OJSC ORIENT EXPRESS BANK. International Financial Reporting Standards Consolidated Condensed Interim Financial Information.

Transcription

1 OJSC ORIENT EXPRESS BANK International Financial Reporting Standards Consolidated Condensed Interim Financial Information

2 CONTENTS REVIEW REPORT Consolidated Condensed Interim Statement of Financial Position... 1 Consolidated Condensed Interim Statement of Profit or Loss and Other Comprehensive Income... 2 Consolidated Condensed Interim Statement of Changes in Equity... 3 Consolidated Condensed Interim Statement of Cash Flows... 4 Notes to the Consolidated Condensed Interim Financial Information 1 Introduction Operating Environment of the Bank Summary of Significant Accounting Policies Critical Accounting Estimates and Judgements in Applying Accounting Policies New Accounting Pronouncements Cash and Cash Equivalents Securities and Securities Pledged under Repurchase Agreements Due from Other Banks Loans and Advances to Customers Other Assets Due to Other Banks Customer Accounts Debt Securities Issued Other Borrowed Funds Other Liabilities Subordinated debt Share Capital Interest Income and Expense Fee and Commission Income and Expense Administrative and Other Operating Expenses Income Taxes Segment Analysis Capital Adequacy Contingencies, Commitments and Derivative Financial Instruments Fair Value of Financial Instruments Related Party Transactions Events after the end of the reporting period... 42

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5 Consolidated Condensed Interim Statement of Profit or Loss and Other Comprehensive Income Note Six-Month Period Ended Six-Month Period Ended 30 June Interest income Interest expense ( ) ( ) Net interest income Provision for loan impairment 9 ( ) ( ) Net interest income after provision for loan impairment Fee and commission income Fee and commission expense ( ) ( ) 9 Result on sale of loans and debts Securities loss, net ( ) (15 731) Gains less losses/(losses less gains) arising from dealing in foreign currencies ( ) Foreign exchange translation gain/(loss), net Other operating income Administrative and other operating expenses ( ) ( ) Other provisions (55 434) (31 735) (Loss)/profit before tax ( ) Income tax credit/(expense) ( ) (LOSS)/PROFIT FOR THE PERIOD ( ) Other comprehensive (loss)/income: Items that may be reclassified subsequently to profit or loss: Revaluation of available for sale financial assets, net of tax (469) Change in translation reserve, net of tax (532) (147) Other comprehensive (loss)/income for the period, net of tax (1 001) TOTAL COMPREHENSIVE (LOSS)/INCOME FOR THE PERIOD ( ) The notes form an integral part of these consolidated condensed interim financial information. 2

6 Consolidated Condensed Interim Statement of Changes in Equity In thousands of Russian Roubles Share Capital Share premium Retained earnings Revaluation reserve Translation reserve Equitysettled employee benefits reserve Total Equity 1 January (63) Profit for the period Other comprehensive income for the period (147) Total comprehensive income for the period (147) Sale of treasury shares (Note17) Balance as at 30 June January (690) Loss for the period - - ( ) ( ) Other comprehensive loss for the period (469) (532) - (1 001) Total comprehensive loss for the period - - ( ) (469) (532) - ( ) Purchase of treasury shares (Note 17) (51 626) ( ) ( ) Balance as at (1 159) The notes form an integral part of these consolidated condensed interim financial information. 3

7 Consolidated Condensed Interim Statement of Cash Flows Notes Six-Month Period Ended Six-Month Period Ended 30 June Net cash (used in)/ from operating activities ( ) Net cash used in investing activities ( ) ( ) Net cash from financing activities Net (decrease)/increase in cash and cash equivalents ( ) Cash and cash equivalents, beginning of the period Effect of changes in exchange rates on cash and cash equivalents Cash and cash equivalents at the end of the period The notes form an integral part of these consolidated condensed interim financial information. 4

8 1 Introduction This consolidated condensed interim financial information has been prepared in accordance with International Accounting Standard 34 Interim Financial Reporting for the six-month period ended for Open Joint Stock Bank Orient Express Bank ( the Bank ) and its subsidiaries (together referred to as the Group ). The Bank was incorporated and is domiciled in the Russian Federation. The Bank is an open joint stock company limited by shares and was set up in accordance with Russian regulations. The Bank does not have any immediate parent entity and due to the structure of shareholdings, as detailed in the table below, management is of the opinion that the Bank does not have a single ultimate controlling party. As at and 31 December the shareholders of the Bank were: Shareholder Ownership in total shares, % 30 June 31 December 2013 Evizon Holdings Limited (on behalf of Baring Vostok Private Equity Fund IV and Baring Vostok Fund IV Supplemental Fund) International Finance Corporation Sergei Vlasov Antof N.V. (controlled by I.Kim) Andrey Bekarev Russia Partners III LP Igor Kim Orient Express Bank (treasury shares) Alexander Taranov RBOF Holding Company I LTD (controlled by International Finance Corporation) Evgeniya Schouplova (on behalf of Sergei Vlasov) Other shareholders each less than 5% Total Principal activity. The Group s principal business activity is retail banking operations within the Russian Federation. The Bank has operated under a full banking licence issued by the Central Bank of the Russian Federation ( CBRF ) since 12 May The Bank participates in the state deposit insurance program, which was introduced by Federal Law #177-FZ Deposits of individuals insurance in Russian Federation dated 23 December The State Deposit Insurance Agency guarantees repayment of 100% of individual deposits up to RR 700 thousand per individual in the case of the withdrawal of a licence of a bank or a CBRF imposed moratorium on payments. As at the Group had 8 branches and offices located across the Russian Federation (31 December : 8 branches and offices). As at the Bank had employees (at 31 December : ). Registered address and place of business. The Bank s registered office is located at 1 Svyatitelya Innokentiya Pereulok, Blagoveschensk, Amursky Region, , Russian Federation. The Bank s principal place of business is 22, Frunze Street, Khabarovsk, , Russian Federation. Presentation currency. This consolidated condensed interim financial information is presented in Russian Roubles ( RR ), unless otherwise stated. 5

9 2 Operating Environment of the Bank The Russian Federation displays certain characteristics of an emerging market. Tax, currency and customs legislation is subject to varying interpretations and contributes to the challenges faced by banks operating in the Russian Federation (Note 24). The international sovereign debt crisis, stock market volatility and other risks could have a negative effect on the Russian financial and corporate sectors. Management determined loan impairment provisions by considering the economic situation and outlook at the end of the reporting period, and applied the incurred loss model required by the applicable accounting standards. These standards require recognition of impairment losses that arose from past events and prohibit recognition of impairment losses that could arise from future events, no matter how likely those future events are. The future economic development of the Russian Federation is dependent upon external factors and internal measures undertaken by the government to sustain growth, and to change the tax, legal and regulatory environment. Management believes it is taking all necessary measures to support the sustainability and development of the Group s business in the current business and economic environment. 3 Summary of Significant Accounting Policies Basis of preparation. This consolidated condensed interim financial information has been prepared in accordance with International Accounting Standard ( IAS ) 34 Interim Financial Reporting and should be read in conjunction with the annual consolidated financial statements of the Group for the year ended 31 December, which have been prepared in accordance with International Financial Reporting Standards ( IFRS ). At the principal rate of exchange used for translating foreign currency balances was USD 1 = RR (31 December : USD 1 = RR ) and EUR 1 = RR (31 December : EUR 1 = RR ). Except as described below, the same accounting policies and methods of computation were followed in the preparation of this consolidated condensed interim financial information as compared with the annual consolidated financial statements for the year ended 31 December. Interim period tax measurement. Interim period income tax expense is accrued using the effective tax rate that would be applicable to expected total annual earnings, that is, the estimated weighted average annual effective income tax rate applied to the pre-tax income of the interim period. Changes in presentation. Where necessary, corresponding figures have been adjusted to conform to the presentation of the current period amounts. 6

10 3 Summary of Significant Accounting Policies (Continued) The effect of reclassifications for presentation purposes was as follows on amounts for the six-month period ended 30 June : As originally presented 30 June Reclassification As reclassified 30 June Fee and commission income (a) Administrative and other operating expenses (b) ( ) ( ) Interest income (c) ( ) Gains less losses arising from dealing in foreign currencies (d) ( ) ( ) Foreign exchange translation (loss)/gain, net (d) ( ) (a) (b) (c) (d) income received from customers as reimbursement of the Bank s commission expense paid to other banks for withdrawal of cash by Bank s customers on their credit cards from ATMs of other banks, was reclassified from interest income to commission income; insurance premiums paid by the Bank on behalf of its borrowers to insurance companies, were netted against interest income; the sum of (a) and (b) above; revaluation of foreign currency swaps was reclassified from foreign exchange translation (loss)/gain to the gains less losses arising from dealing in foreign currencies. Certain new standards, interpretations and amendments to the existing standards, as disclosed in the consolidated financial statements for the year ended 31 December, became effective for the Group from 1 January These new or amended standards had an impact on presentation and disclosures. The amendments to IAS 1 Presentation of Financial Statements, require us to separate items presented in other comprehensive income into two groups, based on whether or not they may be reclassified to profit or loss in the future. The suggested title used by IAS 1 has changed to statement of profit or loss and other comprehensive income. Implementation of IFRS 13, Fair Value Measurement, resulted in additional disclosures about fair values of financial instruments. Other new or amended standards or interpretations did not have any impact on this consolidated condensed interim financial information. 4 Critical Accounting Estimates and Judgements in Applying Accounting Policies In preparing this consolidated condensed interim financial information, the significant judgements made by management in applying the Group s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ended 31 December. Impairment losses on loans and advances. The Group regularly reviews its loan portfolios to assess impairment. In determining whether an impairment loss should be recorded in profit or loss for the year, the Group makes judgements as to whether there is any observable data indicating that there is a measurable decrease in the estimated future cash flows from a portfolio of loans before the decrease can be identified with an individual loan in that portfolio. This evidence may include observable data indicating that there has been an adverse change in the payment status of borrowers in a group, or national or local economic conditions that correlate with defaults on assets in the group. Management uses estimates based on historical loss experience for assets with credit risk characteristics and objective evidence of impairment similar to those in the portfolio when scheduling its future cash flows. The methodology and assumptions used for estimating both the amount and timing of future cash flows are reviewed regularly to reduce any differences between loss estimates and actual loss experience. A 10% increase or decrease in actual loss experience compared to the loss estimates used would result in an increase or decrease in loan impairment losses of RR thousand (six-month period ended 30 June : RR thousand), respectively. 7

11 4 Critical Accounting Estimates and Judgements in Applying Accounting Policies (Continued) The reason for an increase in allowance for impairment of loans to individuals during the six-month period ended is a decrease in the estimated future cash flows as evidenced by a change in the payment status of borrowers. 5 New Accounting Pronouncements Since the Group published its last annual consolidated financial statements, certain new standards and interpretations became mandatory for the Group s annual accounting periods beginning on or after 1 January 2014 or later periods and which the Group has not early adopted: IFRIC 21 Levies (issued on 20 May 2013 and effective for annual periods beginning 1 January 2014). The interpretation clarifies the accounting for an obligation to pay a levy that is not income tax. The obligating event that gives rise to a liability is the event identified by the legislation that triggers the obligation to pay the levy. The fact that an entity is economically compelled to continue operating in a future period, or prepares its financial statements under the going concern assumption, does not create an obligation. The same recognition principles apply in interim and annual financial statements. The application of the interpretation to liabilities arising from emissions trading schemes is optional. The Group is currently assessing the impact of the amendments on its financial statements. Amendments to IAS 36 Recoverable amount disclosures for non-financial assets (issued on 29 May 2013 and effective for annual periods beginning 1 January 2014; earlier application is permitted if IFRS 13 is applied for the same accounting and comparative period). The amendments remove the requirement to disclose the recoverable amount when a CGU contains goodwill or indefinite lived intangible assets but there has been no impairment. The Group is currently assessing the impact of the amendments on the disclosures in its financial statements. Amendments to IAS 39 Novation of Derivatives and Continuation of Hedge Accounting (issued on 27 June 2013 and effective for annual periods beginning 1 January 2014).The amendments will allow hedge accounting to continue in a situation where a derivative, which has been designated as a hedging instrument, is novated (i. e parties have agreed to replace their original counterparty with a new one) to effect clearing with a central counterparty as a result of laws or regulation, if specific conditions are met. The Group is currently assessing the impact of the amendments on the disclosures in its financial statements. 6 Cash and Cash Equivalents 31 December Cash on hand Cash balances with the CBRF (other than mandatory reserves) Correspondent accounts with other banks: - Other countries Russian Federation Cash settlements in progress Total cash and cash equivalents Cash settlements in progress represent operations with plastic cards and non-bank financial institutions. At the Group had 3 counterparty bank (31 December : 7 banks) with aggregated cash and cash equivalent balances above RR thousand. The total aggregate amount of these balances was RR thousand (31 December : RR thousand) or 37% of the cash and cash equivalents (31 December : 41%). 8

12 7 Securities and Securities Pledged under Repurchase Agreements 31 December Trading securities pledged under repurchase agreements Trading securities Securities held to maturity pledged under repurchase agreements Investment securities held to maturity Investment securities available for sale Less: Provision for impairment of securities held to maturity (27 181) (26 306) Total securities and securities pledged under repurchase agreements At securities pledged with the CBRF in order to obtain overdraft loans if necessary were RR thousand of trading securities and RR thousand of investment securities held to maturity (31 December : RR thousand and RR thousand, respectively). The Group did not use the overdraft facility as at and 31 December. Trading securities and Repurchase receivables related to trading securities 31 December Trading securities Bonds of credit and finance organisations Russian Federation bonds Municipal bonds Corporate bonds Total trading securities Trading securities pledged under repurchase agreements Bonds of credit and finance organisations Municipal bonds Corporate bonds Russian Federation bonds Total trading securities pledged under repurchase agreements Total trading securities and trading securities pledged under repurchase agreements Bonds of credit and finance organisations represent bonds of domestic banks and financial companies of large domestic corporations. Corporate bonds represent bonds of large domestic corporations. Trading securities are carried at fair value, which also reflects any credit risk related write-downs. As trading securities are carried at their fair values based on observable market data, the Group does not analyse or monitor impairment indicators. Trading securities pledged under repurchase agreements represent securities sold under direct sale and repurchase agreements, which the counterparty has the right, by contract, to sell or repledge (Note 11). The Trading securities pledged under repurchase agreements were short-term in nature and matured in July 2013 and January 2013 respectively. 9

13 7 Securities and Securities Pledged under Repurchase Agreements (Continued) Investment securities available for sale 31 December Investment securities available for sale Foreign government bonds Shares Total investment securities available for sale Investment Securities Held to Maturity and Investment Securities Held to Maturity Pledged under Repurchase Agreements 31 December Investment Securities Held to Maturity Bonds of credit and finance organisations Corporate bonds Municipal bonds Less: Provision for impairment of securities held to maturity (27 181) (26 306) Total investment securities held to maturity Investment securities held to maturity pledged under repurchase agreements Bonds of credit and finance organisations Municipal bonds Total investment securities held to maturity pledged under repurchase agreements Total investment securities held to maturity and investment securities held to maturity pledged under repurchase agreements Investment securities held to maturity pledged under repurchase agreements represent securities sold under sale and repurchase agreements which the counterparty has the right, by contract or custom, to sell or re-pledge. The repurchase agreements were short-term in nature and matured in July 2013 and January 2013, respectively. At fair value of investment securities held to maturity and investment securities held to maturity pledged under repurchase agreements was RR thousand and RR thousand, respectively (31 December : RR thousand and RR thousand, respectively). 8 Due from Other Banks 31 December Interbank loans Promissory notes Total due from other banks

14 9 Loans and Advances to Customers This note covers both loans originated and purchased by the Group. 31 December Loans and advances to individuals Loans and advances to corporate customers Total gross loans and advances to customers Less: Provision for loan impairment ( ) ( ) Total loans and advances to customers As at and 31 December loans and advances to individuals comprise: 31 December Consumer loans Credit cards SME loans Car loans Mortgage loans Other loans Total gross loans and advances to individuals Less: Provision for loan impairment ( ) ( ) Total loans and advances to individuals Other loans represent retail loans purchased from other banks. As at and 31 December loans and advances to corporate customers comprise: 31 December Corporate loans Reverse sale and repurchase agreements SME loans Total gross loans and advances to corporate customers Less: Provision for loan impairment ( ) ( ) Total loans and advances to corporate customers

15 9 Loans and Advances to Customers (Continued) The Group has a right to sell or repledge securities with a fair value of RR thousand (31 December : RR thousand) received under reverse sale and repurchase agreements. Movements in the provision for impairment of loans to individuals during the six-month period ended and are as follows: In thousands of Russian Roubles Consumer loans Credit cards Mortgage loans Car loans SME loans Other loans Total Provision for impairment of loans to individuals at 1 January Provision/(recovery of provision) for impairment during the period (27 611) Provision used on sale of loans ( ) ( ) (89) ( ) (23 528) ( ) ( ) Provision for impairment of loans to individuals at 30 June Provision for impairment of loans to individuals at 1 January Provision/(recovery of provision) for impairment during the period Provision used on sale of loans ( ) ( ) - ( ) ( ) ( ) ( ) Write-off of loans against allowance for impairment (6 132) (6 132) Provision for impairment of loans to individuals at Movements in the provision for impairment of loans to corporate customers during the six-month period ended and are as follows: Corporate loans SME loans Total Provision for impairment of loans to corporate customers at 1 January Provision for impairment during the period Provision for impairment of loans to corporate customers at 30 June Provision for impairment of loans to corporate customers at 1 January Recovery of provision for impairment during the period (25 028) (479) (25 507) Provision used on sale of loans (5) - (5) Provision for impairment of loans to corporate customers at

16 9 Loans and Advances to Customers (Continued) During the six-month period ended the Bank disposed of loans and advances to customers under cession agreements with the total gross value of RR thousand (six-month period ended 30 June : RR thousand) with cash proceeds of RR thousand (six-month period ended 30 June : RR thousand) and receivable cash proceeds of RR thousand (sixmonth period ended 30 June : RR thousand). As of the date of disposal these loans were provided for impairment in the total amount of RR thousand (six-month period ended 30 June : RR thousand). The net financial result of a loan disposal during the six-month period ended recognized in the statement of comprehensive income was RR thousand (six-month period ended 30 June : RR thousand). The loans were disposed of by transferring the contractual rights to receive the cash flows and risks and rewards of the loans to other banks, collection agencies, other legal entities and related parties. Economic sector risk concentrations within the customer loan portfolio are as follows: 31 December Amount % Amount % Individuals Financial services Trade Manufacturing Other Total loans and advances to customers (before impairment provision)

17 9 Loans and Advances to Customers (Continued) Analysis of credit quality of loans to individuals outstanding at is as follows: In thousands of Russian Roubles Consumer loans Credit cards SME loans Car loans Mortgage loans Other loans Total Neither past due nor impaired Non classified loans Loans without overdue payments at reporting date - Loans with all payments (more than six), from origination date to reporting date, being done on time Loans with history of 1 to 6 ontime payments and no past due payments Loans with history of past due payments of up to 15 days Loans with history of past due payments of up to 30 days Loans with history of past due payments over 30 days Total neither past due nor impaired (gross) Overdue but not impaired loans - Loans with payments that are overdue by no more than 30 days at reporting date Loans with payments that are overdue by more than 30 days at reporting date but are fully collateralized Total overdue but not impaired loans Loans individually determined to be impaired Loans with payments that are overdue by days Non-performing loans (loans overdue by 90 or more days) - Loans with payments that are overdue by days Loans with payments that are overdue by days Loans with payments that are overdue over 360 days Total non-performing loans (loans overdue by 90 or more days) Total individually impaired loans (gross) Total loans and advances to individuals (gross) Less impairment provisions ( ) ( ) ( ) ( ) ( ) ( ) ( ) Total loans and advances to individuals

18 9 Loans and Advances to Customers (Continued) Analysis of credit quality of loans to corporate customers outstanding at is as follows: Corporate loans SME loans Reverse sale and repurchase agreements Total Neither past due nor impaired Non classified loans Loans with all payments (more than six), from origination date to reporting date, being done on time Other current loans Rolled-over loans Total neither past due nor impaired (gross) Overdue but not impaired loans - Loans with payments that are overdue by no more than 30 days at reporting date Loans with payments that are overdue by more than 30 days at reporting date but are fully collateralized Total overdue but not impaired loans Loans individually determined to be impaired Loans with payments that are overdue by days Non-performing loans (loans overdue by 90 or more days) - - Loans with payments that are overdue by days Loans with payments that are overdue by days Loans with payments that are overdue over 360 days Total non-performing loans (loans overdue by 90 or more days) Total individually impaired loans (gross) Total loans and advances to legal entities (gross) Less impairment provisions ( ) (54 515) - ( ) Total loans and advances to legal entities

19 9 Loans and Advances to Customers (Continued) Analysis of credit quality of loans to individuals outstanding at 31 December is as follows: Consumer loans Credit cards SME loans Car loans Mortgage loans Other loans Total Neither past due nor impaired Non classified loans Loans without overdue payments at reporting date - Loans with all payments (more than six), from origination date to reporting date, being done on time Loans with history of 1 to 6 ontime payments and no past due payments Loans with history of past due payments of up to 15 days Loans with history of past due payments of up to 30 days Loans with history of past due payments over 30 days Total neither past due nor impaired (gross) Overdue but not impaired loans - Loans with payments that are overdue by no more than 30 days at reporting date Loans with payments that are overdue by more than 30 days at reporting date but are fully collateralized Total overdue but not impaired loans Loans individually determined to be impaired Loans with payments that are overdue by days Non-performing loans (loans overdue by 90 or more days) - Loans with payments that are overdue by days Loans with payments that are overdue by days Loans with payments that are overdue over 360 days Total non-performing loans (loans overdue by 90 or more days) Total individually impaired loans (gross) Total loans and advances to individuals (gross) Less impairment provisions ( ) ( ) ( ) ( ) ( ) ( ) ( ) Total loans and advances to individuals

20 9 Loans and Advances to Customers (Continued) Analysis of credit quality of loans to corporate customers outstanding at 31 December is as follows: Corporate loans SME loans Reverse sale and repurchase agreements Total Neither past due nor impaired Non classified loans Loans with all payments (six payments or more), from origination date to reporting date, being done on time Other current loans Rolled-over loans Total neither past due nor impaired (gross) Overdue but not impaired loans - Loans with payments that are overdue by no more than 30 days at reporting date Loans with payments that are overdue by more than 30 days at reporting date but are fully collateralized Total overdue but not impaired loans Loans individually determined to be impaired Non-performing loans (loans overdue by 90 or more days) - Loans with payments that are overdue by days Loans with payments that are overdue by days Loans with payments that are overdue over 360 days Total non-performing loans (loans overdue by 90 or more days) Total individually impaired loans (gross) Total loans and advances to legal entities (gross) Less impairment provisions ( ) (54 994) - ( ) Total loans and advances to legal entities

21 9 Loans and Advances to Customers (Continued) The Group applied the portfolio provisioning methodology prescribed by IAS 39, Financial Instruments: Recognition and Measurement, and created portfolio provisions for impairment losses that were incurred, but have not been specifically identified with any individual loan, by the end of the reporting period. The Group s policy is to classify each loan as neither past due nor impaired until specific objective evidence of impairment of the loan is identified. The impairment provisions may exceed the total gross amount of individually impaired loans as a result of this policy and the portfolio impairment methodology. The Group s internal ratings scale includes the following categories: - Non classified loans loans originated close to the reporting date. No payments were due on those loans from the date of origination to the reporting date, and there is no evidence of impairment at the reporting date. - Loans without overdue payments at reporting date, consisting of: - Loans with all payments (more than six), from origination date to reporting date, being done on time; - Other loans without overdue payments at reporting date loans with no overdue payments at reporting date, but with at least one past due payment, from origination date to reporting date, which was paid by the reporting date. - Other loans include all other loans that do not fall into categories set out above. Loans to entrepreneurs-individuals are classified as SME loans to individuals; loans to SME legal entities are classified as SME corporate loans. The primary factors that the Group considers in determining whether a loan is impaired are its overdue status and realisability of related collateral, if any. 18

22 10 Other Assets Other financial assets 31 December Settlements with payment systems Debtors for sale of loans Settlements with exchanges Debtors and prepayments Service fee asset Foreign currency spots Other financial assets Total gross other financial assets Less: Provision for impairment of other financial assets ( ) ( ) Total other financial assets Other non-financial assets Prepayments for services and equipment Repossessed collateral Prepayment for profit tax Total gross other non-financial assets Less: Provision for impairment of other non-financial assets (62 195) (64 846) Total other non-financial assets Total other assets Settlements with exchanges represent a security deposit for trade in foreign currency and the balance depends on the size of the deals. The exchanges block the balances and the Bank s access to money is thus restricted until the relevant deals are complete. Debtors for sale of loans are balances due from counterparties for loans sold to them. Debtors and prepayments represent settlements with suppliers, employees, and other debtors. Repossessed collateral is represented by real estate, cars, inventory and other items acquired by the Group from borrowers in settlement of overdue loans. The Group expects to dispose of the assets in the foreseeable future. 19

23 10 Other Assets (Continued) Movements in the provision for impairment of other assets during the six-month period ended are as follows: Debtors and prepayments Prepayments for services and equipment Debtor for sale of loans Other financial assets Total Provision for impairment at 1 January Provision/(recovery of provision) for impairment during the period (2 651) Provision used on sale of accounts receivable - - ( ) - ( ) Write-off of debtors and prepayments against allowance for impairment (360) (360) Provision for impairment at Movements in the provision for impairment of other assets during the six-month period ended 30 June are as follows: Debtors and prepayments Prepayments for services and equipment Debtor for sale of loans Other financial assets Total Provision for impairment at 1 January Provision/(recovery of provision) for impairment during the period (22 716) (1 851) Provision for impairment at 30 June During the six-month period ended the Bank disposed accounts receivable with the total gross value of RR thousand (six-month period ended 30 June : nill) with cash proceeds of RR thousand (six-month period ended 30 June : nill) and receivable cash proceeds of RR thousand (six-month period ended 30 June : nill). As of the date of disposal these accounts receivable were provided for impairment in the total amount of RR thousand (six-month period ended 30 June : nill). The net financial result of accounts receivable disposal during the sixmonth period ended recognized in the consolidated condensed interim statement of profit or loss and other comprehensive income was nill (six-month period ended 30 June : nill). The accounts receivable were disposed of by transferring the contractual rights to receive the cash flows to other legal entities and individual customers. 20

24 11 Due to Other Banks Note Direct sale and repurchase agreements with CBRF 7, December Loans and deposits from other banks Direct sale and repurchase agreements with other banks 7, Correspondent accounts and overnight placements of other banks Loans from CBRF Total due to other banks At 31 December, loans from CBRF bear interest rate of 8% per annum, mature in August 2013 and are guaranteed by Russian commercial banks. At, loans and deposits from other banks bear an interest rate from 4.5% to 11% (31 December : from 4.5% to 12.25%) and mature from July 2013 to April 2014 (31 December : from January 2013 to April Customer Accounts 31 December State and public organisations - Term deposits Current/settlement accounts Other legal entities - Term deposits Current/settlement accounts Individuals - Term deposits Current/demand accounts Total customer accounts Economic sector concentrations within customer accounts are as follows: 31 December Amount % Amount % Individuals Financial intermediation Manufacturing Wholesale and retail trade Construction Real estate, renting Transport, storage and communications Trade unions, non-for-profit organizations, individuals entrepreneurs Agriculture, hunting and forestry Hotels and restaurants Education Health and social work Electricity, gas and water supply Fishing Other Total customer accounts

25 12 Customer Accounts (Continued) At deposits and current accounts of the Group s ten largest depositors amounted to RR thousand or 7.3% of total customer accounts (31 December : RR thousand or 6.0%). The Group has several deposits from related parties. Information on related party deposits is disclosed in Note Debt Securities Issued 31 December Bonds issued on domestic market, 4th tranche (RR thousand), matures in August 2015, coupon 11.0% Bonds issued on domestic market, 10th tranche (RR thousand), matures in December 2015, coupon 12.0% Bonds issued on domestic market, 2nd tranche (RR thousand), matures in September 2014, coupon 11.2% Bonds issued on domestic market, 5th tranche (RR thousand), matures in October 2013, coupon 10.0% Promissory notes Bonds issued on domestic market, 1st tranche (RR thousand), matures in March 2013, coupon 7.5% Total debt securities in issue In March 2010 the Bank issued on the Moscow Exchange a tranche of non-convertible bonds with a nominal amount of RR thousand with a coupon rate of 12.5% per annum. The holders of the bonds have a right to require the Bank to repurchase these bonds at nominal amount on 10 March 2011 and on 7 March On 14 March 2011 at official offer the Bank redeemed bonds of this tranche at par value. In April and August 2011 the Bank floated repurchased bonds again with a coupon rate of 7.5% per annum. The bonds of this tranche were repaid on 7 March In October 2010 the Bank issued on the Moscow Exchange a tranche of RR denominated non-convertible bonds with a nominal amount of RR thousand with a coupon rate of 9.0% per annum. The holders of the bonds have a right to require the Bank to repurchase these bonds at nominal amount on 19 April and on 17 October On 23 April at official offer the Bank redeemed bonds of this tranche at par value. Later in April the Bank floated repurchased bonds again with a coupon rate of 10.0% per annum. On 6 March 2013 the Bank purchased bonds of this tranche with nominal amount of RR thousand at % of face value. In September 2011 the Bank issued on the Moscow Exchange a tranche of non-convertible bonds with a nominal amount of RR thousand with a coupon rate of 10.5% per annum. The holders of the bonds have a right to require the Bank to repurchase these bonds at nominal amount on 1 October and 31 March The coupon rate is 11.2% per annum from 28 September. On 1 October at official offer the Bank redeemed bonds of this tranche. Later in October the Bank floated repurchased bonds with a coupon rate of 11.2% per annum. In August the Bank issued on the Moscow Exchange a tranche of non-convertible bonds with a nominal amount of RR thousand with a coupon rate of 11.0% per annum. The holders of the bonds have a right to require the Bank to repurchase these bonds at nominal amount on 20 August In December the Bank issued on the Moscow Exchange a tranche of non-convertible bonds with a nominal amount of RR thousand with a coupon rate of 12.0% per annum. The holders of the bonds have a right to require the Bank to repurchase these bonds at nominal amount in December

26 14 Other Borrowed Funds Loans from European Bank for Reconstruction and Development ( EBRD ): 31 December 4th credit facility of RR Mosprime+4.20% 2nd tranche due Dec th credit facility of RR Mosprime+4.20% 1st tranche due Dec st credit facility of RR Mosprime+4.7% 3rd tranche due Feb rd credit facility of RR Mosprime+4.20% 1st tranche due Dec st credit facility of RR Mosprime+4.7% 2nd tranche due Nov st credit facility of RR Mosprime+4.7% 1st tranche due Nov nd credit facility of RR Mosprime+5.00% 2nd tranche due Aug Total other borrowed funds Other Liabilities Other financial liabilities 31 December Accrued expenses Settlements with payment systems Warranty on loans sold Foreign currency spots Other financial liabilities at fair value Other Total other financial liabilities Other non-financial liabilities Taxes other than on income Accrued vacation liability to employees Accrued salary Provision for legal claims Accrued short-term bonuses Current tax liability Other Total other non-financial liabilities Total other liabilities Accrued expenses comprise accrued expense for deposit insurance, and other accruals. The provision for legal claims represents the present value of the director's best estimate of the future outflows of economic benefits that will be required under the Group s obligation to reimburse some credit related commissions that the Group collected from its customers before such practice of Russian banks was questioned by the courts. The estimate has been made on the basis of historical trends for such claims and court practice and may vary as a result of new developments in the legislation and business practice. The warranty on loans sold arose on the Bank s obligation to repurchase qualifying loans sold to State Agency on Mortgage Lending. 23

27 16 Subordinated debt 31 December Subordinated RR denominated bonds Subordinated USD denominated notes Total subordinated debt On 21 June 2007 the Group issued USD denominated subordinated notes in the amount of USD thousand. The notes bear a fixed interest rate of 11% per annum payable semi-annually from the issuance until 26 June and a floating interest rate thereafter set at a rate per annum representing the aggregate of the US Treasury Rate plus 7.45 per cent per annum payable semi-annually until maturity on 26 June As at the floating interest rate amounted to 8.17% per annum. During the year 2011 the Bank repurchased subordinated notes with the nominal amount of USD thousand or 30.93% of the total outstanding subordinated notes. In February 2013 the Bank issued on the Moscow Exchange a tranche of non-convertible subordinated bonds with a nominal amount of RR thousand with a coupon rate of 13.6% per annum payable semi-annually. The debt ranks after all other creditors in the case of liquidation. 17 Share Capital Statutory capital authorised, issued and fully paid comprises: In thousands of Russian Roubles except for number of shares Number of Ordinary outstanding shares Number of Preference outstanding shares Ordinary shares Preference shares Inflation effect on share capital Total At 1 January Treasury shares sold At 30 June At 1 January Treasury shares purchased ( ) ( ) (43 574) (8 052) - (51 626) At All ordinary shares carry equal rights and have a nominal value of RR Preference shares have a nominal value of RR 0.01 and are not redeemable, carry no voting rights but rank ahead of the ordinary shares in the event of liquidation of the Bank. Holders of preference shares are entitled to receive annual dividends of RR per share. Holders of preference shares are entitled to receive times the Central bank of Russia refinancing rate valid at 31 December each year of nominal value per share. Share premium represents the excess of contributions received over the nominal value of shares issued. If the dividends are not paid, preference shareholders carry the right to vote at annual and general meetings until the dividends are paid. 24