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8 Notes to the consolidated interim condensed financial statements for the three months 1 Background (a) (b) (c) Organisation and operations These consolidated interim condensed financial statements include the financial statements of Eurasian Bank JSC (the Bank ) and its subsidiary, Eurasian Bank OJSC (together referred to as the Group ). Eurasian Bank JSC (the Bank ) was established in 1994 in the Republic of Kazakhstan as a closed joint-stock company under the laws of the Republic of Kazakhstan. Due to a change in legislation introduced in 2003, the Bank was re-registered as a joint-stock company on 2 September The Bank operates based on general banking licence number 237 granted on 28 December The Bank also possesses licences number and number for brokerage, dealing and custodian activities. The principal activities of the Bank are deposit taking and customer account maintenance, lending and issuing guarantees, custodian services, cash and settlement operations, operations with securities and foreign exchange. The activities of the Bank are regulated by the Committee for the control and supervision of the financial market and financial organisations of the National Bank of the Republic of Kazakhstan (the FMSC ) and the National Bank of the Republic of Kazakhstan (the NBRK ). As at the Group has 20 regional branches (: 20) and 143 cash settlement centers (: 143) from which it conducts business throughout the Republic of Kazakhstan and Russian Federation. The registered address of the Bank s head office is 56 Kunayev str., Almaty, Republic of Kazakhstan. The majority of the Group s assets and liabilities are located in Kazakhstan. On 1 April 2010 the Bank acquired a subsidiary, Eurasian Bank OJSC, located in Moscow, Russian Federation. On 1 January 2011 the Group acquired the retail assets of LLP Prosto Kredit and LLP MKO Prosto Kredit ( Prosto Kredit ) in the Republic of Kazakhstan. Shareholders As at Eurasian Financial Company JSC (hereafter, EFC) is the Bank s Parent company, which owns % of the Bank s shares (: EFC owned %,). Business environment The Group s operations are primarily located in Kazakhstan. Consequently, the Group is exposed to the economic and financial markets of Kazakhstan which display characteristics of an emerging market. The legal, tax and regulatory frameworks continue development, but are subject to varying interpretations and frequent changes which together with other legal and fiscal impediments contribute to the challenges faced by entities operating in Kazakhstan. The consolidated interim condensed financial statements reflect management s assessment of the impact of the Kazakhstan business environment on the operations and the financial position of the Group. The future business environment may differ from management s assessment. 8

9 Notes to the consolidated interim condensed financial statements for the three months 2 Basis of preparation (a) (b) (c) (d) Statement of compliance The consolidated interim condensed financial statements are prepared in accordance with International Accounting Standard 34 Interim Financial Reporting ( IAS 34 ). Accordingly, certain information and disclosures normally required to be included in the notes to the annual consolidated financial statements have been omitted or condensed. The consolidated interim condensed financial statements should be read in conjunction with the consolidated financial statements and with selected notes to the consolidated financial statements of the Group for the year. Basis of measurement The consolidated interim condensed financial statements are prepared on the historical cost basis except that financial instruments at fair value through profit or loss and available-for-sale financial assets are stated at fair value. Functional and presentation currency The functional currency of the Bank is the Kazakhstan tenge ( KZT ) as, being the national currency of the Republic of Kazakhstan, it reflects the economic substance of the majority of underlying events and circumstances relevant to the Bank. The functional currency of the Bank s subsidiary is the Russian Rouble ( RUB ) as, being the national currency of the Russian Federation, it reflects the economic substance of the majority of underlying events and circumstances relevant to the subsidiary. The KZT is the presentation currency for the purposes of these consolidated interim condensed financial statements. In translating to the KZT, assets and liabilities of the Bank s subsidiary that are included in the statement of financial position are translated at the foreign exchange rate ruling at the reporting date. All income and expense and equity items are translated at approximating rates at the dates of the transactions. The resulting exchange difference is recorded in the cumulative translation reserve. Financial information presented in KZT is rounded to the nearest thousand. Any conversion of RUB amounts to KZT should not be construed as a representation that RUB amounts have been, could be, or will be in the future, convertible into KZT at the exchange rate shown, or at any other exchange rate. Use of estimates and judgments The preparation of consolidated interim condensed financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results could differ from those estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected. In preparing these consolidated interim condensed financial statements the significant judgements made by management in applying the Group s accounting policies and the key sources of estimation uncertainty are the same as those that applied to the Group s consolidated financial statements for the year. 3 Significant accounting policies In preparing these consolidated interim condensed financial statements the Group has applied the same accounting policies and methods of computation as those applied in the annual consolidated financial statements of the Group for the year. 9

10 Notes to the consolidated interim condensed financial statements for the three months 4 Net interest income 31 March 2013 Interest income Loans to customers 17,458,686 14,297,613 Held-to-maturity investments 148, ,709 Available-for-sale financial assets 130,814 71,629 Placements with banks 46,680 54,690 Financial instruments at fair value through profit or loss 16,641 15,588 Cash and cash equivalents 8,436 13,162 Amounts receivable under reverse repurchase agreements - 14,290 17,809,970 14,650,681 Interest expense Current accounts and deposits from customers (6,499,633) (4,680,985) Subordinated debt securities issued (939,235) (677,696) Debt securities issued (756,813) (774,375) Amounts payable under repurchase agreements (398,939) (206) Other borrowed funds (352,680) (373,363) Deposits and balances from banks (157,376) (239,503) (9,104,676) (6,746,128) 8,705,294 7,904,553 5 Fee and commission income 31 March 2013 Agent services 1,339,280 2,008,333 Settlement 279, ,084 Cash withdrawal 239, ,216 Payment card maintenance fees 150, ,620 Guarantee and letter of credit issuance 114,783 96,440 Cash delivery 11,948 10,143 Custodian services 4,028 13,695 Other 71,195 46,523 2,210,381 2,821,054 10

11 Notes to the consolidated interim condensed financial statements for the three months 6 Fee and commission expense 31 March 2013 Agent services 431, ,530 Cash withdrawal 102,453 48,121 Settlement 72,277 92,368 Payment card maintenance fees 3,021 17,317 Custodian services 834 2,902 Other 5,033 3,230 7 Net foreign exchange gain 615, , March 2013 Dealing, net 1,201, ,474 Translation differences, net 297,864 47,341 8 Impairment losses 1,498, , March 2013 Loans to customers (Note 16) 3,103,838 1,113,065 Other assets (13,064) (23,754) Provision for contingent liabilities 76,100-3,166,874 1,089,311 9 Personnel expenses 31 March 2013 Wages, salaries, bonuses and related taxes 3,813,478 3,320,004 Other employee costs 340, ,366 4,153,512 3,589,370 11

12 Notes to the consolidated interim condensed financial statements for the three months 10 Other general administrative expenses 31 March 2013 Depreciation and amortisation 745, ,499 Communications and information services 472, ,904 Operating lease expense 398, ,281 Insurance of car loans 372,414 - Taxes other than on income 210, ,679 Security 164, ,058 Advertising and marketing 153, ,680 Repairs and maintenance 70,200 51,655 Travel expenses 61,898 54,844 Cash delivery services 42,190 24,259 Insurance 38,563 10,887 Payment cards production 27,072 13,062 Transportation 15,792 11,573 Loan servicing 12,626 58,704 Professional services 10,379 78,633 Services of State Center for pension payments 9,938 60,331 Trainings 5,296 6,771 Stationery and office supplies 3,676 27,397 Representation expenses 2,655 3,339 Other 125, , Income tax expense 2,942,692 2,187, March 2013 Current tax expense Current period 522,116 - Deferred tax expense Origination and reversal of temporary differences (157,564) 444,925 Total income tax expense 364, ,925 As at the applicable tax rate for current and deferred tax is 20% (2013: 20%). 12

13 Notes to the consolidated interim condensed financial statements for the three months 12 Cash and cash equivalents Cash on hand 32,242,866 20,248,246 Nostro accounts with the NBRK and the CBRF 63,608,834 30,333,937 Nostro accounts with other banks - rated from AA- to AA+ 8,822 50,422 - rated from A- to A+ 33,876,609 26,338,051 - rated from BBB- to BBB+ 1,728, ,288 - rated from BB- to BB+ 1,007, ,973 - rated below B+ 18, ,135 - not rated 146,810 82,610 Total nostro accounts with other banks 36,787,571 27,668,479 Term deposits with other banks - rated from BBB- to BBB+ 1,932, ,000 - rated from BB- to BB+ 2,128, rated below B+ - 2,418,731 - not rated 5,462,073 1,540,985 Total term deposits with other banks 9,523,079 4,895,716 Total cash and cash equivalents 142,162,350 83,146,378 The credit ratings are presented by standards of Fitch credit ratings agency. None of cash and cash equivalents are impaired or past due. As at the Group has 2 banks (2013: 2 banks) whose balances exceed 10% of equity. The gross value of these balances as at is KZT 95,282,434 thousand (2013: KZT 53,462,403 thousand). The ratings of these banks are A+ and BBB, respectively. Minimum reserve requirements Minimum reserve requirements are calculated in accordance with regulations issued by the NBRK and should be maintained as average of cash on hand and balances on current account with the NBRK for the two week period calculated as certain minimum level of residents and nonresidents customer deposits and current accounts balances as well as other bank liabilities. As at the minimum reserve is KZT 7,996,826 thousand (2013: KZT 6,694,173 thousand). 13

14 Notes to the consolidated interim condensed financial statements for the three months 13 Financial instruments at fair value through profit or loss ASSETS Held by the Group - Government bonds Russian Government Federal bonds (OFZ) 885,314 1,139, ,314 1,139,628 LIABILITIES Derivative financial instruments Foreign currency contracts - 2,278-2,278 Foreign currency contracts The tables below summarises, by major currencies, the contractual amounts of forward exchange contracts outstanding at with details of the contractual exchange rates and remaining periods to maturity. Foreign currency amounts presented below are translated at rates ruling at the reporting date. The resultant unrealised gains and losses on these unmatured contracts, along with the amounts payable and receivable on the matured but unsettled contracts, are recognised in profit or loss and in financial instruments at fair value through profit or loss, as appropriate. Type of instrument Foreign currency swap Notional amount Maturity EUR 4,000,000 09/01/ Available-for-sale financial assets Amounts payable by Group EUR 4,000,000 Amounts receivable by Group Fair value Asset KZT 000 Fair value Liability KZT 000 RUB ,325-2,278-2,278 Held by the Bank - Government and municipal bonds Treasury notes of the Ministry of Finance of the Republic of Kazakhstan 6,020,470 10,965,674 Notes of the NBRK 7,228,438 - Total government and municipal bonds 13,248,908 10,965,674 Equity investments - Corporate shares 14,954 14,198 13,263,862 10,979,872 Pledged under sale and repurchase agreements - Government and municipal bonds Treasury notes of the Ministry of Finance of the Republic of Kazakhstan 4,188,302 - Notes of the NBRK 1,735,866 - Total government and municipal bonds 5,924,168-19,188,030 10,979,872 The credit ratings are presented by standards of Fitch credit ratings agency. 14

15 Notes to the consolidated interim condensed financial statements for the three months 15 Loans and advances to banks Mandatory reserves with the CBRF 285, ,523 Term deposits - rated from BB- to BB+ 760, ,944 - rated below B+ 1,250 1,260 - not rated 3,528,796 2,089,646 Total term deposits 4,290,838 2,598,850 Total loans and advances to banks 4,575,961 2,922,373 The credit ratings are presented by standards of Fitch credit ratings agency. No loans and advances to banks are overdue or impaired as at (2013: nil). (a) (b) Concentration of loans and advances to banks As at no banks (2013: nil) have balances that exceed 10% of equity. Mandatory reserves with the CBRF Under legislation of the Russian Federation, the Group subsidiary is required to maintain certain mandatory reserve. The mandatory reserve deposit is a non-interest bearing deposit calculated in accordance with regulations issued by the CBRF and whose withdrawability is restricted. 15

16 Notes to the consolidated interim condensed financial statements for the three months 16 Loans to customers Loans to corporate customers Loans to large corporate 201,836, ,915,808 Loans to small and medium size companies 22,848,923 35,784,153 Total loans to corporate customers 224,685, ,699,961 Loans to retail customers Car loans 88,502,176 76,369,442 Mortgage loans 33,307,734 17,943,436 Small business loans 16,530,679 16,664,846 Loans collaterised by cash 52, ,172 Private banking loans 151, ,894 Uncollateralised consumer loans 126,133, ,099,793 Total loans to retail customers 264,677, ,399,583 Gross loans to customers 489,363, ,099,544 Impairment allowance (39,291,991) (35,570,458) Net loans to customers 450,071, ,529,086 Movements in the loan impairment allowance by classes of loans to customers for the period are as follows: Loans to corporate customers Loans to retail customers Total Balance at the beginning of the period 13,845,687 21,724,771 35,570,458 Net charge 465,356 2,638,482 3,103,838 Write-offs (76,206) (143,713) (219,919) Effect of foreign currency translation 611, , ,614 Balance at the end of the period 14,846,322 24,445,669 39,291,991 Movements in the loan impairment allowance by classes of loans to customers for the period 31 March 2013 are as follows: Loans to corporate customers Loans to retail customers Total Balance at the beginning of the period 13,585,773 15,291,234 28,877,007 Net (recovery)/charge (154,816) 1,267,881 1,113,065 Recoveries 40,900 24,551 65,451 Effect of foreign currency translation (4,549) 41 (4,508) Balance at the end of the period 13,467,308 16,583,707 30,051,015 16

17 Notes to the consolidated interim condensed financial statements for the three months 16 Loans to customers, continued The following table provides information by types of loan products as at : Gross amount Impairment allowance Carrying amount Loans to corporate customers Loans to large corporate 201,836,945 (11,849,888) 189,987,057 Loans to small and medium size companies 22,848,923 (2,996,434) 19,852,489 Loans to retail customers Car loans 88,502,176 (1,052,919) 87,449,257 Mortgage loans 33,307,734 (2,306,498) 31,001,236 Small business loans 16,530,679 (5,275,583) 11,255,096 Loans collaterised by cash 52,390-52,390 Private banking loans 151,420 (537) 150,883 Uncollateralised consumer loans 126,133,114 (15,810,132) 110,322,982 Balance at the end of the year 489,363,381 (39,291,991) 450,071,390 The following table provides information by types of loan products as at : Gross amount KZT 000 Impairment allowance KZT 000 Carrying amount KZT 000 Loans to corporate customers Loans to large corporate 193,915,808 (10,639,263) 183,276,545 Loans to small and medium size companies 35,784,153 (3,206,424) 32,577,729 Loans to retail customers Car loans 76,369,442 (709,679) 75,659,763 Mortgage loans 17,943,436 (2,257,456) 15,685,980 Small business loans 16,664,846 (5,055,072) 11,609,774 Loans collaterised by cash 171,172 (481) 170,691 Private banking loans 150,894 (597) 150,297 Uncollateralised consumer loans 127,099,793 (13,701,486) 113,398,307 Balance at the end of the year 468,099,544 (35,570,458) 432,529,086 17

18 Notes to the consolidated interim condensed financial statements for the three months 16 Loans to customers, continued (a) Credit quality of loans to customers The following table provides information on the credit quality of loans to customers as at : Impairment Gross loans Impairment allowance Net loans allowance to gross loans, % Loans to corporate customers Loans to large corporate Loans without individual signs of impairment Standard not overdue loans 146,418,784 (2,424,267) 143,994, Overdue loans: - overdue less than 30 days 14,646,520 (129,037) 14,517, overdue days 19,096,297 (66,837) 19,029, overdue days 560,684 (1,962) 558, overdue more than 360 days 631,176 (8,975) 622, Total loans without individual signs of impairment 181,353,461 (2,631,078) 178,722, Loans with individual signs of impairment: - not overdue 3,924,258 (3,874,927) 49, overdue less than 90 days 4,063,114 (1,069,250) 2,993, overdue more than 90 days and less than 1 year 8,123,078 (1,044,605) 7,078, overdue more than 1 year 4,373,034 (3,230,028) 1,143, Total loans with individual signs of impairment 20,483,484 (9,218,810) 11,264, Total loans to large corporate 201,836,945 (11,849,888) 189,987, Loans to small and medium size companies Loans without individual signs of impairment Standard not overdue loans 14,002,520 (51,675) 13,950, Overdue loans: - overdue less than 30 days 782,635 (2,739) 779, overdue days 1,684,304 (19,987) 1,664, overdue days 719,446 (2,518) 716, overdue days 174,761 (612) 174, overdue more than 360 days 345,238 (4,606) 340, Total loans without individual signs of impairment 17,708,904 (82,137) 17,626, Loans with individual signs of impairment: - not overdue 4,469 (16) 4, overdue less than 90 days 4,800 (4,800) overdue more than 90 days and less than 1 year 567,331 (328,458) 238, overdue more than 1 year 4,563,419 (2,581,023) 1,982, Total loans with individual signs of impairment 5,140,019 (2,914,297) 2,225, Total loans to small and medium size companies 22,848,923 (2,996,434) 19,852, Total loans to corporate customers 224,685,868 (14,846,322) 209,839,

19 Notes to the consolidated interim condensed financial statements for the three months 16 Loans to customers, continued (a) Credit quality of loans to customers, continued Impairment Gross loans Impairment allowance Net loans allowance to gross loans, % Loans to retail customers Car loans - not overdue 81,934,385 (16,903) 81,917, overdue less than 30 days 2,868,218 (18,950) 2,849, overdue days 1,285,409 (85,421) 1,199, overdue days 849,012 (228,159) 620, overdue days 563,539 (191,078) 372, overdue more than 360 days 1,001,613 (512,408) 489, Total car loans 88,502,176 (1,052,919) 87,449, Mortgage loans - not overdue 26,131,243 (303,169) 25,828, overdue less than 30 days 1,054,250 (16,607) 1,037, overdue days 528,819 (7,672) 521, overdue days 1,124,078 (2,788) 1,121, overdue days 379,335 (8,170) 371, overdue more than 360 days 4,090,009 (1,968,092) 2,121, Total mortgage loans 33,307,734 (2,306,498) 31,001, Small business loans - not overdue 7,455,379 (46,561) 7,408, overdue less than 30 days 487,923 (20,813) 467, overdue days 356,750 (60,134) 296, overdue days 1,347,602 (743,253) 604, overdue days 633,611 (77,931) 555, overdue more than 360 days 6,249,414 (4,326,891) 1,922, Total small business loans 16,530,679 (5,275,583) 11,255, Private banking loans - not overdue 151,420 (537) 150, Total loans Private banking 151,420 (537) 150, Loans collaterised by cash - not overdue 48,832-48, overdue days 3,558-3,558 - Total loans collateralised by cash 52,390-52,390 - Uncollateralised consumer loans - not overdue 93,398,731 (46,657) 93,352, overdue less than 30 days 6,118,547 (107,101) 6,011, overdue days 4,297,050 (794,172) 3,502, overdue days 4,435,510 (2,157,085) 2,278, overdue days 7,327,801 (4,455,112) 2,872, overdue more than 360 days 10,555,475 (8,250,005) 2,305, Total uncollateralised consumer loans 126,133,114 (15,810,132) 110,322, Total loans to retail customers 264,677,513 (24,445,669) 240,231, Total loans to customers 489,363,381 (39,291,991) 450,071,

20 Notes to the consolidated interim condensed financial statements for the three months 16 Loans to customers, continued (a) Credit quality of loans to customers, continued The following table provides information on the credit quality of loans to customers as at : Impairment Gross loans Impairment allowance Net loans allowance to gross loans, KZT 000 KZT 000 KZT 000 % Loans to corporate customers Loans to large corporate Loans without individual signs of impairment Standard not overdue loans 175,374,898 (2,455,874) 172,919, Overdue loans: - overdue days 62,998 (246) 62, overdue days 474,453 (1,850) 472, overdue more than 360 days 590,841 (1,927) 588, Total loans without individual signs of impairment 176,503,190 (2,459,897) 174,043, Loans with individual signs of impairment: - not overdue 5,332,330 (4,267,956) 1,064, overdue less than 90 days 1,562,520 (749,940) 812, overdue more than 90 days and less than 1 year 6,798,337 (607,146) 6,191, overdue more than 1 year 3,719,431 (2,554,324) 1,165, Total loans with individual signs of impairment 17,412,618 (8,179,366) 9,233, Total loans to large corporate 193,915,808 (10,639,263) 183,276, Loans to small and medium size companies Loans without individual signs of impairment Standard not overdue loans 26,904,371 (124,464) 26,779, Overdue loans: - overdue less than 30 days 505,370 (1,971) 503, overdue days 371,260 (1,448) 369, overdue days 17,891 (70) 17, overdue days 280,732 (1,095) 279, overdue more than 360 days 265,412 (1,035) 264, Total loans without individual signs of impairment 28,345,036 (130,083) 28,214, Loans with individual signs of impairment: - not overdue 4,800 (1,155) 3, overdue less than 90 days 2,737,364 (502,345) 2,235, overdue more than 90 days and less than 1 year 1,059,221 (138,398) 920, overdue more than 1 year 3,637,732 (2,434,443) 1,203, Total loans with individual signs of impairment 7,439,117 (3,076,341) 4,362, Total loans to small and medium size companies 35,784,153 (3,206,424) 32,577, Total loans to corporate customers 229,699,961 (13,845,687) 215,854,

21 Notes to the consolidated interim condensed financial statements for the three months 16 Loans to customers, continued (a) Credit quality of loans to customers, continued Impairment Gross loans Impairment allowance Net loans allowance to gross loans, KZT 000 KZT 000 KZT 000 % Loans to retail customers Car loans - not overdue 72,403,428 (90,359) 72,313, overdue less than 30 days 1,497,963 (2,509) 1,495, overdue days 773,138 (1,754) 771, overdue days 494,662 (119,074) 375, overdue days 387,834 (111,237) 276, overdue more than 360 days 812,417 (384,746) 427, Total car loans 76,369,442 (709,679) 75,659, Mortgage loans - not overdue 11,453,483 (299,334) 11,154, overdue less than 30 days 1,343,731 (10,903) 1,332, overdue days 552,563 (7,197) 545, overdue days 353,485 (21,188) 332, overdue days 369,221 (61,009) 308, overdue more than 360 days 3,870,953 (1,857,825) 2,013, Total mortgage loans 17,943,436 (2,257,456) 15,685, Small business loans - not overdue 8,449,223 (169,777) 8,279, overdue less than 30 days 76,626 (2,313) 74, overdue days 1,366,019 (585,911) 780, overdue days 107,943 (32,578) 75, overdue days 760,303 (154,853) 605, overdue more than 360 days 5,904,732 (4,109,640) 1,795, Total small business loans 16,664,846 (5,055,072) 11,609, Loans collaterised by cash - not overdue 171,172 (481) 170, Total loans collateralised by cash 171,172 (481) 170, Private banking loans - not overdue 150,894 (597) 150, Total Private banking loans 150,894 (597) 150, Uncollateralised consumer loans - not overdue 100,481,680 (858,552) 99,623, overdue less than 30 days 4,724,230 (46,890) 4,677, overdue days 3,769,471 (39,829) 3,729, overdue days 3,939,109 (2,228,514) 1,710, overdue days 6,206,142 (4,135,909) 2,070, overdue more than 360 days 7,979,161 (6,391,792) 1,587, Total uncollateralised consumer loans 127,099,793 (13,701,486) 113,398, Total loans to retail customers 238,399,583 (21,724,771) 216,674, Total loans to customers 468,099,544 (35,570,458) 432,529,

22 Notes to the consolidated interim condensed financial statements for the three months 16 Loans to customers, continued (b) (i) Key assumptions and judgments for estimating the loan impairment Loans to corporate customers Loan impairment results from one or more events that occurred after the initial recognition of the loan and that have an impact on the estimated future cash flows associated with the loan, and that can be reliably estimated. Loans without individual signs of impairment do not have objective evidence of impairment that can be directly attributed to them. The objective indicators of loan impairment for loans to corporate customers include the following: overdue payments under the loan agreement; significant difficulties in the financial conditions of the borrower; deterioration in business environment or negative changes in the borrower s markets; negative force-majeure events. The Group estimates loan impairment for loans to corporate customers based on an analysis of the future cash flows for impaired loans and based on its past loss experience for portfolios of loans for which no indications of impairment has been identified. In determining the impairment allowance for loans to corporate customers, management makes the following key assumptions: historic period loss rate of %; a discount of between 15% and 50% to the originally appraised value if the property pledged is sold; a delay of 12 to 36 months in obtaining proceeds from the foreclosure of collateral. Changes in these estimates could affect the loan impairment provision. For example, to the extent that the net present value of the estimated cash flows differs by one percent, the impairment allowance on loans to corporate customers as at would be KZT 2,098,395 thousand lower/higher (2013: KZT 2,158,543 thousand lower/higher). (ii) Loans to retail customers The Group estimates loan impairment for loans to retail customers based on its past historical loss experience on each type of loan. The significant assumptions used by management in determining the impairment losses for loans to retail customers include: loss migration rates are constant and can be estimated based on the historic loss migration pattern for the past 2-6 years; recovery rates for uncollateralised loans are estimated based on historical cash recovery rates for the past 2-6 years; a discount of between 15% and 50% to the annually appraised value if the property pledged is sold; a delay of 12 months in obtaining proceeds from the foreclosure of collateral. Changes in these estimates could affect the loan impairment provision. For example, to the extent that the net present value of the estimated cash flows differs by plus minus three percent, the impairment allowance on loans to retail customers as at would be KZT 7,206,955 thousand lower/higher (2013: KZT 6,500,244 thousand lower/higher). 22

23 Notes to the consolidated interim condensed financial statements for the three months 16 Loans to customers, continued (c) (i) Analysis of collateral Loans to corporate customers The following table provides information on collateral and other credit enhancements securing loans to corporate customers, net of impairment, by types of collateral: Loans to customers, carrying amount Fair value of collateral - for collateral assessed as at reporting date Fair value of collateral - for collateral assessed as at loan inception date Fair value of collateral not determined Loans without individual signs of impairment Real estate 49,800,155 44,155,944 5,644,211 - Future contract revenues 32,279, ,279,874 Insurance 19,645, ,645,646 Grain 19,049,156 16,843,193 2,205,963 - Equipment 10,478,398 7,328,162 3,150,236 - Construction in progress 8,724,329 8,724, Motor vehicles 8,079,888 6,514,470 1,565,418 - Subsoil use 6,722,300 6,722, Goods in turnover 2,909, ,200 1,967,146 - Cash and deposits 2,302,025-2,302,025 - Guarantees 1,742, ,742,168 Other 5,230,565 4,849, ,052 - No collateral or other credit enhancement 29,385, ,385,300 Total loans without individual signs of impairment 196,349,150 96,080,111 17,216,051 83,052,988 Overdue or impaired loans Real estate 9,014,956 2,280,468 6,734,488 - Future contract revenues 1,723, ,723,043 Insurance 605, ,733 Equipment 601,813 81, ,656 - Motor vehicles 447, ,502 23,510 - Goods in turnover 259, ,371 - Cash and deposits 12,927-12,927 - Guarantees 1, ,199 Other 22,632-22,632 - No collateral or other credit enhancement 801, ,710 Total overdue or impaired loans 13,490,396 2,785,127 7,573,584 3,131,685 Total loans to corporate customers 209,839,546 98,865,238 24,789,635 86,184,673 23

24 Notes to the consolidated interim condensed financial statements for the three months 16 Loans to customers, continued (c) (i) Analysis of collateral, continued Loans to corporate customers, continued Loans to customers, carrying amount Fair value of collateral - for collateral assessed as at reporting date Fair value of collateral - for collateral assessed as at loan inception date Fair value of collateral not determined KZT 000 Loans without individual signs of impairment Real estate 48,467,604 35,463,008 13,004,596 - Future contract revenues 32,941, ,941,117 Insurance 31,877, ,877,015 Grain 22,042,993 22,042, Equipment 11,256,861 9,669,174 1,587,687 - Construction in progress 9,311,377 9,311, Motor vehicles 7,456,973 6,471, ,500 - Guarantees 2,522, ,522,224 Cash and deposits 2,151,523-2,151,523 - Goods in turnover 1,800, , ,067 - Subsoil use 45,171 45, Other 3,282,610 3,277,130 5,480 - No collateral or other credit enhancement 29,102, ,102,129 Total loans without individual signs of impairment 202,258,246 87,129,908 18,685,853 96,442,485 Overdue or impaired loans Real estate 5,632,792 3,509,482 2,123,310 - Goods in turnover 1,981,429 1,728, ,969 - Future contract revenues 1,792, ,792,788 Insurance 854, ,400 Equipment 510, ,837 - Motor vehicles 337, , ,933 - Cash and deposits 160, ,324 - Guarantees 5, ,032 No collateral or other credit enhancement 2,321, ,321,066 Total overdue or impaired loans 13,596,028 5,465,369 3,157,373 4,973,286 Total loans to corporate customers 215,854,274 92,595,277 21,843, ,415,771 Collateral obtained During the three months, the Group did not obtained certain assets by taking possession of collateral for loans to corporate customers (2013: nil). During the three months, the Group did not obtained certain assets by taking possession of collateral for loans to retail customers (2013: nil). 24

25 Notes to the consolidated interim condensed financial statements for the three months 16 Loans to customers, continued (d) (e) Industry and geographical analysis of the loan portfolio Loans to customers were issued primarily to customers located within the Republic of Kazakhstan who operate in the following economic sectors: Loans to corporate customers Wholesale trade 60,045,224 68,650,164 Agriculture, forestry and timber 33,921,015 33,685,073 Construction 28,968,694 28,950,432 Transport 20,636,961 14,587,091 Retail trade 12,802,203 13,081,639 Mining/metallurgy 12,162,219 13,751,948 Services 11,520,051 12,250,035 Manufacturing 10,956,372 11,250,637 Lease, rental and leasing 6,824,794 6,585,798 Foods production 5,833,756 5,962,130 Energy production and supply 3,909,895 3,574,595 Research and activities 3,549,616 3,407,717 Financial intermediary 2,250,286 3,073,755 Medical and social care 1,918,059 1,942,913 Real estate 1,206,045 1,336,098 Machinery production 960, ,764 Entertainment 643, ,241 Publishing 318, ,656 Other 6,257,590 5,780,275 Loans to retail customers Car loans 88,502,176 76,369,442 Mortgage loans 33,307,734 17,943,436 Small business loans 16,530,679 16,664,846 Private banking loans 151, ,894 Loans collaterised by cash 52, ,172 Uncollateralised consumer loans 126,133, ,099, ,363, ,099,544 Impairment allowance (39,291,991) (35,570,458) 450,071, ,529,086 Significant credit exposures As at the Group has 8 borrowers or groups of connected borrowers (2013: 7), whose loan balances exceed 10% of equity. The gross value of these loans as at is KZT 75,007,072 thousand (2013: KZT 56,119,420 thousand). 25

26 Notes to the consolidated interim condensed financial statements for the three months 16 Loans to customers, continued (f) Transfers of financial assets In December 2013, the Group sold to a third party a portfolio of mortgage loans with a carrying value of KZT 12,509,133 thousand for KZT 13,242,692 thousand and provided a guarantee to the buyer that it will repurchase individual loans back or exchange them for other individual loans if loans become delinquent for more than sixty days. The amount that will be repurchased or exchanged is limited to 20% of transferred financial assets at the date of the sale. The net gain recognised in the consolidated statement of profit or loss and other comprehensive income at the date of transfer amounted to KZT 707,582 thousand. The Group has determined that it has transferred some but not substantially all of the risks and rewards to the transferee, accordingly the Group retains control and continues to recognise the loans to the extent of its continuing involvement in that mortgages. The Group s continuing involvement with such transferred portfolio is recorded in the сonsolidated interim condensed statement of financial position in other assets (Note 18) of KZT 4,235,804 thousand with corresponding liability on continuing involvement included in other liabilities of KZT 3,527,198 thousand (Note 24) and the guarantee with the fair value of KZT 102,707 thousand recognised in other liabilities. This asset includes also an interest strip receivable of KZT 1,090,159 thousand which represents the right to withhold from the loan buyer a portion of interest receivable on mortgage loan portfolio sold. The Group has a right to receive 1.7% p.a. of the mortgage loan portfolio sold on a monthly basis. 17 Held-to-maturity investments Held by the Bank Government bonds Treasury notes of the Ministry of Finance of the Republic of Kazakhstan 4,516,717 14,074,495 Total government bonds 4,516,717 14,074,495 Pledged under sale and repurchase agreements Government bonds Treasury notes of the Ministry of Finance of the Republic of Kazakhstan 7,007,301 9,387,811 Total government bonds 7,007,301 9,387,811 11,524,018 23,462,306 The credit ratings are presented by standards of Fitch credit ratings agency. No notes or bonds are overdue or impaired as at (2013: nil). 26

27 18 Other assets Eurasian Bank JSC Notes to the consolidated interim condensed financial statements for the three months Debtors on letters of credit 5,617,821 3,265,562 Asset from continuing involvement (Note 16(f)) 4,235,804 4,235,721 Accrued commission income 1,392,028 1,158,797 Debtors on loan operations 879, ,089 Plastic cards settlements 523, ,003 Receivables from insurance company 3, ,710 Other 1,030, ,683 Impairment allowance (587,356) (548,429) Total other financial assets 13,094,501 10,415,136 Advances for capital expenditures 2,235,070 2,416,402 Taxes prepaid other than on income tax 390, ,916 Materials and supplies 215, ,075 Prepayments 167, ,487 Other 27,888 25,880 Total other non-financial assets 3,036,386 2,995,760 Total other assets 16,130,887 13,410,896 Asset from continuing involvement as at in amount KZT 4,235,804 thousand (2013: KZT 4,235,721 thousand) arose as a result of loans sale to mortgage company in December Deposits and balances from banks Term deposits 14,110,086 13,458,364 Vostro accounts 323, ,269 14,433,173 14,116,633 As at the Group has no banks whose balances exceed 10% of equity (2013: nil). 20 Current accounts and deposits from customers Current accounts and demand deposits - Retail 15,696,658 15,210,807 - Corporate 66,283,415 50,526,171 Term deposits - Retail 143,495, ,445,122 - Corporate 255,850, ,491, ,325, ,673,786 As at, the Group maintains customer deposit balances of KZT 3,068,245 thousand (2013: KZT 3,095,332 thousand) that serve as collateral for loans and unrecognised credit instruments granted by the Group. As at, the Group has 13 customers (2013: 11 customers), whose balances exceed 10% of equity. These balances as at are KZT 185,230,511 thousand (2013: KZT 137,200,872 thousand). 27

28 Notes to the consolidated interim condensed financial statements for the three months 21 Debt securities issued Par value 31,820,649 31,820,649 Premium 15, ,195 Accrued interest 1,285, ,512 33,121,947 32,786,356 A summary of bond issues at and is presented below: Issue registration date Maturity Bonds of the fifth issue 09-Jul Sep-23 Carrying amount 31 March December Coupon Effective 2013 rate rate inflation +1% 8.26% 7,460,938 7,595,067 inflation +1% 7.89% 1,383,919 1,404,906 Bonds of the seventh issue 24-Sep Jan-19 Bonds of the ninth issue 15-Oct Oct % 9.94% 22,011,890 21,484,606 Bonds of the tenth issue 13-Jul Jul % 7.60% 2,265,200 2,301,777 33,121,947 32,786, Subordinated debt securities issued Par value 40,000,000 40,000,000 Discount (4,788,880) (4,959,365) Accrued interest 777, ,653 35,988,523 35,669,288 As at subordinated debt securities issued comprise unsecured obligations of the Group. In case of bankruptcy, the repayment of the subordinated debt securities would be made after repayment in full of all other liabilities of the Group. A summary of subordinated debt issues at and is presented below: Issue registration date Maturity Bonds of the forth issue 29-Jun Sep-14 Coupon rate Effective rate Carrying amount 31 March December 2013 inflation +1% 11.34% 9,866,369 9,938,138 Bonds of the sixth issue 04-Aug Sep % 10.96% 5,046,328 5,183,652 Bonds of the eighth issue 15-Oct Oct-23 inflation +1% 12.14% 11,152,763 10,832,008 Bonds of the eleventh issue 20-Nov Dec % 8.64% 9,923,063 9,715,490 35,988,523 35,669,288 28

29 Notes to the consolidated interim condensed financial statements for the three months 23 Other borrowed funds Loans from state financial institutions 16,409,420 17,783,211 Loans from the Ministry of Finance of the Republic of Kazakhstan 1,420,592 1,344,023 Loans from banks 1,135,259 2,283,115 18,965,271 21,410,349 As at, the terms and conditions of the loans outstanding are as follows: Average interest rate Year of maturity Carrying amount Currency Damu Entrepreneurship Development Fund JSC KZT % ,409,420 The Ministry of Finance of the Republic of NBRK refinancing Kazakhstan KZT rate ,022,793 The Ministry of Finance of the Republic of Kazakhstan USD Libor +1% ,799 Foreign banks USD % ,135,259 18,965,271 As at, the terms and conditions of the loans outstanding are as follows: Average interest rate Year of maturity Carrying amount Currency Damu Entrepreneurship Development Fund JSC KZT % ,783,211 The Ministry of Finance of the Republic of NBRK refinancing Kazakhstan KZT rate ,009,017 The Ministry of Finance of the Republic of Kazakhstan USD Libor +1% ,006 Foreign banks EUR 6.47% ,366 Foreign banks USD % ,143,749 21,410,349 29

30 Notes to the consolidated interim condensed financial statements for the three months 24 Other liabilities Prepayments for loans 3,757,471 4,070,655 Liability from continuing involvement (Note 16(f)) 3,527,198 3,905,380 Payables to borrowers on lending operations 1,130, ,836 Accrued administrative expenses 441, ,707 Plastic cards settlements 378, ,062 Capital expenditures payables 251, ,152 Payables to obligatory deposit insurance Fund 153, ,528 Payables to insurance company 125, ,315 Other financial liabilities 754, ,039 Total other financial liabilities 10,519,811 9,896,674 Other taxes payable 687, ,518 Vacation reserve 560, ,191 Deferred income 460, ,787 Amounts payable to employees 377, ,031 Other non-financial liabilities 299 2,326 Total other non-financial liabilities 2,086,076 2,198,853 Total other liabilities 12,605,887 12,095,527 Prepayments for loans comprise payments made by retail borrowers ahead of schedule. These payments are settled against the loan balance at the date the instalments fall due. 25 Share capital (a) Issued capital and share premium Issued and outstanding share capital as at and comprised of the following fully paid ordinary shares: Shares Shares Issued at KZT ,368,300 8,368,300 Issued at KZT 1, ,631,500 2,631,500 Issued at KZT 1, ,930,452 2,930,452 Issued at KZT 6, ,280,881 2,280,881 Total issued and outstanding shares 16,211,133 16,211,133 The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at annual and general meetings of the Bank. (b) Book value per share Under the listing rules of the Kazakh Stock Exchange the Group should present book value per share in its consolidated financial statements. The book value per share is calculated dividing net assets less intangible assets, which organization will not be able to realize to third parties in order to reimburse cash or cash equivalents paid and/or receive economic benefits, by number of outstanding ordinary shares. As at the book value per share was KZT 3, (2013: KZT 3,442.23). 30

31 Notes to the consolidated interim condensed financial statements for the three months 26 Earnings per share The calculation of earnings per share is based on the net profit, and a weighted average number of ordinary shares outstanding during the period, calculated as shown below. The Group has no dilutive potential ordinary shares. 31 March 2013 Net profit 1,356,927 3,765,578 Weighted average number of ordinary shares 16,211,133 16,211,133 Basic and diluted earnings per share, in KZT Commitments The Group has outstanding commitments to extend loans. These commitments take the form of approved loans and credit card limits and overdraft facilities. The Group provides financial guarantees and letters of credit to guarantee the performance of customers to third parties. These agreements have fixed limits and generally extend for a period of up to five years. The Group applies the same credit risk management policies and procedures when granting credit commitments, financial guarantees and letters of credit as it does for granting loans to customers. The contractual amounts of commitments are set out in the following table by category. The amounts reflected in the table for commitments assume that amounts are fully advanced. The amounts reflected in the table for guarantees and letters of credit represent the maximum accounting loss that would be recognised at the reporting date if counterparties failed completely to perform as contracted. Contracted amount Loan and credit line commitments 60,002,015 48,598,277 Guarantees 18,982,030 19,233,613 Letters of credit 6,784,438 5,944,911 85,768,483 73,776,801 Management expects that loan and credit line commitments, to the extent demanded, will be funded from amounts collected from scheduled repayments of current loan portfolio. The total outstanding contractual commitments above do not necessarily represent future cash requirements, as these commitments may expire or terminate without being funded. As at the Group has 1 customer whose balances exceed 10% of total commitments (2013: 1 customer). The value of these commitments as at is KZT 8,738,880 thousand (2013: KZT 7,394,880 thousand). 31