Otkritie Holding Joint Stock Company Interim condensed consolidated financial statements

Transcription

1 Otkritie Holding Joint Stock Company Interim condensed consolidated financial statements

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

23 8. Available-for-sale investment securities (continued) Additionally, during 2014, the Group reclassified certain financial assets from available-for-sale investment securities to investments securities held to maturity, as the Group has the intention and ability to hold such reclassified financial assets until maturity. Such securities are measured at amortized cost using the effective interest method less any allowance for impairment. Unwinding of the discount is recorded in the interest income over the period to maturity using the effective interest method. The impact of reclassifications is as follows: Amounts due from credit institutions Loans to customers Held-to-maturity investment securities Fair value at the date of reclassification ,200 9,307 Disposal of securities (985) (354) Carrying amount of reclassified assets as of 30 June ,175 8,962 Fair value of reclassified assets as of ,191 9,556 Fair value gain/(loss) recognized in equity on reclassified assets before reclassification for the sixmonth period ended Impairment loss recognized in the income statement before reclassification for the six months ended Fair value gain/(loss) that would have been recognized on the assets reclassified for the six months ended if the reclassification had not been made (2) Gain/(loss) recognized after reclassification in the income statement for the six months ended 30 June 2015, including: Effect of exchange rate changes (1) (29) (111) Net interest income Average effective interest rate at the date of reclassification 6.29% 8.97% 7.19% Cash flows expected to be recovered at the date of reclassification ,460 10, Held-to-maturity investment securities Held-to-maturity investment securities comprise the following: 31 December 2014 Debt securities issued by state and municipal authorities Russian state bonds (OFZ) 12,351 Municipal and subfederal bonds 1, Corporate debt securities Corporate Eurobonds 40,394 36,344 Corporate bonds 5,175 Total held-to-maturity investment securities 59,915 36,492 20

24 9. Held-to-maturity Investment securities (continued) Held-to-maturity investment securities pledged under repurchase agreements comprise: 31 December 2014 Debt securities issued by state and municipal authorities Municipal and subfederal bonds 1,987 Corporate debt securities Corporate Eurobonds 10,905 17,275 Corporate bonds 5,474 Total held-to-maturity investment securities pledged under repurchase agreements 10,905 24,736 Russian state bonds (OFZ) are represented by RUB-denominated debt securities issued by the Ministry of Finance of the Russian Federation. Municipal bonds and subfederal bonds are denominated in Russian rubles. Corporate Eurobonds are RUB-denominated and USD-denominated interest-bearing securities issued by major Russian and foreign companies and credit institutions, freely tradable in Russia and internationally. As of, the Group raised RUB 9,835 million (31 December 2014: RUB 21,020 million) under direct repurchase agreements with the CBR collateralized with held-to-maturity investment securities, which were recognized within the amounts due to credit institutions. The fair value of securities pledged under direct repurchase agreements with the CBR is RUB 10,732 million (31 December 2014: RUB 22,814) (Note 13). Analysis of held-to-maturity debt investment securities by credit quality as of is as follows: Investment rating Speculative rating No rating Total Debt securities issued by state and municipal authorities Russian state bonds (OFZ) 12,351 12,351 Municipal and subfederal bonds 1,995 1,995 Corporate debt securities Corporate Eurobonds 5,719 45, ,299 Corporate bonds 5,175 5,175 Total held-to-maturity debt investment securities 18,070 52, ,820 Analysis of held-to-maturity debt investment securities by credit quality as of 31 December 2014 is as follows: Investment rating Speculative rating No rating Total Debt securities issued by state and municipal authorities Municipal and subfederal bonds 2,135 2,135 Corporate debt securities Corporate Eurobonds 40,846 12, ,619 Corporate bonds 4, ,474 Total held-to-maturity debt investment securities 45,812 15, ,228 The ratings in the tables above are determined based on the rating scales of international rating agencies. 21

25 10. Taxation Income tax expense comprises: 30 June 2014 Current tax charge 3,466 2,677 Deferred tax charge origination and reversal of temporary differences (836) (735) Income tax charge 2,630 1,942 Deferred tax recognized in other comprehensive income is allocated as follows: 30 June 2014 Losses from available-for-sale investment securities (1,076) (243) Currency translation differences 7 3 Revaluation of real estate properties Income tax recognized in other comprehensive income (1,069) (240) In 2015 and 2014, the current income tax rate applicable to the majority of the Group s profit was 20%. In 2015 and 2014, the tax rate for interest income on state securities in the Russian Federation was 15% for federal taxes. 11. Other impairment The movements in other impairment allowances and provisions were as follows: Available-forsale investment securities Property and equipment Other financial assets Other nonfinancial assets Guarantees and commitments Investment property 31 December , ,109 Charge/(reversal) (115) 2,011 Business combinations 14,079 14,079 Assets written off against provisions (449) (128) (95) (672) Utilized Disposal of companies Currency translation effect ,616 1,147 15, ,552 Total Available-forsale investment securities Property and equipment Other financial assets Other nonfinancial assets Guarantees and commitments Investment property 31 December , ,574 Charge Business combinations Assets written off against provisions (59) (59) Utilized (64) (64) Disposal of companies Currency translation effect June , ,290 Allowance for impairment of assets is deducted from the carrying amount of the related assets. Provisions for commitments and contingencies and other provisions are recorded in liabilities. Total 22

26 12. Other assets Other assets comprise: 31 December 2014 Other financial assets Accounts receivable on operations with securities 74,769 35,438 Expected benefits from financial support provided by the Deposit Insurance Agency (Note 26) 45,590 Assets held for sale 7,095 7,975 Settlements under spot deals with foreign currency, precious metals and securities 4,089 2,886 Accounts receivable from customers, clients and insurance policy holders 2,629 3,673 Assets on compensation for losses imposed by court 1,723 1,973 Receivables on operations with coins Investments in associates Receivables from personnel 72 3 Dividends receivable Precious metals and foreign currency receivables 6 21 Receivables under fiduciary management agreements 2 1 Amounts in course of settlement Other financial assets 1, Total other financial assets before allowance for impairment 137,926 53,095 Less: allowance for impairment (1,616) (1,316) Total other financial assets 136,310 51,779 Other non-financial assets Other property 3,381 1,218 Current income tax assets 2,976 4,310 Property liens 2,171 1,120 Goodwill 1,532 2,978 Settlements with budget on taxes, fines, penalties (other than income tax) 1, Deferred expenses 1,057 1,123 Advances to suppliers Inventories 5 20 Other non-financial assets Total other non-financial assets before allowance for impairment 14,071 12,218 Less: allowance for impairment (1,147) (808) Total other non-financial assets 12,924 11,410 Total other assets 149,234 63,189 Allowance for impairment is calculated by the Group based on the best estimate of the recoverable amount of other assets. The carrying amounts of goodwill allocated to each cash-generating unit are presented below: 31 December 2014 Commercial banking 1,404 2,850 Investment banking Insurance business Total goodwill 1,532 2,978 23

27 13. Amounts due to credit institutions Amounts due to credit institutions comprise: 31 December 2014 Repurchase agreements with the CBR 1,193, ,877 Repurchase agreements 106,338 52,575 Term deposits and loans 88, ,489 Current accounts 7,984 33,650 CBR deposits 4, ,620 Brokerage accounts 2,913 1,496 Other amounts due to credit institutions 5, Total amounts due to credit institutions 1,409,230 1,063,682 Term deposits and loans are represented by amounts received from banks. As of, 51% (31 December 2014: 61%) of total deposits and loans related to five major counterparty banks. The amounts received under direct repurchase agreements with the CBR and the value of securities pledged as collateral is as follows: Carrying amount of repurchase agreements 31 December 2014 Carrying amount Fair value of of repurchase collateral agreements Fair value of collateral Financial assets at fair value through profit or loss Corporate Eurobonds 19,614 22,185 41,675 46,035 Corporate bonds 54,759 63,879 Municipal and subfederal bonds 7,272 8,167 Russian state bonds (OFZ) Eurobonds of the Russian Federation ,614 22, , ,683 Available-for-sale investment securities Eurobonds of the Russian Federation 536, ,845 Corporate Eurobonds 3,610 4,092 7,628 8,740 Corporate bonds 19,953 22,258 Municipal and subfederal bonds 5,321 5,635 Russian state bonds (OFZ) 3,650 3, , ,937 36,552 40,265 Held-to-maturity investment securities Corporate Eurobonds 9,835 10,732 14,352 15,633 Corporate bonds 5,080 5,446 Municipal and subfederal bonds 1,588 1,735 9,835 10,732 21,020 22,814 Amounts due from credit institutions 1,884 2,046 Loans to customers 1 1 4,746 5,321 Securities received under reverse repurchase agreements Corporate bonds 564, , , ,180 Corporate Eurobonds 31,353 34,986 22,719 25,269 Corporate shares 16,648 29,801 26,319 48,079 Eurobonds of the Russian Federation 9,476 9,496 8,340 8,515 Russian state bonds (OFZ) Municipal and subfederal bonds , , , ,609 Securities borrowed Corporate Eurobonds 1,100 1,224 28,012 31,285 Corporate bonds 236, ,261 Eurobonds of the Russian Federation ,100 1, , ,218 Total 1,193,632 1,308, , ,956 24

28 13. Amounts due to credit institutions (continued) The amounts received under direct repurchase agreements with credit institutions and the value of securities pledged as collateral is as follows: Carrying amount of repurchase agreements 31 December 2014 Carrying amount Fair value of of repurchase collateral agreements Fair value of collateral Financial assets at fair value through profit or loss Corporate shares 2,598 3,519 Corporate Eurobonds Mutual funds units ,310 4,395 Securities received under reverse repurchase agreements Corporate shares 86, ,350 50,780 88,587 Corporate Eurobonds 5,116 6,423 Eurobonds of the Russian Federation 2,165 2,296 Bonds of foreign governments 2,015 2,643 Russian state bonds (OFZ) 865 2,279 Mutual funds units , ,262 50,780 88,587 Securities borrowed Corporate Eurobonds 3,320 4,359 1,795 2,001 Corporate shares 1,601 1,969 Mutual funds units ,745 7,130 1,795 2,001 Total 106, ,787 52,575 90, Amounts due to customers and borrowings Amounts due to customers and borrowings comprise: Individuals Legal entities Total Term deposits 457, ,254 1,166,528 Current accounts 66, , ,642 Brokerage accounts 15,498 65,979 81,477 Borrowings 115, ,652 Direct repurchase agreements 5 65,412 65,417 Total amounts due to customers and borrowings 539,212 1,072,504 1,611,716 Including amounts held as security against commitments and contingencies (Note 19) 2,424 2, December 2014 Individuals Legal entities Total Term deposits 247, , ,407 Current accounts 54,065 99, ,834 Brokerage accounts 11,367 92, ,258 Borrowings 58,234 58,234 Direct repurchase agreements 2,027 2,027 Total amounts due to customers and borrowings 312, ,781 1,122,760 Including amounts held as security against commitments and contingencies (Note 19) 3,981 3,981 25

29 14. Amounts due to customers and borrowings (continued) As of, borrowings include RUB 99,000 million of loans bearing the preferential interest rate of 0.51% p.a. and maturing in 10 years and RUB 30,000 million of loans bearing the interest rate of 13.51% p.a. and maturing in one year, granted by the Deposit Insurance Agency to National Bank TRUST as a financial assistance in accordance with the plan of DIA's participation in efforts to prevent bankruptcy of National Bank TRUST. As of the acquisition date, the Group discounted the loan of RUB 99,000 million using the market rate of 13% p.a. in accordance with IAS 20 Accounting for Government Grants and Disclosure of Government Assistance. In April 2015, when the control over National Bank TRUST was acquired, the fair value of the loan was RUB 33,043 million. As of, the carrying amount of the loan was RUB 33,778 million. Amortization in the amount of RUB 735 million was recognized as interest expense in the consolidated income statement. The loan was collateralized by assets of National Bank TRUST for the amount of RUB 98,950 million. In accordance with the Russian Civil Code, the Group is obliged to repay deposits upon demand of a depositor. In case a term deposit is repaid upon demand of the depositor prior to maturity, interest on it is paid based on the interest rate for demand deposits, unless a different interest rate is specified in the agreement. As of, amounts due to customers and borrowings of RUB 433,623 million (27%) were due to ten major customers (31 December 2014: RUB 345,129 million (31%)). The amounts received under repurchase agreements and the value of securities pledged as collateral are as follows: Carrying amount of repurchase agreements 31 December 2014 Carrying amount Fair value of of repurchase collateral agreements Fair value of collateral Financial assets at fair value through profit or loss Corporate shares 6,665 6, Corporate Eurobonds 2,018 2, ,324 Eurobonds of the Russian Federation ,889 8, ,399 Securities received under reverse repurchase agreements Corporate shares 22,237 23,615 Corporate Eurobonds 17,315 17,055 1,065 1,759 Bonds of foreign governments 4,232 5,427 Eurobonds of the Russian Federation 1,472 1,820 Russian state bonds (OFZ) 1,127 2,769 Mutual funds units ,449 50,752 1,065 1,759 Securities borrowed Corporate Eurobonds 4,456 3,483 Corporate shares 3,064 3,534 Eurobonds of the Russian Federation Mutual funds units 8 8 8,173 7,820 Available-for-sale investment securities Eurobonds of the Russian Federation 1,906 2,031 1,906 2,031 Total 65,417 68,937 2,027 3,158 As of, guarantee deposits against bank guarantees issued totaled RUB 2,424 million (31 December 2014: RUB 3,981 million). 26

30 15. Debt securities issued Debt securities issued comprise: 31 December 2014 Bonds 151, ,125 Promissory notes 35,851 79,954 Loan participation notes 23,367 29,122 Eurobonds 18,493 21,651 Deposit certificates Total debt securities issued 230, ,345 Including: held as security against loans to customers (Note 7) Including: held as security against commitments and contingencies (Note 19) 933 1,777 As of, the Group issued non-interest-bearing promissory notes with an aggregate nominal value of RUB 430 million (31 December 2014: RUB 359 million) maturing on demand or no later than October 2015 (31 December 2014: on demand or no later than October 2015). Other promissory notes and deposit certificates issued by the Group as of bear annual interest rates ranging from 0.1% to 20.3% (31 December 2014: from 1.5% to 21.15% p.a.) or have discount with yield to maturity from 1.1% to 17.8% p.a. (31 December 2014: from 1.5% to 32.0% p.a.). Bonds, Eurobonds and loan participation notes of the Group are represented as follows: Year of issue Year of maturity Coupon rate At Carrying amount 31 December 2014 Currency Bonds Otkritie Holding-2-ob RUB % 4,118 4,215 Otkritie Holding-3-ob RUB % 5,998 6,670 Otkritie Holding-4-ob RUB % 4,957 4,255 Otkritie Holding-5-ob RUB % 4,957 4,942 Otkritie Holding-6-ob RUB % 4,944 1,808 Otkritie Holding-3-bob RUB % 17,891 5,264 Otkritie Holding-4-bob RUB % 5,134 5,135 Otkritie Holding-2-bob RUB % 6,775 Otkritie FC Bank-3-bob RUB % 5,827 5,451 Otkritie FC Bank-4-bob RUB % 3,092 9,710 Otkritie FC Bank-5-bob RUB % 12,608 9,548 Otkritie FC Bank-6-bob RUB % 11,520 12,318 Otkritie FC Bank-7-bob RUB % 2,149 Otkritie FC Bank-12-ob RUB % 5,272 5,113 Otkritie FC Bank-BO-PO1 RUB % 1,642 Otkritie FC Bank-BO-PO2 RUB % 945 Otkritie KHMB-1-ob RUB % 2,129 2,962 Otkritie KHMB-2-bob RUB % 30,000 30,090 Mortgage bonds, Mortgage Agent KHMB-1-01-ob RUB % 3,369 3,767 Mortgage bonds, Mortgage Agent KHMB-2-01-ob RUB % 3,915 4,416 Mortgage bonds, Mortgage Agent KHMB-2-02-ob RUB % 1,948 2,200 Mortgage bonds, Mortgage Agent Petrocommerce- 1-1-ob RUB % 2,767 3,144 Mortgage bonds, Mortgage Agent Otkritie-1-1-ob RUB % 1,784 2,182 Mortgage bonds, Mortgage Agent NOMOS-1-ob RUB % 1,658 1,935 Otkritie FC Bank, BO-02 (former Petrocommerce) RUB % 3,084 Otkritie FC Bank, BO-03 (former Petrocommerce) RUB % 621 Otkritie FC Bank, BO-04 (former Petrocommerce) RUB % 51 Otkritie FC Bank, 09 (former Petrocommerce) RUB % 2,477 Eurobonds Otkritie FC Bank eu USD % 18,493 21,651 Loan participation notes Loan participation notes OIM ABS Limited 2017 RUB % 18,058 18,062 Loan participation notes OIM ABS Limited 2018 RUB % Loan participation notes OIM ABS Limited 2024 RUB % p.a. + (Total CPI 100%) 5,309 5,197 Loan participation notes OIM ABS Limited 2020 USD % 5,863 Total 193, ,898 27

31 16. Other liabilities 31 December 2014 Other financial liabilities Derivative financial liabilities 53,005 92,845 Obligations to deliver securities 20,087 11,746 Provisions for guarantees, commitments and other 15, Liabilities under spot deals with foreign currency, precious metals and securities 12,503 5,956 Fair value of liability to pay subordinated loan interest 11,762 Employee benefit obligations 3,835 2,385 Reserves of insurance companies 2,493 1,874 Current income tax liabilities 1, Settlements on taxes and levies 1, Settlements on transactions with securities 1,171 2,917 Current settlements with suppliers Liabilities under contributions to the Deposits Insurance Agency Accounts payable under finance leases Liabilities under operations with precious metals 58 Dividends payable Non-controlling interest in mutual funds Foreign currency payables 1 Other financial liabilities 3, Total other financial liabilities 127, ,133 Other non-financial liabilities Advances received 1,274 1,210 Other non-financial liabilities Total other non-financial liabilities 2,207 1,550 Total other liabilities 129, ,683 Derivative financial liabilities are mainly represented by swaps and forwards for underlying assets including foreign currencies or securities. Obligations to deliver securities are represented by a short position in stock exchange transactions with securities. Liabilities under spot deals with foreign currency, precious metals and securities are represented by spot transactions not settled as of the reporting date. Accounts payable under finance leases represent the amount of obligations for real estate properties and motor vehicles transferred to the Group under finance lease agreements. 17. Subordinated loans As of, subordinated loans comprised the following: Currency Start date (year) Maturity date (year) Nominal interest rate 31 December 2014 Subordinated bonds USD % 28,381 28,425 Subordinated bonds USD % 19,304 19,607 Subordinated bonds USD % 11,132 16,895 Subordinated loan USD %+LIBOR 3m 5,161 Subordinated loan RUB % 4,900 4,900 Subordinated loan RUB % 2,098 Subordinated loan RUB % 1,995 1,994 Subordinated loan USD % 1,948 Subordinated loan USD % 1,148 Subordinated loan USD % 680 Subordinated loan RUB % Subordinated loan RUB % Subordinated loan RUB % Subordinated bonds USD % 11,288 Total subordinated loans 76,939 83,300 In the event of bankruptcy or liquidation of the Group, repayment of these debts is subordinate to the repayments of the Group s liabilities to all other creditors. 28

32 18. Equity Movements in shares outstanding, issued and fully paid were as follows: Number of shares Nominal value Total As of 31 December ,234,644,155 1,235 1,235 Additional issue of shares 306,734, As of 31 December ,541,378,455 1,541 1,541 As of 1,541,378,455 1,541 1,541 As of, all ordinary shares had a nominal value of RUB 1 and carried one vote each. The amount of dividends is determined and approved at the annual general shareholders' meeting of the Group. On 22 January 2014, shareholders of the Group approved an issue of 306,734,300 ordinary shares. The total consideration received for these shares comprised cash for the total amount of RUB 16,003 million. The issue was registered by the CBR on 18 March 2014 and in June was fully purchased by new shareholders of the Group. As a result, the Group recognized a share premium in the amount of RUB 15,697 million, including expenses related to the issue in the amount of RUB 1.05 million. In accordance with the Russian legislation, dividends may only be declared to the shareholders of the Group from accumulated undistributed and unreserved earnings as shown in the parent company's financial statements prepared in accordance with RAL. The parent company had approximately RUB 22,676 million of undistributed and unreserved earnings as of (31 December 2014: RUB 21,781 million). The annual general shareholders' meeting of the Group held on decided neither to accrue nor pay any dividends for In August 2014, dividends for the total amount of RUB 500 million (RUB 0.3 per share) were paid for Commitments and contingencies Operating environment Russia continues economic reforms and development of its legal, tax and regulatory frameworks as required by a market economy. The future stability of the Russian economy is largely dependent upon these reforms and developments and the effectiveness of economic, financial and monetary measures undertaken by the government. The Russian economy is vulnerable to market downturns and economic slowdowns elsewhere in the world. The global financial crisis resulted in uncertainty regarding further economic growth, availability of financing and cost of capital, which could negatively affect the Group's future financial position, results of operations and business prospects. In 2014, the USA, EU countries and a number of other states imposed sanctions on certain sectors of the Russian economy, companies and individuals. Imposed restrictions do not have a direct effect on the Group's business, but may indirectly affect the Group and its borrowers, and, accordingly, the Group's performance and financial position. Management believes it is taking appropriate measures to support the sustainability of the Group's business in the current circumstances. Legal In the ordinary course of business, the Group is subject to legal actions and complaints. Management believes that the ultimate liability, if any, arising from such actions or complaints will have no material adverse effect on the future financial position or performance of the Group, except for those against which the Group created provisions. Taxation Some definitions in the current Russian tax, foreign exchange and customs legislation are not clear enough and quite unambiguous, which often makes them open to diverse interpretations (which may apply to past relations, inter alia), selective and inconsistent application, as well as to frequent and often highly unpredictable changes. Therefore, the Group management's interpretation of such legislation as applied to the transactions and activity of the Group, including transactions performed by the Group companies during the reporting period, may be challenged by the relevant regional and federal regulatory authorities at any time in the future. The tax authorities may be taking a more assertive position in their interpretation and application of this legislation, in performing tax reviews and assessing additional taxes. As a result, it is possible that transactions and operations of the Group that have not been challenged in the past may be challenged by the tax authorities. As a result, significant additional taxes, penalties and interest may be accrued by the relevant authorities. 29

33 19. Commitments and contingencies (continued) Taxation (continued) Generally, on site review of the accuracy of tax calculation and payments conducted by tax authorities may cover three calendar years preceding the year during which the tax review decision was made. Under certain circumstances tax reviews may cover earlier periods. Federal Law No. 376-FZ of 24 November 2014 (better known as the deoffshorization law or the law on controlled foreign companies) introduced significant changes to Russian tax legislation, including the term "controlled foreign company", taxation rules for profits received by foreign controlled companies in the Russian Federation and the concept of tax residency of a foreign legal entity, all effective starting 1 January Overall, the adoption of the law should increase the administrative and, in some cases, tax burden on Russian taxpayers that have foreign subsidiaries. The current Russian transfer pricing legislation allows Russian tax authorities to make tax base adjustments and assess additional corporate tax and value added tax in respect of all controlled transactions if the transaction price is outside the range of market prices. The list of controlled transactions includes transactions entered into with related parties (Russian and foreign), as well as certain types of transactions with unrelated parties that are considered the same as controlled transactions. Transactions with securities and derivative financial instruments are subject to special transfer pricing rules. Existing transfer pricing regulations in Russia have significantly increased the tax compliance administration burden on taxpayers in comparison with the transfer pricing rules before 2012, in particular, the burden of proving the arm's length nature of the applied prices shifted from Russian tax authorities to taxpayers. These rules are applied not only to transactions made in the reporting period, but also to the transactions made in previous tax periods if the corresponding gains and losses were recognized in the reporting period (with the exception of certain types of transactions). Due to the uncertainty and absence of current practice of application of the current Russian transfer pricing legislation, the Russian tax authorities may challenge the level of prices applied by the Group under the controlled transactions and accrue additional tax liabilities unless the Group is able to demonstrate the use of market prices with respect to the controlled transactions. In the reporting period, the Group determined its tax liabilities arising from controlled transactions using actual transaction prices. Management of the Group believes that the Group fully complies with transfer pricing rules and controlled transaction prices for the six months of 2015 were consistent with market prices. Within terms specified by Tax Code of the Russian Federation the Group companies will submit to the Russian tax authorities duly executed notice in respect to controlled transactions occurred and prepare corresponding documentation on transfer pricing with regard to controlled transactions. As of, management of the Group believes that its interpretation of the applicable legislation is appropriate and that the Group's tax, currency and customs positions will be sustained. Commitments and contingencies The Group s commitments and contingencies comprised the following: 31 December 2014 Credit-related commitments Undrawn loan commitments 131, ,678 Guarantees issued 122, ,237 Letters of credit 4,502 11,678 Less allowance for credit-related commitments (458) (158) Total credit-related commitments 257, ,435 Operating lease commitments Not later than 1 year 2,224 1,745 From 1 to 5 years 3,027 3,335 Later than 5 years ,648 5,481 Commitments and contingencies (before deducting collateral) 263, ,916 Less: the Group's own promissory notes and deposits held as security against commitments and contingencies (Notes 14, 15) (3,357) (5,758) Total commitments and contingencies 260, ,158 30

34 19. Commitments and contingencies (continued) Commitments and contingencies (continued) The shares of "Bank Otkritie Financial Corporation" (Public Joint-Stock Company) and "Khanty-Mansiysk bank Otkritie" (PJSC) owned by the Group were held as security as of and 31 December 2014, respectively. Movements in commitments and contingencies are disclosed in Note 11 (Other impairment). 20. Gains and losses from operations with financial instruments Gains and losses from operations with financial instruments comprise the following: 30 June 2014 Net gains from trading securities 14,032 4,038 Total gains from trading securities 14,032 4,038 Foreign exchange derivatives 17, Net gains/(losses) from foreign currencies (3,317) 128 Total gains from foreign currencies 13, Precious metals derivatives 173 Net loss from precious metals (86) (27) Total gains/(losses) from precious metals 87 (27) Other derivatives (960) 2,108 Total gains/(losses) from other derivative instruments (960) 2,108 Total gains from financial instruments 26,980 6, Net fee and commission income Net fee and commission income comprises: 30 June 2014 Fee and commission income Cash and settlement operations 6,717 4,954 Brokerage services 2,884 1,546 Guarantees and letters of credit 1, Currency control Agency fees Trust and other fiduciary activities 54 1,386 Other Total fee and commission income 11,882 8,904 Fee and commission expenses Cash and settlement operations (2,514) (1,704) Securities operations (787) (639) Agency fees (36) Trust and other fiduciary activities (5) (48) Guarantees (3) (3) Currency transactions (71) Other (317) (112) Total fee and commission expenses (3,662) (2,577) Total fee and commission income, net 8,220 6,327 31

35 22. Other income Other income comprises: 30 June 2014 Excess of the Group's share in net assets of acquirees over purchase consideration 1,141 Interest, fines and forfeits arising from cash advance operations Dividends received Income from consulting and other services Income from repayment and sale of the acquired claims and loan agreements Income from derecognition of liabilities 48 Insurance services 1,428 Income from sale and liquidation of property and equipment 374 Income from reimbursement of losses 248 Other Total other income 3,194 3, Personnel and administrative expenses Personnel expenses, other employee benefits and administrative expenses comprise: 30 June 2014 Payroll expenses 17,853 13,119 Other expenses arising from property and equipment, office supplies, utilities 2,304 1,563 Professional fees 1,602 1,383 Operating lease expenses 1,338 1,130 Other taxes, except income tax 1, Administrative expenses (communications, business travel expenses) Payments to the deposit insurance fund Advertising and marketing Sale of property and equipment, other property rights Charity Insurance services 125 Expenses on assignment of claims Other Total personnel and administrative expenses 27,727 19, Fair value of assets and liabilities The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique: Level 1: quoted (unadjusted) prices in active markets for identical assets and liabilities; Level 2: techniques for which all inputs which have a significant effect on the fair value recorded in the consolidated financial statements are observable, either directly or indirectly; Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data. 32

36 24. Fair value of assets and liabilities (continued) The following table shows an analysis of financial instruments recorded in consolidated financial statements at fair value by level of the fair value hierarchy: Level 1 Level 2 Level 3 Total Assets measured at fair value Trading securities within Financial assets at fair value through profit or loss 223,869 9, ,618 Derivatives within Financial assets at fair value through profit or loss 52,363 52,363 Financial assets at fair value through profit or loss pledged under repurchase agreements 32,084 2,830 34,914 Available-for-sale investment securities 105,969 1,105 21, ,572 Available-for-sale investment securities pledged under repurchase agreements 564, ,968 Property and equipment (land and buildings) 16,566 16,566 Investment property 7,015 7,015 Assets for which fair values are disclosed Cash and cash equivalents 279, ,029 Precious metals 8,084 8,084 Amounts due from credit institutions 2, , ,456 Held-to-maturity investment securities 63,647 63,647 Held-to-maturity investment securities pledged under repurchase agreements 10,733 10,733 Loans to customers 25,536 1,550,685 1,576,221 Loans to customers pledged under repurchase agreements 1 1 Liabilities measured at fair value Derivatives within Other liabilities 53,005 53,005 Liabilities for which fair values are disclosed Amounts due to credit institutions 1,409,230 1,409,230 Amounts due to customers and borrowings 1,617,522 1,617,522 Debt securities issued 170,596 23,993 33, ,763 Subordinated loans 76,939 76,939 33

37 24. Fair value of assets and liabilities (continued) 31 December 2014 Level 1 Level 2 Level 3 Total Assets measured at fair value Trading securities within Financial assets at fair value through profit or loss 75, ,910 Derivatives within Financial assets at fair value through profit or loss 128, ,200 Financial assets at fair value through profit or loss pledged under repurchase agreements 118,762 1, ,082 Available-for-sale investment securities 57,421 3,556 16,704 77,681 Available-for-sale investment securities pledged under repurchase agreements 40,265 40,265 Property and equipment (land and buildings) 16,991 16,991 Investment property 4,918 4,918 Assets for which fair values are disclosed Cash and cash equivalents 650, ,669 Precious metals 2,312 2,312 Amounts due from credit institutions 2,442 54,532 56,974 Loans to customers 20,078 1,439,108 1,459,186 Loans to customers pledged under repurchase agreements 5,321 5,321 Held-to-maturity investment securities 33,310 33,310 Held-to-maturity investment securities pledged under repurchase agreements 22,814 22,814 Liabilities measured at fair value Derivatives within other liabilities 92,845 92,845 Liabilities for which fair value is disclosed Amounts due to credit institutions 1,063,682 1,063,682 Amounts due to customers and borrowings 1,097,961 1,097,961 Debt securities issued 122, , ,522 Subordinated loans 83,300 83,300 Financial instruments recorded at fair value The following is a description of the determination of fair value for financial instruments which are recorded at fair value using valuation techniques. These incorporate the Group s estimate of assumptions that a market participant would make when valuing the instruments. Financial assets at fair value through profit or loss and available-for-sale investment securities Financial assets at fair value through profit or loss and available-for-sale investment securities measured using a valuation technique are represented mainly by non-traded equity and debt securities. These securities are valued using models which sometimes only incorporate data observable in the market and at other times use both observable and non-observable data. The non-observable inputs include assumptions regarding the future financial performance of the investee, its risk profile, and economic assumptions regarding the industry and geographical jurisdiction in which the investee operates. 34

38 24. Fair value of assets and liabilities (continued) Financial instruments not recorded at fair value in the consolidated statement of financial position Set out below is a comparison, by class, of the carrying amounts and fair values of the Group s financial instruments that are not recorded at fair value in the consolidated statement of financial position. The table does not include the fair values of non-financial assets and non-financial liabilities. Carrying amount as of 30 June 2015 Fair value as of 30 June 2015 Unrecognized gains/(losses) as of 30 June 2015 Carrying amount as of 31 December 2014 Fair value as of 31 December 2014 Unrecognized gains/(losses) as of 31 December 2014 Financial assets Cash and cash equivalents 279, , , ,669 Precious metals 8,084 8,084 2,312 2,312 Amounts due from credit institutions 479, ,456 56,974 56,974 Loans to customers 1,576,913 1,576,221 (692) 1,485,765 1,459,186 (26,579) Loans to customers pledged under repurchase agreements 1 1 5,943 5,321 (622) Held-to-maturity investment securities 59,915 63,647 3,732 36,492 33,310 (3,182) Held-to-maturity investment securities pledged under repurchase agreements 10,905 10,733 (172) 24,736 22,814 (1,922) Other financial assets within Other assets 136, ,310 51,779 51,779 Financial liabilities Amounts due to credit institutions 1,417,607 1,417,607 1,063,682 1,063,682 Amounts due to customers and borrowings 1,611,716 1,617,522 (5,806) 1,122,760 1,097,961 24,799 Debt securities issued 230, ,763 2, , ,522 5,823 Other financial liabilities within Other liabilities 127, , , ,133 Subordinated loans 76,939 76,939 83,300 83,300 Total unrecognized change in unrealized fair value (455) (1,683) 35

39 24. Fair value of assets and liabilities (continued) Movements in Level 3 financial instruments at fair value The following table shows a reconciliation of the opening and closing amounts of Level 3 financial assets and liabilities which are recorded at fair value: At 1 January 2015 Gains/(losses) recorded in income statement Gains/(losses) recorded in other comprehensive income Purchase of companies Transfers from Level 1 Transfers from Level 2 At Purchases Disposals Reclassification Financial assets Available-for-sale investment securities 16,704 (539) 382 3,757 1,615 (421) 21,498 Property and equipment (land and buildings) 16, (305) (293) 16,566 Investment property 4,918 (125) 4,604 (2,072) (310) 7,015 Total Level 3 financial assets 38,613 (664) 409 8,507 1,615 (2,798) (603) 45,079 Total Level 3 38,613 (664) 409 8,507 1,615 (2,798) (603) 45,079 At 1 January 2014 Gains/(losses) recorded in income statement Gains/(losses) recorded in other comprehensive income Purchases Disposals Disposal of subsidiaries Transfers from Level 1 Transfers from Level 2 At 31 December 2014 Reclassification Financial assets Available-for-sale investment securities 18, ,605 6,106 (636) 1, (11,684) 16,704 Property and equipment (land and buildings) 17, (305) (293) 16,991 Investment property 5, (926) (1,400) (15) 4,918 Total Level 3 financial assets 41, ,632 7,219 (1,867) (1,400) 1, (11,992) 38,613 Total Level 3 41, ,632 7,219 (1,867) (1,400) 1, (11,992) 38,613 36

40 24. Fair value of assets and liabilities (continued) Movements in Level 3 financial instruments at fair value (continued) The following table shows transfers between Level 1 and Level 2 of the fair value hierarchy for financial assets and liabilities which are recorded at fair value, during the six months ended : Transfers from Level 2 to Level 1 Transfers from Level 1 to Level 2 Financial assets Trading securities within Financial assets at fair value through profit or loss 396 8,745 Available-for-sale investment securities 1,094 The above financial instruments were transferred from Level 2 to Level 1 as they started to be actively traded during the period and their fair values were consequently obtained using quoted prices in an active market for identical assets. The above financial instruments were transferred from Level 1 to Level 2 due to elimination of active market during the period and their fair values were consequently obtained using observable input data. The following table shows transfers between Level 1 and Level 2 of the fair value hierarchy for financial assets and liabilities which are recorded at fair value, during the six months ended 30 June 2014: 30 June 2014 Transfers from Level 2 to Level 1 Transfers from Level 1 to Level 2 Financial assets Trading securities within Financial assets at fair value through profit or loss 1, Available-for-sale investment securities 212 The above financial instruments were transferred from Level 2 to Level 1 as they started to be actively traded during the period and their fair values were consequently obtained using quoted prices in an active market for identical assets. The above financial instruments were transferred from Level 1 to Level 2 due to elimination of active market during the period and their fair values were consequently obtained using observable input data. Gains or losses on Level 3 financial instruments included in profit or loss for the period comprise: Realized gains/(losses) Unrealized gains/(losses) Total Financial assets Available-for-sale investment securities (538) 382 (156) Realized gains/(losses) 30 June 2014 Unrealized gains/(losses) Total Financial assets Available-for-sale investment securities 232 1,605 1,837 37

41 24. Fair value of assets and liabilities (continued) Movements in Level 3 financial instruments at fair value (continued) The following table shows the quantitative information about significant unobservable inputs used in the fair value measurement categorized within Level 3 of the fair value hierarchy: Carrying amount Valuation technique Unobservable inputs Range (weighted average) Available-for-sale investment securities Bonds of foreign governments 1,059 Discounted cash flows Credit risk rate 9.30%-12.07% Corporate Eurobonds 1,563 Net assets value Value of underlying asset Not applicable Corporate shares 7,147 Net assets value Equity Not applicable Corporate shares 5,972 Discounted cash flows Credit risk rate 16.75%-23.02% Units in closed investment funds 2,969 Net assets value Value of underlying asset Not applicable Corporate bonds 210 Discounted cash flows Credit risk rate 15.05% Promissory notes 2,578 Discounted cash flows Credit risk rate Not applicable 31 December 2014 Carrying amount Valuation technique Unobservable inputs Range (weighted average) Available-for-sale investment securities Bonds of foreign governments 1,019 Discounted cash flows Credit risk rate 9.56%-12.34% Corporate Eurobonds 1,584 Net assets value Value of underlying asset Not applicable Corporate shares 6,738 Net assets value Equity Not applicable Corporate shares 5,972 Discounted cash flows Credit risk rate 16.75%-23.02% Units in closed investment funds 769 Net assets value Value of underlying asset Not applicable Corporate bonds 622 Discounted cash flows Credit risk rate Not applicable Impact of changes in key assumptions on the fair value of Level 3 financial instruments measured at fair value The following table shows the effect of reasonably possible alternative assumptions on the fair value of Level 3 instruments: Carrying amount 31 December 2014 Effect of reasonably possible alternative Carrying assumptions amount Effect of reasonably possible alternative assumptions Financial assets Available-for-sale investment securities 21,498 (465) 16,704 (470) In order to determine reasonably possible alternative assumptions as of, the Group adjusted key unobservable model inputs as follows: For Argentine warrants recognized within available-for-sale investment securities, the Group adjusted the discount rate by 1.3%, as such a change is seen by the Group as a reasonably possible alternative change, based on the yield on Eurobonds of the issuer. The effect of reasonably possible alternative assumptions would have entailed a decrease in the carrying amount by RUB 31 million (31 December 2014: RUB 36 million). In order to calculate the effect of alternative assumptions for the corporate bonds in investment securities, the Group adjusted the assumptions of the issuer's credit risk by increasing the discount rate by 3% as such a change is seen by the Group as a possible alternative change based on indicators for other items with similar parameters. The effect of reasonably possible alternative assumptions would have entailed a decrease in the carrying amount by RUB 5 million (31 December 2014: RUB 5 million). 38

42 24. Fair value of assets and liabilities (continued) Impact of changes in key assumptions on the fair value of Level 3 financial instruments measured at fair value (continued) In order to calculate the effect of alternative assumptions for the corporate shares in investment securities, the Group adjusted the discount rate by 1.3% as such a change is seen by the Group as a possible alternative change based on indicators for other items with similar parameters. The effect of reasonably possible alternative assumptions would have entailed a decrease in the carrying amount by RUB 429 million (31 December 2014: RUB 429 million). The effect of alternative assumptions for the promissory notes was not calculated as they mature in July The following describes the methodologies and assumptions used to determine fair values for those financial instruments, which are not already recorded at fair value in these consolidated financial statements. Assets for which fair value approximates carrying amount For financial assets and financial liabilities that are liquid or having a short-term maturity (less than three months) it is assumed that the carrying amounts approximate their fair value. This assumption is also applied to demand deposits, savings accounts without a specific maturity and floating-rate financial instruments. Fixed rate financial instruments The fair value of fixed rate financial assets and liabilities carried at amortized cost is estimated by comparing market interest rates when they were first recognized with current market rates offered for similar financial instruments. The estimated fair value of fixed interest bearing deposits is based on discounted cash flows using prevailing money-market interest rates for debt instruments with similar credit risk and maturity. For quoted debt instruments issued the fair value is determined based on quoted market prices. For those bonds issued where quoted market prices are not available, a discounted cash flow model is used based on a current interest rate yield curve appropriate for the remaining term to maturity. 39

43 25. Major subsidiaries and associates Share of control Name Type of activity Country of incorporation 31 December 2014 Otkritie Holding JSC Finance Russia Parent company Parent company Subsidiaries: "Bank Otkritie Financial Corporation" (Public Joint-Stock Company) Bank Russia 64.71% 61.49% "Khanty-Mansiysk bank Otkritie" (PJSC) Bank Russia 53.37% 51.63% National Bank TRUST Bank Russia % Otkritie Asset Management LLC Finance Russia % % OTKRITIE Brokerage house JSC Finance Russia % % OTKRITIE CAPITAL INTERNATIONAL LIMITED Finance UK % % OTKRITIE CAPITAL CYPRUS LIMITED Finance Cyprus % % OTKRITIE Advisory Services Limited Finance The Bermuda Islands % % OTKRITIE Insurance JSC Insurance Russia % % Otkritie Life Insurance LLC Insurance Russia % % OIM ABS Limited Finance Ireland % % OTKRITIE-Inform Ltd. Services Russia % % OTKRITIE Capital LLC Finance Russia % % OTKRITIE Trading LLC Finance Russia % % OTKRITIE N LLC Finance Russia % % OTKRITIE CAPITAL U.S. Inc Finance United States of America % % OTKRITIE - Foreign shares Open Mutual Fund Finance Russia 57.91% 52.68% Otkritie Investment Cyprus Ltd. Finance Cyprus % % Wardbase Trading Limited Finance Cyprus % % Arrowzone Cyprus Limited Finance Cyprus % % Belfanto Investments Ltd Finance Cyprus % % Lordline Cyprus Limited Finance Cyprus % % Oviresto Investments Ltd Finance Cyprus % % Viewrock Cyprus Limited Finance Cyprus % % Vitalpeak Cyprus Limited Finance Cyprus % % "Finance decision" JSC Finance Russia % % Otkritie TZ LLC Services Russia % % CIHRUS LLC Finance Russia 70.00% Attenium LLC Investment management Russia 70.00% Rapida Ltd Payment system Russia 70.00% Processing center Rapida LLC Processing center Russia 70.00% Gikor LLC Asset management Russia 70.00% Elinova Holdings Ltd. Finance Cyprus % Rozala Ltd. Finance Cyprus % Placendo Ltd. Finance Cyprus % COPR LLC Finance Russia % 0.00% BKM Finance Limited Finance Ireland 64.71% 61.49% Project Finance Group LLC Construction Russia 53.37% 51.63% Promgazkomplekt LLC Real estate Russia 64.71% 61.49% PromEstate LLC Real estate Russia 64.71% 61.49% Sovfintrans JSC Investment management Russia 64.71% 61.49% UCA JSC Asset management Russia 64.71% 61.49% OFCB Capital Public Limited Company Finance Ireland 64.71% 61.49% Erada CJSC Real estate Russia 64.71% 61.49% 40

44 25. Major subsidiaries and associates (continued) Name Type of activity Country of incorporation Share of control 31 December 2014 NM-Garant LLC Investment management Russia 64.71% 61.49% BFK-Invest LLC Real estate Russia 64.71% 61.49% Nomos Bank MC LLC Asset management Russia 64.71% 61.49% KN-Estate LLC Real estate Russia 64.71% 61.49% Invest-Trading LLC Investment management Russia 64.71% 61.49% Vostok-Сapital LLC Investment management Russia 64.71% 61.49% NM-Aktiv LLC Investment management Russia 64.71% 61.49% NM-Capital LLC Investment management Russia 64.71% 61.49% Business-Estate LLC Real estate Russia 64.71% 61.49% "Universal - Real estate fund" Closed Mutual Real Estate Fund Real estate Russia 64.71% 61.49% Delovoy Center Closed Mutual Real Estate Fund Real estate Russia 51.63% Mortgage Agent Otkritie 1 CJSC Finance Russia 53.37% 51.63% Mortgage Agent KhMB-1 CJSC Finance Russia 53.37% 51.63% Mortgage Agent KhMB-2 CJSC Finance Russia 53.37% 51.63% Mortgage Agent Nomos CJSC Finance Russia 53.37% 51.63% KHMB-Capital Closed Mutual Fund Finance Russia 53.37% 51.63% Mortgage Agent Petrocommerce 1 CJSC Finance Russia 53.37% 51.63% Petrocommerce Invest Consulting CJSC Finance Russia 64.71% PK-Invest LLC Finance Russia 64.71% CMREF "Strategicheskie Investitsii" Real estate Russia 64.71% Financial and Industrial Integration Company LLC Finance Russia 64.71% CMF Credit Resources Finance Russia % CMF Trust Development-2 Real estate Russia % TIB Holdings S.A. Finance Switzerland % TIB Financial Services Limited Finance Cyprus % LLC TRUST Broker Finance Russia % Fiennes Investments Ltd Finance Cyprus % Associates: Otkritie-Agent LLC Finance Russia 25.00% 25.00% Inform-Trend LLC Services Russia 25.00% 25.00% "OTKRITIE Bonds" Open-End Mutual Fund Finance Russia 40.28% 38.33% OTKRITIE MICEX Index Energy Open Mutual Fund Finance Russia 25.44% In March 2015, the Group acquired control over Bank Petrocommerce (OJSC) and its subsidiaries (Petrocommerce Invest Consulting CJSC, PK-Invest LLC, CMREF "Strategicheskie Investitsii) as a result of purchasing 666,814,474 shares (99.5%) of the bank. In June 2015, Bank Petrocommerce (OJSC) was merged with "Bank Otkritie Financial Corporation" (Public Joint-Stock Company). A network of Bank Petrocommerce (OJSC) was transformed into "Bank Otkritie Financial Corporation" (Public Joint-Stock Company) branches with focus on provision of services to LUKOIL Group and its employees. In April 2015, the Group obtained control over National Bank TRUST as a result of purchasing 4,630,143,460,000,000 additionally issued shares (100%) at the nominal value of RUB 10 million. In addition, the Group acquired CEMF "Credit resources", CEMF Trust Development 2, TIB Holdings SA, TIB Financial Services Limited, LLC TRUST Broker and Fiennes Investment Ltd. In April 2015, the Group acquired Elinova Holdings Ltd., a subsidiary which is mainly engaged in financial market operations. 41

45 25. Major subsidiaries and associates (continued) In February 2015, it was decided to early terminate trust management agreement with Delovoy Center Closed Mutual Real Estate Fund (Olma), redeem 100% of its investments units held by the Group and discontinue its operations. In May 2015, investment units of Delovoy Center Closed Mutual Real Estate Fund (Olma) were redeemed at the value of its net assets as of the redemption date and the fund discontinued its operations. In June 2015, the Group acquired Rozala Ltd., Placendo Ltd. and COPR LLC. In June 2015, the Group sold 100% interest in CIHRUS LLC, the owner of Rapida and CONTACT payment systems for 9.3% interest in QIWI PLC. Changes of the ownership interest in "Bank Otkritie Financial Corporation" (Public Joint-Stock Company) result from the conversion of the Group's shares in OJSC Commercial bank Petrocommerce into additionally issued shares of "Bank Otkritie Financial Corporation" (Public Joint-Stock Company). This also caused changes in ownership interests in other subsidiaries of the bank, including "Khanty-Mansiysk bank Otkritie" (PJSC). Changes of the ownership interest in OTKRITIE - Foreign shares Open Mutual Fund, "OTKRITIE" Bonds Open-End Mutual Fund, OTKRITIE MICEX Index Energy Open Mutual Fund are caused by the changes in the total amount of units in the investment funds. Subsidiaries with significant non-controlling interests The information about subsidiaries with significant non-controlling interests is as follows: Non-controlling interests, % Profit/(loss) attributed to noncontrolling interests during the period Accumulated noncontrolling interests at the end of the period Dividends paid on non-controlling interests during the period "Bank Otkritie Financial Corporation" (Public Joint-Stock Company) and its subsidiaries ,200 60,236 "Khanty-Mansiysk bank Otkritie" (PJSC) and its subsidiaries (1,824) 15,082 Non-controlling interests, % 31 December 2014 Loss attributed to non-controlling interests during the period Accumulated noncontrolling interest at the end of the period Dividends paid on non-controlling interest during the period "Bank Otkritie Financial Corporation" (Public Joint-Stock Company) and its subsidiaries (374) 50,258 "Khanty-Mansiysk bank Otkritie" (PJSC) and its subsidiaries (76) 15,610 The following table illustrates summarized financial information on these subsidiaries. This information is based on amounts before elimination of intra-group transactions. "Bank Otkritie Financial Corporation" (Public Joint-Stock Company) and its subsidiaries 31 December 2014 Total assets 3,103,047 2,600,375 Total liabilities 2,906,825 2,439,973 "Khanty-Mansiysk bank Otkritie" (PJSC) and its subsidiaries 31 December 2014 Total assets 645, ,343 Total liabilities 589, ,938 42

46 25. Major subsidiaries and associates (continued) Subsidiaries with significant non-controlling interests (continued) "Bank Otkritie Financial Corporation" (Public Joint-Stock Company) and its subsidiaries Interest income 124,206 Interest expense (96,402) Allowance for loan impairment (20,430) Net profit 8,286 "Khanty-Mansiysk bank Otkritie" (PJSC) and its subsidiaries Interest income 38,170 Interest expense (31,206) Allowance for loan impairment (10,944) Net loss (6,630) "Bank Otkritie Financial Corporation" (Public Joint-Stock Company) and its subsidiaries 30 June 2014 Interest income 71,939 Interest expense (37,584) Allowance for loan impairment (12,920) Net profit 3,814 Khanty-Mansiysk Bank OJSC and its subsidiaries 30 June 2014 Interest income 16,455 Interest expense (9,971) Allowance for loan impairment (1,945) Net profit 1, Business combinations and disposals Acquisition of Bank Petrocommerce Group In March 2015, the Group purchased 99.5% voting shares in Bank Petrocommerce (OJSC), following the approvals given by the regulatory authorities. The purchase was performed as part of the strategic partnership between "IFD Kapital" Group and Otkritie Group. A network of Bank Petrocommerce (OJSC) was transformed into "Bank Otkritie Financial Corporation" (Public Joint-Stock Company) branches with focus on provision of services to LUKOIL Group and its employees. As of the acquisition date, Bank Petrocommerce Group comprised the following: Bank Petrocommerce (OJSC), Petrocommerce Invest Consulting CJSC, PK-Invest LLC, Financial and Industrial Integration Company LLC, CMREF Strategic Investments. Bank Petrocommerce (OJSC) is a commercial bank that has been operating in the Russian Federation since Its primary operations include deposit taking and lending, support of clients export/import transactions, currency conversion operations, transactions with securities and derivatives. 43

47 26. Business combinations and disposals (continued) Acquisition of Bank Petrocommerce Group (continued) The fair value of the identifiable assets and liabilities acquired and financial result arising as of the date of acquisition are as follows: Fair value recognized on acquisition Assets Cash and cash equivalents 71,214 Obligatory reserves with the CBR 2,052 Precious metals Financial assets at fair value through profit or loss 8,575 Loans to customers 119,304 Available-for-sale investments 26,988 Investment property 2,016 Property and equipment 6,394 Intangible assets 6,590 Other assets 10,658 Total assets 253,791 Liabilities Amounts due to credit institutions 782 Amounts due to customers and borrowings 177,346 Debt securities issued 36,480 Other liabilities 13,864 Subordinated loans 5,758 Total liabilities 234,230 Net assets 19,561 Transferred consideration 19,356 Non-controlling interests 98 Less: fair value of identifiable net assets of Acquired Group (19,561) Gain on bargain purchase of Acquired Group of companies (107) The non-controlling interest in Bank Petrocommerce (OJSC) is measured at the proportionate share of its acquired net assets. Acquired identifiable assets and liabilities include balances on transactions between the Group and the Acquired Group as well as the loans issued and funds raised. The fair values of such assets and liabilities approximate their carrying amounts. The above transactions comprise the following balance sheet items: cash and cash equivalents in the amount of RUB 50,501 million, loans and advances to customers of RUB 5,486 million, derivative financial instruments of RUB 1,108 million, other assets of RUB 2 million, amounts due to other banks of RUB 183 million, debt securities issued of RUB 20,825 million. The fair value of acquired assets and liabilities was determined by an independent appraiser using discounted cash flows model and other valuation techniques. Analysis of cash inflow/(outflow) on acquisition Net cash acquired with the subsidiary (included in cash flows from investing activities) 20,713 Cash paid in previous accounting periods (19,356) including: in 2013 (3,000) in 2014 (16,356) Since the date of acquisition, the contribution of the Petrocommerce Group to the Group's interest income totaled RUB 3,774 million, decrease of non-interest expense RUB 1,223 million and decrease of net profit before tax RUB 1,387 million. If the combination had occurred at the beginning of the year, the Group's profit before tax would have been RUB 13,318 million, interest income RUB 164,751 million and non-interest income RUB 46,077 million. 44

48 26. Business combinations and disposals (continued) Acquisition of Bank Petrocommerce Group (continued) The table below shows the fair value and total contractual amount of accounts receivable acquired as well as the amount of bad debt. Fair value Total contractual amount Estimated bad debt Assets Cash and cash equivalents 62,634 62, Amounts due from credit institutions 1,005 1,005 Loans to customers 119, ,885 32,500 Other assets 10,658 11, Total 192, ,710 34,472 In February 2015, the Supervisory Board approved an issue of additional ordinary shares and conversion of shares of Bank Petrocommerce (OJSC) into the shares of "Bank Otkritie Financial Corporation" (Public Joint-Stock Company) using approved conversion ratios and its subsequent merger with "Bank Otkritie Financial Corporation" (Public Joint- Stock Company). The conversion ratio applied was For the purpose of converting the shares held by the shareholders of Bank Petrocommerce (OJSC), "Bank Otkritie Financial Corporation" (Public Joint-Stock Company) issued 13,305,139 additional registered ordinary shares with the nominal value of RUB 50 each (equal to 8.83% of the share capital of "Bank Otkritie Financial Corporation" (Public Joint-Stock Company). The nominal value of the additional issue amounted to RUB 665 million. Acquisition of National Bank TRUST In April 2015, the Group acquired share control over National Bank TRUST. National Bank TRUST is the parent company of the Group comprising CMF "Credit resources" and CMF Trust Development - 2. The transaction was performed in accordance with the Plan stipulating participation of the State Corporation Deposit Insurance Agency (the "DIA") in efforts to prevent bankruptcy of National Bank TRUST approved by the CBR Board of Directors in December 2014 (the "Action Plan"), in accordance with which the Board of Directors of the CBR approved Otkritie Holding JSC and "Bank Otkritie Financial Corporation" (Public Joint-Stock Company) as investors for the purposes of financial stabilization of National Bank TRUST. Jointly with the Investor, National Bank TRUST must develop the Financial Recovery Plan comprising a list of distressed assets of National Bank TRUST as of 22 December In accordance with the Action Plan, the Bank must be reorganized by merger with the Investor by 31 December The management of the Group believes that the Financial Recovery Plan will help to restore the financial stability of National Bank TRUST and to ensure uninterrupted settlements with clients. The acquisition is performed as part of the business development strategy of the Group and is an opportunity to expand customer base and strengthen positions in retail banking. In accordance with IFRS 3 Business Combinations, the merger of National Bank TRUST with the Group was accounted for using the purchase method. As of the date of these interim, the Group is in the process of completing its estimation of the fair value of identifiable assets and liabilities of National Bank TRUST. 45

49 26. Business combinations and disposals (continued) Acquisition of National Bank TRUST (continued) The provisional fair values of the identifiable assets and liabilities of National Bank TRUST: Fair value recognized on acquisition Assets Cash and cash equivalents 40,723 Amounts due from credit institutions 2,319 Financial assets at fair value through profit or loss 38,989 Loans to customers 54,298 Held-to-maturity investments 12,401 Investment property 2,006 Property and equipment 5,569 Intangible assets 562 Expected benefits from financial support provided by DIA 45,581 Other assets 578 Total assets 203,026 Liabilities Amounts due to credit institutions 265 Amounts due to customers and borrowings 179,448 Debt securities issued 344 Current income tax liabilities 43 Other liabilities 16,852 Subordinated loans 6,074 Total liabilities 203,026 Total identifiable net assets Acquisition cost Less: fair value of identifiable net assets of Acquired Group Goodwill arising on acquisition When accounting for the acquisition of National Bank TRUST, the Group recognized an asset (as part of identifiable net assets) representing benefits from expected DIA's loans issued to the Bank at the preferential interest rate to cover the deficit of net asset of National Bank TRUST as of 22 December According to the preliminary measurements, the fair value of such asset totaled RUB 45,581 million. These measurements depend on the final assessment of the deficit of net assets of National Bank TRUST as of 22 December At the reporting date, the results of the Complex review of the financial position of National Bank TRUST performed on 22 December 2014 were not approved, therefore accounting of business combination as of the reporting date was not completed and the fair value of the assets measured as of the business combination date may change during the period leading to retrospective restatement of business combination results. The fair value of loans to customers as of the date of acquisition amounted to RUB 54,298 million. The contracted amount of loans to customers before allowance for impairment totaled RUB 159,330 million. The best estimate as of the date of acquisition of contractual cash flows not expected to be received was RUB 108,224 million. The acquired identifiable assets and liabilities include balances of cash and cash equivalents in the amount of RUB 35,314 million between the Group and National Bank TRUST, whose fair values approximate their carrying amounts. 46

50 26. Business combinations and disposals (continued) Acquisition of National Bank TRUST (continued) Since the date of acquisition, the contribution of National Bank TRUST to the Group's interest income has totaled RUB 12,093 million, decrease of non-interest expense RUB 2,581 million and decrease of net profit before tax RUB 512 million. If the combination had occurred at the beginning of the year, the Group's profit before tax would have been RUB 26,763 million, interest income RUB 168,098 million and non-interest income RUB 62,754 million. Analysis of cash inflow/(outflow) on acquisition: Net cash acquired with the subsidiary (included in cash flows from investing activities) 5,409 Cash paid on acquisition Net cash inflow 5,409 Acquisition of Rozala Ltd. and its subsidiaries In June 2015, the Group purchased 100% interest in Rozala Ltd. (Cyprus) to acquire a group of companies holding the title to the intellectual property, software and hardware previously used by Bank24.ru (JSC) to provide services to small businesses. The Group plans to use these assets to develop online services for individual entrepreneurs, medium and small businesses for the purposes of settlements and settlement-related services based on its subsidiary. The fair value of the identifiable assets and liabilities acquired and financial result arising as of the date of acquisition were: Fair value recognized on acquisition Assets Property and equipment 22 Intangible assets 1,737 Total assets 1,759 Liabilities Other liabilities 1 Total liabilities 1 Total identifiable net assets 1,758 Purchase consideration transferred 367 Contingent consideration liability 250 Non-controlling interests Less: fair value of identifiable net assets (1,758) Gain on bargain purchase of Acquired Group of companies (1,141) The acquisition of Rozala Ltd. and its subsidiaries is recognized in Other income in the consolidated income statement. Analysis of cash outflows on acquisition of the subsidiary Net cash acquired with the subsidiary (included in cash flows from investing activities) Cash paid on acquisition (included in cash flows from investing activities) (367) Net cash outflow (367) The Purchase Agreement concluded with the previous owner stipulated a contingent consideration. According to the Agreement, the payments to the previous owner comprise the following: a) RUB 20 million in the event the key hardware is transferred to the Group company (no later than 1 September 2015 or as otherwise agreed by the parties according to the liquidation procedures of Bank24.ru); b) RUB 200 million in the event the new business has no net loss for the first time during a month (not until 1 January 2016); c) RUB 30 million in the event the business has accumulated net profit beginning with 1 December 2014 (not until 1 January 2017); d) 15% of net profit of the new business for the year is less RUB 30 million once the accumulated net profit exceeds the accumulated net loss beginning with 1 December As of the acquisition date, fair value of the contingent consideration totaled RUB 250 million. 47

51 26. Business combinations and disposals (continued) Disposal of CIHRUS LLC, the owner of Rapida and CONTACT payment systems In June 2015, the Group completed the transaction with QIWI Group, where QIWI acquired 100% interest in the holding company CIHRUS LLC, the owner of Rapida and CONTACT payment systems, and the Group acquired 9.3% interest in QIWI. The transaction is performed under the strategic partnership agreement concluded between the companies in May The carrying amount of the company's net assets on disposal was RUB 4,720 million. The fair value of 9.3% interest in QIWI totaled RUB 9,024 million as of the acquisition date. Financial result of the Group from the disposal amounted to RUB 4,304 million. In June 2015, the Group purchased additional 30% of shares in CIHRUS LLC to complete the transaction. As a result, the Group's share increased to 100%. Money consideration to be paid by the Group totals RUB 1,950 million. The carrying amount of the additionally purchased shares amounted to RUB 1,384 million. The difference of RUB 566 million between the consideration and the carrying amount of the purchased shares was recognized in equity as retained earnings. The assets and liabilities disposed are as follows: Cost at the date of disposal Assets Cash and cash equivalents 3,215 Amounts due from credit institutions 40 Loans to customers 22 Property and equipment 34 Intangible assets 3,206 Deferred income tax assets 12 Other assets 2,589 Total assets 9,118 Liabilities Amounts due to credit institutions 2,417 Amounts due to customers and borrowings 1,336 Deferred income tax liabilities 32 Other liabilities 613 Total liabilities 4,398 Net assets 4,720 The total consideration was as follows: Value of QIWI's shares 9,024 Cash received Cash due Total consideration 9,024 Cash inflow from the disposal of the subsidiary was as follows: Net cash disposed with the subsidiary (included in cash flows from investing activities) (3,215) Cash received (included in cash flows from investing activities) Net cash outflow for the reporting period (3,215) 48

52 27. Segment analysis In accordance with IFRS 8, the Group defined the major operating segments as follows: Corporate business large corporate customer banking, including lending services, deposits, accounts management and cash management and payment services, foreign exchange operations, brokerage services. Small and medium business: lending to small and medium-sized businesses, cash and settlement services, foreign exchange operations. Retail business retail banking, including consumer lending, car lending, mortgage lending, account management and cash management and payment services, foreign exchange operations, brokerage and insurance services. Financial markets dealing in shares, bonds, Eurobonds, foreign currencies and precious metals, operations with derivative financial instruments, issuing debt securities, other investment banking services. Other other operations not included in the above segments. The Group largely allocates and manages activities and resources of its companies, as well as assesses their performance based on the respective information about these segments. This segment disclosure is presented on the basis of IFRS compliant data with regard to the operating segments adjusted for intersegment reallocation. Information about operating segments is reported to the appropriate operating decision makers for the purposes of allocating resources and assessing segment performance. Transfer prices between operating segments are set on an arm's length basis in a manner similar to transactions with third parties. In the reporting period, the Group had no revenue from transactions with a single external customer or counterparty that amounted to 10% of its total revenue. Corporate business Small and medium business Retail business Financial market operations Other Total Assets Cash and cash equivalents 7,423 4,924 36, ,411 5, ,029 Precious metals 7, ,084 Amounts due from credit institutions , , ,456 Financial assets at fair value through profit or loss , ,981 Financial assets at fair value through profit or loss pledged under repurchase agreements 34,914 34,914 Loans to customers 784,073 41, , , ,576,913 Loans to customers pledged under repurchase agreements 1 1 Available-for-sale investment securities 128, ,572 Available-for-sale investment securities pledged under repurchase agreements 564, ,968 Held-to-maturity investment securities 59,915 59,915 Held-to-maturity investment securities pledged under repurchase agreements 10,905 10,905 Investment property 1,244 5,771 7,015 Property and equipment 4,224 1,920 11,562 8,246 5,362 31,314 Intangible assets 8, , ,105 20,461 Deferred tax assets 3,743 3,743 Other assets 8, ,373 81,470 57, ,234 Total assets 821,796 49, ,017 2,375,948 79,996 3,640,505 Liabilities Amounts due to credit institutions 26,857 4,427 3,881 1,374,065 1,409,230 Amounts due to customers and borrowings 833,238 52, , ,612 64,062 1,611,716 Debt securities issued 14, , , ,246 Deferred tax liabilities 7,194 7,194 Other liabilities 2, ,049 88,252 32, ,753 Subordinated loans 69,235 7,704 76,939 Total liabilities 877,465 57, ,720 1,851, ,586 3,465,078 49

53 27. Segment analysis (continued) Corporate business Small and medium business Retail business Financial market operations Other Total External customers Interest income 64,952 3,396 25,066 64, ,030 Interest expense (37,109) (1,842) (19,958) (53,014) (1,648) (113,571) Inter-segment settlements 3, ,522 (17,410) 1,657 Net interest income/(expense) 31,470 2,158 16,630 (5,810) 11 44,459 Allowance for impairment of interest bearing assets (18,898) (1,963) (13,062) (299) (34,222) Net interest income after allowance for impairment of interest-bearing assets 12, ,568 (6,109) 11 10,237 Fee and commission income 4,182 1,074 6, ,882 Fee and commission expense (304) (52) (2,898) (297) (111) (3,662) Trading income and revaluation effect (2,527) 28, ,496 Other income ,731 7,493 Operating income before allowance for impairment 17,072 1,424 4,790 23,462 5,698 52,446 Other impairment (872) (2) (211) (876) (50) (2,011) Operating expenses (5,683) (1,838) (11,649) (5,437) (6,953) (31,560) Profit/(loss) before tax 10,517 (416) (7,070) 17,149 (1,305) 18,875 Income tax expense (2,630) (2,630) Net profit/(loss) 10,517 (416) (7,070) 17,149 (3,935) 16,245 Corporate business Small and medium business 31 December 2014 Retail business Financial market operations Other Total Assets Cash and cash equivalents 6,312 5,997 50, , ,669 Precious metals 2, ,312 Amounts due from credit institutions 5, ,618 41,184 56,974 Financial assets at fair value through profit or loss , ,110 Financial assets at fair value through profit or loss pledged under repurchase agreements 120, ,082 Loans to customers 738,108 40, , , ,485,765 Loans to customers pledged under repurchase agreements 5,943 5,943 Available-for-sale investment securities 77,681 77,681 Available-for-sale investment securities pledged under repurchase agreements 40,265 40,265 Held-to-maturity investment securities 36,492 36,492 Held-to-maturity investment securities pledged under repurchase agreements 24,736 24,736 Investment property ,246 4,918 Property and equipment 3,141 2,301 10,607 1,956 2,476 20,481 Intangible assets 8, , ,596 Deferred income tax assets 1,154 1,154 Other assets 9, ,652 39,073 12,931 63,189 Total assets 774,214 49, ,415 1,694,199 21,589 2,812,367 Liabilities Amounts due to credit institutions 25, ,645 1,034,493 1,063,682 Amounts due to customers and borrowings 627,934 43, , , ,122,760 Debt securities issued 50, , , ,345 Deferred income tax liabilities 6,794 6,794 Other liabilities , ,588 2, ,683 Subordinated loans 62,521 20,779 83,300 Total liabilities 703,905 44, ,132 1,524,917 30,474 2,654,564 50

54 27. Segment analysis (continued) Corporate business Small and medium business 30 June 2014 Retail business Financial market operations Other Total External customers Interest income 35,627 3,346 16,107 26, ,454 Interest expense (15,908) (493) (8,170) (26,256) (285) (51,112) Inter-segment settlements (3,271) (154) 2, (103) Net interest income/(expense) 16,448 2,699 10, (379) 30,342 Allowance for impairment of interest bearing assets (4,744) (1,484) (6,778) (1,450) (14,456) Net interest income after allowance for impairment of interest bearing assets 11,704 1,215 4,077 (731) (379) 15,886 Fee and commission income 1,225 1,149 5,294 1, ,905 Fee and commission expense (320) (53) (1,720) (482) (3) (2,578) Trading income and revaluation effect ,636 (23) 6,186 Other income , ,677 Operating income before allowance for impairment 13,686 2,397 9,637 6, ,076 Other impairment (397) (63) (95) (45) (184) (784) Operating expenses (4,588) (1,976) (8,822) (3,968) (3,659) (23,013) Profit/(loss) before tax 8, ,081 (3,581) 8,279 Income tax expense (1,942) (1,942) Net profit/(loss) 8, ,081 (5,523) 6, Related party transactions In accordance with IAS 24 Related Party Disclosures, parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party in making financial or operational decisions. In considering each possible related party relationship, attention is directed to the substance of the relationship, and not merely the legal form. Related parties may enter into transactions which unrelated parties might not, and transactions between related parties may not be effected on the same terms, conditions and amounts as transactions between unrelated parties. Other related parties include companies, which are controlled by beneficial owners and key management personnel and have a significant impact on the Group. The volumes of related party transactions, outstanding balances as of the reporting date, and related expenses and income for the reporting period are as follows: Beneficiaries 31 December 2014 Key Other Key management related management personnel parties Beneficiaries personnel Other related parties Loans to customers less allowance , ,615 Available-for-sale financial assets Other assets Amounts due to customers and borrowings 232 2, Debt securities issued 64 Other liabilities

55 28. Related party transactions (continued) The income and expense arising from related party transactions are as follows: Key management Other related Beneficiaries personnel parties 30 June 2014 Key management Other related Beneficiaries personnel parties Interest income 42 1, Interest expense (4) (96) (23) (2) (30) (16) Provisions and other impairment Gain/(loss) from operations with financial assets 91 (337) (2) (957) Fee and commission income Other income Personnel and administrative expenses (1,871) (192) (1) (1,031) (275) Beneficial owners of the Group are those having more than 20% in the Company s share capital. The Group enters into related party transactions under the following conditions: loans are issued on an arm's length basis without collateral and funds are raised from related parties also on an arm's length basis. Compensation to key management personnel comprises the following: Salaries and other short-term benefits 1, Social security costs Total key management personnel compensation 1,460 1, Events after the reporting period In August 2015, the Group placed the issue of bonds of Otkritie Holding JSC, Series BO-05, in the amount of RUB 3 billion. The securities have a nominal value of RUB 1 thousand each, the coupon rate of 12.5% p.a. and mature in 3 years. The funds received as a result of the bonds issue will be used to support the Group's current operations. In July, VTB Capital successfully completed the securitization transaction of the mortgage loans portfolio of the Group totaling RUB 5.8 billion. As a part of the securitization transaction, the mortgage agent was established and issued two tranches of mortgage bonds. The amount of the issued bonds equaled to RUB 5.82 billion. The coupon rate of the senior tranche bonds was set at 8.75%. The final maturity of the both tranches of bonds is 9 December