Consolidated Condensed Interim Financial Statements and Report on Review

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2 Consolidated Condensed Interim Financial Statements and Report on Review CONTENTS Report on Review Consolidated Condensed Interim Financial Statements Consolidated Condensed Interim Statement of Financial Position... 1 Consolidated Condensed Interim Income Statement... 2 Consolidated Condensed Interim Statement of Comprehensive Income... 3 Consolidated Condensed Interim Statement of Changes in Equity... 4 Consolidated Condensed Interim Statement of Cash Flows... 5 Selected Notes to the Consolidated Condensed Interim Financial Statements 1 Introduction Operating Environment of the Group Basis for preparation Accounting Policies, Critical Accounting Estimates and Judgments, Adoption of New or Revised Standards and Interpretations, and Changes in Presentation Loans and Advances to Customers Investment Securities Available-for-sale Other Assets Due to Banks Due to Individuals and Corporate Customers Other Liabilities Subordinated Debt Interest Income and Expense Fee and Commission Income and Expense Net Gains Arising from Trading in Foreign Currencies, Operations with Foreign Currency Derivatives and Foreign Exchange Translation Gains Operating Expenses Segment Analysis Financial Risk Management Credit Related Commitments Fair Value Measurement Related Party Transactions Capital Adequacy Ratio Subsequent Events... 48

3 Ernst & Young Audit Services LLC Khreschatyk Street, 19A Kyiv, 01001, Ukraine Tel: +380 (44) Fax: +380 (44) Ukrainian Chamber of Auditors Certificate: ТОВ «Ернст енд Янг Аудиторськi послуги» Украïна, 01001, Киïв вул. Хрещатик, 19А Тел.: +380 (44) Факс: +380 (44) Свiдоцтво Аудиторськоï Палати Украïни: 3516 REPORTON REVIEW OF CONDENSED INTERIMCONSOLIDATED FINANCIAL STATEMENTS To the Shareholder and Management Board of SUBSIDIARY BANK SBERBANK OF RUSSIA PUBLIC JOINT-STOCK COMPANY Introduction We have reviewed the condensed interim consolidated financial statements of SUBSIDIARY BANK SBERBANK OF RUSSIA PUBLIC JOINT-STOCK COMPANY and its subsidiary (the Group ), comprising of the condensed interim consolidated statement of financial position as at and the related condensed interim consolidated statements of income, comprehensive income, of changes in equity and of cash flows for the three and six months then ended, and selected explanatory notes. Management of the Group is responsible for the preparation and presentation of these condensed interim consolidated financial statements in accordance with International Financial Reporting Standard IAS 34, Interim Financial Reporting ( IAS 34 ). Our responsibility is to express a conclusion on these condensed interim consolidated financial statements based on our review. Scope of Review We conducted our review in accordance with International Standard on Review Engagements 2410, Review of Interim Financial Information Performed by the Independent Auditor of the Entity. A review of condensed interim consolidated financial statements consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Conclusion Based on our review, nothing has come to our attention that causes us to believe that the accompanying condensed interim consolidated financial statements are not prepared, in all material respects, in accordance with IAS 34. Emphasis of matter We draw attention to Note 2 to the condensed interim consolidated financial statements, which describes the political unrest that started in November 2013 and escalated in 2014 in Ukraine. The events referred to in Note 2 could adversely affect the Group s results and financial position in a manner not currently determinable. Our opinion is not qualified in respect of this matter. 26 August 2014 A member firm of Ernst & Young Global Limited

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6 Consolidated Condensed Interim Statement of Comprehensive Income Six months ended 30 June (unaudited) Three months ended 30 June (unaudited) Note Profit / (loss) for the reporting period recognised in the consolidated income statement (21 568) Components of other comprehensive income: Other comprehensive income to be reclassified to consolidated income statement in subsequent periods: Investment securities available-for-sale: - Net gains on revaluation of investment securities available-for-sale Accumulated losses transferred to Income statement upon disposal of securities available-for-sale Revaluation surplus on office premises Deferred income tax relating to components of other comprehensive income: - Investment securities available-for-sale (1 797) (1 908) (2 573) (2 221) - Office premises Net other comprehensive income to be reclassified to consolidated income statement in subsequent periods Total components of other comprehensive income for the reporting period, net of tax Total comprehensive income for the reporting period Attributable to: - shareholder of the Bank non-controlling interest The notes are an integral part of these consolidated condensed interim financial statements. 3

7 Consolidated Condensed Interim Statement of Changes in Equity Attributable to the shareholder of the Bank Share capital Share premium Revaluation reserve for office premises Fair value reserve for investment securities available-forsale (Accumulated deficit) / Retained earnings Total Non-controlling interest Total equity Balance as at 1 January ( ) Changes in equity for six months ended 30 June 2013 (unaudited) Total comprehensive income recognised for the six months ended 30 June Amortisation of revaluation reserve for office premises - - (1 461) Balance as at 30 June 2013 (unaudited) Balance as at 1 January (12 675) Changes in equity for six months ended 30 June 2014 (unaudited) Disposal of subsidiary (91) Total comprehensive income recognised for the six months ended Amortisation of revaluation reserve for office premises - - (1 238) Balance as at (unaudited) The notes are an integral part of these consolidated condensed interim financial statements. 4

8 Consolidated Condensed Interim Statement of Cash Flows Six months ended 30 June (unaudited) Cash flows from operating activities Interest received Interest paid ( ) ( ) Expenses directly attributable to deposit insurance paid (69 083) (34 093) Fees and commissions received Fees and commissions paid (90 032) (45 274) Net gains from trading securities Net gains from trading in foreign currencies and from operations with foreign currency derivatives Other operating income received Operating expenses paid ( ) ( ) Income tax paid (42 812) (54 403) Cash flows from operating activities before changes in operating assets and liabilities Changes in operating assets and liabilities Net decrease/(increase) in mandatory cash balances with the National Bank of Ukraine ( ) Net increase in trading securities - ( ) Net decrease in due from banks Net decrease / (increase) in loans and advances to customers ( ) Net decrease in securities pledged under repurchase agreements Net decrease/(increase) in other assets (46 505) Net decrease in loans from the National Bank of Ukraine - (3 509) Net increase in due to banks Net (decrease)/increase in due to individuals ( ) Net (decrease)/increase in due to corporate customers ( ) Net decrease in other liabilities (27 678) (1 799) Net cash (used in) / from operating activities ( ) Cash flows from investing activities Purchase of investment securities available-for-sale ( ) ( ) Proceeds from disposal and redemption of investment securities available-for-sale Purchase of premises, equipment and intangible assets ( ) ( ) Proceeds from disposal of premises, equipment and intangible assets Proceeds from disposal of subsidiaries Net cash from / (used in) investing activities ( ) Cash flows from financing activities Redemption of debt securities - ( ) Repayment of interest on debt securities - (21 452) Other borrowed funds received Redemption of other borrowed funds ( ) ( ) Repayment of interest on other borrowed funds (16 121) (16 533) Repayment of interest on subordinated debt (39 030) (16 012) Net cash used in financing activities (61 768) ( ) Effect of exchange rate changes on cash and cash equivalents (9 528) Net increase /(decrease) in cash and cash equivalents ( ) Cash and cash equivalents at the beginning of the reporting period Cash and cash equivalents as at the end of the reporting period The notes are an integral part of these consoliated condensed financial statements. 5

9 1 Introduction These consolidated condensed interim financial statements of SUBSIDIARY BANK SBERBANK OF RUSSIA PUBLIC JOINT-STOCK COMPANY ( the Bank ) and its subsidiary (together referred to as the Group ) have been prepared in accordance with IAS 34 Interim Financial Reporting for the six months ended. Organisation and operations. The Bank was established as CLOSED JOINT-STOCK COMPANY COMMERCIAL BANK NRB-UKRAINE according to Ukrainian legislation and was registered by the National Bank of Ukraine (the NBU ) on 15 June In May 2008, the Bank was acquired by the Open Joint-Stock Company Sberbank of the Russia and changed its name to Closed Joint-Stock Company Subsidiary Bank Sberbank of Russia. In August 2009, the Bank was reorganised to a public joint-stock company. The Bank specialises in providing banking services to companies operating in various industries and individuals. These services include taking deposits and granting loans and advances, investing in securities, transferring payments in Ukraine and abroad, exchanging of currencies and other services. The Bank is 100% owned by Open Joint Stock Commercial Bank Sberbank of Russia (the Shareholder ). On 17 April 2014 Management of the Board of the Bank decided to cease participation in its subsidiary LLC Kiparis- 2. The Group s share in the subsidiary was sold on 24 April As at, the Group had 190 branches throughout Ukraine (31 December 2013: 210). The actual number of the Group s employees as at was (31 December 2013: 3 136). Registered address and place of business. The Bank s head office is located at 46 Volodymyrska Str., Kyiv, Ukraine. Presentation currency. These consolidated condensed interim financial statements are presented in thousands of Ukrainian hryvnia ( UAH thousands ) unless otherwise stated. It is also the functional currency of the Group. UAH exchange rates established by the NBU and used in the preparation of the consolidated condensed interim financial statements are as follows: 31 December 2013 US Dollar Euro Russian Ruble

10 2 Operating Environment of the Group The Ukrainian economy while deemed to be of market status continues to display certain characteristics consistent with that of an economy in transition. These characteristics include, but are not limited to, low levels of liquidity in the capital markets and the existence of currency controls which cause the national currency to be illiquid outside of Ukraine. The stability of the Ukrainian economy is significantly impacted by the government s policies and actions with regard to administrative, fiscal, legal, and economic reforms. As a result, operations in Ukraine involve risks that are not typical for developed markets. The Ukrainian economy is vulnerable to market downturns and economic slowdowns elsewhere in the world. In November 2013, the former Ukrainian government declined to sign the association agreement with the European Union. This event became a starting point in the escalation of the political situation in the country, which resulted in the dismissal of the president and the government by the parliament, secession of the Autonomous Republic of Crimea from Ukraine and armed confrontations in the Eastern regions of the country. The transitional Ukrainian government has initiated a set of anti-crisis measures, aimed at the stabilisation of the political situation, halting of the decline in domestic production, reducing the state budget deficit and deterioration of other macroeconomic indicators. In March 2014, the transitional Government signed a political association with the European Union, followed by the International Monetary Fund making available to Ukraine USD 3.2 billion loan from billion two-year Stand-By Arrangement, and is further negotiating additional financial aid from other international financial sources. From 1 January 2014 to 19 August 2014, the Ukrainian Hryvnia has devaluated against major foreign currencies by approximately 62%, and the National Bank of Ukraine imposed certain restrictions on purchase of foreign currencies at the inter-bank market. The international rating agencies have downgraded sovereign debt ratings for Ukraine. The combination of the above events has resulted in the deterioration of liquidity, much tighter credit conditions where credit is available, inability of certain borrowers to service their debt and deposit outflow from the Ukrainian banking system. The economic effects of these factors on the results of the Group s operations, to the extent they are caused by the past events and are determinable and measurable, have been taken into account in preparing these consolidated interim condensed financial statements. Management is monitoring the current economic situation and is taking actions where appropriate. Ukraine claimed unlawful the actions of the Crimean authorities, which resulted in the secession of the Crimea followed by its accession to the Russian Federation and, during April-May 2014, introduced a number of legislative restrictions, effectively prohibiting the Ukrainian banks from conducting their operations in Crimea. As at, the carrying value of the Group s assets located in or otherwise associated with the Crimea is UAH thousand (31 December 2013: UAH thousand), out of which UAH thousand secured by irrevocable guaranty (please refer to Note 5) and liabilities UAH thousand (31 December 2013: UAH thousand). Further, certain parts of Donetsk and Lugansk regions, including Donetsk city and Lugansk city themselves, are currently are in the zone of wide scale armed confrontations between Ukrainian military forces and separatists. This fact caused majority of the entities in the regions to suspend their production and commercial activities for uncertain time. Also, the war actions may affect physical conditions of the regions entities tangible assets and inventories. The Group considered the impact of loss event occurred to estimate allowance for impairment of loans to customers as of. Further negative developments, including the political unrest, could adversely affect the Group s results and financial position, including further deterioration in the quality of the loan portfolio, with increases in nonperforming loans and decreases in loan collateral values and losses on corporate bonds, in a manner not currently determinable. 7

11 3 Basis for preparation These consolidated condensed interim financial statements have been prepared in accordance with 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 2013 prepared in accordance with IFRS. These consolidated condensed interim financial statements do not contain all the explanatory notes as required for a full set of financial statements. 4 Accounting Policies, Critical Accounting Estimates and Judgments, Adoption of New or Revised Standards and Interpretations, and Changes in Presentation The accounting policies adopted in the preparation of the interim consolidated condensed financial statements are consistent with those followed in the preparation of the Group s annual consolidated financial statements for the year ended 31 December 2013, except for the adoption of new standards and interpretations as of 1 January 2014, noted below: IFRS 9 Financial Instruments. IFRS 9, as issued, reflects two of the three phases of the IASB project on replacement of IAS 39 and applies to classification and measurement of financial assets and financial liabilities and hedge accounting. The standard has no mandatory effective date and may be applied voluntarily. The adoption of IFRS 9 will have an effect on the classification and measurement of the Group s financial assets, but will not have an impact on classification and measurements of the Group s financial liabilities. The Group will quantify the effect when the remaining part of the standard containing guidance on impairment of financial assets is issued. Investment Entities Amendments to IFRS 10 Consolidated Financial Statements, IFRS 12 Disclosure of Interests in Other Entities and IAS 27 Separate Financial Statements. These amendments provide an exception to the consolidation requirement for entities that meet the definition of an investment entity under IFRS 10. The exception to consolidation requires investment entities to account for subsidiaries at fair value through profit or loss. These amendments become effective for annual periods beginning on or after 1 January 2014 and did not have any impact on the Group s consolidated condensed interim financial statements. Offsetting Financial Assets and Financial liabilities Amendments to IAS 32 Financial Instruments: Presentation (issued in December 2011). These amendments clarify the meaning of currently has a legally enforceable right to set-off and also clarify the application of the IAS 32 offsetting criteria to settlement systems (such as central clearing house systems) which apply gross settlement mechanisms that are not simultaneous. These amendments become effective for annual periods beginning on or after 1 January 2014 and did not have any impact on the Group s consolidated condensed interim financial statements. Novation of Derivatives and Continuation of Hedge Accounting Amendments to IAS 39 Financial Instrument: Recognition and Measurement. These amendments provide relief from discontinuing hedge accounting when novation of a derivative designated as a hedging instrument meets certain criteria. These amendments are effective for annual periods beginning on or after 1 January These amendments did not have any impact on the Group s consolidated condensed interim financial statements as the Group does not apply hedge accounting according to IFRS. IFRIC 21 Levies (IFRIC 21). IFRIC 21 clarifies that an entity recognises a liability for a levy when the activity that triggers payment, as identified by the relevant legislation, occurs. For a levy that is triggered upon reaching a minimum threshold, the interpretation clarifies that no liability should be anticipated before the specified minimum threshold is reached. IFRIC 21 becomes effective for annual periods beginning on or after 1 January This interpretation did not has any impact on the Group s consolidated condensed interim financial statements 8

12 4 Accounting Policies, Critical Accounting Estimates and Judgements, Adoption of New or Revised Standards and Interpretations, and Changes in Presentation (Continued) Recoverable Amount Disclosures for Non-Financial Assets Amendments to IAS 36. These amendments remove the unintended consequences of IFRS 13 Fair Value Measurement on the disclosures required under IAS 36 Impairment of Assets. In addition, these amendments require disclosure of the recoverable amounts for the assets or cash-generating units (CGUs) for which an impairment loss has been recognised or reversed during the period. These amendments had no impact on the Group s financial position or performance. Management s estimates and judgements. Judgements and critical estimates made by the Management in the process of applying the accounting policies were consistent with those disclosed in the annual consolidated financial statements for the year ended 31 December The Management has not identified new areas of judgment or critical estimates. Income tax expense is recognised in these consolidated condensed interim financial statements based on the Management s best estimates of the effective annual income tax rate expected for the full financial year. Costs that occur unevenly during the financial year are anticipated or deferred in the interim report only if it would also be appropriate to anticipate or defer such costs at the end of the financial year. Change in accounting estimates. During six months 2014 the Group has changed its accounting estimates used in estimation of the allowance for impairment of loans and advances to customers, specifically, due to extremely difficult situation in the Donetsk and Lugansk regions Group increased discount period for collateral in those regions from 1 to 4 years due to low liquidity of this property. Have not the Group implemented stated changes the loan loss allowance would have amounted to UAH thousand (currently reported UAH thousand). Changes in presentation. The Group has changed presentation of interest income on reverse REPO deals in the condensed interim consolidated income statement for the six months ended. The presentation of the comparative figures has been adjusted to be consistent with the new presentation. The effect of changes on the condensed interim consolidated income statement and related disclosures for the six months ended 30 June 2013 is as follows: Interest income As previously reported Change in presentation As changed Interest income (13 553) Net gains arising from trading securities (15 569) (2 201) Net losses arising from investment securities available-for-sale (195) 185 (10) The effect of changes on the condensed interim consolidated income statement and related disclosures for the three months ended 30 June 2013 is as follows: Interest income As previously reported Change in presentation As changed Interest income (14 363) Net gains arising from trading securities (30 628) (16 450) Net losses arising from investment securities available-for-sale (188) 185 (3) 9

13 4 Accounting Policies, Critical Accounting Estimates and Judgements, Adoption of New or Revised Standards and Interpretations, and Changes in Presentation (Continued) The effect of changes on related disclosure for the six months ended 30 June 2013 is as follows: As previously reported Change in presentation As changed Interest income Loans and advances to customers Debt investment securities available-for-sale (561) Due from banks Debt trading securities (37 220) Net gains arising from trading securities (15 569) (2 201) Net losses arising from investment securities available-for-sale (195) 185 (10) The effect of changes on related disclosure for the three months ended 30 June 2013 is as follows: As previously reported Change in presentation As changed Interest income Loans and advances to customers Debt investment securities available-for-sale (561) Due from banks Debt trading securities (29 195) Net gains arising from trading securities (30 628) (16 450) Net losses arising from investment securities available-for-sale (188) 185 (3) The Group has changed presentation of fee and commission in the notes to condensed interim consolidated condensed interim financial statements for the six months ended. The presentation of the comparative figures for the six months ended 30 June 2013 has been adjusted to be consistent with the new presentation. As previously reported Change in presentation As changed Fee and commission income Plastic card operation Cash and settlements transactions with individuals (21 306) Cash and settlements transactions with legal entities (15 602) The effect of changes on related disclosure for the three months ended 30 June 2013 is as follows: As previously reported Change in presentation As changed Fee and commission income Plastic card operation Cash and settlements transactions with individuals (12 723) Cash and settlements transactions with legal entities (8 772)

14 5 Loans and Advances to Customers The tables below show credit quality of the Group s loan portfolio by loan classes as at and 31 December For the purposes of these consolidated condensed interim financial statements a loan is considered past due when the borrower fails to make any payment due under the loan agreement at the reporting date. In this case the aggregate amount of all amounts due from borrower under the respective loan agreement including accrued interest and commissions is recognised as past due. (unaudited): Not past due loans Past due loans Total Commercial loans to legal entities Specialised loans to legal entities Consumer and other loans to individuals Mortgage loans to individuals Credit cards and overdrafts Car loans to individuals Total loans and advances to customers before allowance for loan impairment Less: Allowance for loan impairment ( ) ( ) ( ) Total loans and advances to customers net of allowance for loan impairment December 2013: Not past due loans Past due loans Total Commercial loans to legal entities Specialised loans to legal entities Consumer and other loans to individuals Mortgage loans to individuals Credit cards and overdrafts Car loans to individuals Total loans and advances to customers before allowance for loan impairment Less: Allowance for loan impairment ( ) ( ) ( ) Total loans and advances to customers net of allowance for loan impairment

15 5 Loans and Advances to Customers (Continued) Commercial lending to legal entities comprises corporate loans and loans to individual entrepreneurs. Loans are granted for current needs (working capital financing, acquisition of movable and immovable property, portfolio investments, expansion and consolidation of business, etc.). Majority of commercial loans are provided for periods of up to 5 years depending on the borrowers risk assessment. Commercial lending also includes overdraft lending and lending for export-import transactions. The repayment source is cash flow from current production and financial activities of the borrower. Specialised lending to legal entities includes investment and construction project financing and also developers financing. As a rule, loan terms are linked to payback periods of investment and construction projects, contract execution periods and exceed the terms of commercial loans to legal entities. The principal and interest may be repaid from cash flows generated by the investment project at the stage of its commercial operation. Consumer and other individual loans comprise loans to individuals other than housing acquisition, construction and repair of real estate as well as car loans and credit cards and overdrafts. These loans include loans for current needs. Mortgage loans to individuals include loans for acquisition, construction and reconstruction of real estate. These loans are mostly long-term and are collateralized by real estate. Credit cards and overdrafts are provided to individuals for periods of up to 2 years on average. Car loans to individuals include loans for purchasing a car or other vehicle. Car loans are provided for periods of up to 5 years. 12

16 5 Loans and Advances to Customers (Continued) The table below shows the analysis of loans and allowance for loan impairment as at (unaudited): Gross loans Allowance for impairment Net loans Allowance for impairment to gross loans Commercial loans to legal entities Collectively assessed Not past due (97 239) % Loans up to 30 days overdue (20 836) % Loans 31 to 60 days overdue (16 809) % Loans 61 to 90 days overdue (7 895) % Loans 91 to 180 days overdue (27 252) % Loans over 180 days overdue ( ) % Total collectively assessed loans ( ) % Individually impaired Not past due ( ) % Loans up to 30 days overdue ( ) % Loans 31 to 60 days overdue ( ) % Loans 61 to 90 days overdue (68 180) % Loans 91 to 180 days overdue ( ) % Loans over 180 days overdue ( ) % Total individually impaired loans ( ) % Total commercial loans to legal entities ( ) % Specialised loans to legal entities Collectively assessed Not past due (14 593) % Loans up to 30 days overdue (159) % Loans 31 to 60 days overdue Loans 61 to 90 days overdue Loans 91 to 180 days overdue (14 886) % Loans over 180 days overdue (34 218) % Total collectively assessed loans (63 856) % Individually impaired Not past due Loans up to 30 days overdue Loans 31 to 60 days overdue Loans 61 to 90 days overdue Loans 91 to 180 days overdue Loans over 180 days overdue ( ) % Total individually impaired loans ( ) % Total specialised loans to legal entities ( ) % Total loans to legal entities ( ) % 13

17 5 Loans and Advances to Customers (Continued) Gross loans Allowance for impairment Net loans Allowance for impairment to gross loans Consumer and other loans to individuals Collectively assessed Not past due (5 813) % Loans up to 30 days overdue (10 671) % Loans 31 to 60 days overdue (19 289) % Loans 61 to 90 days overdue (15 489) % Loans 91 to 180 days overdue (28 814) % Loans over 180 days overdue ( ) % Total collectively assessed loans ( ) % Individually impaired Not past due Loans up to 30 days overdue Loans 31 to 60 days overdue Loans 61 to 90 days overdue Loans 91 to 180 days overdue Loans over 180 days overdue (32 129) % Total individually impaired loans (32 129) % Total consumer and other loans to individuals ( ) % Mortgage loans to individuals Collectively assessed Not past due (89) % Loans up to 30 days overdue (90) % Loans 31 to 60 days overdue (259) % Loans 61 to 90 days overdue Loans 91 to 180 days overdue (2 769) % Loans over 180 days overdue (63 346) % Total collectively assessed loans (66 553) % Individually impaired Not past due 916 (380) % Loans up to 30 days overdue Loans 31 to 60 days overdue Loans 61 to 90 days overdue Loans 91 to 180 days overdue Loans over 180 days overdue ( ) % Total individually impaired loans ( ) % Total mortgage loans to individuals ( ) % 14

18 5 Loans and Advances to Customers (Continued) Gross loans Allowance for impairment Net loans Allowance for impairment to gross loans Credit cards and overdrafts Collectively assessed Not past due (5 409) % Loans up to 30 days overdue (1 399) % Loans 31 to 60 days overdue (2 881) % Loans 61 to 90 days overdue (2 455) % Loans 91 to 180 days overdue (2 821) % Loans over 180 days overdue (1 792) % Total credit cards and overdrafts (16 757) % Car loans to individuals Collectively assessed Not past due (31) % Loans up to 30 days overdue 436 (35) % Loans 31 to 60 days overdue 231 (41) % Loans 61 to 90 days overdue 86 (23) % Loans 91 to 180 days overdue 506 (311) % Loans over 180 days overdue (4 347) % Total car loans to individuals (4 787) % Total loans to individuals ( ) % Total loans and advances to customers as at ( ) % 15

19 5 Loans and Advances to Customers (Continued) The table below shows the analysis of loans and allowances for loan impairment as at 31 December 2013: Gross loans Allowance for impairment Net loans Allowance for impairment to gross loans Commercial loans to legal entities Collectively assessed Not past due ( ) % Loans up to 30 days overdue (8 449) % Loans 31 to 60 days overdue (5 002) % Loans 61 to 90 days overdue (80 067) % Loans 91 to 180 days overdue (31 729) % Loans over 180 days overdue ( ) % Total collectively assessed loans ( ) % Individually impaired Not past due ( ) % Loans up to 30 days overdue (19) % Loans 31 to 60 days overdue (43 551) % Loans 61 to 90 days overdue ( ) % Loans 91 to 180 days overdue Loans over 180 days overdue ( ) % Total individually impaired loans ( ) % Total commercial loans to legal entities ( ) % Specialised loans to legal entities Collectively assessed Not past due (21 422) % Loans up to 30 days overdue (2 311) % Loans 31 to 60 days overdue Loans 61 to 90 days overdue Loans 91 to 180 days overdue Loans over 180 days overdue (50 999) % Total collectively assessed loans (74 732) % Individually impaired Not past due Loans up to 30 days overdue (16) % Loans 31 to 60 days overdue Loans 61 to 90 days overdue Loans 91 to 180 days overdue Loans over 180 days overdue (96 716) % Total individually impaired loans (96 732) % Total specialised loans to legal entities ( ) % Total loans to legal entities ( ) % 16

20 5 Loans and Advances to Customers (Continued) Gross loans Allowance for impairment Net loans Allowance for impairment to gross loans Consumer and other loans to individuals Collectively assessed Not past due (5 120) % Loans up to 30 days overdue (3 214) % Loans 31 to 60 days overdue (2 787) % Loans 61 to 90 days overdue (2 190) % Loans 91 to 180 days overdue (7 339) % Loans over 180 days overdue ( ) % Total collectively assessed loans ( ) % Individually impaired Not past due Loans up to 30 days overdue Loans 31 to 60 days overdue Loans 61 to 90 days overdue Loans 91 to 180 days overdue Loans over 180 days overdue (7 039) % Total individually impaired loans (7 039) % Total consumer and other loans to individuals ( ) % Mortgage loans to individuals Collectively assessed Not past due (33) % Loans up to 30 days overdue 524 (9) % Loans 31 to 60 days overdue Loans 61 to 90 days overdue 633 (52) % Loans 91 to 180 days overdue 889 (408) % Loans over 180 days overdue (98 940) % Total collectively assessed loans (99 442) % Individually impaired Not past due Loans up to 30 days overdue Loans 31 to 60 days overdue Loans 61 to 90 days overdue 635 (635) % Loans 91 to 180 days overdue Loans over 180 days overdue ( ) % Total individually impaired loans ( ) % Total mortgage loans to individuals ( ) % 17

21 5 Loans and Advances to Customers (Continued) Gross loans Allowance for impairment Net loans Allowance for impairment to gross loans Credit cards and overdrafts Collectively assessed Not past due (2 447) % Loans up to 30 days overdue (861) % Loans 31 to 60 days overdue (1 234) % Loans 61 to 90 days overdue (1 083) % Loans 91 to 180 days overdue (2 788) % Loans over 180 days overdue (3 078) % Total credit cards and overdrafts (11 491) % Car loans to individuals Collectively assessed Not past due (129) % Loans up to 30 days overdue 316 (20) % Loans 31 to 60 days overdue 219 (36) % Loans 61 to 90 days overdue 55 (12) % Loans 91 to 180 days overdue 64 (64) % Loans over 180 days overdue (3 416) % Total car loans to individuals (3 677) % Total loans to individuals ( ) % Total loans and advances to customers as at 31 December ( ) % 18

22 5 Loans and Advances to Customers (Continued) As defined by the Group for the purposes of internal credit risk assessment, loans fall into the non-performing category when a principal and/or interest payment becomes more than 90 days overdue. As at, the outstanding non-performing loans were as follows (unaudited): Gross loans Allowance for impairment Net loans Allowance for impairment to gross loans Commercial loans to legal entities ( ) % Specialised loans to legal entities ( ) % Сonsumer and other loans to individuals ( ) % Mortgage loans to individuals ( ) % Credit cards and overdrafts (4 613) % Car loans to individuals (4 658) % Total non-performing loans and advances to customers as at ( ) % As at 31 December 2013, the outstanding non-performing loans were as follows: Gross loans Allowance for impairment Net loans Allowance for impairment to gross loans Commercial loans to legal entities ( ) % Specialised loans to legal entities ( ) % Сonsumer and other loans to individuals ( ) % Mortgage loans to individuals ( ) % Credit cards and overdrafts (5 866) % Car loans to individuals (3 480) % Total non-performing loans and advances to customers as at 31 December ( ) % 19

23 5 Loans and Advances to Customers (Continued) Allowances for Loan Impairment. The analysis of changes in allowances for loan impairment for the six months ended is presented in the table below (unaudited): Commercial loans to legal entities Specialised loans to legal entities Сonsumer and other loans to individuals Mortgage loans to individuals Credit cards and overdrafts Car loans to individuals Total Allowance for loan impairment as at 1 January 2014 ( ) ( ) ( ) ( ) (11 491) (3 677) ( ) Net allowance charge to allowance for loan impairment during the reporting period ( ) (39 374) ( ) ( ) (5 736) (1 110) ( ) Loans and advances written off during the reporting period Allowance for loan impairment as at ( ) ( ) ( ) ( ) (16 757) (4 787) ( ) The analysis of changes in allowances for loan impairment for the six months ended 30 June 2013 is presented in the table below (unaudited): Commercial loans to legal entities Specialised loans to legal entities Сonsumer and other loans to individuals Mortgage loans to individuals Credit cards and overdrafts Car loans to individuals Total Allowance for loan impairment as at 1 January 2013 ( ) ( ) ( ) ( ) (1 765) (3 816) ( ) (Net allowance charge to) / net recovery of allowance for loan impairment during the reporting period ( ) (15 572) (3 917) 560 ( ) Loans and advances written off during the reporting period Allowance for loan impairment as at 30 June 2013 ( ) ( ) ( ) ( ) (5 682) (3 256) ( ) 20

24 5 Loans and Advances to Customers (Continued) Allowances for Loan Impairment. The analysis of changes in allowances for loan impairment for three months ended is presented in the table below (unaudited): Commercial loans to legal entities Specialised loans to legal entities Сonsumer and other loans to individuals Mortgage loans to individuals Credit cards and overdrafts Car loans to individuals Total Allowance for loan impairment as at 1 April 2014 ( ) ( ) ( ) ( ) (19 499) (3 593) ( ) (Net allowance chargeto allowance for loan impairment during the reporting period ( ) (19 763) (70 016) (1 194) ( ) Loans and advances written off during the reporting period Allowance for loan impairment as at ( ) ( ) ( ) ( ) (16 757) (4 787) ( ) The analysis of changes in allowances for loan impairment for three months ended 30 June 2013 is presented in the table below (unaudited): Commercial loans to legal entities Specialised loans to legal entities Сonsumer and other loans to individuals Mortgage loans to individuals Credit cards and overdrafts Car loans to individuals Total Allowance for loan impairment as at 1 April 2013 ( ) ( ) ( ) ( ) (3 367) (3 751) ( ) (Net allowance charge to) / net recovery of allowance for loan impairment during the reporting period (92 033) (7 351) (2 315) 495 (54 953) Loans and advances written off during the reporting period Allowance for loan impairment as at 30 June 2013 ( ) ( ) ( ) ( ) (5 682) (3 256) ( ) 21

25 5 Loans and Advances to Customers (Continued) Renegotiated loans. Information on loans whose terms have been renegotiated, as at and 31 December 2013 is presented in the table below. It shows the carrying amount for renegotiated loans by class. Commercial loans to legal entities Specialised loans to legal entities Consumer and other loans to individuals Mortgage loans to individuals Credit cards and overdrafts Car loans to individuals Total : Not past due collectively assessed loans Renegotiated loans up to 90 days overdue Renegotiated loans more than 90 days overdue Total renegotiated loans before allowance for loan impairment December 2013: Not past due collectively assessed loans Renegotiated loans up to 90 days overdue Renegotiated loans more than 90 days overdue Total renegotiated loans before allowance for loan impairment

26 5 Loans and Advances to Customers (Continued) Economic sector risk concentration. Economic sector risk concentrations within the customer loan portfolio as at and 31 December 2013 are as follows: 31 December 2013 (unaudited) Amount % Amount % Transport, aviation, space industry % % Energy % % Machine building % % Food and agriculture % % Services % % Oil and gas % % Individuals % % Metallurgy % % Chemical industry % % Trade % % Telecommunications % % Construction % % Timber industry % % Other % % Total loans and advances to customers before allowance for loan impairment % % As at, the Group had 20 largest corporate borrowers with aggregated loan amounts due from each of these borrowers exceeding UAH thousand (31 December 2013: 20 largest borrowers with loan amounts due from each of these borrowers exceeding UAH thousand). The total aggregate amount of these loans was UAH thousand or 42.5% of the total gross loan portfolio of the Group (31 December 2013: UAH thousand or 40.2%). In July 2014 the Group obtained an irrevocable guarantee from the Bank s Shareholder amounting to USD thousand (UAH thousand) to secure its loans and advances. Carrying value of secured loans amounted to UAH thousand, maturing in August November Would borrowers overstay repayment, exposure will be settled in full by the Shareholder. 23

27 6 Investment Securities Available-for-sale 31 December (unaudited) 2013 Government bonds issued by the Ministry of Finance of Ukraine Deposit certificates issued by the National Bank of Ukraine Corporate bonds Total debt investment securities available-for-sale Corporate shares Total investment securities available-for-sale Government bonds issued by the Ministry of Finance of Ukraine are interest-bearing securities denominated in UAH and USD (Note 17). These bonds have maturity dates from July 2014 to August 2015 (31 December 2013: from January 2014 to August 2015), coupon rates from 5.5% p.a. to 9.5% p.a. (31 December 2013: 5.5% p.a. to 15.0% p.a.) and yield to maturity from 1.9% p.a. to 14.1% p.a. (31 December 2013: 7.3% p.a. to 13.6% p.a.), depending on the series of the bond issued. Investment securities available-for-sale are carried at fair value which also reflects credit risk related write downs. Fair value of investment securities available-for-sale is based on their market quotations and valuation models with data use of both observable and not observable on the open market. Unrealised gains/(losses) on revaluation of investment securities available-for-sale other than impairment losses are recognised in other comprehensive income and presented in equity as fair value reserve for investment securities available-for-sale as at in the cumulative gain of UAH thousand (31 December 2013: loss of UAH thousand). As at, included in investment securities available-for-sale are Government bonds issued by the Ministry of Finance of Ukraine with a nominal value of UAH thousands and a fair value of UAH thousand (31 December 2013: nominal value of UAH thousand and a fair value of UAH thousand) were used to cover the Bank s NBU mandatory reserve requirements. As at, included in investment securities available-for-sale are past due fully impaired corporate bonds with a nominal value of UAH thousand (31 December 2013: UAH thousand). None of the investment securities available-for-sale was renegotiated. 24

28 7 Other Assets 31 December (unaudited) 2013 Other financial assets Funds in settlement Derivative financial instruments Allowance for impairment of other financial assets (225) (6) Total other financial assets Other non-financial assets Prepaid expenses Precious metals Prepayments for premises and other assets Non-current assets repossessed from debtors Inventory Tax settlements (other than on income tax) Other non-financial assets Allowance for impairment of other non-financial assets (10 754) (12 837) Total other non-financial assets Total other assets Due to Banks 31 December (unaudited) 2013 Term placements of banks Correspondent accounts and overnight placements of banks Total due to banks