Investor presentation. September 2016

Transcription

1 Investor presentation September 2016

2 Disclaimer This document and its contents are confidential and may not be reproduced, redistributed, published or passed on to any other person, directly or indirectly, in whole or in part, for any purpose. If this presentation has been received in error it must be returned immediately to B&N Bank (joint-stock company) (the Bank ). This presentation is not directed to, or intended for distribution to or use by, any person or entity that is a citizen or resident of, or located in, any locality, state, country or other jurisdiction where such distribution or use would be contrary to law or regulation or which would require any registration or licensing within such jurisdiction. THIS PRESENTATION IS NOT FOR DISTRIBUTION, DIRECTLY OR INDIRECTLY, INTO THE UNITED STATES. This presentation and the information contained herein are not an offer of securities for sale in the United States. The Bank s securities may not be offered or sold in the United States absent registration or an exemption from registration under the U.S. Securities Act of 1933, as amended (the Securities Act ). The Bank does not intend to register any portion of the offering of its securities in the United States or to conduct a public offering of any securities in the United States. This communication is directed solely at (a) persons who have professional experience in matters relating to investments falling within article 19(1) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the Order ) or (b) high net worth entities falling within article 49(2)(a) to (d) of the Order, and other persons to whom it may be lawfully communicated, falling within article 49(1) of the Order (all such persons together being referred to as relevant persons ). Any person who is not a relevant person should not act or rely on this document or any of its contents. Any investment activity to which this communication relates will only be available to and will only be engaged with relevant persons. Any person who is not a relevant person should not act or rely on this communication. This presentation is not for publication, release or distribution in Australia, Canada or Japan. This presentation does not constitute or form part of, and should not be construed as, an offer or invitation to sell securities of the Bank, or the solicitation of an offer to subscribe for or purchase securities of the Bank, and nothing contained herein shall form the basis of or be relied on in connection with any contract or commitment whatsoever. Any decision to purchase any securities of the Bank should be made solely on the basis of the final terms and conditions of the securities and the information to be contained in the Information Memorandum or equivalent disclosure document produced in connection with the offering of such securities. Prospective investors are required to make their own independent investigations and appraisals of the business and financial condition of the Bank and the nature of the securities before taking any investment decision with respect to securities of the Bank. The Information Memorandum (or equivalent disclosure document) may contain information different from the information contained herein. The information in this presentation has not been independently verified. No representation or warranty, express or implied, is made as to the accuracy, completeness or fairness of the presentation and the information contained herein and no reliance should be placed on such information. This presentation contains forward-looking statements, which include all statements other than statements of historical facts, including, without limitation, any statements preceded by, followed by or including the words targets, believes, expects, aims, intends, may, anticipates, would, could or similar expressions or the negative thereof. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors beyond the Bank s control that could cause the Bank s actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. Such forwardlooking statements are based on numerous assumptions regarding the Bank s present and future business strategies and the environment in which it will operate in the future. These forward-looking statements speak only as at the date of this presentation. The Bank expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained herein to reflect any change in its expectations with regard thereto or any change in events, conditions or circumstances on which any of such statements are based. This presentation is not a public offer or advertisement of securities in the Russian Federation and is not an invitation to make offers to purchase any securities in the Russian Federation. Any information in this presentation is intended for, and addressed only to "qualified investors" (as defined under Russian law) or persons outside the Russian Federation. The information and opinions in this presentation are subject to change without notice. All financial information not separately sourced in this presentation is from the Bank s IFRS financial statements. The Bank's functional and reporting currency is the Rouble. Solely for the convenience of the reader, certain information derived from the Bank's financial statements included in this presentation has been translated from Roubles into US dollars. 1

3 H key highlights and developments

4 H key highlights and developments H net income of RUB 3.0 bln (H net loss of RUB 2.4 bln), equating to an annualised return on equity (ROAE) of 10.3% P&L H core operating income increased by 45% year-on-year, whilst total operating income (adjusted for one-offs) grew by 16% to RUB 19.9 bln, driven inter alia by increased business volumes Cost / income ratio increased from 44% in H to 59% in H1 2016, to a large extent driven by expenses related to the integration / merger of acquired banks Cost of risk decreased from 8.9% in H to 3.9% in H Total assets decreased by 7% in H (to RUB 764 bln), inter alia due to negative revaluation of FX-denominated assets driven by material ruble strengthening Balance Sheet NPL ratio (90 days+ overdue) remained flat in H at 4.4%, with provision coverage ratio of 159% as at end H Total customer funding base remained effectively flat in H (-1%) at RUB 482 bln Basel II IFRS Tier 1 and Total capital adequacy ratios increased by 3.2 pp and 3.6 pp in H to 12.2% and 14.0% respectively, driven by a combination of strengthening capital base and reduction in RWA volumes Other Completion of legal merger and technological integration of B&N Bank Smolensk, B&N Bank Surgut and Bank Kedr with B&N Bank 3

5 B&N Group overview

6 Committed and supportive shareholders Mikail Shishkhanov Mikhail Gutseriev Sait-Salam Gutseriev General Information Beneficial owner of B&N Bank (59.4%) Ranked #46 among Top 200 Wealthiest Russian Businessmen (Forbes, 2016) Beneficial owner of B&N Bank (39.4%). Ranked #16 among Top 200 Wealthiest Russian Businessmen (Forbes, 2016) Co-owner of the group s real estate development business Ranked #48 among Top 200 Wealthiest Russian Businessmen (Forbes, 2016) Education Peoples Friendship University Finance Academy under the Government of the Russian Federation PhD degree in Law, Doctorate in Economics Institute of Technology (Jambyl, Kazakstan) Gubkin Russian State University of Oil and Gas (Moscow) Finance Academy under the Government of the Russian Federation (Moscow) St. Petersburg University of Law Grozny Oil Institute (named after academician M. Millionshikov) Finance Academy under the Government of the Russian Federation PhD degree in Law, Doctorate in Economics PhD degree in Law, Doctorate in Economics 5

7 B&N Group has a well-diversified asset base Natural Resources Real Estate Financial Services Construction Warehousing Media Oil & gas RussNeft GCM Global Energy plc Neftisa ForteInvest ADAMAS Coal Russian Coal Fertiliser Slavkaliy Shopping malls Smolensky Passage Petrovsky Passage Kaleidoscope Kaluzhsky Festival Hotels InterContinental Moscow Tverskaya Hotel National Hilton Leningradskaya 2 Holiday Inn hotels 4 Marriott hotels Sheraton Palace Renaissance (Minsk) Business centres Chaika Plaza Summit Integral Burevestnik Algorithm Diapazon Banks B&N Bank MDM Bank B&N Bank Credit Cards Rost Bank Other Insurance B&N Insurance 1 VSK Insurance Company 1 Private pension funds Safmar Pensions (former Raiffeisen) European Doverie Education & Science Regionfund Leasing Europlan Construction Mospromstroy Inteco А101 Development Warehousing Multinational Logistics Partnership Eurasia Logistics Other Media Radio Chanson Radio Dacha Radio Moscow Is Speaking Radio Vesna FM Radio Vostok FM Love Radio Radio Taxi FM Radio Stolitsa FM 1 In July 2016, the merger of VSK Insurance Company and B&N Insurance was completed. Under the transaction, Safmar FG acquired 45.2% of shares in VSK. 6

8 B&N Bank overview

9 B&N Bank key highlights 7 1 Effective business model, supporting stable operating income growth and cost optimisation One of the largest privately-owned universal banks in Russia with an extensive branch network 6 Strong asset quality and robust, diversified funding base Active consolidator of the Russian banking sector through M&A and financial rehabilitation 2 Experienced Board of Directors and Management team Committed shareholders with strong track record of support, ensuring stable capital adequacy 5 Intra-group synergies 3 4 B&N Bank s FY 2015 and H financial performance compares favourably to peers 8

10 B&N Bank at a glance Founded in 1993, B&N Bank (rated B- by S&P) is a robustly growing universal bank with a primary focus on corporate and retail business and an extensive branch network (on a consolidated basis more than 500 branches / offices as at 30 June 2016) B&N Bank group is a leader in Russian banking sector consolidation through M&A transactions, as well as the financial rehabilitation of a number of banks. As a result, B&N Bank has significantly improved its ranking by assets in the last couple of years, ranking #5 amongst privately-owned Russian banks and #9 amongst all Russian banks as at end H Shareholders have a strong track record of support for B&N Bank with >US$ 600 mln in equity injections and subordinated loans made since 2008 In 2015, B&N Bank received a RUB 8.8 bln Tier 2 capital injection from the Deposit Insurance Agency (DIA) in the form of Federal Loan Bonds (OFZ) as part of the State s recapitalisation programme The Bank has an excellent track record in the international debt capital markets with >US$700m raised and repaid since 2005 As at end H1 2016, the Bank had RUB 105 bln of exchange-traded bonds outstanding in the domestic capital market B&N Bank has more than 4 mln clients, including a number of large private and state-owned corporations The Group seeks to apply best international market practices in corporate governance, financial and risk management 3 Rankings based on Fitch Russian Banks Datawatch (6M 2016), consolidated by group and excluding subsidiaries of international banks 4 B&N Bank is the parent company of a banking group consisting of the following banks consolidated in the Bank s IFRS financial statements: B&N Bank, B&N Bank Credit Cards, CB KEDR, B&N Bank Tver, B&N Bank Smolensk, B&N Bank Surgut and Uralprivatbank 5 B&N Bank banking group per IFRS consolidation + MDM Bank and other affiliated banks H key IFRS financials Change end Key balance sheet items RUB bln US$ mln 1 H1 16 / YE 15 Assets ,898-7% Loans to customers ,514-26% Equity % Liabilities ,967-7% Customer accounts ,513-1% Change H1 16 Key P&L items RUB bln US$ mln 1 / H1 15 Net interest income before provisions % Net fee & commission income % Total operating income % Core operating income % Net income n.m. Total comprehensive income n.m. 1 Converted at CBR RUB/US$ rate as at 30 June 2016: Core operating income comprises net interest income and net fee & commission income Ranking 3 Among Russian Among all Among Russian Among all Russian B&N Bank 4 B&N Bank banking group 5 private banks Russian banks private banks banks Total Assets #5 #9 #3 #7 Retail Deposits #4 #8 #3 #6 Corporate Loans #14 #21 #5 #9 Retail Loans #11 #16 #6 #10 Corporate Deposits #8 #14 #6 #12 9

11 Shareholders with a strong and consistent track record of support Beneficial Shareholder Structure Other 1.2% Мikhail Gutseriev 39.4% Мikail Shishkhanov 59.4% Consistent Track Record of Capital Support US$ 100 mln subordinated loan (М. Shishkhanov) RUB 1.5 bln Tier 1 capital injection through additional share issue (М. Shishkhanov) RUB 1.8 bln Tier 1 capital injection (М. Shishkhanov) RUB 4 bln Tier 1 capital injection through additional share issue (М. Gutseriev) US$ 50 mln subordinated loan (М. Shishkhanov) US$ 50 mln subordinated loan (М. Shishkhanov) RUB 1 bln subordinated loan (М. Shishkhanov) RUB 6 bln Tier 1 capital injection through additional share issue (М. Shishkhanov) RUB 3 bln Tier 1 capital injection (М. Shishkhanov) RUB 6 bln Tier 1 capital injection through additional share issue (М. Gutseriev) 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 10

12 Milestones to becoming a leading privately-owned Russian universal bank First loans & bonds issued First syndicated loan and domestic bonds issuance US$100m capital injection Regional network expansion Enhanced transparency US$ 200 mln Eurobond issue US$ 200 mln syndicated loans US$100m subordinated loan f Leading positions among the most transparent Russian banks according to S&P Premium banking services Rated 4th amongst "100 most reliable Russian banks" US$50m subordinated loan RUB 1.5 bln capital injection ECP & syndicated loan for more than US$350m Launch of premium- banking services Building a track record in banking sector consolidation Consolidation of regional banks DNB Bank Bank rehabilitation BashInvestbank Uralprivatbank Acquisition of MDM Bank Servicing clients of failed banks Moscomprivatbank Rost Bank Probusinesbank Establishment of B&N BANK Deposit Insurance Programme Building a track record in pension fund consolidation B&N BANK was founded in 1993 and opens first branches Joins Russian Central Bank Deposit Insurance Program US$50m short-term notes program US$100m capital injection RUB 1 bn bonds are included in CBR Lombard List US$50m subordinated loan Raiffeisen DOVERIE SAFMAR pensions Education & Science REGIONFUND 11

13 Overview of B&N Bank group target business model Group objective Systemically important Top 10 universal bank at the core of a financial-industrial group Business unit objectives Retail & SME Bank Transformation of the business model into a transactional / cash-management bank for retaining and monetising the client base, combined with building up the Bank s competitive advantage on the basis of digital banking Corporate & Investment Bank Creation of a Top 10 CIB with a focus on building a segmental model of coverage and industrial expertise Operational objectives Building an operating model, ensuring flexibility and low cost of operations, including efficient organisation, optimised processes and a streamlined IT infrastructure 12

14 B&N Bank business overview and financial highlights

15 Well-positioned as a consolidator of the Russian banking sector Asset Structure Liability Structure RUB 217 bln RUB +95% 425 bln +92% RUB 818 bln -7% RUB 764 bln RUB 199 bln RUB +98% 394 bln +93% RUB 760 bln -7% RUB 704 bln 2% 27% 12% 2% 21% 5% 4% 16% 2% 12% 6% 3% 50% 53% 67% 10% 11% 63% 28% 13% 9% 8% 6% 4% YE 2013 YE 2014 YE 2015 End H Cash & equivalents Due from banks 1 Investment securities Loans to customers Other assets 4% 7% 4% 64% 69% 16% 1% 2% 67% 86% 7% 6% 16% 17% YE 2013 YE 2014 YE 2015 End H Debt securities Customer accounts Due to banks Subordinated debt Other liabilities In , B&N Bank group made several acquisitions (MDM Bank being the largest), as well as participating in the financial rehabilitation of a number of banks, including Moscomprivatbank (subsequently rebranded as B&N Bank Credit Cards) and the banks comprising Rost group B&N Bank s 2015 total asset growth of 92% and total liability growth of 93% has, therefore, been driven by a combination of organic growth and the consolidation of banks acquired through M&A and financial rehabilitation tenders In H the Bank s total assets decreased by 7%, inter alia due to negative revaluation of FX-denominated assets driven by material ruble strengthening in this period 1 See slide 25 for more detailed information on B&N Bank s interbank exposure 14

16 Strengthening capital position In 2015, the Bank s equity increased by 85.7%, inter alia through: - RUB 6 bln additional share issue (April 2015) - Conversion of RUB 11 bln of subordinated deposits into perpetual subordinated deposits and classification as equity in accordance with IAS 32 (November 2015) - RUB 6 bln conversion of subordinated loans previously made by the shareholders into equity though debt forgiveness (December 2015) In addition, in August 2015 the Bank received a RUB 8.8 billion Tier 2 capital injection / subordinated loan from the DIA through an injection of Federal Loan Bonds (OFZ) as part of the State s banking system recapitalization programme In H1 2016, the Bank s equity increased by a further 5% to RUB 59.7 bln, attributable to a combination of retained earnings and the conversion of RUB 0.7 billion of subordinated loans through debt forgiveness The Bank s Basel III regulatory capital adequacy ratios, in accordance with Russian Accounting Standards and the CBR regulatory framework, stood comfortably above regulatory minimum requirements as at end H IFRS Basel II Capital Adequacy Ratios and RWA Total RWA RUB 214 bln Total CAR 12.1% 3.6% 8.5% +92% Total RWA +55% RUB 410 bln Total CAR 10.9% 3.4% 8.0% 6.1% 7.4% YE 2013 YE 2014 YE 2015 End H Common equity tier 1 Additional tier 1 Tier 2 capital 1.8% YE 2013 YE 2014 YE 2015 End H Tier 1 capital Total RWA RUB 636 bln Total CAR 10.4% 1 1.4% Tier 2 capital CBR Basel III Regulatory Capital Adequacy Ratios (RAS) Total CAR 11.9% 7.5% 9.0% Total CAR 12.8% 4.8% 4.8% Total CAR 11.4% 3.0% 2.3% -23% Total RWA RUB 490 bln Total CAR 14.0% Total CAR 12.3% 2.8% 2.1% 12.2% N 1.0 regulatory minimum: 8.0% N 1.2 regulatory minimum: 6.0% N 1.1 regulatory minimum: 4.5% 1 During the Bank's H IFRS audit review, the Bank s capital adequacy ratios as at YE 2015 were restated due to reclassification of RUB 11 bln of perpetual subordinated deposits from Tier 2 to Tier 1 capital 15

17 High quality loan portfolio maintained In H1 2016, the Bank s net loan portfolio contracted by 26% primarily driven by: Negative revaluation of FX-denominated loans, due to material ruble strengthening (FX-denominated loans accounted for 29% of the loan portfolio as at end H1 2016) Gross Loan Loan Portfolio portfolio* by by Segment, sector end H Retail loans 20% SME loans 4% Optimisation of the corporate loan portfolio aimed at: (i) improving the quality and yield of the portfolio; and (ii) fulfilling obligations to the Deposit Insurance Agency (under the State s bank recapitalisation programme) to increase lending to priority sectors of the economy. As a result, a number of major loans, which did not meet the Bank s new criteria, were not renewed and are to be replaced by loans to clients from target sectors Corporate loans 76% NPL (90+ days), Provisions and NPL Coverage Ratio As at end H1 2016, the Bank s NPL ratio (90+ days overdue) remained flat at the low level of 4.4%, comparing favourably to other peer banks The Bank s NPL provision coverage ratio was maintained at a conservative level: 159% as at end H % % 118% 124% 159% Peer group average NPL ratio 2 4.1% 3.9% 5.4% 6.5% 7.0% 5.4% 4.4% 4.4% 4.4% 3.6% 3.8% 3.1% 2 1 Based on management account data 2 Peer group includes FC Otkritie, Promsvyazbank, Credit Bank of Moscow, Bank Saint Petersburg, Vozrozhdenie Bank 0 YE 2013 YE 2014 YE 2015 End H NPL / Gross loans Provisions / Gross loans Provision coverage ratio 16

18 Diversified funding underpinned by strong retail deposit base Liabilities Structure, end H Customer Funding by Segment Due to banks (excl. CBR) 11% Deposits from DIA 1% Other 1% RUB 172 bln RUB +53% 264 bln +85% RUB 488 bln -1% RUB 482 bln 19% 16% Due to CBR 1% Debt securities issued 17% Corporate accounts 11% Retail accounts 58% Customer accounts 69% 38% 62% 21% 79% 81% 84% YE 2013 YE 2014 YE 2015 End H Retail customer accounts Corporate customer accounts Significant 2015 customer funding growth is attributable to a combination of organic growth of retail market share and inorganic expansion of the client base through the consolidation of acquired banks Retail customer accounts continue to represent the lion s share of total customer accounts (84% as at H1 2016) Customer Accounts Maturity Breakdown, end H Less than 1 month 25% As at end H1 2016, circa 55% of total customer accounts had a maturity of one year or more FX-denominated liabilities and customer accounts as a share of total were circa 19% and 23% respectively as at end H From 1 to 5 years 55% From 1 to 3 months 11% From 3 months to 1 year 9% 17

19 Stable core operating income growth Operating Income and Net Interest Margin Operating Expenses and Cost / Income Ratio RUB bln % +160% -3% RUB bln % +21% +59% % % % % 3.1% 2.9% % % 48% 27% 53% 44% % H H Net interest income Net fee & commission income Net trading & FX gains Other operating income Net interest margin Core operating income growth 1 1 Core operating income comprises net interest income and net fee & commission income Staff costs Cost / Income ratio Other opex H H Adjusted Cost / Income ratio 2 Adjusted ratio calculated excluding one-off income gains from the consolidation and deconsolidation of subsidiary banks (2015), as well as gain on initial recognition of financial instruments (2014) 2 The core components of the Bank s operating income have demonstrated stable and strong growth, inter alia due to the material increase in business volumes over the past months: - Net interest income (before provisions) in H increased by 40% year-on-year to RUB 10.4 billion - Net fee & commission income in H grew by almost 70% year-on-year to RUB 2.4 billion, primarily driven by growth in commissions on cash & settlement operations, insurance sales, and issuance of guarantees / letters of credit - The Bank s core operating income in H grew by 45% year-on-year, whilst total operating income (adjusted for one-offs) grew by 16% to RUB 19.9 billion H operating expenses grew by 29% year-on-year, largely driven by expenses related to the integration and merger of acquired banks B&N Bank group is currently implementing an integration plan, which is expected to deliver a significant reduction in the cost base over 2-3 years through synergies 18

20 B&N Bank s 2015 and H financial performance compares favourably to peers 2015 & H Total Asset Growth vs. Peers (IFRS) % 1% 92% -7% 30% 8% -8% 8% -2% 2% -2% -0.4% CMB B&N Otkritie PSB BSPB Vbank YE 2015 End H B&N Bank s strong asset growth in 2015 was driven by a combination of organic growth and M&A / financial rehabilitation transactions YE 2015 & H NPL Ratio (90 days+) vs. Peers (IFRS) % 7.5% 4.4% 4.4% 4.8% 6.1% 6.1% 4.9% 5.1% 5.0% PSB B&N BSPB Otkritie CBM Vbank YE 2015 End H % 7.8% B&N Bank has a high-quality loan portfolio with one of the lowest NPL ratios amongst its peers FY 2015 & H Return on Average Equity (ROAE) vs. Peers (IFRS) 20 Based on Net Income 20 Based on Total Comprehensive Income % 10.3% 6.7% 6.9% 4.5% 2.0% 3.6% 3.5% 3.3% 0.2% CBM B&N BSPB Vbank PSB Otkritie -16.3% -21.3% % 12.8% 10.4% 9.4% 8.8% 7.8% 3.6% 6.8% 2.7% CBM BSPB B&N PSB Otkritie Vbank -6.8% -0.6% -21.0% FY 2015 H FY 2015 H Despite the challenging macroeconomic environment, B&N Bank maintained bottom-line profitability in 2015 and demonstrated growth in H Key: B&N B&N Bank; CBM Credit Bank of Moscow; BSPB Bank Saint Petersburg; Otkritie Bank Otkritie FC; PSB Promsvyazbank; Vbank Vozrozhdenie Bank 19

21 Appendices

22 B&N Bank: balance sheet summary Balance Sheet Summary (IFRS), RUB mln End H YE 2015 Change end H / YE 2015 YE 2014 Change YE 2015 / YE 2014 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 n.m % Deposits from Deposit Insurance Agency % % Other % % Total liabilities % % Total equity % % Key ratios NPL ratio 4.4% 4.4% 0.0 pp 3.8% 0.6 pp Provision coverage ratio 158.8% 123.6% 35.2 pp 117.5% 6.1 pp Tier 1 Capital ratio (Basel II) 12.2% 9.0% 3.2 pp 7.7% 1.3 pp Total Capital ratio (Basel II) 14.0% 10.4% 3.6 pp 10.9% -0.5 pp CBR N1.1 ratio (Basel III) 7.4% 6.1% 1.3 pp 8.0% -1.9 pp CBR N1.2 ratio (Basel III) 9.5% 8.4% 1.1 pp 8.0% 0.4 pp CBR N1.0 ratio (Basel III) 12.3% 11.4% 0.9 pp 12.8% -1.4 pp Source: Based on IFRS Consolidated Financial Statements 1 Including Mandatory cash balances with the CBR 2 Including Due to the CBR 21

23 B&N Bank: income statement summary Income Statement Summary (IFRS), RUB mln H Change H1 Change FY H FY 2015 FY / H / FY 2014 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 n.m n.m. Total operating income % % Operating expenses (11 701) (9 056) 29.2% (20 106) (12 682) 58.5% Staff costs (3 823) (3 279) 16.6% (7 338) (4 808) 52.6% Administrative and other operating costs (7 878) (5 778) 36.4% (12 768) (7 874) 62.1% Net operating income before impairment losses % % Loan impairment losses (3 971) (13 440) -70.5% (53 656) (9 979) 437.7% Other (impairment losses)/provision reversals (243) (101) 140.8% (741) (84) 780.4% Profit before tax (2 189) n.m % Profit after tax (2 395) n.m % Other comprehensive income/(loss) (425) n.m (713) n.m. Total comprehensive income / (loss) (1 231) n.m % Key ratios Return on average equity (based on total comprehensive income) 1 8.8% -7.4% 16.2 pp 7.8% 15.7% -7.9 pp Return on average equity (based on net income) % -14.4% 24.7 pp 0.2% 18.6% pp Net interest margin (NIM) 2.9% 3.1% -0.2 pp 3.2% 4.7% -1.5 pp Cost / Income ratio (CIR) 58.8% 44.4% 14.4 pp 26.9% 44.1% pp Adjusted cost / income ratio (CIR) % 53.0% 5.8 pp 47.7% 54.5% -6.8 pp Cost of risk 3 3.9% 8.9% -5.0 pp 5.8% 5.6% 0.2 pp Source: Based on IFRS Consolidated Financial Statements 1 ROAE calculated as total comprehensive income / net income divided by average equity for the period; figures for H and H are annualised 2 Adjusted ratio calculated excluding one-off income gains from the consolidation and deconsolidation of subsidiary banks (2015 / H1 2015), as well as gain on initial recognition of financial instruments (2014 / H ) 3 Cost of risk for FY 2015 is adjusted to exclude loan impairment losses related to Rost Bank which was deconsolidated from B&N Bank s balance sheet in December 2015; figures for H and H are annualised 22

24 Integration / merger of group banks progressing according to plan 2016 H1 H2 June 2016 Q YE 2016 Completion of legal merger and technological integration of Bank Kedr, B&N Bank Smolensk (former SKA Bank) and B&N Bank Surgut (former AKKO Bank) with B&N Bank Legal merger and technological integration of B&N Bank Tver (former Tveruniversalbank) to be completed Legal merger of B&N Bank and B&N Bank Murmansk (former DNB Bank) with MDM Bank to be completed Technological integration of MDM Bank and B&N Bank to be completed in YE 2015 YE 2016 B&N Bank Credit Cards B&N Bank Tver B&N Bank IFRS consolidation Uralprivatbank 2 B&N Bank Surgut 1 B&N Bank Smolensk 1 Bank Kedr 1 B&N Bank Murmansk B&N Bank Stolitsa Currently, there are two scenarios under consideration for the legal merger of B&N Bank and MDM Bank, together with B&N Bank Murmansk: (i) B&N Bank and B&N Bank Murmansk are merged into MDM Bank (with the combined bank continuing to operate under the B&N Bank brand); and (ii) MDM Bank and B&N Bank Murmansk are merged into B&N Bank. The final decision on the scenario for legal merger of the banks will be taken at an extraordinary meeting of B&N Bank shareholders on 7 October B&N Bank Surgut, B&N Bank Smolensk and Bank Kedr were legally merged into B&N Bank in June Uralprivatbank is planned for disposal by YE 2016 Note: See slide 24 for more details on individual banks 23

25 Overview of B&N banking group banks and indicative merger timetable Bank Date of acquisition / transfer under financial rehabilitation New name Date of merger / planned merger with B&N Bank Comments BashInvestBank November 2008 n/a Merger as a branch of B&N Bank completed in December 2013 Geographical focus on the Republic of Bashkortostan DNB Bank Moscomprivatbank Akkobank Тveruniversalbank April 2014 April 2014 B&N Bank Murmansk B&N Bank Credit Cards B&N Bank Surgut B&N Bank Tver Planned merger to be completed by YE 2016 Consolidated under IFRS since YE 2014; to remain as separate legal entity but full subsidiary Merger completed in June 2016 Planned merger to be completed in Q Formerly DNB s Russian subsidiary with geographical focus on Murmansk region Credit card monoliner (Moscomprivatbank had presence in 31 regions of Russia) Geographical focus on Khanty-Mansiisk Autonomous District Geographical focus on Tver Region SKA Bank December 2014 B&N Bank Smolensk Merger completed in June 2016 Geographical focus on Smolensk Region Bank Kedr ROST Bank Uralprivatbank Europlan Bank n/a Merger completed in June 2016 Geographical focus on Krasnoyarsk Territory n/a Merger with B&N Bank in 2025 following completion of financial rehabilitation March 2015 n/a Planned disposal by YE 2016 September 2015 December 2015 B&N Bank Stolitsa n/a Planned merger to be completed in 2017 Legal merger to be completed by YE 2016 Main geographical focus on European Russia Small bank, acquired from the former shareholders of Rost group Small auto loan monoliner (previously part of Europlan group) Major universal bank with strong market positions in Siberia and the Urals 24

26 B&N Bank interbank funding of Rost Bank In December 2015, Rost Bank was transferred to Mikail Shishkhanov as the investor responsible for financial rehabilitation of the bank Rost Bank key indicators, RUB billion (IFRS) Since 2015, the assets on Rost Bank s balance sheet have increased significantly, primarily attributable to the transfer of loan portfolios from B&N Bank which, per plan, will enable Rost Bank to generate an adequate return and eliminate its capital deficit during the financial rehabilitation period Rost Bank old / problem loan portfolio Problem loan portfolio is provisioned on a conservative basis: NPL provision coverage ratio of 151% as at end H Potential release of provisions per implementation of asset recovery plan Rost Bank new loan portfolio Good quality, performing assets Expected yield of new loan portfolio to enable Rost Bank to eliminate its capital deficit by YE 2013 YE 2014 YE 2015 H ROST Bank gross loans Interbank loans from B&N Bank Rost Bank NPL and provisioning ratios (IFRS) Since Rost Bank stopped taking deposits from the public in 2014, its main sources of funding are: shareholder funding, deposits from the Deposit Insurance Agency and interbank loans from B&N Bank on market terms (RUB 467 billion as at end H1 2016) In line with the market trend, it is expected that Rost Bank s cost of funding will gradually decrease and its net interest margin expand B&N Bank s interbank lending to Rost Bank is to decrease gradually as loans mature per plan over the period of financial rehabilitation. In addition, it is planned that some loans will be refinanced, including with state-owned banks 41.5% 20.7% 16.0% 11.2% 10.6% 4.8% 3.4% 1.6% YE 2013 YE 2014 YE 2015 H NPL / gross loans Provisions / gross loans 25

27 Complementary geographical coverage of group banks networks Geographical Coverage and Market Share 1, % Murmansk Kaliningrad Pskov St. Petersburg Novgorod Arkhangelsk Smolensk Tver Orel Moscow Kursk Nizhny Novgorod Voronezh Kazan Perm Rostov Ulyanovsk Khanty-Mansiysk Yekaterinburg Krasnodar Volgograd Samara Tyumen Surgut Ufa Stavropol Orenburg Chelyabinsk Kurgan Omsk Tomsk Krasnoyarsk Novosibirsk Kemerovo Barnaul Gorno-Altaisk Abakan Irkutsk Ulan-Ude Chita Khabarovsk Market share key 1 : >5% 3%-5% 1%-3% <1% 0% Vladivostok Key banking group distribution channels statistics > 500 offices / outlets >10,000 ATMs 2 Top 5 mobile bank 3 Top 10 internet bank 3 1 Calculated as the total pro forma market share of the combined banking group s client business in each region as at 31 December 2015; source: CBR data adapted by the Bank 2 Own ATM networks of B&N Bank and MDM Bank, plus reciprocal partnership arrangements 3 MDM Bank positions based on Markswebb Rank & Report 2016 ( 26

28 B&N Bank has a strong and established credit history Debt capital market borrowings, RUB bn B&N Bank has a more than 10-year track record in the international and domestic capital markets Major arrangers include: Commerzbank AG, Merrill Lynch, Raiffeisenbank (Austria), The Royal Bank of Scotland, BCP Securities, Landesbank Berlin AG, VTB Bank (Deutschland) AG, VTB Capital and Sberbank CIB, SC LOWY (HK) Securities, XiaXin Securities (HK) Investors by geography are represented by the following countries: Switzerland, Russia, Italy, Latvia, Germany, France, UK, the Netherlands, Australia, USA, Hong Kong and Brazil Since 2012, the volume of borrowings in debt capital markets has increased tens of times from RUB 2.7 bln to RUB 121 bln (circa US$1.8 bln 1 ) The volume of borrowings in the domestic capital market since 2011 has increased from RUB 1 bln to RUB 108 bln (circa US$1.6 bln 1 ) B&N Bank was the first Russian bank to enter the international debt capital markets in From July to November 2015, B&N Bank placed Euro-Commercial Paper of series 08, 09 and 10 in the total amount of US$ 86.8 mln In 2016, B&N Bank issued 3-year Eurobonds (LPN`19) in the amount of US$ 150 mln 1 Converted at CBR RUB/US$ rate as at 01 August 2016: July 2016 ECP & Eurobonds Domestic bonds US$50mln LPN Programme, 1 year US$200mln Eurobonds, 3 years US$52mln Syndicated loan, 1 year US$27mln Syndicated loan, 1 year RUB 1bn Domestic bonds 02, 3 years US$50mln Syndicated loan, 1 year RUB 3bn Exchange bonds BО-01, 3 years US$57mln ECP Programme, series 01 and 02, 6m US$80mln Syndicated loan, 1 year RUB 5bn Exchange bonds BО-02 and BО-03, 3 years US$93.8mln - ECP Programme, series 03, 04 and 05, 1 year RUB 4bn Exchange bonds BО-04 and BО-05, 6 years US$72mln - ECP Programme, series 06 and 07, 1year/6m RUB 27bn Exchange bonds BО-06 - BО-14, 6 years US$86.8mln ECP Programme, series 08, 09 and 10, 1 year/6m US$150mln Eurobonds, 3 years 27

29 Financial institution with strong international relationships Trade Finance Counterparties Corresponding Banking Relationships Currency AUD BYR CHF CNY CNY DKK EUR EUR EUR EUR EUR EUR EUR GBP JPY KZT NOK PLN SEK USD USD USD VND KRW Correspondent Bank Commerzbank AG, Frankfurt am Main Belgazprombank, Minsk ING Belgium SA/NV, Brussels Bank of China (ELUOSI), Moscow ICBC Moscow, Moscow ING Belgium SA/NV, Brussels Commerzbank AG, Frankfurt am Main Deutsche Bank AG, Frankfurt am Main ING Belgium SA/NV, Brussels J.P. Morgan AG, Frankfurt am Main Raiffeisen Bank International AG, Vienna KBC Bank NV, Brussels VTB Bank (Deutschland) AG, Frankfurt am Main BNY Mellon, London branch, London The Bank of Tokyo-Mitsubishi UFJ Ltd, Tokyo Kazkommertsbank JSC, Almaty DNB Bank ASA, Oslo PKO Bank Polski Spolka Akcyjna, Warsaw ING Belgium SA/NV, Brussels JPMorgan Chase Bank National Association, New York Deutsche Bank Trust Company Americas, New York BNY Mellon, New York Vietcombank, Hanoi Kookmin Bank, Seoul 28