NOMOS BANK AnnuAl RepoRt And Accounts 2012

NOMOS BANK Annual Report and Accounts 2012

Content Section 1: NOMOS at a Glance...2 Section 2: President s Statement...6 Section 3: Chairman s Statement...12 Section 4: Operational review Corporate Banking...14 Retail Banking...17 Small Business Banking...21 Private Banking...24 Investment banking...26 HR report...28 Corporate Social Responsibility...30 Financial review...32 Risk Management...36 Section 5: Corporate Governance Supervisory Board Members...42 Management Board Members...45 Corporate Governance Report...48 Abbreviations...54 Consolidated Financial Statements for 2012 (IFRS)...56

NOMOS at a glance NOMOS is the sixth largest banking group in Russia by total assets and the second largest privately-owned Russian universal bank with total assets of RUB 899.9 billion and equity of RUB 90.4 billion as at 31 December 2012. NOMOS provides a full range of banking services to corporate, small business and retail clients. As at 31 December 2012, NOMOS served approximately 13,500 corporate customers, 85,800 small business clients and approximately 1.5 million retail customers, including private banking clients. NOMOS is listed on both the London Stock Exchange (GDRs) and the Moscow Exchange. 13,500 85,800 1,5 mln corporate clients small business clients retail clients 2 NOMOS Annual Report and Accounts 2012

Geographical presence: map of branches St Petersburg Tyumen (incl KHMAO) 14 31 125 Moscow & Region 38 7 82 Point of sales in other regions NOMOS has an extensive branch network of 297 outlets in the economically important regions of Russia, with the majority of its business concentrated in Moscow, St Petersburg, Tyumen (including the Khanty-Mansiysk autonomous district), and the Novosibirsk and Khabarovsk regions. Novosibirsk Khabarovsk As at December 31, 2012 NOMOS had 297 branches and other points of sale in economically important regions of Russia NOMOS Annual Report and Accounts 2012 3

NOMOS at a glance continued NOMOS key operating segments: Corporate: The historical backbone of NOMOS- BANK, focused on mid-sized companies. Loan book grew 31.5% in 2012. Retail: Second largest operating segment with a focus on mass/ affluent customers. Loan book grew 55.1% in 2012. Investment banking: Serves NOMOS s corporate and high net worth customers; operates in three core areas: interbank and repo market operations, foreign exchange and fixed income. Small business: A relatively new but rapidly expanding business. Loan book grew 30.1% in 2012. 2012 + growth 55.1% 31.5% 30.1% growth of the retail loan portfolio growth of the corporate loan portfolio of the small business loan portfolio 4 NOMOS Annual Report and Accounts 2012

The shareholders structure (changed in 2013) On August 9, 2012 PPF Group sold its 26.5% stake in NOMOS with 19.9% acquired by Otkritie FC, 3.5% by Alexander Mamut (co-owner of Polymetal) and 3.1% by Oleg Malis, who later increased their stakes by purchasing more shares of NOMOS from the market. On November 22, 2012 NomGDR Limited made an offer to acquire the Bank s GDRs from NOMOS GDR holders at a purchase price of US$14 per GDR. The offer expired on 5 February 2013 and as a result, 16.1% of total voting stock was purchased by NomGDR. Otkritie FC also made an offer to ICT, a major shareholder of NOMOS, for the purchase of its entire stake in NOMOS. This purchase of stock from ICT will be carried out in a number of steps during 2013 and 2014. 20.7% 48.8% ICT Group 45 052 259 48.8% Deutsche Bank Aktiengesellschaft* 19 144 833 20.7% Otkritie FC Securities Limited 18 392 052 19.9% Mr. Alexander Mamut 4 611 876 5.0% 19.9% 4.9% 5.0% 0.7% Mr. Oleg Malis 4 540 036 4.9% Free float local shares 681 314 0.7% Total 92 422 370 The shareholder structure presented as of April 18, 2013. For more details, please, refer to page 13 of the Annual Report. * deutsche Bank Aktiengesellschaft serves as the nominal holder of the Bank s GDRs. Information on credit ratings assigned to NOMOS Agency Fitch Moodys Rating BB Ba3 NOMOS Annual Report and Accounts 2012 5

President s statement 2012 a year of impressive performance in line with targets for the year ended 31 December 2012. The achieved ROE is in line with the guidance around 20%, but not at its ceiling due to an increased level of funding costs and higher market competition. Vadim Belyaev President of NOMOS-BANK In 2012, despite the turbulence in the markets which restricted liquidity, NOMOS performed across all its operations, whilst also completing the integration of BKM, growing to become the sixth largest banking group in Russia by total assets. Principally, core revenue generation has remained strong, as have the Group s key measures of profitability: ROE to shareholders was strong at 18.3% and net profit attributable to shareholders of RUB 12.6 billion was 25.7% higher than in 2011. Earnings per share for 2012 reached RUB 136.1 and earnings per GDR amounted to US$2.2 NOMOS achieved its goal of rapid and profitable growth in the three core markets in which it operates: corporate, small business and retail/private banking, managing to preserve loan portfolio quality and keep the net interest margin at a satisfactory level. Notably, loans to customers increased at above market rates during 2012 with the net loan portfolio expanding by nearly a third (31.9%), compared with the average market growth rate of 21.5%. Nonetheless, the Group has continued to ensure that its rapid rate of expansion remained balanced by prudent risk management policies and practices and during 2012, maintained a high-quality and well-diversified credit portfolio. Asset quality remained stable throughout the year, underpinned by the Group s cautious approach to provisioning. The cost of risk remained within the guidance of 1%. 6 NOMOS Annual Report and Accounts 2012

Successful results of all business segments: strong core revenue generation ROE for 2012 amounted to 18.3% Asset growth ahead of the market average Throughout 2012, the Group focused on improvement of the operating environment and automation of business processes which enabled NOMOS to accelerate the growth of its clients small business and retail credit portfolios significantly without any reduction in asset quality. Furthermore, given the increased competitiveness of the market in order to develop the Retail and Small Business divisions in the most efficient way, NOMOS introduced a new segmentfocused network management model aimed at maximizing financial results. This operating model focused on changes to improve organizational structure, centralization of the back office function, and the transformation of branches into operating offices. NOMOS expanded its distribution network, opening 31 new offices over the year. Balance sheet strength is a key fundamental for NOMOS and it has been over the last few years through the Group s stable and diversified approach to funding focused on both the wholesale and retail markets. Customer deposits are a vital contribution to this strategy and these accounted for 58.3% of total liabilities as at December 31, 2012. On the wholesale side, in April 2012 NOMOS-BANK successfully closed a subordinated Eurobond the USD 500 million 7 year offering represented the largest subordinated Eurobond issue by a Russian private bank and marked the longest noncallable subordinated debt transaction out of Russia. This long-term issuance was met with good demand and received over 120 orders with over 20% of demand coming from the US illustrating the Group s ability to successfully raise funding in the markets despite the challenging environment. The Central Bank of Russia approved the inclusion of the deal proceeds in the calculation of NOMOS-BANK s Tier 2 capital and the capital adequacy ratio of NOMOS amounted to 16.3% as at December 31, 2012. NOMOS Annual Report and Accounts 2012 7

President s statement continued Major Corporate events of 2012 The key corporate event for NOMOS in 2012 was the acquisition of 19.9% of NOMOS shares by Otkritie Financial Corporation ( Otkritie FC ) in August 2012 and the latter s announcement of the intention to acquire all shares held by ICT Group by the end of 2014 and integrate the Corporation s banking subsidiary (Otkritie Bank) into NOMOS, thereby creating one of Russia s leading financial institutions. On August 9, 2012, PPF Group sold its 26.5% stake in NOMOS with 19.9% acquired by Otkritie FC, 3.5% by Alexander Mamut (coowner of Polymetal) and 3.1% by Oleg Malis. Otkritie FC also made an offer to ICT, a major shareholder of NOMOS, for the purchase of its entire stake at the price of US$14 per GDR. This purchase of stock from ICT is subject to corporate approvals and will be carried out in a number of steps during 2013 and 2014. On November 22, 2012, the second stage of the transaction was announced with NomGDR Limited declaring its intention to acquire NOMOS GDR from NOMOS GDR holders at a purchase price of US$14 per GDR. NomGDR Limited is an orphan special purpose vehicle ( SPV ). Otkritie Advisory Services Limited, an indirect wholly-owned subsidiary of Otkritie FC, entered into a call option agreement to acquire, subject to receipt of necessary approvals, all issued and outstanding shares of NomGDR Limited. This voluntary offer was approved by the Supervisory Board based on the fairness opinion produced by Citigroup Global Markets Limited. The offer expired on February 5, 2013, and as a result, 16.1% of total voting stock was purchased by NomGDR. In line with changes in the shareholder structure changes were also made to the management structure as outlined below: Vadim Belyaev, was appointed the President and the Chairman of the Management Board of NOMOS-BANK in November 2012. Dmitry Romaev, was appointed Advisor to the President in December 2012, CEO of NOMOS-BANK in March 2013 and First Deputy President of NOMOS-BANK in April 2013. In this capacity Dmitry will manage the Bank s operations and coordinate the integration of NOMOS- BANK into Otkritie FC whilst continuing to grow NOMOS core business divisions of corporate and private banking. Dmitry has been a member of the Management Board since April 2013. Evgeny Dankevich, was appointed Advisor to the President of NOMOS-BANK in February 2013 and First Deputy President in April 2013. Evgeny is responsible for the coordination of Operational and IT processes and the development of the Retail and Small business segments. Evgeny has been also a member of the Management Board since April 2013. Elena Budnik, was appointed Senior Vice President of 8 NOMOS Annual Report and Accounts 2012

Otkritie Financial Corporation intends to acquire up to 100% of NOMOS shares by the end of 2014 19.9% August of NOMOS shares were purchased by Otkritie Financial Corporation in 2012 NOMOS-BANK in December 2012, leading the Bank s Retail Banking business. Elena has been a Deputy Chairman of the Management Board since April 2013. Alexey Karakhan, was appointed Senior Vice President of NOMOS-BANK in December 2012, in charge of Strategic Communications and HR. Alexey has been a member of the Supervisory Board since February 2013. Changes to the Supervisory Board composition were also proposed and approved at the EGM on 27 February 2013. The Board has been reduced to eight members from eleven. Two Directors, Dmitry Mizgulin (BKM) and Alexander Zelenov (VEB), were re-elected, and six new Directors were elected: Vadim Belyaev, Dmitry Romaev, Ruben Aganbegyan, Mikhail Belyaev, Alexey Karakhan, Dmitry Vasiliev. New members of the Audit Committee and Nomination and Remuneration Committee were elected. Dmitry Vasiliev was appointed the Chairman of the Audit Committee, which also includes Mikhail Belyaev, Ruben Aganbegyan and Alexander Zelenov. Ruben Aganbegyan was appointed the Chairman of Nomination and Remuneration Committee, which also includes Dmitry Vasiliev and Alexey Karakhan. These appointments are an important step in the integration strategy of NOMOS and Otkritie FC, ensuring a smooth and swift business consolidation. NOMOS s new management has industry experience that is both broad and deep and the team will be well-suited to meet the current challenges in the financial markets and to create a stronger and more competitive combined business with attractive growth potential. The management team has a proven track record of successfully integrating acquisitions, which is an important strategic advantage for the Group. Looking ahead, NOMOS and Otkritie FC will work together to achieve common strategic and operational objectives whilst ensuring a smooth transition and seamless integration of business processes. A dedicated team has been assigned to combine the two businesses without losing focus on day-to-day operations and an integration strategy has been developed with the help of international advisors. Upon the consolidation of NOMOS controlling stake by Otkritie FC and the integration of Otkritie Bank (Otkritie FC s commercial banking subsidiary) into NOMOS the combined entity will offer a wider unified range of products to a much larger customer base though an expanded office network. NOMOS will maintain the tight focus on catering to clients needs by continuing to provide innovative products that are tailored to their requirements and backed by top standard account management skills. The integration will bring distinct competitive advantages and will enable the combined corporation to realize its ambition to become a leading financial group in Russia. NOMOS Annual Report and Accounts 2012 9

President s statement continued Economic overview Continued increasing demand for more sophisticated banking products Despite the ongoing global financial crisis, Russia s economy performed comparatively well during 2012 growing faster than many EU countries. Inflation remained moderate at 6.6% (6.1% in 2011). Unemployment continued to decline throughout 2012 and reached 5.5% level by the end of 2012 (6.6% in 2011). Russia faced a slight economic slowdown in the second half of 2012, which is expected to continue in 2013 with GDP growth amounting to 3.4% in 2012 (4.3% in 2011) slipping to 3.0% forecast for 2013. That said, Russia still has one of the highest levels of forecast real GDP growth amongst the major countries in Europe. Consolidation in the Russian banking sector continued in 2012. The total number of licensed banks continued to fall from 978 in 2011 to 956 in 2012, while the share held by the top 30 banks in the total assets of the banking sector increased to 74.6% in 2012 from 74.5% in 2011. The possible increase of the capital requirements for Russian banks from the current RUB 90 million to RUB 1 billion by FY15 will accelerate the further consolidation of the banking sector. During 2012 the global economy continued to slow irrevocably on the back of a weak recovery in the United States and the deceleration of growth rates in China. This was exacerbated by a recession in Japan and Europe, the latter driven by the ongoing European sovereign debt issues. The continuing crisis in the Eurozone created volatility in equity markets in many parts of the world. As a result, the Russian stock market experienced steep declines during 2012 in common with other BRIC countries. However the macroeconomic picture in Russia, even considering this slowdown, remains stable. The country runs a current account surplus equivalent to 4.5% of gross domestic product, government debt is low relative to GDP with approximately 3% share and reserves are high, reaching over USD 500 billion. In addition, the price of oil among the most important indicators for the strength of the Russian economy was relatively stable throughout 2012 averaging at $111 per barrel. Given this backdrop, we expect the economy to continue to slow throughout 2013 while the future prospects in the long term remain encouraging. Overview of the banking sector in Russia The Russian banking sector showed considerable growth in 2012: the overall net loan book increased by 21.5% driven primarily by the retail segment which increased its portfolio by 39.5%. Russian banks posted a record 10 NOMOS Annual Report and Accounts 2012

amount of net income, which reached Rub 1 trillion (USD 33 billion) in 2012, according to RAS standards and CBR information. At 2012 the Russian banking sector retained an 18.2% ROAE (17.6% in 2011). Total assets held by the banking sector increased by 18.9% (23.1% in 2011). This growth in assets in 2012 was limited by the restricted access to liquidity in the market and increasing funding costs. The level of State support was significant during 2012 and reached RUB 3 trillion, almost half of which came from repo funds. The share of CBR funding of total liabilities of the banking sector was more than 6% as at 2012 (vs.12% in FY09 and 3% in 2011). The sector s Loan to deposit ratio amounted to 116% in 2012 rising slightly from 115% in 2011. During 2012, the Russian banking sector overall remained adequately capitalized, although capital ratios continued to deteriorate. However, the asset quality remained stable with sector Cost of Risk at 0.5% and the Non- Performing Loan ratio at 4.5% (4.8% in 2011). The main challenges faced by Russian banks in 2013 will be those created by the difficult economic environment and stricter CBR requirements on local capital adequacy rules and the tightening of rules for unsecured retail lending, which will restrict asset growth and add to the already fragile capital position of many players. On the other hand further improvements in financial market infrastructure relating to the creation of the central depository and euro-clear ability, as well as lower inflation will attract more investors to Russia. All in all, Russia s banking market still offers great potential for growth and consolidation. With a loan to GDP ratio of 44% compared with more than 100% in the Eurozone local banks have ample scope to expand in the years ahead to serve a market that remains significantly underpenetrated. Strategic objectives Over the next two years, NOMOS is to be integrated into Otkritie Financial Corporation (Otkritie FC) to create the leading private financial corporation in Russia. Otkritie Bank will be consolidated with NOMOS which will strengthen NOMOS s position as one of the top five banking groups in the country. The new, combined banking group will be a universal bank with a balanced portfolio of corporate, retail and small business clients. Among the key strategic objectives of NOMOS are to: 1. Facilitate integration into Otkritie FC and to efficiently consolidate Otkritie Bank. 2. Be present in the 45 economically developed regions of Russia, with a special focus on the top ten regions where Otkritie FC would build a significant market share of over 5% in the relevant segments. 3. Create long-term, multi-product relationships with customers in each of the chosen market segments, based on fair pricing, outstanding service and sustained innovation. 4. Maximise cross-selling opportunities between NOMOS and other Otkritie FC entities, including capital markets, insurance and asset management. 5. Enhance operational efficiency by developing a cost efficient operating platform, simplifying and standardising business processes and upgrading IT infrastructure. 6. Continue improving risk management systems. Vadim Belyaev, President of NOMOS-BANK NOMOS Annual Report and Accounts 2012 11

Chairman s Statement Report of the Supervisory Board Performance During 2012 in successfully pursuing its strategy of seeking profitable growth, NOMOS achieved fasterthan-market expansion of its assets and a stable core operating performance. These positive results for 2012 demonstrate the effective management and timely decision-making that guide NOMOS, alongside its enhanced system of corporate governance. As a result, by the end of 2012 NOMOS realized enhanced financial stability and the potential to achieve further profitable growth at above-market rates. Key aspects of the Committee s work in 2012 NOMOS-BANK takes its corporate governance commitments very seriously and aims to deliver a robust set of governance procedures that ensure high-quality and timely dialogue between the Supervisory Board and the Management, effective reporting on operational matters, a strong focus on shareholder value and enhanced risk management. The Bank s corporate governance system is functioning in compliance with the requirements of the Russian and UK legislation. During 2012 three committees were established and successfully functioned under the Supervisory Board: the Audit Committee, Nomination and Remuneration Committee and Risk Committee. In 2012 the Audit Committee rendered considerable support to the Supervisory Board in control and audit of NOMOS s financial statements, provided the relevant recommendations for approval of the quarterly financial statements prepared according to IFRS and annual financial statements prepared according to IFRS and RAS, as well as for assessment of the Bank s auditor activities; in its activities the Audit Committee paid great attention to integration of the efficient internal control system. During 2012 the Audit Committee was headed by an independent director and the majority of the members of the Audit Committee were independent directors. The Nomination and Remuneration Committee provides its recommendations for nomination of the members of the Supervisory Board and remuneration of the senior executives of NOMOS- BANK. In 2012 the Nomination and Remuneration Committee recommended the candidates for the Bank s Supervisory Board to be elected at the Annual General Shareholders Meeting, provided recommendations with respect to remuneration of the members of the Supervisory Board and the Review Commission and approved the Policy on Remuneration of the Bank s Key Employees. In 2012 the Risk Committee of the Supervisory Board performed detailed monitoring of the position of NOMOS-BANK on risks and continued to implement a number of strategic initiatives, including those on determination of the risk appetite and establishment of the risk register. The Supervisory Board, based on the Committees work, ensures efficient control over NOMOS- BANK s financial and operational indicators. During this prolonged period of turbulence in the financial 12 NOMOS Annual Report and Accounts 2012

role of the supervisory board Our robust governance procedures ensure high-quality and timely dialogue between the Supervisory Board and the Management Board, via the committees that have been instituted to oversee audit, nominations, remuneration and risk management. risk committee management board corporate governance supervisory board chairman audit committee nomination and remuneration committee markets the market position of NOMOS-BANK was preserved and stability of its business did not suffer, largely due to the intrinsic focus on risk control and risk management. The Main Shareholders In 2012 the shareholding structure of NOMOS changed. In August 2012 PPF Group sold its 19.9% of the Group s voting shares to Otkritie FC Securities Limited, controlled by Otkritie FC, and 6.6% to the companies owned by Alexander Mamut and Oleg Malis. In August 2012 Otkritie FC announced the intention to acquire all shares held by ICT Group by the end of 2014. Founded in 1995, Otkritie Financial Corporation is one of Russia s largest financial groups. Through its five core businesses investment banking, brokerage, commercial banking, asset management, and insurance Otkritie FC offers its clients more than eighty financial products and services. The major shareholders of Otkritie FC are Boris Mints and Vadim Belyaev, the founder and the Chairman of the Board of Directors of Otkritie FC. Among the shareholders of Otkritie FC and Otkritie Bank are International Financial Corporation and the Deposit Insurance Agency. In November 2012 NomGDR Limited, an SPV established by Otkritie FC, announced its intention to acquire the global depository receipts (GDRs) of NOMOS-BANK issued according to Rule 144А and Regulation S. The voluntary offer was approved by the Supervisory Board of NOMOS-BANK based on, among other things, the fairness opinion produced by Citigroup Global Markets Limited that the financial conditions offered by NomGDR Limited are beneficial for the holders of GDRs. The Offer Memorandum is available on the following website: (www.nomosoffer.com). The voluntary offer was made to investors on 22 November, 2012. The offer period ended on 5 February, 2013. As a result, 16.1% of total voting stock was bought by NomGDR. Dividend policy To date, NOMOS-BANK has not paid a dividend to shareholders, choosing instead to reinvest all profits into its equity capital. This corresponds to the Bank s strategy aimed at maximizing the profits and ROE. In March 2011, a General Shareholders Meeting approved NOMOS-BANK s dividend policy. The Supervisory Board is responsible for making any proposals on dividend payments. Ruben Aganbegyan, Chairman of Supervisory Board of NOMOS-BANK NOMOS Annual Report and Accounts 2012 13

Operational review Operational review Corporate banking Segment overview for 2012 In 2012 the Corporate Business team once again proved its professionalism and efficiency by achieving its two main strategic goals: to outperform market growth and to report stable financial results. The corporate loan book increased 31.5% in 2012. The division s volume of corporate deposits increased 25.6%. Profit before tax for the corporate banking segment was RUB 11.2 billion which is in line with last year s result of RUB 11.3 billion. These achievements are all the more commendable when taking into account the tough competition and the liquidity squeeze on the market due to the outflow of funds from the banking system. Some key factors of the success of NOMOS s corporate banking business are: Its modern product line which continues to satisfy customer requirements. The constant monitoring of the client base. Its ongoing analysis of the market environment and opportunities offered by competitors. Continued improvement in business processes. Control over decision-making. The key success factor to this performance is the effective cooperation of all departments within the Corporate Banking segment, including cooperation between client managers and product managers, the clearly defined hierarchy from head office to branches, and cooperation with other business units of the Group. The regional Corporate Business demonstrated outstanding results in 2012. In this segment, the loan book growth rate of 47.3% for the Group excluding BKM was even higher than the average level for the Group. The regional share of guarantees granted increased to 36% of the Group excluding BKM in the total guarantees portfolio. The Corporate Business segment s strategic objective is to diversify the business and to increase its share of smallersized companies. In 2012 the volume of loans provided to companies with revenues of up to RUB 5 billion increased 29% for the Group excluding BKM. The share of this customer cluster in the performance of the Group excluding BKM Corporate segment gradually increased and amounted to 22% of the loan book, 37% of the guarantees portfolio and 29% of the customer deposits as at 2012. Mid-cap companies amounted to 66% of the total number of the corporate clients of the Group excluding BKM. In 2012, special attention was paid to business process optimization and automation, which helped to speed up the process of loan consideration and documentation. An Electronic tranche disbursement system was implemented. NOMOS clients are now able to send a disbursement application via the Remote Banking System without going to the bank and receive funds under the loan agreement on the same day (due to optimization of the document flow and client servicing time in the bank. In October 2012, the Credit conveyor system was implemented with the main target of streamlining and speeding up the processing of corporate credit applications, as well as optimizing the corporate client lending procedure. The introduction of the Credit conveyor 14 NOMOS Annual Report and Accounts 2012

system resulted in the improvement of service quality provided to corporate clients. Achievemets in 2012 In 2012 the total number of corporate clients increased 19.5% to 13,500. Client numbers: 2010 8,875 2011 11,300 2012 13,500 NOMOS continued focusing on increasing share of wallet and its efficient cross-selling strategy enabled NOMOS to increase the average number of products per customer from 2.8 in 2010 to 3.1 as at the end of 2012. This was the direct result of the Group s success in developing new loan, deposit and trade finance products, which drove the large increase in the size of the corporate loan portfolio and deposit base, accompanied by a material increase in interest and fee income. Total net loans and advances to customers increased by 31.5% to RUB 422.0 billion in 2012, with growth predominantly coming from new products and regional expansion outside Moscow. In addition to standard banking products, the Group successfully continued to develop its factoring and guarantees business. As of the end of 2012 the factoring portfolio of the Group was RUB 7.4 billion, 11.8% higher than at the end of 2011. The fee and commission income from factoring operations increased 3.7 times to RUB 669 million for 2012 (RUB 183 million in 2011). The total volume of corporate guarantees granted by NOMOS in 2012 increased 42.4% to RUB 205 billion while the number of contracts increased from 6,700 to 9,500, both due to new clients and to an increased share of wallet among existing clients. In 2012, NOMOS-BANK was recognized as the best Russian bank in the precious metals market for the sixth time. The precious metals department of NOMOS- BANK made 8,667 transactions with total turnover about USD 24.7 billion in 2012. NOMOS-BANK is one of the leaders on the Russian gold market with a gold purchase volume of 72.3 tons in 2012 with a total value of about USD 3.8 billion. The Bank is also engaged in the purchase and sale of silver and coins. NOMOS-BANK has been an LBMA member since 2011, and it was the first bank in Russia to introduce a precious metals internet trading service. During 2012 NOMOS-BANK focused on the development of cash and settlement services in order to increase the volume of settlement transactions and fee income. Complex settlement products for cash management purposes were introduced, and more flexible service conditions were implemented such as: account statements and opening balance provided to clients by 9am upon request; extended working hours; unified tariff book availability; and foreign exchange services for clients using NOMOS- BANK s internal rates and direct communication with a NOMOS- BANK dealer. Documentary transaction processing was improved by the implementation of unified document forms, part of which is automatically filled in from the Bank s data base. As a result 2012 settlement transaction income was RUB 615.5 million which is 16.4% higher than in 2011. Total customer deposits increased by 25.6% to RUB 267.6 billion as at 31 December 2012. NOMOS- BANK updated its deposit product range from just two standard products at the beginning of 2010 to 31 products by the end of 2012, allowing corporate clients to manage their liquidity more effectively. NOMOS Annual Report and Accounts 2012 15

Operational review continued Industrial Distribution The corporate loan book was welldiversified across industry sectors. The corporate banking business focused on seven key growth sectors during 2012: manufacturing, trade, construction and operations with real estate, leasing, mining, services, transport and communications. Operational highlights of 2012 The table below sets out selected financial information for the Corporate Banking segment for the years ended 31 December 2012 and 2011. Corporate business In millions of Roubles Selected financial position data: The successful growth of NOMOS s loan portfolio resulted in an increase in revenues and net interest income, while success in capturing crossselling opportunities was the main factor in the increase in net fee and commission income, which rose 25.3% to RUB 3.3 billion. The majority of net fee and commission income (RUB 2.1 billion) was earned on documentary operations. The division s loan book quality remained stable during 2012 with the share of non-performing loans of 1.8%. For more detail, please refer to the Risk Management Section on page 38 for the Loan portfolio quality and COR analysis. Audited 2011 Audited 2012 Change Y12-Y11 Total segment assets 342 188 434 888 27,1% of which, net loans to clients 320 870 422 035 31,5% Total segment liabilities 231 360 282 279 22,0% of which, client accounts 213 096 267 557 25,6% Selected income statement data: Net interest income* 15 482 16 235 4,9% Net Fee and Commission income 2 612 3 273 25,3% Total operating income before impairment losses and provision 15 702 16 819 7,1% Operating expenses 4 099 5 432 32,5% Profit before tax 11 283 11 198-0,8% Strategic Goals for 2013 NOMOS s strategy for the development of the Corporate Business segment is to continue the successful development of all business areas with the main focus on increasing efficiency. On this basis the key goals of the corporate business are to increase market share, and to ensure profit growth by managing revenues and expenses. The main goals for 2013 are: To enhance relationships with corporate clients and further increase the Group s share of wallet. To expand the client base with an emphasis on maintaining well-diversified exposure across industry sectors. To increase fee revenue and settlement transaction volumes. To expand in the economically significant regions of Russia outside Moscow. * Calculated as net interest income before gain on remeasurement of cash flows and provision for impairment losses on interest bearing assets 16 NOMOS Annual Report and Accounts 2012

Retail Banking Segment overview for 2012 The Retail Banking division for the mass/affluent remains one of the priorities for the Group and a very important growth area for NOMOS. Today the business division offers everything from credit products (including term loans, credit cards and mortgages) to current accounts and term deposits, debit cards, settlement and cash services, as well as private banking services. NOMOS retail customers are serviced through a large and growing banking network comprising 297 branches and outlets, 1,825 ATMs, call centres, telesales operations and an innovative internet banking offering. In 2012 the retail segment focused on the loan portfolio growth, control over profitability and improvement of the business process automation. NOMOS s corporate and small business relationships are an important source of new customers for the retail business and we seek to leverage these relationships. The Group is one of the major players of the retail banking market. According to figures from the Central Bank of Russia and based on data prepared in accordance with Russian Accounting Standards, at the end of 2012 NOMOS ranked 18th by volume of retail loan portfolio and 12th by volume of customer deposits with a market share of 1.1% and 1.1% respectively. The retail banking market in Russia continues to experience buoyant demand for credit and financial services and as a consequence, total loans and advances to retail customers of NOMOS grew 55.1% to RUB 90.1 billion during 2012, which is notably higher than the average market growth rate of 39.5%. The Group s portfolio of retail customers deposits increased by 20.4% to RUB 157.3 billion as at 31 December 2012, in line with average market growth. The significant loan portfolio growth resulted in the strong profitability of the Retail Banking segment which reported net profit of RUB 2.8 billion, almost twice higher than 2011 result. Among the key income drivers were steady growth in net interest income, which increased by 48.5% to RUB 7.5 billion, and a substantial increase of net fee and commission income by 44.1% to RUB 3.2 billion. Such good results were achieved owing to: Successful direct and crossselling campaigns. Development of the product line. Improved efficiency of the branch network. High quality of the customer service, including successful work of the call center and modern technologies (internet banking). Attracting Customers and building a Regional Distribution Network By the end of 2012 the number of the retail customers of the Group amounted to approximately 1.5 million throughout Russia. In 2012, there were both qualitative and quantitative changes in the structure of the Bank s regional network, namely that nine branches were assigned operational office status, which enabled increasing management efficiency, the optimization of certain functions in the area of sales, government relations and administrative work, which helped to reduce administrative expenses. NOMOS Annual Report and Accounts 2012 17

Operational review continued 5.1% 48.7% 4.2% 41.7% Mortgage loan Consumer loans Car loans 2011 2012 46.2% 54.1% Improving Product Line and Sales Channels The main loan products of the Group include mortgage and consumer loans, as well as car loans. At the end of 2012, 41.7% of the total amount of loans to individuals were mortgages and 54.1% were cash loans. In 2012 particular attention was paid to the improvement of the business process automation. The introduction of the Credit Conveyor system made it possible to ensure a standardized approach to retail credit risk and was implemented across all the retail loan programs. On the back of the Credit Conveyor system, there were also fraud detection systems introduced, such as the Hunter system which detects credit applications through suspicious information that could indicate fraud. This system allows the Bank to significantly reduce the number of fraudulent credit applications, accelerate the process of credit approval for diligent clients, and reduce the number of errors during the identification of potentially unreliable borrowers. 2012 was also marked by the dynamic development of NOMOS-BANK s remote services. Customers were offered such services as SMS-Bank, a mobile banking service that comprises multi-platform applications, including those for the ios (iphone, ipad) and Android-based devices. The functionality of internet banking was also expanded: customers now have the opportunity to open deposit accounts and perform operations with current accounts online without having to visit their branch. The applications interface was improved which resulted in an increase of the number of customers who use internet banking. In addition, NOMOS-BANK launched a co-branded offer in cooperation with Transaero, the major air carrier, which consists of a service under Verified by Visa and Маstercard Secure Code programs. Achievements in 2012 The successful results of the Retail Banking business in 2012 achieved the Group s main objectives to increase the consumer and mortgage loan portfolio at higher than average market rates. The loan portfolio growth was accompanied by a conservative risk approach. PRIVATE BANKING NOMOS is making steady progress towards its goal to offer the best 18 NOMOS Annual Report and Accounts 2012