107 Income tax expense 20 (86,886) (150,186) (577,087) (458,182) Profit for the period 203, ,368 1,661,271 1,298,925 Other comprehensive income/(loss): Items that may be reclassified to profit or loss Investment securities available for sale and Repurchase receivables - Gains less losses arising during the period, net of tax 204, ,178 18,397 20,646 - Gains less losses/(losses less gains) reclassified to profit or loss upon disposal, net of tax 8,609 5,917 (11,565) (11,565) Other comprehensive income for the period, net of tax 213, ,095 6,832 9,081 Total comprehensive income for the period 416, ,463 1,668,103 1,308,006 Earnings per share for profit attributable to the owners of the Group, basic (expressed in RR per share) Earnings per share for profit attributable to the owners of the Group, diluted (expressed in RR per share) The notes set out on pages 5 to 34 form an integral part of this Consolidated Condensed Interim Financial Information 2

6 Consolidated Condensed Interim Statement of Changes in Equity Note Share capital Share premium Sharebased payment reserve Revaluation Reserve Treasury shares Retained earnings Balance at 31 December ,162 8,622, ,740 - (2,524) 11,266,710 20,551,007 Profit for the sixmonths period ended (Unaudited) ,661,271 1,661,271 Other comprehensive income: Revaluation of investment securities available for sale and transfers to profit or loss upon disposal or impairment , ,832 Total comprehensive income for the sixmonths period ended (Unaudited) ,832-1,661,271 1,668,103 Share issue 1, (1,950) - - Share-based payment reserve , ,427 Balance at (Unaudited) 188,112 8,622, ,167 6,832 (4,474) 12,927,981 22,242,537 Balance at 1 January ,112 8,622, ,200 (225,047) (4,474) 11,800,358 20,969,068 Profit for the sixmonths period ended (Unaudited) , ,393 Other comprehensive income: Revaluation of investment securities available for sale and Repurchase receivables , ,202 Total comprehensive income for the sixmonths period ended (Unaudited) , , ,595 GDRs buy-back (323,808) - (323,808) Share-based payment reserve , ,396 Shares sold under ESOP - - (66,192) ,628 - Balance at (Unaudited) 188,112 8,622, ,404 (11,845) (327,718) 12,069,379 21,124,251 Total The notes set out on pages 5 to 34 form an integral part of this Consolidated Condensed Interim Financial Information 3

7 Consolidated Condensed Interim Statement of Cash Flows Note Six months ended (Unaudited) Six months ended (Unaudited) Cash flows from operating activities Interest received 17,213,302 18,152,968 Interest paid (6,393,682) (4,317,329) Customers acquisition expenses paid (625,320) (1,004,918) Cash received from trading in foreign currencies 1,068, ,497 Cash received from insurance operations 656, ,053 Cash received from sale of impaired loans 7 7,809 62,142 Fees and commissions paid (675,437) (447,707) Fees and commissions received 355,087 84,564 Other operating income received 14, ,102 Administrative and other operating expenses paid (1,795,475) (1,518,341) Income tax paid (31,075) (789,629) Cash flows from operating activities before changes in operating assets and liabilities 9,794,798 11,230,402 Changes in operating assets and liabilities Net (increase)/decrease in CBRF mandatory reserves (221,898) 236,339 Net increase in loans and advances to customers (9,065,883) (9,763,589) Net decrease/(increase) in guarantee deposits with payment systems 373,021 (47,249) Net increase in Due from banks (350,000) - Net decrease other financial assets 797, ,857 Net increase in other non-financial assets - (82,813) Net (decrease)/increase in due to banks (6,438,991) 5,195,095 Net increase/(decrease) in customer accounts 28,671,405 (1,159,061) Net decrease in other financial liabilities (778,690) (96,250) Net increase in other non-financial liabilities - 2,377 Net cash from operating activities 22,781,737 5,659,108 Cash flows from investing activities Acquisition of tangible fixed assets (26,408) (55,353) Acquisition of intangible assets (152,898) (324,199) Acquisition of investments available for sale 8 (8,525,240) (4,397,922) Proceeds from sale of investments available for sale 8 918, ,135 Net cash used in investing activities (7,785,743) (4,175,339) Cash flows from financing activities Proceeds from debt securities in issue - 143,149 Repayment of debt securities in issue (8,310,421) (11,155,151) GDRs buy-back 14 (323,808) - Net cash used in financing activities (8,634,229) (11,012,002) Effect of exchange rate changes on cash and cash equivalents (1,101,754) 500,933 Net increase/(decrease) in cash and cash equivalents 5,260,011 (9,027,300) Cash and cash equivalents at the beginning of the period 6 10,699,577 18,825,970 Cash and cash equivalents at the end of the period 6 15,959,588 9,798,670 The notes set out on pages 5 to 34 form an integral part of this Consolidated Condensed Interim Financial Information 4

8 1 Introduction This consolidated condensed interim financial information for the six-months period ended for TCS Group Holding PLC (the Company ) and its subsidiaries (together referred to as the Group or TCS Group Holding PLC ) has been prepared in accordance with International Accounting Standard 34 (IAS 34) Interim Financial Reporting as adopted by the European Union. The Company was incorporated, and is domiciled, in Cyprus in accordance with the provisions of the Companies Law, Cap.113. The Board of Directors of the Company at the date of authorisation of this consolidated condensed interim financial information consists of Constantinos Economides, Alexios Ioannides, Mary Trimithiotou, Philippe Delpal, Jacques Der Megreditchian and Martin Cocker. The Company Secretary is Altruco Secretarial Limited, Kanika International Business Center, 6th floor, Profiti, Ilia No 4 Germasogeia, 4046 Limassol, Cyprus. Mail: P.O.Box 50734, 3609, Limassol, Cyprus. At and 31 December 2014 share capital of the Group is comprised of Class A shares and Class B shares. A Class A share is an ordinary share with a nominal value of USD 0.04 per share and carrying one vote. A Class B share is an ordinary share with a nominal value of USD 0.04 per share and carrying 10 votes. As at the number of Class A shares is 90,494,146 and Class B shares is 92,144,679. As at 31 December 2014 the number of Class A shares is 90,494,146 and Class B shares is 92,144,679. On 25 October 2013 the Group completed an initial public offering of its Class A ordinary shares in the form of global depository receipts (GDRs) listed on the London Stock Exchange plc. During the three months ended the Group repurchased 1,843,682 GDRs at amount of RR 323,808 thousand at market prices. As at and 31 December 2014 the entities holding either Class A or Class B shares of the Company were: 30 June December 2014 Country of Incorporation Tadek Holding & Finance S.A %* 50.45%* British Virgin Islands Guaranty Nominees Limited (JP Morgan Chase Bank NA) 41.86%** 43.91%** United Kingdom Rousse Nominees Limited 2.88% 2.88% Guernsey Vostok Emerging Finance Ltd 3.49% - Bermuda Altruco Trustees Limited 1.32%*** 1.32%*** Cyprus Tasos Invest & Finance Inc. 0.00%**** 0.00%**** British Virgin Islands Vizer Limited 0.00%***** 0.00%***** British Virgin Islands Maitland Commercial Inc. 0.00%***** 0.00%***** British Virgin Islands Norman Legal S.A. 0.00%***** 0.00%***** British Virgin Islands Lorimer Ventures Limited % Cyprus Total % % * The shareholding of Tadek Holding & Finance S.A. consists of Class B shares. ** Guaranty Nominees Limited is a company holding class A shares of the Company for which global depositary receipts were issued under a deposit agreement made between the Company and JP Morgan Chase Bank NA signed in October The percentage of class A shares held by Guaranty Nominees Limited in the total share capital of the Company is equal to 41.86% (31 December 2014: 43.91%). *** The shareholding of Altruco Trustees Limited represents Class A shares under the ESOP (Note 27) only. **** Tasos Invest & Finance Inc. owns 1 Class B share at and 31 December

9 1 Introduction (Continued) ***** Vizer Limited, Maitland Commercial Inc and Norman Legal S.A. each own 25 Class B shares of the Company at and 31 December As at and 31 December 2014 the ultimate controlling party of the Company is Mr. Oleg Tinkov. As at and as at 31 December 2014 the beneficial owner of Tadek Holding & Finance S.A., Tasos Invest & Finance Inc., Vizer Limited, Maitland Commercial Inc and Norman Legal S.A. was Russian entrepreneur Mr. Oleg Tinkov, the beneficial owner of Rousse Nominees Limited was Baring Vostok Private Equity Fund IV, L.P. and the beneficial owner of Lorimer Ventures Limited was Horizon Capital Private Equity Fund. Mr. Oleg Tinkov controls 91.1% of the aggregated voting rights attaching to the Class A and B shares. Subsidiaries and structured entity included in this consolidated condensed interim financial information are listed below: Name Nature of business 31 December 2014 Percentage Percentage of voting of rights ownership Percentage of ownership Percentage of voting rights Country of registration JSC Tinkoff Bank Banking operations 100% 100% 100% 100% Russia JSC Tinkoff Insurance Insurance operations 100% 100% 100% 100% Russia LLC TCS Services 100% 100% 100% 100% Russia LLC T-Finance Assets holding 100% 100% 100% 100% Russia TCS Finance Ltd Financing Ireland Goward Group Ltd Investment holding company 100% 100% 100% 100% British Virgin Islands LLC Feniks Collection services 100% 100% 100% 100% Russia JSC Tinkoff Bank (the Bank ) provides on-line retail banking services in Russia. The Bank specialises in issuing credit cards. On 2 April 2015 the Bank changed its corporate name from CJSC Tinkoff Credit Systems Bank. JSC Tinkoff Insurance (the Insurance Company ) provides insurance services mainly to clients of the Group. TCS Finance Ltd is a structured entity which issued debt securities for the Group. This entity was consolidated as it was specifically set up for the purposes of the Group, and the Group has exposure to substantially all risks and rewards through outstanding guarantees of the entity s obligations. The Group guarantees all obligations of this entity represented by the bonds issued of RR 8,876,245 thousand out of RR 11,000,623 thousand as of. LLC Feniks is a debt collection agency. The Bank owns 51% and Goward Group Ltd. owns 49% of voting shares in the collection agency. The subsidiary provides debt collection services to the Group. Principal activity. The Group s principal business activity is retail banking and insurance operations within the Russian Federation through the Bank and Insurance Company. The Bank has operated under general banking license 2673 issued by the Central Bank of the Russian Federation ( CBRF ) since 8 December The Insurance Company operates under an insurance license issued by the Central Bank of the Russian Federation. 6

10 1 Introduction (Continued) The Bank participates in the state deposit insurance scheme, which was introduced by the Federal Law 177-FZ Deposits of individuals insurance in Russian Federation dated 23 December The State Deposit Insurance Agency guarantees repayment of 100% of individual deposits up to RR 1,400 thousand per individual in case of the withdrawal of a license of a bank or a CBRF-imposed moratorium on payments. Registered address and place of business. The Company s registered address is Kanika International Business Center, 6 th floor, Profiti Ilia 4 Germasogeia, Limassol 4046 Cyprus. The Bank s registered address is 1-st Volokolamsky proezd, 10, building 1, , Moscow, Russian Federation. The Group s principal place of business is the Russian Federation. Presentation currency. This consolidated condensed interim financial information is presented in thousands of Russian Rubles (RR). 2 Operating Environment of the Group Russian Federation. The Russian Federation displays certain characteristics of an emerging market. Its economy is particularly sensitive to oil and gas prices. The legal, tax and regulatory frameworks continue to develop and are subject to frequent changes and varying interpretations (Note 24). During the six month period ended the Russian economy was negatively impacted by a decline in oil prices and ongoing political tension in the region and international sanctions against certain Russian companies and individuals. As a result during the first half of 2015: the CBRF exchange rate fluctuated between RR and RR per USD; the CBRF key refinancing interest rate decreased from 17.0% p.a. to 11.5% p.a.; the RTS stock exchange index ranged between 755 and 1,069; Russia s credit rating was downgraded by Fitch Ratings in January 2015 to BBB-, whilst Standard & Poor s cut it to BB+, putting it below investment grade for the first time in a decade. In February 2015 Moody s downgraded Russia s rating to Ba1 from Baa3. Fitch Ratings still have Russia as investment grade. All these rating agencies indicated a negative outlook, meaning further downgrades are possible; the inflation rate reached the level of 8.28% compared to 4.73% in the first half of 2014; the unemployment rate at the end of the second quarter compared to the same period last year increased by 0.4% and amounted to 5.4%; access to international financial markets to raise funding was limited for a number of large entities and banks due to international sanctions; and capital outflows increased compared to preceding years. The financial markets continue to be volatile and are characterised by frequent significant price movements and increased trading spreads. Subsequent to : the CBRF exchange rate fluctuated between RR per USD and RR per USD; the RTS stock exchange index ranged between 724 and 932; the CBRF key refinancing interest rate decreased from 11.5% p.a. to 11.0% p.a. bank lending activity decreased as banks are reassessing the business models of their borrowers and their ability to withstand the increased lending and exchange rates; and These events may have a further significant impact on the Group s future operations and financial position, the effect of which is difficult to predict. The future economic and regulatory situation and its impact on the Group s operations may differ from management s current expectations. 7

11 2 Operating Environment of the Group (Continued) 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. Thus final impairment losses from financial assets could differ significantly from the current level of provisions. Refer to Note 4. 3 Summary of Significant Accounting Policies Basis of preparation. This consolidated condensed interim financial information has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the European Union (EU) 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), as adopted by the EU, and the requirements of the Cyprus Companies Law, Cap Except as described below, the same accounting policies and methods of computation were followed in the preparation of this consolidated condensed interim financial information as compared with the annual consolidated financial statements for the year ended 31 December 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. Due from other banks. Amounts due from other banks are recorded when the Group advances money to counterparty banks with no intention of trading the resulting unquoted non-derivative receivable due on fixed or determinable dates. Amounts due from other banks are carried at amortised cost. Seasonality. The management do not consider that the Group s business exhibits material differences due to seasonality. Adoption of New or Revised Standards and Interpretations. Certain new standards, interpretations and amendments to the existing standards, as disclosed in the consolidated financial statements for the year ended 31 December 2014, became effective for the Group from 1 January These new or amended standards or interpretations did not have any material impact on this consolidated condensed interim financial information. At the principal rate of exchange used for translating foreign currency balances was USD 1 = RR (31 December 2014: USD 1 = RR ). 4 Critical Accounting Estimates and Judgements in Applying Accounting Policies The Group makes estimates and assumptions that affect the amounts recognised in the consolidated condensed interim financial information and the carrying amounts of assets and liabilities within the next financial year. Estimates and judgements are continually evaluated and are based on management s experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Management also makes certain judgements, apart from those involving estimations, in the process of applying the accounting policies. Judgements that have the most significant effect on the amounts recognised in the consolidated condensed interim financial information and estimates that can cause a significant adjustment to the carrying amount of assets and liabilities within the next financial year include: 8

12 4 Critical Accounting Estimates and Judgements in Applying Accounting Policies (Continued) Impairment losses on loans and advances. The Group regularly reviews its loan portfolio to assess impairment. In determining whether an impairment loss should be recorded in profit or loss for the period, the Group makes judgments as to whether there is any observable data indicating that there is a measurable decrease in the estimated future cash flows from a portfolio of loans before the decrease can be identified with an individual loan in that portfolio. This evidence may include observable data indicating that there has been an adverse change in the payment status of borrowers in a group, or national or local economic conditions that correlate with defaults on assets in the group. The primary factor that the Group considers as objective evidence of impairment is the overdue status of the loan. In general, loans where there are no breaches in loan servicing are considered to be unimpaired. Given the nature of the borrowers and the loans it is the Group s view and experience that there is a very short time lag between a possible loss event that could lead to impairment and the non or under payment of a monthly installment. Management uses estimates based on historical loss experience for assets with credit risk characteristics and objective evidence of impairment similar to those in the portfolio when estimating its future cash flows. The methodology and assumptions used for estimating both the amount and timing of future cash flows are reviewed regularly to reduce any differences between loss estimates and actual loss experience. In accordance with internal methodology for the provision estimation the Group uses its historical retail loan loss statistics for assessment of probabilities of default. The last twelve months of historical loss data give the most weighting in calculating the provision for impairment. This framework allows the Group to have better information to estimate losses on loans to individuals as all latest trends are taken into account, and to reduce the implied probabilities volatility. The loan loss provision includes adjustment on the future expected recovery of impaired loans which was estimated at 1.7% of the provision of loan impairment and was based on conservative sampling of historical data. As at the positive effect of the above adjustment on provision for loan impairment is approximately RR 414,794 thousand (2014: RR 315,302 thousand). To the extent that the incurred losses as at resulting from future cash flows vary by 0.5% (: 0.5%) from the calculated estimate, the result would be approximately RR 475,418 thousand (: RR 456,458 thousand) higher or lower. 5 New Accounting Pronouncements Since the Group published its last annual consolidated financial statements for the year ended 31 December 2014, no new accounting pronouncements have been issued. The Group has not early adopted any of the new standards and interpretations disclosed in the New Accounting Pronouncements note in its last annual financial statements and effective for its annual periods beginning on or after 1 January Cash and Cash Equivalents 30 June December 2014 Cash on hand 20,483 25,571 Cash balances with the CBRF (other than mandatory reserve deposits) 1,928,532 2,295,541 Placements with other banks and organizations with original maturities of less than three months 14,010,573 8,378,465 Total Cash and Cash Equivalents 15,959,588 10,699,577 Placements with other banks and organizations with original maturities of less than three months includes placements under reverse sale and repurchase agreements in the amount of 1,584,195 thousand as at (31 December 2014: none). Cash and cash equivalents are neither impaired nor past due. Refer to Note 26 for the disclosure of the fair value of cash and cash equivalents. 9

13 7 Loans and Advances to Customers 30 June December 2014 Loans to individuals: Credit card loans 85,249,333 85,064,092 Installment loans 7,758,455 6,534,975 Cash loans 1,377,318 1,564,940 POS loans 698, ,319 Total loans and advances to customers before impairment 95,083,672 93,907,326 Less: Provision for loan impairment (19,512,753) (19,327,328) Total loans and advances to customers 75,570,919 74,579,998 Credit cards are issued to customers for cash withdrawals or payment for goods or services, within the range of limits established by the Bank. These limits may be increased or decreased from time-to-time based on management decision. Credit card loans are not collateralized. During June 2015 the Group acquired a portion of JSC Svyaznoy Bank s credit card portfolio of RR 1,643 mln. The acquired portfolio consists of neither past due, not impaired credit card loans. The Bank has a restructuring programme for delinquent borrowers who demonstrate a willingness to settle their debt by switching to fixed monthly repayments of outstanding amounts ( installment loans ). POS ( Point of sale ) loans represent POS lending through the Bank s programme POS loans (KupiVKredit). This programme funds online purchases through internet shops for individual borrowers. Cash loans represent a product for existing borrowers of the Bank who have positive credit history and who do not have loans in other banks. Cash loans are loans provided to customers via the Bank s debit cards. These loans are available for withdrawal without commission. Presented below is an analysis of issued, activated and utilised cards based on their credit card limits as at the end of the reporting period: In units 30 June December 2014 Credit card limits Up to 10 RR thousand 468, , RR thousand 281, , RR thousand 208, , RR thousand 164, , RR thousand 145, , RR thousand 123, , RR thousand 228, , RR thousand 185, ,724 More than 100 RR thousand 423, ,673 Total cards 2,228,968 2,494,772 10

14 7 Loans and Advances to Customers (Continued) Movements in the provision for loan impairment for the 6 months period ended are as follows: As at 31 December 2014 Sales of impaired loans Amounts written-off during the period Provision for impairment during the period As at 30 June 2015 Loans to individuals: Credit card loans 15,609,454 (37,954) (6,463,219) 5,947,833 15,056,114 Installment loans 3,133,634 (4,558) (1,013,385) 1,758,386 3,874,077 Cash loans 457,893 - (220,700) 165, ,901 POS loans 126,347 - (73,795) 127, ,661 Total provision for loan impairment 19,327,328 (42,512) (7,771,099) 7,999,036 19,512,753 Movements in the provision for loan impairment for the 3 months period ended are as follows: As at 31 March 2015 Sales of impaired loans Amounts written-off during the period Provision for impairment during the period As at 30 June 2015 Loans to individuals: Credit card loans 14,937,185 (37,954) (2,753,260) 2,910,143 15,056,114 Installment loans 3,539,981 (4,558) (485,599) 824,253 3,874,077 Cash loans 548,959 - (220,700) 74, ,901 POS loans 169,528 - (39,326) 49, ,661 Total provision for loan impairment 19,195,653 (42,512) (3,498,885) 3,858,497 19,512,753 Movements in the provision for loan impairment for the 6 months period ended are as follows: As at 31 December 2013 Sales of impaired loans Amounts written-off during the period Provision for impairment during the period As at 30 June 2014 Loans to individuals: Credit card loans 8,372,032 (1,005,116) - 7,096,392 14,463,308 Installment loans 884,867 (285,079) - 1,142,933 1,742,721 POS loans 116, , ,849 Cash loans 31, , ,300 Total provision for loan impairment 9,405,326 (1,290,195) - 8,543,047 16,658,178 11

15 7 Loans and Advances to Customers (Continued) Movements in the provision for loan impairment for the 3 months period ended are as follows: As at 31 March 2014 Sales of impaired loans Amounts written-off during the period Provision for impairment during the period As at 30 June 2014 Loans to individuals: Credit card loans 11,057, ,406,027 14,463,308 Installment loans 1,123, ,224 1,742,721 POS loans 152, , ,849 Cash loans 153, , ,300 Total provision for loan impairment 12,486, ,171,683 16,658,178 During six months period ended the Group sold impaired loans to third parties (external debt collection agencies) with a gross amount of RR 43,975 thousand (six months period ended : RR 1,335,333 thousand), and provision for impairment of RR 42,512 thousand (: RR 1,290,195 thousand). The difference between the carrying amount of these loans and the consideration received was recognised in profit or loss as gain from the sale of impaired loans in the amount of RR 6,346 thousand (six months period ended : RR 17,004 thousand). During three months period ended the Group sold impaired loans to third parties (external debt collection agencies) with a gross amount of RR 43,975 thousand and provision for impairment of RR 42,512 thousand (three months period ended : none). The difference between the carrying amount of these loans and the consideration received was recognised in profit or loss as gain from the sale of impaired loans in the amount of RR 6,346 thousand for the three months period ended. 12

16 7 Loans and Advances to Customers (Continued) Analysis of loans to individuals by credit quality is as follows: In thousands of RR Credit card loans 31 December 2014 Installment Cash POS Credit Install- Cash loans loans card ment loans loans loans loans POS loans Neither past due nor impaired: - new 2,623, , , ,659 Loans collectively assessed for impairment (gross): - non-overdue 64,884,251 4,881, , ,017 66,142,385 4,083,880 1,080, ,023 - less than 30 days overdue 3,121, ,401 59,414 32,129 3,230, ,447 68,554 27, to 90 days overdue 3,095, ,491 69,026 45,232 3,015, ,151 79,082 19, to 180 days overdue 3,591, ,078 96,896 75,974 3,126, , ,693 22, to 360 days overdue 3,720, , ,281 50,013 4,625, , ,957 77,221 - loans in courts 4,213, ,958, Less: Provision for loan impairment (15,056,114) (3,874,077) (402,901) (179,661) (15,609,454) (3,133,634) (457,893) (126,347) Total loans to individuals 70,193,219 3,884, , ,905 69,454,638 3,401,341 1,107, ,972 Loans in category new represent loans provided to new borrowers for which the date of the first payment did not occur before the reporting date and purchased loans for which the date of first payment did not occur before the reporting date. Loans in courts are loans to delinquent borrowers, against which the Group has filed claims to courts in order to recover outstanding balances. The Group assesses non-overdue loans for impairment collectively as a homogeneous population with similar credit quality as disclosed above. The Group considers overdue loans as impaired. Refer to Note 26 for the estimated fair value of loans and advances to customers. Information on related party balances is disclosed in Note Investment Securities Available for Sale 31 December 2014 Corporate bonds 11,536, ,535 Russian government bonds 308,743 - Total investment securities available for sale 11,844, ,535 13

17 8 Investment Securities Available for Sale (Continued) The movements in investment securities available for sale during six months ended are as follows: 2015 Carrying amount at 1 January 216,535 Purchases 8,525,240 Redemption of investment securities available for sale (918,803) Interest income accrued on investment securities available for Sale and Repurchase receivables 378,202 Interest received (322,880) Receipt under Sale and Repurchase agreements 5,366,928 Pledged under Sale and Repurchase agreements (1,629,907) Foreign exchange loss on investment securities available for sale in currency (36,834) Revaluation through other comprehensive income 266,503 Carrying amount at 30 June 11,844,984 The movements in investment securities available for sale for three months ended are as follows: 2015 Carrying amount at 31 March 7,257,140 Purchases 6,455,240 Redemption of investment securities available for sale (445,299) Interest income accrued on investment securities available for Sale and Repurchase receivables 242,032 Interest received (200,928) Receipt under Sale and Repurchase agreements 648 Pledged under Sale and Repurchase agreements (1,629,259) Foreign exchange loss on investment securities available for sale in currency (24,709) Revaluation through other comprehensive income 190,119 Carrying amount at 30 June 11,844,984 9 Repurchase Receivables Repurchase receivables represent securities sold under sale and repurchase agreements through which the counterparty has the right, by contract or custom, to sell or repledge. The repurchase agreements are long-term in nature and mature by 20 April 2016 (31 December 2014: short-term in nature and matured on 14 January 2015). 31 December 2014 Available-for-sale securities sold under sale and repurchase agreements Corporate bonds 1,629,259 5,098,868 Russian government bonds - 267,412 Total repurchase receivables 1,629,259 5,366,280 14

18 10 Due to Banks 31 December 2014 Loan from OJSC Sberbank of Russia 2,251,046 2,994,061 Sale and repurchase agreements with CBRF 1,486,337 5,002,399 Due to other banks 161, ,208 Short-term loan from CBRF - 2,005,548 Total due to banks 3,898,411 10,331,216 On 14 March 2014 the Bank raised a loan from OJSC Sberbank of Russia in the amount of RR 3,000 mln with a contractual interest rate of 11.2% maturing on 13 September As at, in amounts due to banks are included liabilities of RR 1,486,337 thousand from sale and repurchase agreements with CBRF. On 10 December 2014 the Bank raised a loan from CBRF in the amount of RR 1,000 mln with a contractual interest rate of 11.25%. The loan was fully redeemed on 10 March On 18 November 2014 the Bank raised a loan from CBRF in the amount of RR 1,000 mln with a contractual interest rate of 11.25%. The loan was fully redeemed on 16 February Refer to Note 26 for the estimated fair value of due to banks. 11 Customer Accounts 31 December 2014 Legal entities - Current/settlement accounts of corporate entities 222, ,242 - Term deposits of corporate entities 1,525,147 1,878,589 Individuals - Current/settlement accounts of individuals 15,009,909 11,056,383 - Term deposits of individuals 54,942,622 30,235,220 Total Customer Accounts 71,700,219 43,366,434 Refer to Note 26 for the estimated fair value of customer accounts. Information on related party balances is disclosed in Note Debt Securities in Issue Maturity date 30 June December 2014 USD denominated bonds issued in September ,876,245 14,426,424 RR denominated bonds issued in July ,096,336 2,094,954 RR denominated bonds issued in May ,042 1,131,498 RR denominated bonds issued in April ,538,870 Euro-Commercial Paper issued in February ,034 Total Debt Securities in Issue 11,000,623 19,414,780 15

19 12 Debt Securities in Issue (Continued) On 18 September 2012 the Group issued USD denominated bonds with a nominal value of USD 250 mln at 10.75% coupon rate maturing on 18 September On 1 April 2015 as a result of a tender the Group redeemed USD denominated bonds with nominal value of USD 80,090 thousand at 2.5% premium, with the total amount of the redemption equal to RR 4,751 mln (equivalent to USD 82,403 thousand). The amount of premium paid amounted to RR 116,549 thousand. On 16 July 2012 the Group issued RR denominated bonds with a nominal value of RR 2,000 mln at 13.9% coupon rate maturing on 14 July On 28 May 2013 the Group issued RR denominated bonds with a nominal value of RR 3,000 mln at 10.25% coupon rate maturing on 24 May As a result of an offer event as at 25 November 2014 securities with nominal value of RR 1,880 mln were repurchased by the Group. In November 2014 the Group has set the coupon rate of RR denominated bonds at 14.00% till the next offer event. On 29 May 2015 as a result of an offer event securities with nominal value of RR 1,092 mln were repurchased by the Group. In May 2015 the Group has set the coupon rate of RR denominated bonds at 12.50% till maturity. On 19 April 2012 the Group issued RR denominated bonds with a nominal value of RR 1,500 mln at 13.25% coupon rate maturing on 16 April On 16 April 2015 the Group redeemed RR denominated bonds at maturity at amount of RR 1,500 mln at nominal value. On 27 February 2014 the Group issued USD denominated Euro-Commercial Paper (ECP) with a nominal value of USD 4 mln with a discount of 5.5% maturing on 26 February On 26 February 2015 the ECP was fully redeemed. All the debt securities issued by the Group are traded on stock exchanges. Refer to Note 26 for the disclosure of the fair value of debt securities in issue. 13 Subordinated Debt As at the carrying value of the subordinated debt was RR 11,109,931 thousand (31 December 2014: RR 11,250,686 thousand). On 6 December 2012 and 18 February 2013 the Group issued USD denominated subordinated bonds with a nominal value of USD 125 mln with zero premium and USD 75 mln at a premium of 7.0% at 14.0% coupon rate (applicable to both tranches) maturing on 6 June The claims of lenders against the Group in respect of the principal and interest on these bonds are subordinated to the claims of other creditors in accordance with the legislation of the Russian Federation. Refer to Note 26 for the disclosure of the fair value of financial instruments. 14 Share Capital except for number of shares Number of authorised shares Number of outstanding shares Ordinary shares Share premium Treasury shares Total At 31 December ,479, ,189, ,162 8,622,919 (2,524) 8,806,557 At 31 December ,479, ,638, ,112 8,622,919 (4,474) 8,806,557 GDRs buy-back (323,808) (323,808) Shares sold under ESOP At 190,479, ,638, ,112 8,622,919 (327,718) 8,483,313 During the three months ended the Group repurchased 1,843,682 GDRs at amount of RR 323,808 thousand at market prices. 16

20 14 Share Capital (Continued) Treasury shares represent Class A shares of the Group under the ESOP and Equity LTIP and all held by a trustee and GDRs repurchased from the market in April to June Refer to Note 27. In June 2014 the Group issued 1,449,750 ordinary Class A shares with a par value of USD 0.04 per share, fully paid, to Altruco Trustees Limited under the ESOP. Refer to Note Interest Income and Expense Six-Months Three-Months Six-Months Three-Months Interest income Loans and advances to customers, including: Credit card loans 17,768,079 8,984,230 18,781,808 9,498,657 Installment loans 429, , , ,267 Cash loans 317, , , ,457 POS loans 193,745 99, ,400 64,626 Investment securities available for sale and Repurchase receivables 378, ,032 70,144 56,545 Placements with other banks 16,708 13,268 10,837 2,044 Reverse Repurchase agreements 6,569 4, Total Interest Income 19,109,761 9,722,610 19,539,563 9,875,596 Interest expense Customer accounts 4,054,144 2,374,143 2,555,859 1,275,560 Subordinated debt 816, , , ,729 Eurobonds 813, , , ,989 Due to banks 288,777 94, , ,751 RR denominated bonds 217,566 82, , ,312 Euro-Commercial Paper 2,305-50,807 10,960 Total Interest Expense 6,193,184 3,297,424 4,344,578 2,124,301 Net Interest Income 12,916,577 6,425,186 15,194,985 7,751, Customer Acquisition Expenses Six-Months Three-Months Six-Months Three-Months Marketing and advertising 727, , , ,893 Staff costs 661, , , ,723 Credit bureaux 78,223 42,810 92,652 46,840 Telecommunication expenses 27,062 13,925 43,452 23,651 Personalisation, printing and distribution 6,707 6,484 13,703 4,919 Acquisition and partnerships Total customer acquisition expenses 1,501, ,542 1,738, ,026 17

21 16 Customer Acquisition Expenses (Continued) Customer acquisition expenses represent expenses paid by the Group on services related to origination of credit card customers (mailing of advertising materials, processing of responses, marketing and advertising etc). The Group uses a variety of different channels for the acquisition of new customers. Staff costs represent salary expenses and related costs of employees involved in customer acquisition. Included in staff costs are statutory social contributions to the pension fund for the six-months period ended in the amount of RR 137,516 thousand (six-months period ended :_RR_132,768 thousand). Included in staff costs are statutory social contributions to the state pension fund for the three-months period ended in the amount of RR 68,847 thousand (three-months period ended :_RR_49,273 thousand). 17 Income from Insurance Operations Six-Months Three-Months Six-Months Three-Months Insurance premiums earned 560, , , ,061 Insurance agency fees 3,810 2,965 40,219 18,412 Insurance claims incurred (139,535) (98,695) (69,786) (37,631) Total income from insurance operations 424, , , ,842 Staff and administrative expense for insurance operations are included in Note Fee and Commission Expense Six-Months Three-Months Six-Months Three-Months Payment systems 392, , ,971 99,663 Service fees 209, , , ,473 Banking and other fees 26,889 12,939 7,100 4,689 Total fee and commission expense 628, , , ,825 Service fees represent fees for statement printing, mailing services and sms services. Payment systems fees represent fees for MasterCard and Visa services. 18

22 19 Administrative and Other Operating Expenses Six-Months Three-Months Six-Months Three-Months Staff costs 2,033,563 1,041,415 1,697, ,609 Taxes other than income tax 428, , , ,425 Rental expenses 228, , ,038 94,530 Depreciation of tangible fixed assets 127,197 60, ,219 60,114 Communication services 113,373 60, ,765 67,932 Expenses on deposit insurance 108,243 62,007 83,216 42,817 Information services 103,649 54,737 51,342 20,471 Amortization of intangible assets 87,892 43,355 50,189 31,832 Professional services 59,496 35,354 60,295 30,646 Stationary and office expenses 29,317 15,147 26,399 12,929 Transportation 6,719 3,691 6,762 2,992 Other administrative expenses 104,832 58, ,700 42,837 Total administrative and other operating expenses 3,430,897 1,730,000 2,931,838 1,527,134 Included in staff costs are statutory social contributions to the pension fund and share-based remuneration: Six-Months Three-Months Six-Months Three-Months Statutory social contribution to the pension fund 379, , ,388 71,939 Share-based remuneration 62,396 29,002 23,427 14, Income Taxes Income tax expense comprises the following: Six-Months Three-Months Six-Months Three-Months Current tax (17,851) (8,969) (726,049) (389,993) Deferred tax (69,035) (141,217) 148,962 (68,189) Income tax expense for the period (86,886) (150,186) (577,087) (458,182) 21 Segment Analysis Operating segments are components that engage in business activities that may earn revenues or incur expenses, whose operating results are regularly reviewed by the chief operating decision maker (CODM) and for which discrete financial information is available. The CODM is the person or group of persons who allocates resources and assesses the performance for the Group. The functions of CODM are performed by the Board of Directors of the Group. 19

23 21 Segment Analysis (Continued) Description of products and services from which each reportable segment derives its revenue The Group is organised on the basis of 2 main business segments: Retail banking representing private banking services, private customer current accounts, savings, deposits, investment savings products, custody, credit and debit cards, consumer loans and mortgages; Insurance operations representing insurance services provided to individuals. Factors that management used to identify the reportable segments The Group s segments are strategic business units that focus on different services to the customers of the Group. They are managed separately because each business unit requires different marketing strategies and represents different types of businesses. Measurement of operating segment profit or loss, assets and liabilities The CODM reviews financial information prepared based on International financial reporting standards adjusted to meet the requirements of internal reporting. The CODM evaluates performance of each segment based on profit before tax. Information about reportable segment profit or loss, assets and liabilities Segment information for the reportable segments as at is set out below: Retail banking Insurance operations Eliminations Total Cash and cash equivalents 15,790, ,104 (566,367) 15,959,588 Mandatory cash balances with the CBRF 907, ,408 Due from other banks - 356, ,951 Loans and advances to customers 75,570, ,570,919 Financial derivatives 8,763, ,763,689 Investment securities available for sale 11,844, ,844,984 Repurchase receivables 1,629, ,629,259 Current income tax assets 1,084,647 22,666-1,107,313 Guarantee deposits with payment systems 2,569, ,569,621 Tangible fixed assets 448, ,278 Intangible assets 997, ,326-1,277,754 Other financial assets 1,251,256 31,605 (22,485) 1,260,376 Other non-financial assets 427, , ,380 Total reportable segment assets 121,286,415 1,543,957 (588,852) 122,241,520 Due to banks 3,898, ,898,411 Customer accounts 72,266,586 - (566,367) 71,700,219 Debt securities in issue 11,000, ,000,623 Deferred income tax liabilities 1,139,320 25,341-1,164,661 Subordinated debt 11,109, ,109,931 Other financial liabilities 967, ,699 (22,485) 1,422,543 Other non-financial liabilities 810,375 10, ,881 Total reportable segment liabilities 101,192, ,546 (588,852) 101,117,269 20