VOZROZHDENIE BANK. Interim Consolidated Condensed Financial Information for the three-month period ended 31 March 2018 (unaudited)

Transcription

1 VOZROZHDENIE BANK Interim Consolidated Condensed Financial Information for the three-month period ended 31 March 2018

2 CONTENTS Interim Consolidated Condensed Financial Information Interim Consolidated Condensed Statement of Financial Position... 1 Interim Consolidated Condensed Statement of Profit or Loss and Other Comprehensive Income... 2 Interim Consolidated Condensed Statement of Changes in Equity... 3 Interim Consolidated Condensed Statement of Cash Flows... 4 NOTES TO THE INTERIM CONSOLIDATED CONDENSED FINANCIAL INFORMATION 1 Introduction Summary of Accounting Policies, Critical Estimates and Professional Judgements Cash and Cash Equivalents Trading Securities Due from Other Banks Loans and Advances to Customers Investments in Securities Other Financial Assets Investment Property Other Assets Premises and Equipment and Intangible Assets Due to Other Banks Customer Accounts Debt Securities in Issue Subordinated Loans Other Financial Liabilities Interest Income and Expense Fee and Commission Income and Expense Administrative and General Expenses Segment Analysis Financial Risk Management Management of Capital Contingencies and Commitments Fair Value Disclosures Related Party Transactions... 60

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4 Interim Consolidated Condensed Statement of Profit or Loss and Other Comprehensive Income for the three-month period Note Three-month period ended 31 March 2018 Three-month period ended 31 March 2017 Interest income Interest expense 17 (2 986) (3 233) Contributions to the State Deposit Insurance Agency 17 (237) (167) Net interest income Provision for loan impairment 6 (1 019) (1 093) Net interest income after provision for loan impairment Fee and commission income Fee and commission expense 18 (181) (181) Gains less losses/(losses less gains) from trading securities (3) 21 Gains less losses from trading in foreign currencies Foreign exchange translation gains less losses Gains less losses from disposals of investment securities available for sale Х 3 Other operating income/(expenses) 238 (106) Administrative and operating expenses 19 (1 967) (1 824) Provision non-credit related commitments 23 (464) - Net loss from impairment of other assets (1) (4) Losses from revaluation of premises 10 (1) (2) Net profit /(loss) from revaluation of investment properties 9 8 (115) Profit before tax Income tax (167) (141) PROFIT FOR THE REPORTING PERIOD Other comprehensive income Items that may be reclassified subsequently to profit or loss Available for sale investments: - Change in revaluation reserve Х (4) - Income tax related to revaluation of investment securities available for sale Х 1 Investments in securities measured at fair value though other aggregate income: - Annual gains less losses (95) - - Income tax reflected in the other aggregate income 18 - Items that will not be reclassified to profit or loss Premises and equipment: - Change in revaluation reserve 11 (3) - - Income tax related to revaluation premises and equipment - - Other comprehensive loss for the reporting period (80) (3) TOTAL COMPREHENSIVE INCOME FOR THE REPORTING PERIOD Basic and diluted earnings per ordinary share (expressed in RR per share) Ordinary shares The notes set out on pages 5 to 62 form an integral part of this interim consolidated condensed financial information. 2

5 Interim Consolidated Condensed Statement of Changes in Equity for the three-month period In millions of Russian Roubles Note Share capital Share premium Revaluation Revaluation reserve for reserve for securities at available FVOCI for sale investment securities Revaluation reserve for premises Retained earnings Total Balance at 31 December х Influence of IFRS 9 first implementation (3 204) (3 204) Reclassification of financial instruments (205) Adjusted balance at 1 January х Profit for the three-month period ended 31 March Other comprehensive loss for the three-month period ended 31 March (77) (3) - (80) Total comprehensive (loss)/income - - (77) - (3) Balance at 31 March х The notes set out on pages 5 to 62 form an integral part of this interim consolidated condensed financial information. 3

6 Interim Consolidated Condensed Statement of Changes in Equity for the three-month period In millions of Russian Roubles Note Share capital Share premium Revaluation reserve for available for sale investment securities Revaluation reserve for premises Retained earnings Total Balance at 1 January Profit for the three-month period ended 31 March Other comprehensive loss for the three-month period ended 31 March (3) - - (3) Total comprehensive (loss)/income - - (3) Balance at 31 March The notes set out on pages 5 to 62 form an integral part of this interim consolidated condensed financial information. 4

7 Interim Consolidated Condensed Statement of Cash Flows for the three-month period ended 31 March 2018 Note Tree-month period ended 31 March 2018 Three-month period ended 31 March 2017 Cash flow from operating activities Interest received Interest paid (2 534) (3 022) Fees and commissions received Fees and commissions paid (181) (181) Net income received from trading in trading securities (1) 10 Net income received/(losses paid) from trading in foreign currencies Other operating (losses paid )/ income received 92 (126) Staff costs paid (1 689) (1 146) Administrative and other operating expenses paid (490) (589) Income tax (paid)/recovered (309) (15) Cash flows from operating activities before changes in operating assets and liabilities Net (increase)/decrease in operating assets Mandatory cash balances with the Bank of Russia 35 (38) Trading securities (1 064) Due from other banks Loans and advances to customers (2 280) (8 186) Other financial assets Other assets 21 (112) Net increase/(decrease) in operating liabilities Due to other banks (997) 218 Customer accounts (17 575) (4 140) Promissory notes and deposit certificates (539) 140 Other financial liabilities (1 856) (116) Other liabilities (143) (59) Net cash from operating activities (18 945) (5 738) Cash flows from investing activities Acquisition of investment securities available for sale Х (5 116) Acquisition of investments in securities 133 Х Proceeds from disposal of investment securities available for sale Х Proceeds from disposal of investments in securities Х Acquisition of premises and equipment and intangible assets 11 (232) (41) Proceeds from disposal of premises and equipment 18 1 Proceeds from disposal of non-current assets held for sale Proceeds from disposal of investment properties Net cash from/(used in) investing activities (2 794) Cash flows from financing activities Repayment of mortgage backed bonds in issue 14 (883) (272) Receipt of other borrowed funds Net cash from/(used in) financing activities 817 (272) Effect of exchange rate changes on cash and cash equivalents (55) (533) Net decrease in cash and cash equivalents (14 345) (9 337) Cash and cash equivalents at the beginning of the reporting period Cash and cash equivalents at the end of the reporting period The notes set out on pages 5 to 62 form an integral part of this interim consolidated condensed financial information. 5

8 1 Introduction This interim consolidated condensed financial information has been prepared in accordance with International Financial Reporting Standards ( IFRS ) for the nine-month period for Bank Vozrozhdenie (the Bank ), its subsidiaries and its securitisation structured entities ZAO IAV 3, OOO IAV 4 and OOO IAV 5 (together referred to as the Group ). The Bank was incorporated and operates in the Russian Federation. The Bank is a public joint-stock company. Principal activity. The Bank s principal business activity is banking and other operations within the Russian Federation. The Bank has operated under a full banking licence issued by the Bank of Russia since The Bank participates in the state deposit insurance program, which was introduced by Federal Law No.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 thousand (before 29 December 2014: RR 700 thousand) per individual if a licence is withdrawn from a bank or the Bank of Russia has imposed moratorium on payments. The Bank has 16 (2016: 31) branches in the Russian Federation. Information about the Bank's structural subdivisions is provided below: 31 March December 2017 Branches Additional offices Operational cash desks and offices 3 3 The Bank's Head Office is located at the following address: 7/4 Luchnikov Pereulok, bldg. 1, Moscow, , Russian Federation. Shareholdersstructure. At 31 March 2018, the Bank's other shareholders are: Percentage of the total number of ordinary shares, % 31 March December 2017 NORDAN LIMITED BIMERSANO SERVICES LTD Bervessa Holding LTD Reldans Holding LTD WIPASENA HOLDING LTD Notilsera Holding LTD Tamilania Holding LTD Rotilesa Holding LTD SKIBERTI LIMITED Kostrano Investments LTD Other shareholders holding less than 5% On January 31, 2018, the Moscow Arbitration Court granted the application of Promsvyazbank PJSC for securing the claim for case A / and seized the Bank's shares held by the companies NORDAN LIMITED, SKIBERTI LIMITED, BIMERSANO SERVICES LTD and WIPASENA HOLDING LTD. Measures taken by the court only mean that these companies are prohibited from disposing independently of shares as an object of civil turnover and do not prevent these companies from participating in the management of the Bank. Thus, the measures taken by the court will not prevent or impede the Bank from carrying out its activities. 6

9 1 Introduction (Continued) On March 6, 2018 the Bank received the order of the Bank of Russia to reduce the shareholding of a group of companies, which collectively own % of Bank s shares (52.73% of the total number of ordinary shares), to no more than 10% of the total issued share capital of the Bank within 90 days from the date of receipt of the order. This group of companies consists of Bervessa Holding LTD, Notilsera Holding LTD, Reldans Holding LTD, Rotilesa Holding LTD, Tamilania Holding LTD, Kostrano Investments LTD. In addition, beginning from the date of receipt of the order this group of companies has a right to vote no more than 10% of the total share capital of the Bank. The Bank is a head credit unit of the banking group (the Group) which includes the following members: Name of the member Location Interest held rounded to the nearest whole number, % 31 March December 2017 ZAO IAV 3 Moscow - - OOO IAV 4 Moscow - - OOO IAV 5 Moscow - - ZAO V-REGISTER Moscow ООО ART PLAZA Moscow OAO YUNOST Moscow Region OOO Baltic Resort Kaliningrad Region ZAO IAV 3, OOO IAV 4 and OOO IAV 5 are structured entities engaged in securitisation of the Bank's mortgage loans. The Bank controls the entities thought it does not hold any shares (units) in these entities. The core asset of OOO Vozrozhdenie-Finance is a mineral water bottling plant in the Stavropol Region, which the Bank provided as an asset contribution to the Company's charter capital. 100% share in the authorized capital of the Company was sold in August, The core activity of ZAO V-REGISTER is financial leasing. ART PLAZA OOO a Bank s subsidiary was established in August, Main activities of ART PLAZA OOO include leasing and management of own and leased real estate. OAO YUNOST is a recreation centre engaged in therapeutic and resort activity in Schelkovsky District, Moscow Region. OOO Baltic Resort was engaged in construction of a recreation tourist area in Kaliningrad Region and since 2015 year has been in the stage of bankruptcy. Presentation currency. This interim consolidated condensed financial information is presented in millions of Russian Roubles ( RR millions ). Foreign currency translation. The Group s functional and presentation currency is the national currency of the Russian Federation, Russian Roubles ( RR ). The following official exchange rates were used to translate balances of foreign currency-denominated accounts: 31 March December March 2017 RR/USD RR/EUR

10 2 Summary of Accounting Policies, Critical Estimates and Professional Judgements Basis of preparation This interim consolidated condensed financial information of the Group has been prepared in accordance with IAS 34 Interim Financial Reporting and should be read in conjunction with the Group s annual consolidated financial statements for the year ended 31 December 2017, which have been prepared in accordance with International Financial Reporting Standards (IFRS). This interim consolidated condensed financial information does not contain all notes required for disclosure in the full set of financial statements. Use of estimates and judgements The preparation of interim consolidated condensed financial information in conformity with IAS 34 requires management to make judgements, estimates and assumptions that affect the application of policies and the reported amounts of assets and liabilities, income and expense. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. 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. Significant Accounting Policies and New Accounting Pronouncements Accounting policies used in the preparation of this interim consolidated condensed financial information is consistent with the accounting policies and methods applied and described in the Group s annual consolidated financial statements for the year ended 31 December Consolidated financial statement has been prepared in accordance with International Financial Reporting Standards ( IFRS ) and has been published in the Internet Adoption of IFRS 9. The Group has adopted IFRS 9, Financial Instruments, with a date of transition of 1 January 2018, which resulted in changes in accounting policies for recognition, classification and measurement of financial assets and liabilities and impairment of financial assets. The Group elected not to restate comparative figures and recognised any adjustments to the carrying amounts of financial assets and liabilities at the date of initial application in the opening retained earnings of the current period. Consequently, the revised requirements of the IFRS 7, Financial Instruments: Disclosures, have only been applied to the current period. The comparative period disclosures repeat those disclosures made in the prior year. The impact of the IFRS 9 adoption on the Group is disclosed below. Financial assets classification and subsequent measurement measurement categories. The Group classifies financial assets in the following measurement categories: FVTPL, FVOCI and AC. The classification and subsequent measurement of debt financial assets depends on: 1) the Group s business model for managing the asset; and 2) the cash flow characteristics of the asset. 8

11 2 Summary of Accounting Policies, Critical Estimates and Professional Judgements (Continued) Financial assets classification and subsequent measurement business model. The business model reflects how the Group manages the assets in order to generate cash flows whether the Group s objective is: i) solely to collect the contractual cash flows from the assets ( hold to collect contractual cash flows,); or ii) to collect both the contractual cash flows and the cash flows arising from the sale of assets ( hold to collect contractual cash flows and sell ); iii) if neither of i) and ii) is applicable, the financial assets are classified as part of other business model and measured at FVTPL. Business model is determined for a group of assets (on a portfolio level) based on all relevant evidence about the activities that the Group undertakes to achieve the objective set out for the portfolio available at the date of the assessment. Factors considered by the Group in determining the business model include the purpose and composition of a portfolio, past experience on how the cash flows for the respective assets were collected, how risks are assessed and managed. Financial assets classification and subsequent measurement cash flow characteristics. Where the business model is to hold assets to collect contractual cash flows or to hold contractual cash flows and sell, the Group assesses whether the cash flows represent solely payments of principal and interest (the SPPI test). In making this assessment, the Group considers whether the contractual cash flows are consistent with a basic lending arrangement, i.e. interest includes only consideration for credit risk, time value of money, other basic lending risks and profit margin. Where the contractual terms introduce exposure to risk or volatility that is inconsistent with a basic lending arrangement, the financial asset is classified and measured at FVTPL. The SPPI assessment is performed on initial recognition of an asset and it is not subsequently reassessed. Financial assets reclassification. Financial instruments are reclassified only when the business model for managing those assets changes. The reclassification has a prospective effect and takes place from the start of the first reporting period following the change. Financial assets impairment credit loss allowance for ECL. Implementation of IFRS 9 amends the Group s approach to loans impairment accounting. Instead of losses incurred approach as per IAS 39, a forecasting approach has been implemented that requires reflecting expected loan losses. Beginning from January 1, 2018 the Group recognizes provisions for expected losses for all loans and other debt assets that are not measured at fair value through profit or loss, and at obligations to provide loans and guarantees (collectively referred to as financial instruments in this Section). The IFRS 9 requirements for the impairment do not cover equity assets: 1) an unbiased and probability weighted amount that is determined by evaluating a range of possible outcomes; 2) the time value of money; and 3) all reasonable and supportable information that is available without undue cost and effort at the end of each reporting period about past events, current conditions and forecasts of future conditions. Debt instruments measured at AC are presented in the consolidated statement of financial position net of the allowance for ECL. For loan commitments and financial guarantees (where those component can be separated from the loan), a separate provision for ECL is recognised as a liability in the consolidated statement of financial position. For debt instruments at FVOCI, an allowance for ECL is recognised in profit or loss and affects fair value gains or losses recognised in OCI rather than the carrying amount of those instruments. 9

12 2 Summary of Accounting Policies, Critical Estimates and Professional Judgements (Continued) The Group applies a three stage model for impairment in accordance with IFRS 9, based on changes in credit quality since initial recognition: 1) A financial instrument that is not credit-impaired on initial recognition is classified in Stage 1. Financial assets in Stage 1 have their ECL measured at an amount equal to the portion of lifetime ECL that results from default events possible within the next 12 months (12 month ECL). 2) If the Group identifies a SICR since initial recognition, the asset is transferred to Stage 2 and its ECL is measured based on ECL on a lifetime basis (lifetime ECL). 3) If the Group determines that a financial asset is credit-impaired, the asset is transferred to Stage 3 and its ECL is measured as a lifetime ECL. For financial assets that are purchased or originated credit-impaired, the ECL is always measured as a lifetime ECL. Effect of initial application of IFRS 9. The following table reconciles the carrying amounts of financial assets, from their previous measurement categories in accordance with IAS 39 into their new measurement categories upon transition to IFRS 9 on 1 January 2018: In millions of Russian Roubles Measurement category IAS 39 IFRS 9 Carrying value per IAS 39 ECL Reclassification Carrying value per IFRS 9 Cash and cash equivalents L&R AC Mandatory cash balances with the Bank of Russia L&R AC Trading securiries Trading assets FVTPL (mandatory) Due from other banks L&R AC Loans and advances to customers L&R AC (3 161) Investment securities AFS AFS FVOCI Investment securities AFS AFS FVTPL (mandatory) Total investment securities AFS Other financial assets L&R AC Total financial assets (3 161)

13 2 Summary of Accounting Policies, Critical Estimates and Professional Judgements (Continued) At 31 December 2017, all of the Group s financial liabilities were carried at AC. Starting from 1 January 2018 the Group's financial liabilities continued to be classified at AC. Еhere were no other changes to the measurement of financial liabilities. The below disclosure provides reconciliation of the carrying amounts of financial instruments by classes from their previous measurement category in accordance with IAS 39 to their new measurement categories upon transition to IFRS 9 on 1 January 2018 as well as describes the reasons for such reclassifications: (a) Cash and cash equivalents All classes of cash and cash equivalents as disclosed in Note 3 were reclassified from L&R measurement category under IAS 39 to AC measurement category under IFRS 9 at the transition date. Due to insignificance of ECLs for cash and cash equivalents balances the Group did not recognise credit loss allowance for such balances at 1 January 2018 and subsequently. (b) Due from other banks balances All classes of due from other banks as disclosed in Note 5 were reclassified from L&R measurement category under IAS 39 to AC measurement category under IFRS 9 at the transition date. Due to insignificance of ECLs for due from other banks balances the Group did not recognise credit loss allowance for such balances at 1 January 2018 and subsequently (c) Investments in securities New classification requirements of IFRS 9 led to changes in classification of investments in securities as follows: Investments in trading securities. Within the transition to IFRS 9 the securities in trading securities portfolio, which had been previously measured at fair value through profit or loss, were included in liquidity management business model, hence they were classified as measured fair value through profit or loss (mandatorily). Reclassification from retired categories with no change in measurement. In addition to the above, the following debt instruments have been reclassified to new categories under IFRS 9, as their previous categories under IAS 39 were 'retired', with no changes to their measurement basis those previously classified as AFS and now classified as measured at FVOCI. Reclassification of equity securities not included in the portfolio. Equity securities, which had been previously classified as available for sale, were classified as measured fair value through profit or loss in accordance with IFRS 9. 11

14 3 Cash and Cash Equivalents 31 March December 2017 Cash on hand Cash balances with the Bank of Russia (other than mandatory reserve deposits) Correspondent accounts and placements with banks with original maturities of less than one month - Russian Federation other countries Total cash and cash equivalents Transactions that did not require the use of cash and cash equivalents and were excluded from the consolidated statement of cash flows are as follows: 31 March December 2017 Non-cash operating activities Other assets acquired by the Group in settlements of overdue loans and advances to customers Repayment of loans and advances to customers by non-cash assets (68) (2 595) Non-cash operating activities - - Additional information on non-cash transactions is disclosed in Notes 9 and 10 with a detailed description of assets acquired by the Group in settlements of overdue loans and advances to customers. Geographical, currency and interest rate analyses of cash and cash equivalents are disclosed in Note Trading Securities 31 March December 2017 Bonds of Bank of Russia Corporate bonds Corporate Eurobonds Corporate shares 10 - Total trading securities Corporate Eurobonds are interest-bearing securities denominated in USD and EUR, issued by large Russian companies and freely tradable internationally. Corporate bonds are interest-bearing securities denominated in Russian Roubles issued by banks and freely tradable in the Russian Federation. Trading Securities classifies as financial assets in the following measurement categories FVTPL. Trading securities are carried at fair value, which also reflects any credit risk related write-downs. As the trading securities are carried at their fair values based on observable market data, the Group does not analyse or monitor impairment indicators. The debt securities are not collateralised. The Bank is licensed by the Federal Commission on Securities Markets for trading in securities. Trading securities are used by the Group basically for managing liquidity risk. Geographical, currency, interest rate and maturity analyses of trading securities are disclosed in Note

15 5 Due from Other Banks 31 March December 2017 Short-term placements with other banks Insurance deposits with non-resident banks Total due from other banks Analysis by credit quality of amounts due from other banks outstanding at 31 March 2018 is as follows: Short-term placements in other banks Insurance deposits with non-resident banks Total Stage 1 (12-months ECL) - AA- to AA+ rated A- to A+ rated BBB- to BBB+ rated B- to B+ rated unrated Total due from other banks Analysis by credit quality of amounts due from other banks outstanding at 31 December 2017 is as follows: (in millions of Russian roubles) Short-term placements in other banks Insurance deposits with non-resident banks Total Neither past due nor impaired - AA- to AA+ rated BBB- to BBB+ rated В- to В+ rated Overdue but not impaired - В- to В+ rated Total due from other banks Geographical, currency, maturity and interest rate analyses of due from other banks are disclosed in Note

16 6 Loans and Advances to Customers 31 March December 2017 Loans to corporate customers Loans to small and medium entities Mortgage loans Other loans to individuals including: consumer loans car loans bank card loans Total loans and advances to customers before provision for loan impairment Less provision for loan impairment (18 521) (15 031) Total loans and advances to customers less impairment provision Segmentation of loans to corporate clients depends on the revenues of the client / group of related borrowers: loans to corporate clients (with revenues exceeding RR million) and loans to medium and small entities (with revenues RR million and less). Loans to state and municipal institutions are categorised as loans to corporate clients, irrespectively to their revenues. As decided by the management of the Group, when issued, a loan may be allocated to one of the categories irrespective to revenues. Retail loans are divided into categories by product: mortgage loans and other loans to individuals including consumer loans, bank card loans and car loans. At 31 March 2018, mortgage loans include loans securitised in amounting to RR million (less impairment provision), at 31 December 2017 amounting to RR million (less impairment provision). Management of the Group determined that the Group had not transferred main risks with respect to the transferred assets, and, consequently, such transfer was not the ground for their derecognition. 14

17 6 Loans and Advances to Customers (Continued) The Group classifies loans with principal and/or interest overdue more than 90 days into the nonperforming loans category. The non-performing loans at 31 March 2018 are as follows: Loans before provision for impairment Provision for loan impairment Loans less provision for impairment Provision-toloan ratio before provision Loans to corporate customers (2 602) ,9% Loans to small and medium entities (2 277) ,7% Mortgage loans 754 (584) ,5% Other loans to individuals (1 528) 1 100,0% Total non-performing loans (6 991) ,9% The non-performing loans at 31 December 2017 are as follows: (in millions of Russian roubles) Loans before provision for impairment Provision for impairment Loans less provision for impairment Provision-toloan ratio before provision Loans to corporate customers (2 905) % Loans to small and medium entities (2 312) % Mortgage loans 741 (391) % Other loans to individuals (1 394) % Total non-performing loans (7 002) % Economic sector risk concentrations within the customer loan portfolio are as follows: 31 March December 2017 Loans % Provision % Loans % Provision % Individuals Manufacturing Construction Trade Agriculture Real estate State and municipal organisations Telecommunications and MM Transport Tourism and hotel industry Finance Other Total At 31 March 2018, loans and advances to customers include loans with a carrying amount of RR million (2017: RR million) with receivable balances pledged as collateral for term placements of AO MSP Bank. Refer to Notes 12 and 23. In the end of 2016 the Bank joined the SME Loans Incentive Program (Program 6.5) implemented by Corporation MSP, JSC in collaboration with the Bank of Russia. Under Program 6.5 the Bank grants loans on easy terms to small and medium enterprises with the follow-up debt consolidation in the Bank of Russia, loan from the Bank of Russia are collateralized by guarantee from Corporation MSP. As at 31 March 2018 loans and advances to customers include loans granted under Program 6.5 with a carrying amount of RR million (2017: RR million). Refer to Notes

18 6 Loans and Advances to Customers (Continued) Credit risk concentrations As at 31 March 2018, the aggregate amount of loans issued to 20 largest borrowers (or groups of related borrowers) was RR million (31 December 2017: RR million) or 24% (31 December 2017: 24%) of total loan portfolio before impairment. Analysis by credit quality of corporate portfolio loans outstanding at 31 March 2018 is as follows: Stage 1 (12-months ECL) Stage 2 (lifetime ECL) Stage 3 (lifetime ECL) Total Loans to corporate customers - not past due less than 30 days overdue to 60 days overdue to 90 days overdue to 180 days overdue to 360 days overdue over 360 days overdue Total loans to corporate customers before ECL Credit loss allowance (796) (2 704) (7 566) (11 066) Total loans to corporate customers Loans to small and medium entities - not past due less than 30 days overdue to 60 days overdue to 90 days overdue to 180 days overdue to 360 days overdue over 360 days overdue Total loans to small and medium entities before ECL Credit loss allowance (365) (101) (4 256) (4 722) Total loans to small and medium entities Total loans to legal entities

19 6 Loans and Advances to Customers (Continued) Analysis by credit quality of corporate portfolio loans outstanding as at 31 December 2017 is as follows: (in millions of Russian roubles) Loans before provision for impairment Provision for impairment Loans less provision for impairment Provisionto-loan ratio before provision Loans to corporate customers Loans assessed on an individual basis and collectively without signs of impairment (1 378) % Overdue but not impaired loans - less than 30 days overdue Total overdue but not impaired loans Impaired loans Assessed on an individual basis - not past due (4 750) % - 61 to 90 days overdue 187 (187) % to 360 days overdue 143 (50) % - over 360 days overdue (2 436) % Assessed collectively - 61 to 90 days overdue 15 (15) % - 91 to 180 days overdue 191 (151) % to 360 days overdue 7 (4) % - over 360 days overdue 346 (264) % Total impaired loans (7 857) % Total loans to corporate customers (9 235) % Loans to small and medium entities Loans assessed on an individual basis and collectively without signs of impairment (474) % Overdue but not impaired loans assessed collectively - less than 30 days overdue 127 (2) % - 31 to 60 days overdue 727 (14) % - 61 to 90 days overdue 54 (1) % Total overdue but not impaired loans 908 (17) % Impaired loans Assessed on an individual basis - not past due (1 562) % to 360 days overdue 268 (231) % - over 360 days overdue 197 (197) % Assessed collectively - 91 to 180 days overdue 153 (95) % to 360 days overdue 20 (12) % - over 360 days overdue (1 777) % Total impaired loans (3 874) % Total loans to small and medium enterprises (4 365) % Total loans to legal entities (13 600) % 17

20 6 Loans and Advances to Customers (Continued) Analysis by credit quality of retail portfolio loans outstanding at 31 March 2018 is as follows: Stage 1 (12-months ECL) Stage 2 (lifetime ECL) Stage 3 (lifetime ECL) Mortgage loans - not past due to 60 days overdue to 90 days overdue to 180 days overdue to 360 days overdue over 360 days overdue Total mortgage loans before ECL Credit loss allowance (112) (125) (584) (821) Total mortgage loans Other loans to individuals Consumer loans - not past due less than 30 days overdue to 60 days overdue to 90 days overdue to 180 days overdue to 360 days overdue over 360 days overdue Total consumer loans before ECL Credit loss allowance (252) (90) (1 298) (1 640) Total consumer loans Car loans - not past due over 360 days overdue Total car loans before ECL Credit loss allowance - - (25) (25) Total car loans Bank card loans - not past due less than 30 days overdue to 60 days overdue to 90 days overdue to 180 days overdue to 360 days overdue over 360 days overdue Total bank card loans before ECL Credit loss allowance (40) (2) (204) (246) Total bank card loans Total loans to individuals Total 18

21 6 Loans and Advances to Customers (Continued) Analysis by credit quality of retail portfolio loans outstanding at 31 December 2017 is as follows: (in millions of Russian roubles) Loans before provision for impairment Provision for impairment Loans less provision for impairment Provisionto-loan ratio before provision Mortgage loans - not past due (16) less than 30 days overdue 128 (7) % - 31 to 60 days overdue 72 (9) % - 61 to 90 days overdue 8 (1) % - 91 to 180 days overdue 84 (31) % to 360 days overdue 139 (76) % - over 360 days overdue 518 (284) % Total mortgage loans (424) % Other loans to individuals Consumer loans - not past due (37) % - less than 30 days overdue 220 (46) % - 31 to 60 days overdue 49 (22) % - 61 to 90 days overdue 47 (30) % - 91 to 180 days overdue 87 (80) % to 360 days overdue 202 (202) % - over 360 days overdue 895 (895) % Total consumer loans (1 312) % Car loans - not past due less than 30 days overdue to 60 days overdue to 90 days overdue to 180 days overdue to 360 days overdue over 360 days overdue 22 (22) % Total car loans 52 (22) % Bank card loans - not past due (4) % - less than 30 days overdue 38 (4) % - 31 to 60 days overdue 9 (5) % - 61 to 90 days overdue 6 (4) % - 91 to 180 days overdue 16 (14) % to 360 days overdue 33 (33) % - over 360 days overdue 148 (148) % Total bank card loans (212) % Total other loans to individuals (1 546) % Total loans to individuals (1 970) % 19

22 6 Loans and Advances to Customers (Continued) The Group usually issues loans in case there is a liquid and sufficient collateral that is documented in accordance with legally established procedures (except for some credit products used for lending to individuals, overdrafts without collateral, loans to RF constituents and municipal organisations, factoring financing, loan products assessed on an individual basis and authorised for issue without collateral). Loans to legal entities may be collateralised by the following: real estate; equipment; motor vehicles; goods in turnover; guarantee deposit; banking guarantee; state (municipal) guarantee; own promissory notes; highly liquid securities; bullions (gold, silver, platinum and palladium); property receivables arising from contractual commitments. Loans collateralised by third parties may be issued only if the third parties also provide their guarantees as collateral for such loans. In this case: the guarantor (a legal entity) should have a financial position not worse than average in accordance with the Group s internal methodologies for evaluation of financial position; the guarantor (an individual) should have a good financial position in accordance with the Group s internal methodologies for evaluation of financial position. Real estate property (except for land), equipment, motor vehicles and inventory items pledged as collateral should be insured. The insured amount of the collateral should be no less than its collateral value, the term of the insurance contract should expire no earlier than one month after the loan maturity date. 20

23 6 Loans and Advances to Customers (Continued) Loans to individuals may be collateralised by the following: real estate purchased under the sale agreement using the credit facilities provided by the Group, and encumbered with a mortgage by law; pledge of rights to claim under the contract on acquisition of residential real estate at a construction stage; pledge of a share - for the residential real estate purchased under the contract on participation in ZhSK; real estate owned by individuals or legal entities, burdened with a mortgage; motor vehicles; guarantees of third parties, in particular employers of the individual borrower; pledge of rights to claim on an individual s deposit; and other property owned by the borrower. In addition, to mitigate the credit risk, the Group uses insurance by borrowers of the pledged item, the individual borrower s life and disability or accident and illness insurance, and also insurance of the risks connected with loss of work. Obligations of the borrowers can be collateralised with various types of collateral simultaneously. The collateral should be sufficient to repay the principal, interest and the amount of the Group s potential expenses associated with the fulfilment of debtor s obligations. The collateral value of property is determined when a loan is issued in accordance with the Group s effective procedure. In addition, the Group has a right for write-off from the borrower s settlement and current accounts with the Group in case of non-fulfilment of loan contract obligations by the borrower. The market value of property is assumed to be the collateral value of security for credit products included in the retail portfolio. The market value of property should be confirmed by the report on real estate market valuation prepared by a valuation company. Depending on the credit limit, profession and current employer of the borrower, life and disability insurance can be taken as security for bank card loans. The Group can also require additional collateral. The financial effect of collateral is presented by disclosing the impact of collateral and other credit enhancements on impairment provisions for loans to legal entities recognised at the end of the reporting period. Without collateral and other credit enhancements, the impairment provisions would be higher by the following amounts: 31 March December 2017 Loans to corporate customers Loans to small and medium entities Financial effect of collateral on mortgage loans at 31 March 2018 would be RR 170 million (2017: RR 338 million) due to application of the recovery rate for assessment of loan impairment provisions. Geographical, currency, interest rate and maturity analyses of loans and advances to customers are disclosed in Note

24 7 Investments in Securities Investment securities available for sale 31 March December 2017 Federal loan bonds х Corporate Eurobonds х Corporate bonds х Bonds of constituents of the Russian Federation х 81 Corporate shares х 308 Total debt investment securities available for sale х Investment securities at FVOCI Federal loan bonds х Corporate Eurobonds х Corporate bonds х Bonds of constituents of the Russian Federation 83 х Total Investment securities at FVOCI х Investment securities at FVTPL Corporate shares 313 х Total Investment securities at FVTPL 313 х Total investment securities х Federal loan bonds (OFZ) are Russian rouble denominated government securities issued by the Ministry of Finance of the Russian Federation. Corporate Eurobonds are interest-bearing securities denominated in USD and EUR, issued by large Russian companies and freely tradable internationally. Corporate bonds are interest bearing securities denominated in Russian roubles, issued by large Russian companies and banks and freely tradable in the Russian Federation. Geographical, currency, interest rate and maturity analyses of investment securities available for sale are disclosed in Note

25 8 Other Financial Assets 31 March December 2017 Settlements with currency and stock exchanges Bank cards receivables Receivables Other - 45 Total other financial assets Other financial assets are neither past due, impaired nor collateralised. Geographical, currency and maturity analyses of financial assets are disclosed in Note Investment Property Investment property repossessed by the Group in settlements of overdue loans and leased out under operating lease or retained until their value increases: 31 March December 2017 Non-residential premises Residential premises Land plots Total investment property Movements in the carrying value of investment property for the nine-month period were as follows: Investment property Carrying amount at 1 January Additions 37 Disposals (58) Reclassification of carrying amount 15 Revaluation subject to market changes 8 Carrying amount at 31 March

26 10 Other Assets 31 March December 2017 Prepayments Non-current assets held for sale Inventories Deferred expenses Settlements under software and IT equipment Current income tax prepayment Other Total other assets Loss from impairment (15) (69) Total other assets less loss from impairment Movements in the carrying value of inventories and non-current assets held for sale for the three-month period were as follows: Inventories Non-current assets held for sale Carrying amount at 1 January Loss from impairment at 1 January 2018 (8) (61) Carrying amount taking into account impairment at 1 January Additions 3 31 Disposals - (224) Reclassification of carrying amount - (15) Carrying amount at 31 March Loss from impairment at 31 March 2018 (8) (7) Carrying amount taking into account impairment at 31 March

27 10 Other Assets (Continued) Non-current assets held for sale represent assets repossessed by the Group in settlements of overdue loans. 31 March 2018 Inventories Non-current assets held for sale 31 December 2017 Inventories Non-current assets held for sale Inventory Equipment Residential premises Non-residential premises Land pots Transport Total inventories and non-current assets held for sale Loss from impairment (8) (7) (8) (61) Total inventories and non-current assets held for sale less loss from impairment The Group is actively marketing non-core assets held for sale and expects to complete the sale within the year after their recording in this category. Tangible assets repossessed by the Group in settlement of overdue loans did not require the use of cash and cash equivalents and therefore were not included in the consolidated statement of cash flows. 11 Premises and Equipment and Intangible Assets Note Premises and land Motor vehicles Office and banking equipment Computers Intangible assets Other Total premises and equipment and intangible assets Cost at 1 January 2018 Balance at the beginning of the year Additions Disposals (6) (54) (6) (25) - (26) (117) Reclassification Cost at 31 March Accumulated depreciation Balance at the beginning of the year Depreciation charge Disposals - (53) (6) (7) - (11) (77) Reclassification Balance at 31 March Carrying amount at 31 March

28 11 Premises and Equipment and Intangible Assets (Continued) Note Premises and land Motor vehicles Office and banking equipment Computers Intangible assets Other Total premises and equipment and intangible assets Cost at 1 January 2017 Balance at the beginning of the year Additions Disposals - (2) (1) (1) - - (4) Reclassification (265) - - (86) - Cost at 31 March Accumulated depreciation Balance at the beginning of the year Depreciation charge Disposals - (1) (1) (1) - - (3) Reclassification (187) (5) - (70) - Balance at 31 March Carrying amount at 31 March Cost at 1 April 2017 Balance at 1 April Additions Disposals (35) (41) (4) (39) - (10) (129) Reclassification - (1) Accumulated depreciation charged on revalued assets (109) (109) Revaluation recognised in other comprehensive income Revaluation recognised in the statement of profit or loss and other comprehensive income (101) (101) Cost at 31 December Accumulated depreciation Balance at 1 April Depreciation charge Disposals (1) (42) (4) (38) - (10) (95) Reclassification (10) - Accumulated depreciation charged on revalued assets (109) (109) Balance at 31 December Carrying amount at 31 December