Investor Presentation (H1 2017) September 2017

Transcription

1 Investor Presentation (H1 2017) September 2017

2 Disclaimer By attending the meeting where the presentation is made, or by reading the presentation slides, you agree to the following limitations and notifications and represent that you are a person who is permitted under applicable law and regulation to receive information of the kind contained in this presentation. This presentation has been prepared by (the Bank ). The Bank has obtained the information in this presentation from sources it believes to be reliable. Although the Bank has taken all reasonable care to ensure that the information herein is accurate and correct, the Bank makes no representation or warranty, express or implied, as to the accuracy, correctness or completeness of such information. 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3 Banking group and strategy overview

4 group at a glance Top 5 privately-owned Russian banking group and top 10 amongst all Russian banks with strong growth story Growth CAGR: 47% (Sector CAGR: 16%) Total Assets #5 / #9 Banking Sector Rankings 1 (amongst privately-owned Russian banks / amongst all Russian banks) Retail Deposits #3 / #7 Retail Loans #10 / #15 Corporate Deposits #9 / #14 Corporate Loans #12 / #18 as a major participant in banking sector consolidation since 2014, including the acquisition of MDM Bank In , group acquired MDM Bank and several smaller institutions. In addition, it won tenders for the financial rehabilitation of Moscomprivatbank (renamed Digital) and the Rost group of banks Completion of the / MDM Bank merger in November 2016 preceded by the merger of a number of smaller institutions marks a key milestone in s development Universal banking group with ~4.8 million clients ~4,000 corporate customers ~4.7 million retail customers ~90,000 SME customers Customer Loans by Segment 2 Customer Accounts by Segment 2 78% 19% 3% 77% 16% 7% CIB RB SME RB CIB SME (CIB Corporate & Investment Banking; RB Retail Banking; SME SME Banking) Multichannel distribution network with strong focus on digital channels >400 offices Presence in 64 regions and in 173 cities ~15,000 ATMs 3 ~23,000 POS terminals #1 internet bank (Russia) 4 #2 mobile bank (Russia) 4 Committed shareholders supporting business growth Strategy up to 2020 to cement position as a leading privately-owned Russian banking group >US$ 700 mln of equity injections and subordinated loans provided by the shareholders to group banks since 2008 Maintain and strengthen s position as a top 10 Russian bank by total assets Further diversify the Bank s asset and liability base Achieve efficiency and profitability metrics in line with market leading peers 1 Rankings based on Fitch Russian Banks Datawatch (6M 2017), consolidated by group and excluding subsidiaries of international banks 2 Based on H IFRS financial statements 3 Own ATM network of, plus reciprocal partnership arrangements 4 position based on Markswebb Rank & Report 2017 (in Russia) ( Ratings S&P: B / Stable / B (June 2017) 3

5 Active participant in Russian banking sector consolidation Acquisitions and financial rehabilitations have allowed the Bank to build scale, strengthen presence in specific regions, and gain expertise / technologies CAGR: 47% Legal merger of most acquired banks took place in 2016 Technological integration of B&N Bank / MDM Bank is on track to be fully completed by the end of the 2017 Technology acquisition: - Acquisition of Moscomprivatbank through financial rehabilitation provided advanced card business technologies - Access to leading internet and mobile bank platform with the acquisition of MDM Bank Strengthening regional presence: - Acquisition of material market share in regions of Siberia and the Urals through the acquisition of MDM Bank - Strengthening of presence in specific regions through acquisition of other banks (e.g. Krasnoyarsk, Tver, Smolensk) Note: CAGR for the Russian banking sector: 16% MDM Bank ,143 1, H Financial Rehabilitation BashInvestBank Total assets (RUB bln), IFRS Acquisition Financial Rehabilitation Moscomprivatbank Rost Group Acquisition of assets & liabilities Probusinessbank 1, Acquisition Uralprivatbank Europlan Bank 2 1 Combined / MDM Bank figures for 2015 based on unaudited pro forma consolidated IFRS financials 2 MDM Bank was acquired in 2015 by shareholders and subsequently merged with in

6 supporting s entry into the ranks of the largest privately-owned Russian banks Top 10 Russian Banks by Total Assets RUB trln Market share: : 1.6% SIFI 5.1 SIFI SIFI SIFI SIFI SIFI SIFI SIFI SIFI 1.1 SIFI Sberbank VTB GPB RAB Otkritie Alfa CBM PSB B&N UniCredit ROSSIYA State-owned bank Privately-owned bank Subsidiary of international bank SIFI Systemically important financial institution (per CBR definition) Top 10 Russian Banks by Retail Deposits RUB trln 11.0 Market share: : 2.4% 2.8 SIFI SIFI SIFI SIFI SIFI SIFI SIFI SIFI SIFI Sberbank VTB RAB Alfa GPB Otkritie B&N PSB Raiffeisen CBM Sovcom SIFI State-owned bank Privately-owned bank Subsidiary of international bank SIFI Systemically important financial institution (per CBR definition) Note: rankings based on Fitch Russian Banks Datawatch (6М 2017) consolidated by group 1 On 29 August 2017, the Central Bank of Russia announced that it was putting FC Otkritie into temporary administration and would become the controlling shareholder with a shareholding of not less than 75% 5

7 Multichannel distribution network with nationwide reach Distribution network Mobile application >400 offices Presence in 64 regions and in 173 cities ~15,000 ATMs 2 ~23,000 POS terminals #1 internet bank (Russia) 3 #2 mobile bank (Russia) 3 Internet Bank #1 Internet Bank for retail clients (Russia) 3 Kaliningrad St. Petersburg Pskov Murmansk Smolensk Novgorod Arkhangelsk Naryan-Mar Tver Orel Moscow Syktyvkar Kursk Nizhny Novgorod Voronezh Rostov Kazan Ulyanovsk Perm Saratov Khanty-Mansiysk Yekaterinburg Krasnodar Samara Surgut Volgograd Ufa Tyumen Stavropol Orenburg Chelyabinsk Kurgan Tomsk Omsk Krasnoyarsk Novosibirsk Kemerovo Barnaul Gorno-Altaisk Abakan Irkutsk Ulan-Ude Chita Khabarovsk Vladivostok Best Mobile Banking App in Central & Eastern Europe 4 #2 Mobile Bank for retail clients (Russia) 3 + International presence: Athens Branch (Greece) Market share key 1 : 3-5% 1%-3% <1% 0% 1 Calculated as the total pro forma market share of the combined banking group s client business in each region as at 31 Dec 2016 based on adapted CBR data 2 Own ATM network of, plus reciprocal partnership arrangements 3 position based on Markswebb Rank & Report 2017 (in Russia) ( 4 Global Finance: 2016 World s Best Digital Banks Awards 6

8 Shareholders with a consistent track record of support Beneficial Shareholder Structure of (voting shares) Key Shareholder Capital Injections M. Gutseriev 35.5% Other 3.4% 2016 Circa RUB 9 bln capital injection through the purchase of problem loans RUB 0.7 bln conversion of subordinated loans previously made by shareholders into equity US$ 56 mln conversion of subordinated loans previously made by shareholders into equity M. Shishkhanov 61.1% RUB 6 bln Tier 1 capital injection through additional share issue RUB 6 bln conversion of subordinated loans previously made by shareholders into equity US$ 150 mln of Tier 2 subordinated loans converted into perpetual Tier 1 capital instruments US$ 133 mln of subordinated loans (in two tranches: US$ 56 mln and US$ 77 mln) with subsequent conversion into perpetual Tier 1 instruments RUB 4 bln Tier 1 capital injection through additional share issue RUB 1.8 bln Tier 1 capital injection Note: Beneficial ownership structure as at 16 August Beneficial ownership shares are calculated based proportionally on shareholdings in companies under joint ownership. In July 2017, Hanberg Finance (owned by Мikhail Gutseriyev) applied to the Federal Antimonopoly Service (FAS) for permission to increase ownership in to control. Upon approval from FAS, it is planned that Mr. Gutseriev will increase his shareholding to above 50% RUB 1 bln subordinated loan RUB 3 bln Tier 1 capital injection through additional share issue RUB 2 bln Tier 1 capital injection US$ 50 mln subordinated loan RUB 3 bln Tier 1 capital injection through additional share issue RUB 1 bln Tier 1 capital injection RUB 1.5 bln Tier 1 capital injection through additional share issue Capital injections into (pre-merger) Capital injections into MDM Bank (pre-merger) 7

9 Corporate governance Board of Directors Shareholder participation in Board of Directors Size 13 members Strategy & Corporate Governance Committee Committees Audit Committee Nominations & Remuneration Committee Risk Management Committee Mikhail Gutseriev Chairman of BoD Key management Mikail Shishkhanov Member of BoD (CEO until May 2017) Expertise BoD expertise includes commercial and investment banking, consulting, risk management, corporate governance and audit On average, BoD members have more than 20 years of relevant experience Yevgeny Davydovich CEO Alexander Lukin First Deputy CEO Experience Board Members, inter alia, have experience working in international companies: EBRD, BNP Paribas, Arthur Andersen, Ernst & Young and Salomon Smith Barney Alexandra Volchenko First Deputy CEO Petr Morsin First Deputy CEO 8

10 Merger / integration of group banks progressing according to plan 2016 June 2016 November 2016 Июнь 2016 г. Kedr Bank Completion of legal merger and technological integration Smolensk / Surgut Completion of legal merger and technological integration Tver Completion of legal merger and technological integration / Murmansk / MDM Bank Completion of legal merger March Q Stolitsa Completion of legal merger Europlan Bank ( Stolitsa) Uralprivatbank Legal merger into to be completed in Q Technological integration of / MDM Bank to be completed Note: See slide 27 for more details on individual banks 9

11 Overview of group target business model Group objective Systemically important Top 10 universal bank at the core of a financial-industrial group Business unit objectives Corporate & Investment Bank Creation of a Top 10 CIB with a focus on building a segmental model of coverage and industrial expertise Retail & SME Bank Transformation of the business model into a transactional bank for retaining and monetising the client base, combined with building up a competitive advantage on the basis of digital banking Operational objectives Building an operating model, ensuring flexibility and low cost of operations, including efficient organisation, optimised processes and a streamlined IT infrastructure 10

12 Business segment overview Corporate & Investment Banking (CIB) ~4,000 customers #9 / #14 by corporate deposits 1 #12 / #18 by corporate loans 1 Retail Banking (RB) ~4.7 mln customers #3 / #7 by retail deposits 1 #10 / #15 by retail loans 1 SME Banking (SME) ~90,000 customers #8 by loans to individual entrepreneurs 2 #17 by SME loans issued in Rankings based on Fitch Russian Banks Datawatch (6M 2016), consolidated by group, show ranking amongst privately-owned Russian banks and all Russian banks 2 Expert RA ranking for 2016: Customer Loans Customer Accounts H Segmental Structure RB 19% SME 3% CIB 78% CIB 16% SME 7% RB 77% Target 2020 Segmental Structure RB and SME 34% Customer Loans CIB 66% CIB 34% Customer Accounts RB and SME 66% 11

13 Strategic focus Corporate & Investment Banking Retail Banking SME Banking Focus on lending to low-risk clients and maintaining sector diversification of the loan portfolio Focus on attracting wholesale deposits from blue-chip companies, including stateowned companies Growing the share of current accounts in total customer funding Increasing cross-selling Developing product expertise in DCM and structured finance Developing flow business Focus on clients in the Bank s target segments (mid-level to high income bracket, payroll projects) Reduction of the Bank s physical branch network and increasing the share of operations conducted through remote channels Increasing clients transactional activity Increasing cross-selling Focus on risk-free fee & commission products (payments, transfers, FX operations etc) Growing the share of current accounts in total customer funding Development of mortgage products with subsequent securitisation Target share of collateralised / uncollateralised credit products: 30% / 70% Development of transactional business on the basis of the Bank s digital platform with a focus on micro and small business segments Broadening the product offering and the functionality of digital channels Increasing clients transactional activity Focus on risk-free products Increasing the share of current accounts in total customer funding The Bank s strategy is focused, inter alia, on reducing funding costs and operating expenses, whilst boosting the Bank s core operating income 12

14 H financial results overview Note: Due to the merger, on 18 November 2016, of into MDM Bank (which was simultaneously renamed ), s 2016 audited IFRS income statement includes the financial results of MDM Bank for the full-year 2016, whilst it only includes the financial results of for the period from the date of merger on 18 November to 31 December The audited consolidated 2016 IFRS financial statements present balance sheet and income statement figures for the comparative period of 2015 for MDM Bank only and the H interim IFRS financial statements present income statement figures for the comparative period of H for MDM Bank only. In this presentation, the FY 2016 income statement is presented on a pro forma consolidated basis ( and MDM Bank) for the full 12 months of 2016, whilst comparative income statement figures for 2015 and H are also presented on a pro forma consolidated basis (the 2015 balance sheet is presented both standalone and pro forma consolidated with MDM Bank).

15 Key H financial highlights P&L HIGHLIGHTS Stable core operating income growth: Core operating income grew by 21.4% to RUB 21.0 billion: Net interest income (before provisions) increased by 15.5% to RUB 15.1 billion Net interest margin expanded to 3.1% (H1 2016: 2.9%) Net fee & commission income grew by 40.0% to RUB 5.8 billion Operating expenses decreased by 11.0% year-on-year; operating expenses as a share of average assets decreased to 2.6% from 3.1% in H Bottom line profitability: Net profit: RUB 1.2 billion Total comprehensive income: RUB 0.7 billion BALANCE SHEET HIGHLIGHTS Slight total asset growth in H (+4%) following several years of above-market growth NPL ratio (90+ days overdue) decreased to 7.5% (YE 2016: 8.1%), whilst provision coverage remained at a high 206% (201% as at YE 2016) Liquid assets accounted for 22% of total assets Capital position with material regulatory capital adequacy buffers as at end H1 2017: IFRS Basel I: Tier 1 CAR: 11.4%; Total CAR: 15.0% CBR Basel III: N1.1: 8.5%; N1.2: 10.4%; N1.0: 13.7% 14

16 Overview of assets and liabilities Assets Structure FX Share of Assets, H RUB bln 818 2% 6% 12% + MDM Bank pro forma % 5% 5% Share of 7% 8% liquid assets 9% 13% 1 19% +4% Share of liquid assets 1 22% % 6% 9% Other assets Cash & equivalents Investment securities Total assets FX: 11% FX: 31% RUB: 69% RUB: 69% Loans to customers FX: 31% FX: 18% 53% 41% 53% 56% Due from banks RUB: 89% RUB: 82% 27% 34% 25% 24% Loans to customers RUB: 79% RUB bln 4% YE 2015 YE 2015 YE 2016 End H % 16% 64% + MDM Bank pro forma 2% Liabilities Structure % БИНБАНК + МДМ Банк проформа 3% 12% 12% +4% БИНБАНК 14% 15% 12% 12% 71% 73% 71% YE 2015 YE 2015 YE 2016 End H % The majority of interbank lending is to Rost Bank see slide 28 for additional details Other liabilities Due to banks Debt securities Customer accounts FX: 14% FX Share of Liabilities, H Total liabilities RUB: 86% RUB: 19% RUB: 82% FX: 19% FX: 18% RUB: 81% FX: 82% Customer accounts RUB: 19% FX: 14% RUB: 86% 1 Liquid assets include: cash & cash equivalents, investment securities and due from banks with a maturity of less than 1 month 15

17 Capital position with material regulatory capital adequacy buffers Basel IFRS Capital Adequacy Ratios 1 (enlarged) (enlarged) Total CAR 10.4% 14.5% 15.0% RUB bln % % 9.0% 3.5% 3.6% 11.0% 11.4% YE 2015 YE 2016 End H YE 2015 YE 2016 End H Tier 1 capital Tier 2 capital Tier 1 capital Tier 2 capital CBR Basel III Regulatory Capital Adequacy Ratios (RAS) enlarged enlarged enlarged CBR requirements 2 % 15 Total CAR 11.4% 13.9% 13.7% 14.5% 8.0% N1.0 min % 4.1% 3.3% 3.6% 3.0% 1.5% 1.9% 2.0% 2.3% 9.8% 10.4% 8.5% 10.9% 8.9% 8.3% 6.1% YE 2015 YE 2016 End H August % 2.00% T2 1.50% AT1 N1.1 min 4.5% 4.50% Core Tier 1 Regulatory minimums N1.2 min 6.0% CET (N1.1) Additional tier 1 Tier 2 capital 1 IFRS capital adequacy as at YE 2015 in accordance with Basel II, as at YE 2016 and H in accordance with Basel I. All capital figures and capital adequacy ratios for 2014 and 2015 are for on a standalone basis 2 Systemically importance buffer is not applicable for, whilst counter cyclical buffer is zero 16

18 Loan portfolio overview In H1 2017, s gross loan portfolio remained flat overall (growth of 0.4%). Corporate loans grew by 4.1%, whilst retail and SME loans contracted by 8.6% and 0.9% respectively, the latter being primarily attributable to : Sale of and write-off of problem loans Tightening of lending criteria in the retail and SME segments, which have been more exposed to the economic downturn RUB bln 231 4% 20% 76% + MDM Bank pro forma Gross Loan Portfolio % 21% 75% -23% % 4% 3% 23% 21% 73% 76% SME loans Retail loans Corporate loans Gross Loan Portfolio by Sector, H Food & agricultural 2% Chemicals 3% Energy 6% Construction 7% YE 2015 YE 2015 YE 2016 End H Manufacturing 2% Transport 2% Other 1% Auto loans 3% Finance 22% Mortgage loans 16% Gross Retail Loan Portfolio by Segment, H Refinanced loans 3% Credit cards 39% Retail trade 9% Individuals 21% Real estate 11% Wholesale trade 14% Consumer loans 38% 17

19 Asset quality, cost of risk and provision coverage NPL Ratio (90+) NPLs (90+), Provisions and Coverage % MDM Bank pro forma 7.4% 8.1% 7.5% RUB bln MDM Bank pro forma БИНБАНК Provisions / NPLs 184% 201% 206% % MDM Bank % YE 2015 YE 2016 End H YE 2015 YE 2016 End H NPL Ratio NPL Provisions RUB bln NPL Ratio Provisions / NPLs NPLs (90+) and Provisions by Segment, H % 7.7% 23.6% 450.4% 110.5% 93.5% Corporate Loans SME Loans Retail Loans % Cost of Risk (customer lending) 1 + MDM Bank pro forma БИНБАНК 7.8% 4.1% 1.9% 2 2.4% FY 2015 FY M M 2017 NPL Provisions 1 Cost of risk for FY 2015 does not include loan impairment losses related to the deconsolidated Rost Bank; cost of risk for FY 2016 and 6M 2017 does not include provisions in relation to interbank lending to Rost Bank FY 2016 and 6M 2017 interbank cost of risk: 2.4% and -0.8% respectively 2 Pro forma figures for 2016 were adjusted/corrected to take into account comments from E&Y as part of its audit review of PJSC for the period ended 18 November

20 Diversified funding underpinned by strong retail deposit base Liability Structure, end H Customer Funding by Segment + MDM Bank pro forma Due to the CBR 5% Due to banks 9% Other 3% RUB bln MDM БИНБАНК + МДМ Банк Bank pro forma проформа % +2% % 22% 23% Debt securities 12% Corporate customers 16% Retail customers 55% Customer accounts 71% 19% 80% 78% 77% 81% YE 2015 YE 2015 YE 2016 End H Retail customer accounts Corporate customer accounts Customer Funding by Account Type + MDM Bank pro forma Deposit Concentration and Related Party Funding + MDM Bank pro forma 12% 15% 13% 9.9% 8.1% 9.2% 10.4% 10% 90% 88% 85% 87% 4.2% 3.3% 1 1.0% 1 4.5% 1 YE 2015 YE 2015 YE 2016 End H YE 2015 YE 2015 YE 2016 End H Term deposits Current / on demand accounts Top 20 depositors / total customer accounts Related party funding / total liabilities 1 Related party funding as at YE 2015, YE 2016 and end H does not include perpetual subordinated debt provided by the controlling shareholders, which is classified as equity. 19

21 Stable core operating income growth The Bank s core operating income has demonstrated stable growth, inter alia due to the material increase in business volumes over the past 24 months and decreasing funding costs 6M 2017 core / recurring operating income accounted for >95% of total operating income In line with broader sector trends, the Bank s net interest margin (NIM) contracted materially due to the impact on funding costs of the CBR s sharp key rate hike in December 2014, however it has been gradually recovering RUB bln Adjusted Operating Income 1 + MDM Bank pro forma % FY 2015 FY M M 2017 Other operating income Net fee & commission income % Net trading & FX gains / losses Net interest income RUB bln 0 Net Interest Margin Core Operating Income + MDM Bank pro forma % +18% +47% FY 2015 FY M M 2017 Net interest income % +40% +15% 21.0 Net fee & commission income + MDM Bank pro forma % 5,0 4,0 3,0 2.7% 3.1% 2.9% 3.1% 2,0 1,0 0,0 FY 2015 FY M M Adjusted operating income calculated excluding s one-off income gains from the consolidation and deconsolidation of subsidiary banks (2015), and gains from the disposal of subsidiaries (2016). 2 Pro forma figures for 2016 were adjusted/corrected to take into account comments from E&Y as part of its audit review of PJSC for the period ended 18 November

22 Integration and cost optimisation delivering a reduction in operating expense base s operating expenses decreased by 11.0% in 6M 2017 year-on-year, as the Bank s cost-cutting programme implemented in 2016 including branch network reduction of circa 25% and staff headcount reduction of 16% began to deliver results group is in the process of implementing an integration plan, which is expected to deliver further reductions in the underlying cost base through synergies RUB bln Operating Expenses + MDM Bank pro forma +3% % -11% % +1% -5% FY 2015 FY M M 2017 Staff costs Other operating expenses Cost / Income Ratio and Operating Expenses / Average Assets + MDM Bank pro forma % % % 54% 1 66% 68% % 3.4% 2.9% 3.1% 2.6% FY 2015 FY M M 2017 Операционные Operating expenses расходы / Average / Средниые assets активы Cost / income ratio Adjusted cost / / income ratio ratio 2 1 Pro forma figures for 2016 were adjusted/corrected to take into account comments from E&Y as part of its audit review of PJSC for the period ended 18 November Adjusted cost / income ratio calculated excluding: s one-off gains from the consolidation and deconsolidation of subsidiary banks (2015), and gains from the disposal of subsidiaries (2016) 21

23 Additional materials

24 : balance sheet summary Balance Sheet Summary (IFRS), RUB mln End H YE 2016 Change end H / YE 2016 Assets Cash and cash equivalents % Due from banks % Investment securities / Financial assets AFVTPL % Loans and advances to customers % Corporate loans % Retail loans % Other % Total assets % Liabilities Due to banks % Customer accounts % Retail customer accounts % Corporate customer accounts % Debt securities in issue % Subordinated debt % Deposits from Deposit Insurance Agency % Other % Total liabilities % Total equity % Key ratios NPL ratio 7.5% 8.1% -0.6 p.p. Provision coverage ratio 206% 201% 5 p.p. Tier 1 Capital ratio (Basel I) 11.4% 11.0% 0.4 p.p. Total Capital ratio (Basel I) 15.0% 14.5% 0.5 p.p. CBR N1.1 ratio (Basel III) 8.5% 8.3% 0.2 p.p. CBR N1.2 ratio (Basel III) 10.4% 9.8% 0.6 p.p. CBR N1.0 ratio (Basel III) 13.7% 13.9% -0.2 p.p. 1 Including Mandatory cash balances with the CBR 2 Including Due to the CBR 23

25 : H income statement summary Income Statement Summary (IFRS), RUB mln + MDM Bank pro forma 6M M 2016 Change 6M 2017 / 6M 2016 Net interest income % Gains less losses from trading, available-for-sale financial assets and foreign exchange, net n.m. Net fee and commission income % Other income, net % Total operating income % Operating expenses (14 416) (16 189) -11.0% Staff costs (7 128) (7 532) -5.4% Administrative and other operating costs (7 288) (8 657) -15.8% Net operating income before impairment losses % Loan impairment losses (4 228) (4 734) -10.7% Other (impairment losses)/provision reversals (1 606) (242) n.m. Profit (loss) on fair value adjustment for financial instruments 5 0 n.m. Losses from revaluation of investment property 0 (1) n.m. Profit (loss) before tax % Profit (loss) after tax % Other comprehensive income/(loss) (536) 362 n.m. Total comprehensive income / (loss) % Key ratios Return on average equity (based on total comprehensive income) 1.6% 5.2% -3.6 p.p. Return on average equity (based on net income) 2.9% 4.3% -1.4 p.p. Net interest margin (NIM) 3.1% 2.9% 0.2 p.p. Cost / Income ratio (CIR) 68.0% 66.1% 1.9 p.p. Cost of risk (customer loans) 1 4.1% 2.4% 1.7 p.p. 1 6M 2017 cost of risk does not include provisions in relation to interbank lending (to Rost Bank). 6M 2017 interbank lending cost of risk was -0.8%. 24

26 : FY 2016 income statement summary FY 2016 Income Statement Summary (IFRS), RUB mln + MDM Bank pro forma FY FY 2015 Change FY 2016 / FY 2015 FY 2015 Net interest income % Gains less losses from trading, available-for-sale financial assets and foreign exchange, net % Net fee and commission income % Other income, net % including one-offs % Total operating income % Operating expenses (31 870) (30 911) 3.1% (20 106) Staff costs (13 754) (13 555) 1.5% (7 338) Administrative and other operating costs (18 116) (17 356) 4.4% (12 768) Net operating income before impairment losses % Loan impairment losses (18 910) (74 397) -74.6% (53 656) Other (impairment losses)/provision reversals (1 544) (1 820) -15.2% (741) Profit (loss) on fair value adjustment for financial instruments 339 (864) % 0 Loss from investment property (1 015) (1 996) -49.1% 0 Profit (loss) before tax (24 678) % 297 Profit (loss) after tax 728 (21 364) % 69 Other comprehensive income/(loss) (1 325) % Total comprehensive income / (loss) (597) (15 050) -96.0% Key ratios Return on average equity (based on total comprehensive income) -0.7% -22.0% 21.3 p.p. 7.8% Return on average equity (based on net income) 0.9% -31.2% 32.1 p.p. 0.2% Net interest margin (NIM) 3.1% 2.7% 0.4 p.p. 3.2% Cost / Income ratio (CIR) 53.7% 36.2% 17.5 p.p. 26.9% Adjusted cost / income ratio (CIR) % 58.7% -4.7 p.p. 47.7% Cost of risk 3 1.9% 7.8% -5.9 p.p. 5.8% 1 Pro forma figures for 2016 were adjusted/corrected to take into account comments from E&Y as part of its audit review of PJSC for the period ended 18 November Adjusted cost / income ratio calculated excluding: s one-off income gain on initial recognition of financial instruments (2014), gains from the consolidation and deconsolidation of subsidiary banks (2015), and gains from the disposal of subsidiaries (2016) 3 Cost of risk for FY 2015 does not include loan impairment losses related to the deconsolidated Rost Bank; cost of risk for FY 2016 does not include provisions in relation to interbank lending to Rost Bank FY 2016 interbank cost of risk: 2.4% 25

27 : FY 2016 unaudited 1 pro forma income statement summary FY 2016 Unaudited Pro Forma Income Statement Summary (IFRS), RUB mln 1 FY 2016 per audited financial statements 12M 2016 MDM Bank P&L + P&L from to standalone premerger P&L from to Pro forma adjustments Pro forma FY MDM Bank Audited Unaudited Unaudited Unaudited Interest income (1 916) Interest expense (24 281) (58 192) (80 557) Net interest income Gains less losses from trading, available-for-sale financial assets and foreign exchange, net Fee and commission income (2) Fee and commission expense (2 867) (2 060) 2 (4 925) Net fee and commission income Other income, net (13) Total operating income (13) Operating expenses (13 645) (18 238) 13 (31 870) Staff costs (6 406) (7 348) - (13 754) Administrative and other operating costs (7 239) (10 890) 13 (18 116) Net operating income before impairment losses Loan impairment losses (378) (15 437) (3 095) (18 910) Other (impairment losses)/provision reversals (359) (1 185) - (1 544) Profit on fair value adjustment for financial instruments Loss from investment property (1 015) - - (1 015) Profit (loss) before tax (3 095) Profit (loss) after tax (3 095) 728 Other comprehensive income/(loss) 691 (2 016) - (1 325) Total comprehensive income / (loss) (1 264) (3 095) (597) 1 Pro forma figures for 2016 were adjusted/corrected to take into account comments from E&Y as part of its audit review of PJSC for the period ended 18 November

28 Overview of Group Group PJSC Parent company of the Group BashInvestBank Merger completed in December 2013 Тveruniversalbank Merger completed in November 2016 Bank Kedr SKA Bank Akkobank Merger completed in June 2016 Merger completed in June 2016 Merger completed in June 2016 DNB Bank Europlan Bank ( Stolitsa) Merger completed in November 2016 Merger completed in November 2016 Merger completed in March % 99.7% АО «Digital» (former Moscomprivatbank) АО «Uralprivatbank» Moscomprivatbank Uralprivatbank Legal merger into to be completed in Q Note: De jure was merged into MDM Bank in November 2016 (with MDM Bank simultaneously renamed ) 27

29 interbank funding of Rost Bank In December 2014, in accordance with the Deposit Insurance Agency s (DIA) Rost Bank Bankruptcy Prevention Plan, was appointed as the investor responsible for financial rehabilitation of Rost Bank. In December 2015, amendments were made to the Bankruptcy Prevention Plan and 100% of shares in Rost Bank were transferred to Mikail Shishkhanov as the new investor. The investor, together with Rost Bank and, prepared a Financial Rehabilitation Plan for presentation to the DIA and Central Bank of Russia. The updated version of this Financial Rehabilitation Plan is currently being reviewed by the Banking Supervision Committee of the CBR and is expected to be approved by the end of 3Q ,1 Rost Bank Key Indicators, RUB billion (IFRS) 611,0 526,0 545,8 522,6 369,2 Since 2015, the assets on Rost Bank s balance sheet have increased significantly, primarily attributable to the transfer of borrowers from which, in accordance with the Rehabilitation Plan, will enable Rost Bank to generate an adequate return and eliminate its capital deficit during the financial rehabilitation period up to YE Since Rost Bank stopped taking deposits from the public in 2014, its main sources of funding have been: shareholder funding, deposits from the Deposit Insurance Agency and interbank loans from B&N Bank provided on market terms. Per the Financial Rehabilitation Plan and in line with the market trend, it is forecast that Rost Bank s cost of funding will gradually decrease and its net interest margin expand over the period. In accordance with the updated Financial Rehabilitation Plan, B&N Bank s interbank funding to Rost is to peak in From 2018, Rost Bank is to start the gradual run-off of its assets, accelerating from 2021 onwards, such that by YE 2025 the assets on Rost Bank s balance sheet is to be immaterial and the capital deficit to have been eliminated through income generation and provision reversals over the period. s interbank lending to Rost Bank decreases in line with the asset run-off / as loans mature. Provisions / NPL YE 2015 YE 2016 End H ROST Bank gross loans Interbank loans from Rost Bank NPL and Provisioning Ratios (IFRS) 184.6% 217.9% 148.2% 20.7% 16.2% 16.6% 11.2% 7.5% 11.2% YE 2015 YE 2016 End H NPL / gross loans Provisions / gross loans 28

30 DIA / CBR funding and capital injections in the context of financial rehabilitation tenders and recapitalisation of the banking system Recipient Amount RUB mln Funding April % 1 year Date Received % Tenor Maturity Date Comments Redeemed in April Purpose of loan to cover the short-term liquidity 2015 deficit of Moscomprivatbank April % 4 years April 2018 Purpose of loan to ensure the long-term liquidity position of Moscomprivatbank, as well as supporting the creation of independent IT infrastructure December % 6 years December 2020 Rost Bank December % 10 years December 2024 Recipient Amount RUB mln August 2015 MDM Bank October 2015 Tier 2 Capital Injections Purpose of loan to support the liquidity of the investor undertaking the recapitalisation and / or to support the liquidity of the Rost group of banks In January 2016, due to the change of investor responsible for financial rehabilitation of Rost Bank, RUB bln of the loan was repaid early by (the funds were transferred to the new investor, Mikail Shishkhanov) Purpose of the loan to cover the difference between the fair value of assets and the book value of liabilities of the bank under rehabilitation Date Received % Tenor Maturity Date Comments Coupon +1% Coupon +1% years years Tier 2 capital injection from the DIA in the form of Federal Loan Bonds (OFZ) as part of the State s recapitalisation programme Tier 2 capital injection from the DIA in the form of Federal Loan Bonds (OFZ) as part of the State s recapitalisation programme 29

31 Board of Directors Board of Directors Мikhail Gutseriev Chairman of the Board of Directors More than 40 years of experience in a broad range of economic sectors. Founder and key shareholder of. Coowner of Safmar Group and Chairman of the Board of Directors of a number of group companies, including RussNeft, Neftisa, Russian Coal, Slavkaliy, Inteco and Mospromstroy. Sergey Maryin Deputy Chairman of the Board of Directors, Deputy Chairman of the Strategy & Corporate Governance Committee Has amassed a wealth of experience in banking and industry, including holding senior positions at Inkombank, Guta Bank and Mospromstroy. Since 2010, Chairman / Deputy Chairman of the Board of Directors of. Sait-Salam Gutseriev Member of the Board of Directors More than 40 years of experience in finance, industry and real estate. Co-owner of Safmar Group , Member of the Board of Directors of , Head of Margrey Limited Representative Office. Since November 2015, CEO of A.N.D Corporation. Said Gutseriev Member of the Board of Directors , worked for Glencore s representative office in London in the Department for Structured Finance of Oil Projects and in the Finance Department. Since 2014, CEO of ForteInvest and a Member of the Board of Directors of Russian Coal and Neftisa Oil Company. Mikail Shishkhanov Member of the Board of Directors January 1996 to July 2015, held the positions of President and CEO of B&N Bank. July 2015 to November 2016, Chairman of the Board of Directors of and CEO of MDM Bank. November 2016 to May 2017, President and CEO of. Major shareholder of, co-owner and Deputy Chairman of BoD, Safmar Group. Avet Mirakyan Member of the Board of Directors, Chairman of the Strategy & Corporate Governance Committee More than 20 years experience in finance, audit and consulting. In 2007, joined B&N Bank as Senior Vice President and CFO , held analogous positions at BNP Paribas (CIB, Russia) , Partner in Transaction Services at EY. Since January 2016, CEO of Safmar FG. Alexander Lukin Member of the Board of Directors More than 15 years of experience in finance. From 2010, Member of the Management Board of , CEO of. In March 2017, appointed CEO of Safmar Pension Fund. Since May 2017, First Deputy CEO and Acting CEO of. Petr Morsin Member of the Board of Directors More than 15 years of experience in banking, including holding senior positions at Orient Express Bank, URSA and Sberbank. Since 2012, Senior Vice President of. From 2015, First Deputy CEO of MDM Bank and, following the merger with, First Deputy CEO of. Kirill Lyubentsov Member of the Board of Directors More than 20 years experience in banking, including with Menatep, IB Trust, Uralsib and Rosbank. Since 2006, has held senior positions at. Since 2012, Member of the Board of Directors of B&N Bank. Since December 2015, President and CEO of ROST Bank. Sergey Popov Member of the Board of Directors More than 35 years experience in finance, consulting and industry, including holding senior positions at the EBRD, Salomon Smith Barney, LUKOIL Financial Services Ltd (London). Since 2012, CFO of Slavkaliy. Angelika Anshakova Member of the Board of Directors, Chairman of the Audit Committee More than 20 years experience in audit, consulting and finance, including with Arthur Andersen and Ernst & Young. Since 2006, a Director of Link Capital. Since 2010, Member of the Board of Directors of. Alexander Filatov Member of the Board of Directors, Chairman of Nominations & Remuneration Committee More than 20 years of experience in consulting and the securities markets, consulting in the area of corporate governance. Member of the Board of Directors of since CEO of Expert Centre for Corporate Relations since Georgy Arakelyan Member of the Board of Directors, Chairman of the Risk Management Committee Has worked in banking and risk management since , worked in risk management at B&N Bank. Since 2014, Managing Partner of Scoring Studio consulting company. BoD expertise includes commercial and investment banking, consulting, risk management, corporate governance and audit 30