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Transcript of 2014 - Ситибанк · 3 22 12 13 ZAO CITIBANK ANNUAL REPORT 2014 Citi’s place in the Russian...
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2014annual report
1
®
ZAO CITIBANK ANNUAL REPORT 2014
ZAO Citibank 2
Citi’s place in the Russian banking system 3
Message from CEO 4
Mission and Principles 8
Citi worldwide 10
Citi in Russia 12
Ratings and Awards 14
Events 16
Executive Board 24
Board of Directors 26
Citi’s Social Investment in Russia 28
Consolidated Financial Statements (IFRS) 35
Russian Accounting Standards (RAS) 84
2
ZAO Citibank (hereinafter — Citi Russia) is part of the international financial corporation Citigroup Inc. (100% of the shares of ZAO Citibank belong to Citigroup Netherlands BV) and provides consumers, corporations and govern-ment institutions with a broad range of world-class financial products and services as well as access to innovative banking technologies.
Citi began doing business in Russia in 1992 and was one of the first international banks to enter the market. Today Citi Russia is among the largest banks in the country as measured by level of capital and volume of assets.
ZAO Citibank
1retail customersmillion>
>
50 retail branches in 12 major Russian cities More than 4,000 employeesMore than 550 hi-tech ATMs
4,500 corporate clients — major Russian and international companies
500,000 credit card holders
More than 1,000 Citigold Private Client customers with assets of $1 million or more placed with Citi
3
22 12 13
ZAO CITIBANK ANNUAL REPORT 2014
Citi’s place in the Russian banking system
Internet banking for retail
customers (2002)
ATMs which accept cash
(2002)
CitiPhone: 24/7 customer
service (2002)
Credit cards (2003)
Mobile banking for corporate
clients (2012)
Direct access to trading on the
Moscow Exchange (2013)
More information about Citi Russia can be found at www.citibank.ru
Citi was the first in Russia to offer
* Place of ZAO Citibank in banking system of Russia according to Finmarket.ru
net assets* capital* net profit*
nd th th
4
Revenues for the year reached RUB 9,579 million
under IFRS. Although this result was lower than
the previous year, diligent efforts to keep expens-
es in check helped us to achieve a net profit of
RUB 7,379 million. At the same time, Citi remained
one of the most highly capitalized banks in the
country and today has one of the healthiest loans
portfolios in the industry.
The adverse market conditions, which included
a highly volatile currency market, lending restric-
tions and a general economic slowdown, were not
conducive to major transactions. Nonetheless, we
improved our standings on the league tables for
investment banking commissions, moving up to
third place from sixth the previous year, according
to Thomson Reuters / Freeman Consulting.
Citi’s success here was due in part to a strong per-
formance on M&A, where Citi advised on some of
the year’s largest deals for such clients as Severstal,
Norilsk Nickel, Pharmstandard and Sanoma, among
others.
We continued to provide financing to the real
sector of the Russian economy. One major deal
Message from CEO
Dear clients, partners and colleagues,
Looking back, 2014 was a year when financial institutions in Russia were forced to prove the sustainability of their business strategies. Citi passed this test with flying colors. Faced with a number of challenges, we maintained our balance and leveraged our strengths, which allowed us to maintain a strong profit margin while continuing to provide added value for clients.
5ZAO CITIBANK ANNUAL REPORT 2014
6
332 54
370 57
398 60
2012 2013 2014 2012 2013 2014
+8% +5%
28 221 29
241
31 274
2012 2013 2014 2012 2013 2014
+8% +14%
73 73 40
47 104 51
2012 2013 2014 2012 2013 2014
+43% +9%
Assets, billion rubles
Capital, billion rubles
Gross profit, billion rubles
Clients’ accounts and deposits, billion rubles
Corporate credit portfolio, billion rubles
Кредиты физическим лицам, млрд руб.
7ZAO CITIBANK ANNUAL REPORT 2014
was PhosAgro’s $440 million ECA-backed financing
coordinated by Citi to fund construction of a new
ammonia plant. Citi also arranged, together with
Swedish Export Credit Corporation, a loan for up to
$300 million for Russian mobile operator MTS.
Although debts markets cooled shortly after the
start of the year, Citi was a lead arranger on one
of the largest debt deals by a Russian corporate in
2014 — Russian Railways’ €500 million LPN place-
ment on the Irish Stock Exchange. As the market
conditions changed, some companies moved to
decrease their debt, and Citi was able to facilitate
this process as well. For example, Citi coordinated
Severstal’s buyback of $288 million worth of loan
participation notes.
While it was a slow year for the equity market, Citi
played a lead role in the largest deal of the year –
the US$468.5 million Accelerated Equity Offering of
the Moscow Exchange, where the Central Bank of
Russia sold half of its stake in the exchange as part
of the government’s privatization program.
In 2014 Citi’s retail banking business continued to
develop and demonstrate stable profitability. Our
consumer loan portfolio increased by 9%, driven in
part by a successful marketing campaign in the first
half of the year. Credit card use was up 10% and the
credit portfolio for credit cards increased by 15%
while the share of overdue credit remained at half
the market average.
Our focus on innovative formats in the develop-
ment of Citi’s branch network has been very visible.
In 2014 the bank opened three Smart Branches —
full-service retail branches which place a strong em-
phasis on digital technologies and require minimal
staffing. These new branches are helping to make
our consumer banking network one of the most
efficient in the industry.
In 2014 thanks to our transition to a new technol-
ogy platform, we were able to significantly expand
our spectrum of investment products and launch
solutions which appeared for the first time on the
Russian market. In particular, clients are now taking
advantage Live FX Rates, which provides round-the-
clock, real-time access to the interbank currency
market, and FX Order Watch, allowing clients to
execute automatic online currency transactions.
Citi’s commitment to offering the best investment
products has not gone unnoticed by the profession-
al community. Citi Russia was voted Winner of Best
Private Banking Services for Super Affluent Clients
by Euromoney Private Banking and Wealth Man-
agement Survey for the second consecutive year.
Our long list of professional awards is a source of
pride for everyone at Citi. We were very pleased
to see that Forbes magazine named Citi the Most
Reliable Bank in Russia for the second consecutive
year. One of our biggest businesses for institutional
clients – Cash Management – was voted the best in
Russia in Euromoney’s annual survey. We also once
again were named Best Corporate/Institutional
Internet Bank by Global Finance.
These awards are not been limited to our products
and services for clients — Citi has been recognized
as an outstanding employer. Our bank earned the
title of Best Employer in both the 2014 survey of
SuperJob website and the Captains of Russian Busi-
ness awards of the Journal of Human Resources
Management.
Citi also takes very seriously its commitment to giv-
ing back to the community. Following this important
tradition, the Citi Foundation allocated more than
US$1 million in 2014 for corporate citizenship pro-
grams, which are primarily focused on developing
entrepreneurship and supporting economic oppor-
tunities for youth.
One of the flagship programs of the Citi Founda-
tion in Russia is an education program for social
entrepreneurs at the Graduate School of Man-
agement of St. Petersburg State University. In two
courses, 170 entrepreneurs completed the com-
prehensive study of the most important aspects of
project management for social entrepreneurship.
8
MissionCiti works tirelessly to serve individuals, communities, institutions and nations. With 200 years of experience meeting the world’s toughest challenges and seizing its greatest opportunities, we strive to create the best outcomes for our clients with financial solutions that are simple, creative and responsible. An institution connecting over 1,000 cities, 160 countries and millions of people.
We are your global bank;
we are Citi
PrinciplesThe four key principles — the values that guide us as we perform our mission — are:
Common Purpose
One team, with one goal: serving our clients and stakeholders.
Responsible Finance
Conduct that is transparent, prudent and dependable.
Ingenuity
Enhancing our clients’ lives through innovation that harnesses the breadth anddepth of our information, global network, and world-class products.
Leadership
Talented people with the best training who thrive in a diverse meritocracy thatdemands excellence, initiative and courage.
Mission and Principles
9ZAO CITIBANK ANNUAL REPORT 2014
According to data from the 86 graduates of the
first course, 70 small enterprises and 592 new jobs
were created. In 2014 this program was recognized
by the Leaders in Corporate Philanthropy awards as
one of the best professional education projects in
Russia.
We have continued our eco-entrepreneurship
program launched four years ago in Altai while
also adding a new region in 2014 — Kamchatka. This
program, which is implemented in partnership with
WWF Russia, helps achieve two important goals –
improvement of the quality of life for local residents
through small business development and conser-
vation of the unique natural environment found in
these beautiful regions.
Another key project supported by the Citi Foun-
dation in 2014 was the creation of an Impact Hub
business incubator for social entrepreneurs who
tackle social issues related to education, healthcare,
environmental conservation and opportunities for
children with disabilities. I would also like to mention
our partnership with the FOCUS-MEDIA Foundation,
which with our support is implementing a project
that creates real career opportunities for students
of vocational colleges.
Citi Russia’s 2014 results underscore the prudence
of our conservative, measured approach to growth
and development over the course of many years.
By focusing on the segments where Citi is best po-
sitioned to provide added value, we have a very sta-
ble position from which to grow our business even
during difficult economic times. Our team clearly
rose to the occasion, meeting unexpected challeng-
es with the flexibility and tenacity that has helped
Citi succeed over the past two centuries and grow
into one of the world’s largest financial institutions.
Citi has experienced many different situations in
modern Russia in our more than two decades of
operations here: from periods of robust growth
to sharp economic contractions. Through it all, we
have remained unwavering in our commitment to
the market. Our initial assessment of the Russian
market still holds true: there is enormous growth
potential here and as a global bank with great depth
and experience Citi is uniquely positioned to play
a positive role in Russia’s future growth, serving
consumers, corporations and government bodies.
I would like to take this opportunity to thank all
stakeholders who contributed to our success –
institutional clients and retail customers, industry
regulators and partners, and last but not least our
employees, whose professionalism and resolute
efforts have helped to deliver these results.
The untold story of Russia’s potential, I believe, is its
human resources. The country has always had an
abundance of smart, determined, bold individuals
with great visions and aspirations. This is something
I have personally seen my interactions with clients
and partners as well as the employees of our bank,
and this gives us good reason to be optimistic about
the market’s future and our place in it.
Sincerely,
Marc Luet
Head of Citi Russia and CEE
10
Citi worldwide
Citi, the leading global bank, has approximately 200 million customer accounts and does business in more than 160 countries and jurisdictions. Citi provides consumers, corporations, governments and institutions with a broad range of financial products and services, including consumer banking and credit, corporate and investment banking, securities brokerage, transaction services, and wealth management.
In 2012 Citi marked the 200th anniversary of its founding in 1812.
1 $16.7 trillion in 2013.2 Network markets represent predominately CTS, local markets FX and corporate lending.
the average value of transactions executed by Citi each day. On peak days this figure can reach $9 trillion, or more than half of the annual GDP of the United States1. 3trillion per day — $
Citi’s integrated global business model and strategy
An unparalleled global network remains Citi’s main competitive advantage and an important factor generating the company’s revenues. Citi strives to maintain a presence in all markets where it can be of use to its clients.
Network Market2
Broader Institutional Market
Major Consumer Banking Cities (GCB)
45+15+19+21+P
11ZAO CITIBANK ANNUAL REPORT 2014
We want Citi to be an indisputably safe and sound institution and will do everything in our power to make that the case, year in and year out
Michael Corbat, Citigroup Chief Executive Officer
Citi aims to be an indisputably safe and sound financial institution. In 2014 Citi continued to develop successfully, focusing on the following long-term strategic priorities:
> Enhance Citi’s position as a leading global bank for both institutions and individuals, by building on its unique glob-al network, deep emerging markets expertise, client relationships and product expertise;
> Position Citi to seize the opportunities provided by three global macro-trends (globalization, urbanization and digitization) to provide better services and products to clients;
> Further our commitment to responsible finance;
> Strengthen Citi’s performance, including gaining market share with clients, making Citi more efficient and pro-ductive, and building upon its history of innovation;
> Wind down Citi Holdings (the group’s assets which will not constitute part of Citi’s core business in the future) as soon as practicable, in an economically rational manner.
45+15+19+21+P
BY REGION
45% North America
15% Europe, Middle East and Africa
19% Latin America
21% Asia
53+24+23+PBY BUSINESS
53% Global Customer Banking
24% ICG Banking
23% ICG Markets and Securities Services
Citi’s Global Consumer Bank
Citi is the world’s largest credit card issuer
Special services for affluent individuals
Citi maintains one of the largest global financial infrastructures, with
trading floors in more than 80 countries, clearing and custody
networks in over 60 countries, and connections with
400 clearing systems.
59 million consumers are served by the bank in 35 countries worldwide producing $10 billion in
pretax earnings.
139 million accounts. Citi cards are used to make $375 billion in purchase
each year.
Citi’s 800 private bankers and product specialists
act as trusted advisors to many of the world’s most successful and influential individuals and families.
Citicorp net revenues in 2014
ICG — Institutional Clients Group1 Results exclude Corporate/Other
12
Citi in Russia
Serving Corporate Clients
Citi’s corporate bank is one of the largest in Russia both by number of clients and by transaction volume. Citi is the
global cash management provider for more than 3000 leading Russian and international companies and advises
many on their international acquisition plans. Citi’s long list of corporate clients includes the Russia’s industrial giants,
leading multinationals, local emerging companies and major financial institutions.
Citi provides clients with the full spectrum of banking services and effective comprehensive solutions tailored to
meet their needs. Acting as a consultant for corporate clients, Citi is a key link in the process of leveraging banking
products and services and it offers solutions which not only meet clients’ needs but also help them improve
profitability.
Products and services for corporate clients:
Cash management Treasury services Trade financing Credit and capital raising
Depositary and clearing services
Online banking Online FX trading platform
Personal manager and more
13ZAO CITIBANK ANNUAL REPORT 2014
Serving consumers
Citi serves more than one million retail clients across Russia. The vast majority of our customers turn to Citi for
more than just one banking service: they choose Citi for our easy access accounts, convenient banking services, and
advanced security and fraud protection. Citi offers retail customers the following products and services:
credit cards with a grace period
personal loans investment products multi-currency current and savings
accounts
payroll packages for salaried employees
Citibank Online for internet banking
Citi Mobile for accessing banking services via mobile
devices
CitiPhone for 24/7 telephone banking support
SMS alerts about transactions and
balances
Citigold – an exclusive premium banking
package
We focus our efforts and attention on serving the clients which we can deliver the maximum advantage thanks to our unique capabilities: a global network which is unrivalled in scale, innovative solutions and market insight. We strive to be the bank of choose of our target clients.
Mark Luet, Head of Citi in Russia and Central & Eastern Europe
14
2013, 2014
2013, 2014
2014
2014
2014
2014
2014
2014
2014
Best Regional and Cash Manager in Central & Eastern Europe, including Russia
Most Reliable Bank in Russia
Best Internet Bank for Corporate Clients (13th year in a row)
Best Domestic Cash Manager in 6 Central & Eastern European countries, including Russia
Best Private Banking Services for Super Affluent Clients
The Best Employer in Russia
Best Consumer Business in EMEA
Deal of the Year in Central & Eastern Europe, including Russia
Best Employer in Russia by National Award «Captains of Russian Business»
Ratings and Awards
15ZAO CITIBANK ANNUAL REPORT 2014
FITCH RATINGS (25.07.2014)
> National Long-Term Rating AAA(rus) / Stable (affirmed 13 February 2015)
> Viability Rating BBB- (affirmed 13 February 2015)
> Support Rating 2 (affirmed 13 February 2015)
> Long-Term Foreign Currency IDR BBB / negative (since 20 January 2015 BBB- / negative1, affirmed 13 February 2015)
> Long-Term Foreign Currency IDR F3 (affirmed 13 February 2015)
In 2014 Forbes magazine once again named Citi the most reliable bank in Russia. Citi has consis-tently ranked among the most reliable banks in Russia since Forbes launched the rating.
The magazine Retail Finance for the third consecutive year rec-ognized Citi Russia as one of the best banks for customer service. In 2014, as in 2013, Citi was ranked first and received the gold medal.
In October 2014 Citi topped the Thomson Reuters / Freeman Con-sulting rating of investment banks according to investment banking commissions. Over the course of the year the company substantially increased its commissions received and rose from sixth place to first place in the ranking.
1 The decrease in the rating from BBB to BBB- for Long-Term Foreign Currency IDR reflects a decrease in the country ceiling for Russia. When banks are assigned Long-Term Local Currency IDR, these ratings also take into account country risks. — Fitch Ratings, Moscow/London, 20 January 2015.
16
Smart Technologies
The Smart Branch format is focused on service which is both fast and convenient for clients and uses ultra-modern
technologies. Citi opened its first Smart Branch in Japan and today is actively deploying this format worldwide.
The core concept of Citi’s Smart Branch is to ensure convenience for clients and expedient service thanks to the
use of ultra-modern technologies in the bank’s client relationship systems as well as in design features. In particular,
clients can access information through easy-to-use touchscreen panels, executive various operations via the
internet bank Citibank Online either with their own device or through tablets available at the branch, talk with the
bank’s specialists via video link and much more.
In March Citi opened the first hi-tech Smart Branch in Russia at the Moskvorechye shopping center on
Kashirskoye Shosse and the second in September at the Filion shopping center.
MORE THAN 60% OF OUR INTERACTIONS WITH OUR CUSTOMERS ARE NOW ONLINE.
Michael Corbat, CEO of Citigroup, speaking at the Mobile World Congress in Barcelona, February 25, 2014
JULY 6, 2014, WAS THE 10th ANNIVERSARY OF THE OPENING OF THE MOSKOVSKOYE BRANCH IN ST. PETERSBURG, WHICH MARKED THE START OF CITI’S RETAIL BANKING BUSINESS IN THE CITY.
Events
17ZAO CITIBANK ANNUAL REPORT 2014
Citi Serves as Partner for St. Petersburg International Economic Forum
Once again Citi was one of the international partners of this important international economic forum. This annual
event at the Lenexpo Exhibition Complex is attended by heads of state, executives of international and Russian
corporations as well as regulators and representatives of Russian ministries and government agencies. For the
second consecutive year partnered with CNBC, one of the largest American television companies, to create a joint
stand, which was one of the most visited sited of the forum.
Moreover, for the third consecutive year Citi was granted the opportunity to present a one-of-a-kind photography
exhibition at SPIEF. This year the exhibition highlighted civilizational progress, from antiquity to the modern era, and
several of the subjects also provided a window to the possibilities of the future.
18
Citibankers attend Euromoney forum in Vienna
Euromoney’s annual forum for the Central and Eastern Europe region was held January 14-15 in Vienna. Citi was
represented by regional business heads as well as regional product seniors. The Euromoney forum is one of the
largest and most important industry gatherings for the region, providing an opportunity to network and get a sense
of the market’s pulse. Approximately 250 clients from across the CEE region attended the event.
Marc Luet, Head of Citi Russia and CEE, participated in Panel VII: CEE Banking: New Models, where the discus-
sion focused on such issues as funding models (cross border vs local currency), regulatory challenges and building
domestic deposit bases, among others.
IN EUROMONEY’S 2014 PRIVATE BANKING AND WEALTH MANAGEMENT SURVEY, CLIENTS RECOGNIZED CITI AS THE BEST FOR RESEARCH / ASSET ALLOCATION IN RUSSIA. IN 2014 THE NUMBER OF CITIGOLD CLIENTS IN RUSSIA PLACING $1 MILLION OF MORE IN ASSETS WITH CITI PASSED THE 1000 MILESTONE.
Citi participated in one of the largest DCM market deals — Russian Railways’ €500 million Eurobond.
Citi acted as Financial Advisor, Global Coordinator & Mandated Lead Arranger for PhosAgro’s $440 million ECA-backed financing to fund construction of a new ammonia plant.
Citi played a key role in the Accelerated Equity Offering of the Moscow Exchange (“MOEX”), where the Central Bank of Russia sold half of its stake in MOEX as part of the Russian Government’s privatization program.
Deals
19ZAO CITIBANK ANNUAL REPORT 2014
Citi serves as partner for Vedomosti financial forum
Citi once again played an active role in the annual Finance Forum organized by Vedomosti. The year 2014 was
a time of serious adjustment for Russian banks and the main topic of discussion at the Ritz Carlton in Moscow was
the question of how the banking system should react to this new reality, which includes fewer opportunities for ex-
tensive development, a decline in asset quality, a systemic deficit of liquidity as well as inflationary and political risks.
Nataly Nikolaeva, Head of Government Affairs for Citi Russia, took part in the session devoted to the banking
system’s adaptation to the new economic conditions.
Head of Equities at Citi Russia Alexei Bolshakov moderated the session on capital markets and took part in the
roundtable “Between Sanctions and Deoffshorization: What’s an Investor to Do?” The finance specialists spoke
about the main events for investors of the preceding year, alternative areas for placement of funds and investment
as well as the most promising assets in 2015.
Elena Skuryatina, Head of E-Business for Citi Russia, participated in a roundtable on the development of retail
banking through the digital transformation of the business. Elena spoke about Citi’s strategy for developing digital
banking in Russia and the effectiveness of smart branches, as well as issues related to clients’ changing expecta-
tions in their dealings with banks and the steps which banks need to take in order to ensure a high level of client
satisfaction.
Citi participated in some of the largest deals on the market, including Severstal’s LPN buyback, and advised Norilsk Nickel on the divestment of its Australian assets and Pharmstandard on its acquisition of a stake in Biocad.
Citi launched a fixed income advisory for retail clients in Russia and extended our co-branded credit card agreement with Aeroflot.
Citi successfully executed a high-yield bond issue for Evraz North America. The deal was the first bond issuance for a Russia-related corporate since February 2014.
Deals
20
Forbes names Citi the most reliable bank in Russia for the second consecutive year
On March 24, 2014, Forbes magazine named Citi the most reliable bank in Russia for the second year in a row in
its annual rating of the top 100 most reliable banks of Russia. Citi was selected as the industry leader based on the
aggregate assessment of key factors, such as assets, capitalization and credit rating.
Forbes is one of the most influential business magazines in Russia and one of the most authoritative publications in
the world. This rating was based on information provided by Fitch Ratings, Moody’s, Standard & Poor’s, Interfax CEA
and Expert.
Deal of the Year in Central and Eastern Europe
VTB Bank’s $3.3 billion capital increase through a supplemental share offer organized by Citi was recognized by
Euromoney as Deal of the Year in Central and Eastern Europe.
The structure of the deal implied in a substantial dilution of the Russian government’s shareholding in VTB Bank,
which meant that it was considered a privatization transaction and thus the equity offering was restricted to
ordinary shares in the local market. Nonetheless, Citi succeeded in generating a high level of interest among the
primary target – sovereign wealth funds. Competing demand among several such buyers enabled VTB to push
ahead with the ordinary share issue and generate price tension. The deal uniquely leveraged demand from both
new institutional investors and existing shareholders to allow the issuer to reach its capital targets and limit the price
discount.
Citi Takes Top Spot in Russia Investment Banking League Table
Citi is now the top ranking investment bank in Russia after a significant jump in fee income propelled it from 6th
place a year ago, according to the data compiled by Thomson Reuters/Freeman Consulting.
While Western banks have generally improved their positions, state-affiliated Russian banks have seen their
standings decline in the wake of economic uncertainties and sanctions.
21ZAO CITIBANK ANNUAL REPORT 2014
Citi internet bank for corporate clients recognized as the best in the world
The bank was recognized the Best Overall Global Internet Bank for the 13th consecutive year. Citi received a number
of first-place prizes for global and regional awards from Global Finance Magazine topped by the Best Overall Global
Internet Bank and Best Global Corporate/Institutional Internet Bank, as well as in Central and Eastern Europe. The
best-in-class online banking platform CitiDirect BESM makes Citi a partner of choice for clients in financial data
management.
This year, 293 banks globally were assessed against a wide range of criteria focused on features and functionality
in the online and mobile channels. Citi was named Best Overall Global Internet Bank and received awards in other
global and regional categories. In terms of services, the bank was globally awarded Best Investment Management
Services and Best Online Cash Management Site as well as Best Web Site Design, Integrated Corporate Bank Site,
and Information Security Initiatives.
This is yet another year that Citi’s professional expertise and investments in the development of its core business were recognized by an independent industry edition. I am proud to point out that Citi is recognized as the best across CEE, including Russia, Ukraine and Kazakhstan, which is a testament of Citi’s continuous leadership in international banking services.
Emre Karter, Head of Citi’s Treasury and Trade Solutions in Central and Eastern Europe, including Russia, Ukraine and Kazakhstan.
The core solutions of the technological platform which underpin Citi’s excellence are:
CitiDirect BE CitiDirect BE Mobile CitiDirect BE Tablet TreasuryVision® CitiConnect
an electronic banking platform allowing customers to cen-tralize all corporate banking functions in one security-protect-ed place, providing access to account information in real time all over the world right from their computer.
an innovative prod-uct, which allows to access CitiDirect BE platform via a smart-phone or a tablet PC. The solution provides the possibility to view account balances, initiate and authorize transactions, receive notifications via email and SMS.
which delivers a true tablet experience with rich, interactive features and on-the-go-access to critical financial information needed for strategic business decisions.
a web-based treasury management plat-form that provides a single window for global visibility into aggregated account information for cash, investments and debt as well as powerful and customizable an-alytics and forecast-ing functionality.
a connectivity offering that enables clients to seamlessly integrate their ERP, treasury workstation and other mission critical systems in an easy-to-connect file and message exchange environment so that they can maximize the power of Citi’s internet banking platform.
22
One of the best employers in Russia
On May 22 Citi was named a laureate of the Captains of Russian Business awards organized by the Journal
of Human Resources and received an award in the nomination for Best Employer. This recognition confirms
Citi’s strong position as one of the most attractive places to work for industry specialists – company known for its
best practice in human resource management, career development and professional growth for its employees.
The Captains of Russian Business awards are organized by the Journal of Human Resources. The winners of the Captains of Russian Business awards were selected by a jury of experts made up of representatives of leading recruitment agencies, law firms, business schools and leaders of the Russian market. The nomination categories also include business leadership and reputation, corporate image, and business ethics, among others.
Sergey Korotkov and Nataly Nikolaeva named among Russia’s 200 most effective banking executives
Sergey Korotkov, Citi Russia’s Retail Head and Executive Board Member, and Nataly Nikolaeva, Managing Director
and Head of Government Affairs at Citi Russia, were included on the list of Russia’s 200 most effective banking
executives according to a report by Banking Overview magazine.
Rating methodology
Prior to being included in the rating, each banker was examined through the lens of a filter of numerical indicators of work effectiveness in his/her bank or subdivision over the previous year. The rating was based on information from the banks’ websites, Central Bank reporting and business media.
FX OrderWatch — new currency exchange opportunities
On October 17 Citi introduced FX Order Watch – a new product offered through Citi Online. This convenient and
simple solution, which has become accessible thanks to Citi’s transition to a new technology platform, allows clients
to exchange currency at a target rate predetermined by submitting various types of exchange orders. Included
as a part of the standard online banking services package, FX Order Watch changes thinking on how currency
transactions should be executed, making them more convenient, flexible and personalized.
Together with the new currencies and technology of Live FX Rates, this new product takes currency and treasury
operations to a new and qualitatively higher level for Citi’s private clients, who are the first in Russia to be provided
access to this sort of banking service.
23ZAO CITIBANK ANNUAL REPORT 2014
Tablet applications for corporate clients
CitiDirect BESM Tablet is a new applications for Apple’s iPad and a number of other tablets operating on the Android
platform. CitiDirect BESM was developed by the Treasury & Trade team, including the Citi Innovation Lab in Dublin,
specially for corporate clients using CitiDirect BE (Citi’s main corporate internet banking platform). The app simplifies
control over important financial information and transaction processes while speeding up decision-making and
business management for treasury and finance executives. The app is available in Russian on the Apple App store
and Google Play.
With the help of CitiDirect BE Tablet, clients can now use tablet computers to execute transactions available as part
of the core functionality of the CitiDirect BE platform as well as monitor financial flows and payments of subsidiaries
throughout the world: > Translate data into global business intelligence with just a few taps. View data globally, by region or country; and
filter by currency, amount and country in chart or map views. > Use features and discovery tools to customize data views to support strategic decision-making. > View balances and overdrafts as well as authorize, release and repair payments anytime and everywhere..
This new offering illustrates Citi’s continued commitment to become the world’s digital bank and to develop a full digitally enabled tool set to meet the needs of our clients. This service was developed specifically for our clients who require timely data and information to drive their business in an increasingly fast paced operating environment. CitiDirect BE Tablet continues the evolution of CitiDirect BE from CitiDirect Online Banking and follows the successful launch of CitiDirect BE Mobile in 2011.
Naveed Sultan, Global Head of Treasury and Trade Solutions at Citi.
Today CitiDirect BE Tablet is available in 66 countries in number of different languages, including Russian, English,
simplified Chinese, Spanish, French and Portuguese.
24
Executive Board
Nataly Nikolaeva, Acting Chair of the Executive Board, Acting President, Head of Government Affairs, Citi Russia
Nataly Nikolaeva has worked for more than 22 years at Citi Russia. She serves as Vice President of the bank and is in charge of Government Affairs. In July 2013 she became the first Russian citizen and first woman to head the Executive Committee of Citi Russia.
In 2011 and 2010 the Association of Managers of Russia included Nataly Nikolaeva in the rating of top government affairs specialists for commercial banks published by the newspaper Kommersant (second and third place, respectively). In 2006 the American Chamber of Commerce in Russia named her Outstanding Participant of the Year, recognizing her exceptional contribution to the organization’s work.
Nataly Nikolaeva received a degree in Economics with honors from Moscow State University and is a Candidate of Economic Sciences.
Ruslan Belyaev — St. Petersburg Branch Manager, Citi Russia
Ruslan Belyaev has led Citi’s St. Petersburg Branch since 2006. He joined the team at Citi more than 18 years ago and throughout the course of his career at Citi he has participated in the arrangement of a number of precedent-setting deals. In particular, Ruslan advised the government of St. Petersburg on issues concerning the creation of a public-private partnership for the development of Pulkovo Airport, the only Russian project to be included in the list of the Top 100 Innovation Projects according to the KPMG’s report “Infrastructure 100: World Cities Edition”.
Ruslan is a member of the Academic Development Commission of the Supervisory Board of the Graduate School of Management of St. Petersburg State University. Since 2010 he has served on the Executive Committee of the St. Petersburg Chapter of the American Chamber of Commerce in Russia.
The magazine Profile included Ruslan in its 2011 rating of the Top 50 Managers of Russia in corporate banking and the magazine Expert Northwest presented Ruslan with the title of Expert of the Year in the education nomination category in 2012.
Ruslan graduated with honors from the Financial Academy of the Russian Government and the University of Passau (Germany).
Sergey Korotkov, Retail Banking Business Head, Citi Russia
Sergey Korotkov has been responsible for the development of Citi’s branch network in Russia since August 2010. His career at Citi began more than 20 years ago, and over this time Sergey has accumulated extensive experience working with both corporate clients and retail customers, including in key leadership positions. Sergei was one of the pioneers of Citi’s consumer banking business in Russia and oversaw the launch of the bank’s regional branch network for retail clients. He also helped to create and lead Citi’s business division serving small and medium enterprises in Russia.
Sergey graduated from the Moscow State Institute of International Relations (MGIMO University) and has a PhD in Economics. He also earned an MBA at the University of Chicago.
25ZAO CITIBANK ANNUAL REPORT 2014
Natalia Belaya, Cash Management Head, Citi Russia & CEE
Natalia leads Citi’s Cash Management business, which provides corporate clients with a broad range of cash management services based on the bank’s unsurpassed global experience and advanced technologies developed at the Citi Innovation Lab in Dublin, Ireland.
Natalia started her career at Citi Russia in 1997 as a sales manager in Citi Transaction Services (CTS) subsequently managed various units within CTS, including Sales in Russia, Cash Management Services and Client Delivery in Russia, Ukraine and Kazakhstan.
Natalia graduated from the State University of Management with a degree in economics.
Michael Berner, Consumer Business Manager, Citi Russia
Michael Berner is responsible for all of Citi’s business with retail customers in Russia.
Michael began his career at Citi in 2003, when he joined the team responsible for launching Citi’s credit card business in Russia, the first project of this kind in the country. He later supervised many of Citi’s major projects involving the launch of new products, joint projects with partners and marketing initiatives, many of which were unique to the Russian financial services market. These included the first cash back credit cards in Russia, the first retail client loyalty program (CitiSelect), co-branded cards with the mobile operator MTS, airline Aeroflot and fuel station chain Neste, the first mass advertising campaigns for consumer loans, and Citigold Wealth Management, among many others.
Michael graduated from the Moscow Automobile and Road Institute (MADI) and received a degree in financial management from the Finance Academy under the Government of the Russian Federation.
26
Board of Directors
Marc Luet, Chairman of the Board of Directors, Head of Citi in Russia & CEE
Marc Luet oversees Citi’s business in eight countries of Central & Eastern Europe, including Russia.
Marc has more than 20 years of experience in retail banking and the credit card business. Prior to July 1, 2013, Marc was Head of Head of Citi’s Consumer Business in Europe, Middle East and Africa (EMEA) and simultaneously Interim Head of Citi’s Global Consumer Marketing & Internet Office. Prior to 2002, he spent 12 years at Citigroup, including as Consumer Business Manager in Hungary and then Belgium.
Marc previously held leadership positions at Fortis group and Egg France, was a member of the Operating Committee of Visa Inc. and also served as President of Visa for CEMEA, an area covering 80 geographies.
Marc has a BSc in Economics from the Panthéon Sorbonne University, is a graduate of Institut d’Etudes Politiques de Paris and holds an MBA from the Tuck School of Business Administration at Dartmouth College. He is a Board Member of Citibank Europe Plc and Citibank Turkey and a Supervisory Board member of Citi Handlowy in Poland.
Denis Korshilov, Head of Fixed Income, Currencies and Commodities, Citi Russia
Citi’s Fixed Income, Currencies and Commodities department (FICC) provides the full spectrum of treasury services, including currency transactions, trading of state and corporate bonds and derivatives, brokerage, interbank lending as well as access to currency markets via the online trading platform FX Pulse. The department is also for managing the bank’s currency position, securities portfolio and liquidity.
Denis was appointed head of FICC in 2011. He started his career at Citi as a Senior FX Dealer in 1997 and led the FX Unit for 14 years. Prior to joining Citi, Denis was Head Trader at Vneshtorgbank.
Denis Korshilov earned a degree in Economics from the Finance Academy under the Government of the Russian Federation.
Florin Petrescu, Head of Human Resources, Citi Russia, Ukraine & Kazakhstan
As Head of Human Resources for Citi in Russia, Ukraine and Kazakhstan, Florin is responsible for a team of over 400 employees. Prior to coming to Moscow for this position, Florin was a Regional HR Business Partner working out to Citi’s London office, where he coordinated the personnel services of retail and commercial banking businesses in 10 countries of the CEEMEA region. Earlier he served as HR Manager for Citi in Romania and Bulgaria.
Florin graduated from the Academy for Economic Studies in Bucharest (Romania) and earned an Executive MSc from Cranfield School of Management (UK).
Emre Karter, Head of Citi Transaction Services, Citi Russia & CEE
Emre joined Citi in Turkey in 1996. Prior to his current position served as Head of Global Transaction Services for Russia, Ukraine and Kazakhstan and earlier for the Turkey/Israel cluster and Non-Presence Countries of the region. Under his leadership Citi strengthened its position across all product lines and client categories, including through the successful deployment of innovations. Working at Citi’s office in Brussels, Emre coordinated Global Relationship Banking for Citi’s Global Subsidiaries Group in CEEMEA.
Emre earned a BS in Management from Bilkent University and an MS in International Business and Finance from New Hampshire College (USA). Emre Karter is a member of the Advisory Board for the Committee on Youth Development of Turkey.
27ZAO CITIBANK ANNUAL REPORT 2014
Irina Kosyachenko, Head of Operations & Technology, Citi Russia, Ukraine & Kazakhstan
Irina has led the Operations & Technology department of Citi in Russia, Ukraine and Kazakhstan since March 2009. Earlier she held in leadership positions overseeing various business units in both corporate and retail banking, including commercial transaction services for corporate clients, bank card issuance and processing of client investment transactions.
Irina began her career with Citi in Kiev in 1998 — she was appointed Head of Operations & Controls when Citi opened its office in the city.
Irina graduated from Kiev State University with a degree in Finance and Credit.
Nataly Nikolaeva, Acting Chair of the Executive Board, Acting President, Head of Government Affairs, Citi Russia
Nataly Nikolaeva has worked for more than 22 years at Citi Russia. She serves as Vice President of the bank and is in charge of Government Affairs. In July 2013 she became the first Russian citizen and first woman to head the Executive Committee of Citi Russia.
In 2011 and 2010 the Association of Managers of Russia included Nataly Nikolaeva in the rating of top government affairs specialists for commercial banks published by the newspaper Kommersant (second and third place, respectively). In 2006 the American Chamber of Commerce in Russia named her Outstanding Participant of the Year, recognizing her exceptional contribution to the organization’s work.
Nataly Nikolaeva received a degree in Economics with honors from Moscow State University and is a Candidate of Economic Sciences.
Maria Ivanova, Global Subsidiaries Group Head, Citi Russia, Ukraine & Kazakhstan
Maria has served as Head of Global Subsidiaries Group for Russia, Ukraine & Kazakhstan since March 2012. She is responsible for relations with representatives of international corporations and financial institutions in Russia, Ukraine and Kazakhstan.
Maria Ivanova has worked at Citi since 1996. She previously served as Trade Finance Head and held other leadership positions within the Global Subsidiaries Group in Russia.
Maria graduated from Yaroslavl State Technical University with a degree in Mechanical Engineering and also earned a Bachelor’s degree from Champlain College in Burlington, Vermont.
Victor Rozhkov, Commercial Bank Head, Citi Russia
Victor oversees a business serving more than 1600 clients — Russian and international companies with annual revenues of US$ 500 million.
Victor joined Citi in Moscow in 1997. From 2002 to 2006 he was St. Petersburg Branch Manager before taking charge of Citi’s Corporate Bank in Ukraine. In 2008 Victor returned to Moscow as Head of Metals & Mining, Power, Infrastructure and Transport in the Russian Global Banking team. In 2009-2010 Victor served as Deputy Chairman of the Board and Head of Corporate Business of Sberbank’s subsidiary in Ukraine, after which he returned to Citi as Russia Commercial Banking Head.
Victor graduated from Moscow State Technical University (MAMI). He also holds MBA degree from University of Hartford (USA).
28
Citi’s Social Investment in RussiaSocial responsibility is a core part of Citi’s business model worldwide. At Citi we recognize the need to actively promote economic progress and improve the lives of people in low-income communities around the world. We invest in efforts that increase financial inclusion, catalyze job opportunities for youth, and develop entrepreneurship. Using innovative approaches to address social issues Citi Russia stimulates the emergence and development of projects which help produce visible changes and achieve positive results.
MORE THAN $1 000 000 — THE VOLUME OF FINANCIAL SUPPORT DISTRIBUTED BY THE CITI FOUNDATION EACH YEAR IN RUSSIA.
Improving financial literacy — increasing the number of low income people who have adopted prudent financial behavior and thus are capable of improving their financial situation and increasing personal savings.
Development of Entrepreneurship — increasing the number of financial products and capital available for the development of small business, which leads to creation of new jobs for low income people.
Improving economic opportunities for youth — increasing the number of young people from low income families who are able to graduate from vocational schools and universities and subsequently find gainful employment or create their own income-generating businesses.
Social investment focus areas of the Сiti Foundation in Russia in 2014
29ZAO CITIBANK ANNUAL REPORT 2014
DEVELOPMENT OF ENTREPRENEURSHIP
The Citi Microentrepreneurship Awards
marked its 10th anniversary. Each year the
leaders in seven market segments are recognized
with this prize. The top award for Best Entrepre-
neur 2014 went to a farmer Sergei Simonovich,
a former village teacher who created his own
production business from his own food products.
The competition is organized by the Citi Foun-
dation, Russian Microfinance Center (RMC) and
the National Partnership of Microfinance Market
Stakeholders (NAMMS) and is part of a global
program for the support and development of
small business which the Citi Foundation oper-
ates in 32 countries worldwide. Over the past
10 years more than 1200 nominees from the
majority of Russia’s regions have taken part in the
competition
Awards website: konkurs.rmcenter.ru
Social entrepreneurship is a relatively new type of business activity, the aim of which is not to make a profit but rather to solve or ease the scale of social and environmental problems. Social entrepreneurs are oriented toward finding new solutions, for which a combination of various business practices and innovative business models are used, the best specialists are recruited and a reasonable amount of investment capital is attracted. They are different in that they strive to create a sustainable business model which does not require constant financial support from the government or charities. The Citi Foundation is focused on the support of people and organizations whose activities combine practicality, private initiative and systematic work for the benefit of society.
Graham Macmillan, Senior Program Officer for Financial Inclusion at the Citi Foundation, in an interview with the magazine Delovoy Peterburg.
The joint program of Citi and the Graduate School of Management of St. Petersburg State University
“Project Management for Social Entrepreneurs” was recognized as one of Russia’s best professional edu-
cation projects in the Leaders in Corporate Philanthropy contest – 2014 contest. The program was launched in
2013 and since then has seen two graduating classes totaling 170 entrepreneurs. The graduates have started
a number of social projects aimed at supporting vulnerable segments of the population and created more than
600 new jobs. It is planned that in the 2014-2015 academic year 150 students will complete the course, which is
1.5 times more than the previous year. The launch of a distance learning program will increase the accessibility
of the program for residents of remote regions of Russia. www.gsom.pu.ru
30
With the support of the Citi Foundation, the international
network of Impact Hub social innovation centers opened
a business incubator in Moscow. Social entrepreneurs working
in such areas as education, healthcare, environmental protection
and improvement of conditions for disabled people can become
residents of the center. Impact Hub in Moscow helps social
entrepreneurs share their experience, provides an expert support
and assistance in attracting investment, and offers educational
programs.
Website of Impact Hub in Moscow: www.impacthubmoscow.net
We believe that social entrepreneurship is capable of solving many social problems, and this is why we support the development of infrastructure which helps to increase the number of such entrepreneurs in Russia. For us Impact Hub is not only a mini-incubator but also a platform for promoting the idea of social entrepreneurship in general.
Tatiana Avramenko, Community Relations Officer for Citi Russia
Approximately 5 million rubles were allocated in 2014 by the
Citi Foundation to support start-ups in Altai and Kamchatka.
The Citi Foundation and WWF Russia expanded their joint
project which is aimed at forming “points of growth” in these
regions, helping local residents and communities to create small
businesses and promote their products and services on regional
and national markets. The development of entrepreneurship,
including businesses based on environmentally sound use of
natural resources, helps in the fight against poaching, which
remains the only source of subsistence for a large number of
local families. The project entails providing assistant for beginning
entrepreneurs, from educational and consulting support to the
creation of infrastructure. The number of participants in the
project in Altai and Kamchatka has exceeded 1000 people.
WWF Russia shares the stories of the most interesting and
successful projects: www.wwf.ru
Citi established the “Social Business” nomination category for several regional contests in order to
recognize the achievements of small socially oriented companies. For example, Citi is the permanent partner
of the Business Gazelle contest held each year by the magazine Delovoy Peterburg and the founder of the
nomination for “Most Significant Social Contribution”. In 2014 the award went to the company Personal Solution,
which successfully finds employment for students and migrants.
31ZAO CITIBANK ANNUAL REPORT 2014
YOUTH EDUCATION
Citi continues to finance and support projects aimed at developing the personal, social and communica-
tion skills of children and adolescents from socially disadvantaged families. Such projects stimulate children
to continue their education in colleges and universities and thus help them to be more competitive on a labor
market.
The Citi Foundation and Focus Media Foundation are imple-
menting a pilot program for the personal development and
employment of college students. Nearly all graduates of orphan-
age schools continue their studies in colleges, yet they encounter
difficulties in their subsequent search for employment. Students
from five colleges in the Moscow region and St. Petersburg are
taking part in the program, which includes training seminars for
the students as well as individual and group consultations with
psychologists and employment specialists. Over the two years of
the pilot program, approximately 400 students and more than
80 teachers have taken part.
In Ryazan, Moscow and St. Petersburg, Citi and Perspektiva,
a regional public organization for disabled people, have jointly
implemented a similar program focused on young people with
disabilities.
“The Future Begins Today” is a joint education project of the Citi Foundation and United Way
Russia Chatitable Fund. The program is oriented on schoolchildren from disadvantaged families who are
approaching graduation and want to acquire a profession which is in high demand. The children are provided
free access to additional lessons on basic school subjects and undergo training to successfully complete their
graduation exams and enroll in colleges and universities, improve their computer skills and participate in
interactive business games. The project has been implemented since 2011 and each year covers approximately
150 children from orphanages and disadvantaged families.
32
CORPORATE CULTURE OF VOLUNTEERISM
Just as all across the world, in Russia Citi’s social investment is not limited to grants. Citi’s approach to social respon-
sibility is “More than Philanthropy”. Citi employees participate in volunteer programs in the cities where they work.
33ZAO CITIBANK ANNUAL REPORT 2014
More than 700 employees of Citi Russia together with their friends and family participated in Citi Global
Community Day in 2014. Since 2006 Citi has held Global Community Day in all countries where it has a presence:
each year this initiative is supported by more than 70,000 employees of the bank from 93 countries. The volun-
teers clean up and improve city squares and parks, provide assistance at nursing homes for the elderly, animal
shelters and other social institutions.
34
35ZAO CITIBANK ANNUAL REPORT 2014
Financial Statements for the year ended 31 December 2014
INTERNATIONAL FINANCIAL REPORTING STANDARDS
Consolidated Financial Statements (IFRS)
Auditors’ Report ...36
Statement of Profit or Loss and Other Comprehensive Income for the year ended 31 December 2014 ...38
Statement of Financial Position as at 31 December 2014 ...39
Statement of Cash Flows for the year ended 31 December 2014 ...40
Statement of Changes in Equity for the year ended 31 December 2014 ...42
Notes to, and forming part of, the Financial Statements for the year ended 31 December 2014 ...43
1 Background ...43
2 Basis of preparation ...43
3 Significant accounting policies ...44
4 Interest income and interest expense ...50
5 Fee and commission income and fee and commission expense ...51
6 Net (losses) gains on securities ...51
7 Net foreign exchange income ...51
8 General administrative expenses ...52
9 Income tax expense ...52
10 Cash and cash equivalents ...54
11 Loans and deposits with banks and other financial institutions ...54
12 Financial instruments held for trading ...55
13 Loans to customers ...58
14 Financial instruments available-for-sale ...63
15 Property and equipment ...64
16 Goodwill ...64
17 Due to the Central Bank of the Russian Federation ...64
18 Deposits and balances from banks and other financial institutions ...65
19 Current accounts and deposits from customers ...65
20 Transfer of financial assets ...65
21 Other liabilities ...66
22 Share capital ...66
23 Corporate governance and internal control ...66
24 Risk management ...68
25 Credit related commitments ...74
26 Operating leases ...75
27 Contingencies ...75
28 Related party transactions ...76
29 Financial assets and liabilities: fair value and accounting classifications ...77
30 Capital management ...78
31 Average effective interest rates ...79
32 Maturity analysis ...80
33 Currency analysis ...81
34 Events after the reporting period ...82
36
JSC KPMG10 Presnenskaya Naberezhnaya Moscow, Russia 123317
Telephone +7 (495) 937 4477Fax +7 (495) 937 4400/99Internet www.kpmg.ru
To the Shareholder and the Board of Directors of ZAO CB Citibank
We have audited the accompanying financial statements of ZAO CB Citibank (the “Bank”), which comprise the statement of financial position as at 31 December 2014, and the statements of profit or loss and other comprehensive income, changes in equity and cash flows for 2014, and notes, comprising a summary of significant accounting policies and other explanatory information.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on the fair presentation of these financial statements based on our audit. We conducted our audit in accordance with Russian Federal Auditing Standards and International Standards on Auditing. Those standards require that we comply with ethi-cal requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The proce-dures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to express an opinion on the fair presentation of these financial statements.
Opinion
In our opinion, the financial statements present fairly, in all material respects, the financial position of the Bank as at 31 December 2014, and its financial performance and its cash flows for 2014 in accordance with International Financial Reporting Standards.
Audited entity: ZAO Commercial bank “Citibank”.
Registered by the Central Bank of the Russian Federation on 1 November 1993, Registration No. 2557. Re-registered as Closed Joint Stock Company Commercial bank “Citibank” on 5 November 2001.
Entered in the Unified State Register of Legal Entities on 14 November 2002 by Moscow Inter-Regional Tax Inspectorate No. 39 of the Ministry of Taxes and Duties of the Russian Federation, Registration No. 1027700431296, Certificate series 77 No. 00480345.
Address of audited entity: 8-10, building 1, Gasheka street, Moscow, 125047, Russian Federation.
Independent auditor: JSC KPMG, a company incorporated under the Laws of the Russian Federation, a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
Registered by the Moscow Registration Chamber on 25 May 1992, Registration No. 011.585.
Included in the Unified State Register of Legal Entities on 13 August 2002 by the Moscow Inter-Regional Tax Inspectorate No.39 of the Ministry for Taxes and Duties of the Russian Federation, Registration No. 1027700125628, Certificate series 77 No. 005721432.
Member of the Non-commercial Partnership “Chamber of Auditors of Russia”. The Principal Registration Number of the Entry in the State Register of Auditors and Audit Organisations: No. 10301000804.
Auditors’ Report
37
FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014
ZAO CITIBANK ANNUAL REPORT 2014
Report of findings from procedures performed in accordance with the requirements of Article 42 of Federal Law dated 2 December 1990 No 395-1 On Banks and Banking Activity
Management is responsible for the Bank’s compliance with mandatory ratios and for maintaining internal control and organising risk manage-ment systems in accordance with requirements established by the Bank of Russia.
In accordance with Article 42 of Federal Law dated 2 December 1990 No 395-1 On Banks and Banking Activity (the “Federal Law”), we have performed procedures to examine: > the Bank’s compliance with mandatory ratios as at 1 January 2015 as established by the Bank of Russia; and > compliance of elements of the Bank’s internal control and organization of its risk management systems with requirements established by
the Bank of Russia.
These procedures were selected based on our judgment and were limited to enquiries, analyses, inspections of documents, comparisons of the Bank’s internal policies, procedures and methodologies to applicable requirements established by the Bank of Russia, as well as recalculations, comparisons and reconciliations of numerical data and other information.
Our findings from the procedures performed are reported below. > Based on our procedures with respect to the Bank’s compliance with mandatory ratios as established by the Bank of Russia, we found that
the Bank’s mandatory ratios as at 1 January 2015 were within the limits established by the Bank of Russia.We have not performed any procedures on the accounting records maintained by the Bank other than those which we considered nec-essary to enable us to express an opinion as to whether the Bank’s financial statements present fairly, in all material respects, the financial position of the Bank as at 31 December 2014, and its financial performance and its cash flows for 2014 in accordance with International Financial Reporting Standards.
> Based on our procedures with respect to compliance of the Bank’s internal control and organization of its risk management systems with requirements established by the Bank of Russia, we found that: - as at 31 December 2014, the Bank’s internal audit function was subordinated to, and reported to, the Board of Directors, and the risk
management function was not subordinated to, and did not report to, divisions accepting relevant risks in accordance with regulations and recommendations issued by the Bank of Russia;
- the Bank’s internal documentation, effective on 31 December 2014, establishing the procedures and methodologies for identifying and managing the Bank’s significant credit, operational, market, interest rate, legal, liquidity and reputational risks, and for stress-testing was approved by the authorized management bodies of the Bank in accordance with regulations and recommendations issued by the Bank of Russia;
- as at 31 December 2014, the Bank maintained a system for reporting on the Bank’s significant credit, operational, market, interest rate, legal, liquidity and reputational risks, and on the Bank’s capital;
- the frequency and consistency of reports prepared by the Bank’s risk management and internal audit functions during 2014, which cover the Bank’s credit, operational, market, interest rate, legal, liquidity and reputational risk management, was in compliance with the Bank’s internal documentation. The reports included observations made by the Bank’s risk management and internal audit functions as to their assessment of the effectiveness of the Bank’s procedures and methodologies, and recommendations for improvement.
- as at 31 December 2014, the Board of Directors and executive management of the Bank had responsibility for monitoring the Bank’s compliance with risk limits and capital adequacy ratios as established by the Bank’s internal documentation. With the objective of monitoring effectiveness of the Bank’s risk management procedures and their consistent application during 2014 the Board of Directors and executive management of the Bank periodically discussed reports prepared by the risk management and internal audit functions, and considered proposed corrective actions.
Our procedures with respect to elements of the Bank’s internal control and organization of its risk management systems were performed solely for the purpose of examining whether these elements, as prescribed in the Federal Law and described above, are in compliance with the require-ments established by the Bank of Russia.
Lukashova N.V. Director (power of attorney dated 16 March 2015 No. 14/15) JSC KPMG
Moscow, Russian Federation 29 June 2015
38
INTERNATIONAL FINANCIAL REPORTING STANDARDS
Statement of Profit or Loss and Other Comprehensive Income for the year ended 31 December 2014
Notes2014
RUB’0002013
RUB’000
Interest income 4 22,531,864 21,355,891
Interest expense 4 (6,850,297) (4,635,048)
Net interest income 15,681,567 16,720,843
Fee and commission income 5 9,764,235 8,857,613
Fee and commission expense 5 (4,035,706) (3,926,626)
Net fees and commissions 5,728,529 4,930,987
Net (losses) gains on securities 6 (1,783,041) 440,460
Net foreign exchange income 7 9,941,050 5,919,202
Other income 1,278,809 622,307
Net non-interest income 15,165,347 11,912,956
Operating income 30,846,914 28,633,799
Impairment losses on loans to customers 13 (2,640,742) (1,935,422)
Impairment losses on other assets (45,975) (5,740)
General administrative expenses 8 (18,580,459) (15,134,279)
Profit before income tax 9,579,738 11,558,358
Income tax expense 9 (2,200,025) (2,429,530)
Profit for the period 7,379,713 9,128,828
Other comprehensive loss
Items that are or may be reclassified subsequently to profit or loss
Revaluation reserve for financial instruments available-for-sale:
- Net change in fair value of financial instruments available-for-sale, net of income tax (3,249,955) (647,964)
- Net change in fair value of financial instruments available-for-sale transferred to profit or loss, net of income tax (198,138) (564,451)
Total items that are or may be reclassified subsequently to profit or loss (3,448,093) (1,212,415)
Other comprehensive loss, net of income tax (3,448,093) (1,212,415)
Total comprehensive income for the period 3,931,620 7,916,413
The financial statements were approved by the Board of Directors of the Bank on 29 June 2015.
Natalia Nikolaeva Assia Gounko Acting President Deputy Chief Accountant
The statement of profit or loss and other comprehensive income is to be read in conjunction with the Notes to, and forming part of, the financial statements.
39
FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014
ZAO CITIBANK ANNUAL REPORT 2014
Statement of Financial Position as at 31 December 2014
Notes2014
RUB’0002013
RUB’000
ASSETS
Cash and cash equivalents 10 65,556,958 32,768,660
Obligatory reserves with the Central Bank of the Russian Federation 2,998,029 2,760,361
Loans and deposits with banks and other financial institutions 11 117,292,716 138,510,589
Financial instruments held for trading 12 26,778,036 26,569,658
Loans to customers 13 152,677,147 118,123,363
Financial instruments available-for-sale 14 27,361,581 46,491,934
Other assets 3,824,622 2,405,166
Property and equipment 15 1,386,617 1,689,792
Goodwill 16 199,779 199,779
Deferred tax assets 9 210,783 177,755
Total assets 398,286,268 369,697,057
LIABILITIES
Financial instruments held for trading 12 19,706,086 1,667,035
Due to the Central Bank of the Russian Federation 17 - 24,627,807
Deposits and balances from banks and other financial institutions 18 39,638,943 40,632,497
Current accounts and deposits from customers 19 274,276,110 240,609,678
Other liabilities 21 4,966,629 5,168,160
Total liabilities 338,587,768 312,705,177
EQUITY
Share capital 22 2,099,023 2,099,023
Additional paid in capital 22 1,227,310 1,227,310
Revaluation reserve for financial instruments available-for-sale (4,209,630) (761,537)
Retained earnings 60,581,797 54,427,084
Total equity 59,698,500 56,991,880
Total liabilities and equity 398,286,268 369,697,057
Natalia Nikolaeva Assia Gounko Acting President Deputy Chief Accountant
The statement of financial position is to be read in conjunction with the Notes to, and forming part of, the financial statements.
40
INTERNATIONAL FINANCIAL REPORTING STANDARDS
Statement of Cash Flows for the year ended 31 December 2014
Notes2014
RUB’0002013
RUB’000
Cash flows from operating activities
Interest and fee and commission receipts 32,100,079 31,994,899
Interest and fee and commission payments (10,705,650) (8,577,908)
Net (payments) receipts from foreign exchange (10,337,440) 3,544,987
Net (payments) receipts from securities (1,219,431) 565,037
Other receipts 1,278,809 622,307
Cash payments to employees and suppliers (17,777,235) (13,953,717)
Operating cash flows before changes in operating assets and liabilities (6,660,868) 14,195,605
(Increase) decrease in operating assets
Obligatory reserves with the Central Bank of the Russian Federation (237,668) 629,849
Loans and deposits with banks and other financial institutions 43,974,968 (77,873,296)
Financial instruments held for trading 17,675,181 (14,038,062)
Loans to customers (27,019,339) (7,316,394)
Financial instruments available-for-sale 15,742,729 57,225,643
Other assets (1,431,604) (199,427)
Increase (decrease) in operating liabilities
Due to the Central Bank of the Russian Federation (24,627,807) 6,421,908
Deposits and balances from banks and other financial institutions (1,270,169) 11,688,654
Current accounts and deposits from customers 8,428,807 15,150,509
Other liabilities (241,811) 174,413
Net cash provided from operating activities before income tax paid 24,332,419 6,059,402
Income tax paid (1,667,296) (2,071,029)
Net cash provided from operating activities 22,665,123 3,988,373
41
FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014
ZAO CITIBANK ANNUAL REPORT 2014
Notes2014
RUB’0002013
RUB’000
Cash flows from investing activities
Net purchases of property and equipment (182,657) (177,118)
Net cash used in investing activities (182,657) (177,118)
Cash flows from financing activities
Dividend payment (1,225,000) (4,770,000)
Net cash used in financing activities (1,225,000) (4,770,000)
Net increase (decrease) in cash and cash equivalents 21,257,466 (958,745)
Effect of changes in exchange rates on cash and cash equivalents 11,530,832 1,283,042
Cash and cash equivalents as at the beginning of the period 32,768,660 32,444,363
Cash and cash equivalents as at the end of the period 10 65,556,958 32,768,660
Natalia Nikolaeva Assia Gounko Acting President Deputy Chief Accountant
The statement of cash flows is to be read in conjunction with the Notes to, and forming part of, the financial statements.
42
INTERNATIONAL FINANCIAL REPORTING STANDARDS
Statement of Changes in Equity for the year ended 31 December 2014
Share capitalRUB’000
Additional paid in capital
RUB’000
Revaluation reserve for finan-
cial instruments available-for-sale
RUB’000Retained earnings
RUB’000Total
RUB’000
Balance as at 1 January 2013 2,099,023 1,227,310 450,878 50,068,256 53,845,467
Profit for the period - - - 9,128,828 9,128,828
Other comprehensive loss
Items that are or may be reclassified subsequently to profit or loss:
Net change in fair value of financial instruments available-for-sale, net of income tax - - (647,964) - (647,964)
Net change in fair value of financial instruments available-for-sale transferred to profit or loss, net of income tax - - (564,451) - (564,451)
Total items that are or may be reclassified subsequently to profit or loss
- - (1,212,415) - (1,212,415)
Total other comprehensive loss - - (1,212,415) - (1,212,415)
Total comprehensive income for the period - - (1,212,415) 9,128,828 7,916,413
Dividends paid - - - (4,770,000) (4,770,000)
Balance as at 31 December 2013 2,099,023 1,227,310 (761,537) 54,427,084 56,991,880
Profit for the period - - - 7,379,713 7,379,713
Other comprehensive loss
Items that are or may be reclassified subsequently to profit or loss:
Net change in fair value of financial instruments available-for-sale, net of income tax - - (3,249,955) - (3,249,955)
Net change in fair value of financial instruments available-for-sale transferred to profit or loss, net of income tax - - (198,138) - (198,138)
Total items that are or may be reclassified subsequently to profit or loss - - (3,448,093) - (3,448,093)
Total other comprehensive loss - - (3,448,093) - (3,448,093)
Total comprehensive income for the period - - (3,448,093) 7,379,713 3,931,620
Dividends paid - - - (1,225,000) (1,225,000)
Balance as at 31 December 2014 2,099,023 1,227,310 (4,209,630) 60,581,797 59,698,500
Natalia Nikolaeva Assia Gounko Acting President Deputy Chief Accountant
Отчет об изменениях капитала должен рассматриваться вместе с Примечаниями к данной финансовой отчетности, которые являются ее неотъемлемой частью.
43
FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014
ZAO CITIBANK ANNUAL REPORT 2014
Notes to, and forming part of, the Financial Statements for the year ended 31 December 2014
1 Background
(a) Organisation and operations
ZAO CB Citibank (the Bank) was established in the Russian Federation as a limited liability company and in 1993 was granted its general banking licence. The Bank converted to a closed joint-stock company in November 2001 and is a part of the international financial company, Citigroup, headquartered in the United States and operating in over 100 countries. The principal activities of the Bank are deposit taking, lending, and foreign exchange and securities transactions, which are conducted through its head office in Moscow and branch in St.Petersburg. As at 31 De-cember 2014, the Bank also has branches in Samara, Rostov-on-Don, Ekaterinburg, Nizhny Novgorod, Volgograd and Ufa, which provide banking services to individuals. The activities of the Bank are regulated by the Central Bank of the Russian Federation (the CB RF). The Bank became a member of the state deposit insurance system in the Russian Federation on 3 February 2005.
The Bank’s registered office is 8-10, building 1, Gasheka str., Moscow.
(b) Russian business environment
The Bank’s operations are primarily located in the Russian Federation. Consequently, the Bank is exposed to the economic and financial markets of the Russian Federation, which display emerging-market characteristics. Legal, tax and regulatory frameworks continue to be developed, but are subject to varying interpretations and frequent changes that, together with other legal and fiscal impediments, contribute to the challenges faced by entities operating in the Russian Federation.
The recent conflict in Ukraine and related events has increased the perceived risks of doing business in the Russian Federation. The imposition of economic sanctions on Russian individuals and legal entities by the European Union, the United States of America, Japan, Canada, Australia and others, as well as retaliatory sanctions imposed by the Russian government, has resulted in increased economic uncertainty including more vol-atile equity markets, a depreciation of the Russian Rouble, a reduction in both local and foreign direct investment inflows and a significant tight-ening in the availability of credit. In particular, some Russian entities, including banks, may be experiencing difficulties in accessing international equity and debt markets and may become increasingly dependent on Russian state banks to finance their operations. The longer term effects of recently implemented sanctions, as well as the threat of additional future sanctions, are difficult to determine. Management of the Bank believes that it takes all the necessary efforts to support the economic stability of the Bank in the current environment.
The financial statements reflect management’s assessment of the impact of the Russian business environment on the operations and financial position of the Bank. The future business environment may differ from management’s assessment.
2 Basis of preparation
(a) Statement of compliance
The accompanying financial statements are prepared in accordance with the requirements of International Financial Reporting Standards (IFRS).
(b) Basis of measurement
These 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 instruments are stated at fair value.
(c) Functional and presentation currency
The functional currency of the Bank 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 them. In previous reporting periods before 1 January 2005 the Bank used US Dollar (USD) as a functional currency. Beginning from 1 January 2005 because of the enforcement of new IAS 21 The Effect on Changes in Foreign Exchange Rates (revised in 2003) the Bank revised its functional currency, and as a result changed it from USD to RUB. The RUB is also the presentation currency for the purposes of these financial statements.
As at 31 December 2014, the official exchange rate was 56.2584 RUB for 1 USD and as at 31 December 2013 the official exchange rate was 32.7292 RUB for 1 USD.
Financial information presented in RUB is rounded to the nearest thousand.
44
INTERNATIONAL FINANCIAL REPORTING STANDARDS
(d) Goodwill
Goodwill arises from acquisitions of subsidiaries.
Goodwill is tested for impairment annually or more frequently if events or changes in circumstances indicate that it might be impaired and is carried at cost less accumulated impairment losses.
Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.
(e) Use of estimates and judgements
The preparation of 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.
Information about significant areas of estimation uncertainty and critical judgments in applying accounting policies is described in the following notes: > loan impairment estimates – Note 13 > estimates of fair value of financial assets and liabilities – Note 29.
(f) Changes in accounting policies and presentation
The Bank has adopted the following amendments to standards with a date of initial application of 1 January 2014: > Offsetting Financial Assets and Financial Liabilities (Amendments to IAS 32 Financial Instruments: Presentation) (see (i)) > Recoverable Amount Disclosures for Non-Financial Assets (Amendments to IAS 36 Impairment of Assets) (see (ii)) > Novation of Derivatives and Continuation of Hedge Accounting (Amendments to IAS 39 Financial Instruments: Recognition and Measure-
ments) (see (iii))
The nature and effect of the changes are explained below.
(i) Offsetting Financial Assets and Financial Liabilities
Amendments to IAS 32 Financial Instruments: Presentation - Offsetting Financial Assets and Financial Liabilities do not introduce new rules for offsetting financial assets and liabilities; rather they clarify the offsetting criteria to address inconsistencies in their application. The amendments specify that an entity currently has a legally enforceable right to set-off if that right is not contingent on a future event; and enforceable both in the normal course of business and in the event of default, insolvency or bankruptcy of the entity and all counterparties.
(ii) Recoverable Amount Disclosures for Non-Financial Assets
Amendment requires detailed disclosure of how fair value less cost of disposal has been measured when an impairment loss has been recog-nized or reversed, including key assumptions and the level of fair value hierarchy for which the fair value measurement is categorized. At the same time the amendments remove the requirement to disclose the recoverable amount when a Cash Generating Unit (CGU) contains goodwill or indefinite lived intangible assets but there has been no impairment.
(iii) Novation of Derivatives and Continuation of Hedge Accounting
These amendments provide relief from discontinuing hedge accounting when novation of a derivative designated as a hedging instrument meets certain criteria.
These amendments do not have an impact on the Bank’s financial statements.
3 Significant accounting policies
The following significant accounting policies are applied in the preparation of the financial statements. The accounting policies are consistently applied by the Bank to all periods presented in these financial statements. Future changes in accounting policies are described at the end of this Note.
(a) Foreign currency transactions
Transactions in foreign currencies are translated to the functional currency of the Bank at exchange rates at the dates of the transactions. Mon-etary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between amortised cost in the functional currency at the beginning of the period, adjusted for effective interest and payments during the period, and the amortised cost in foreign currency translated at the exchange rate at the end of the reporting period. Foreign currency differences arising on retranslation are recognised in profit or loss, except for differences arising on the retranslation of available-for-sale equity instruments or qualifying cash flow hedges to the extent that the hedge is effective, which are recognised in other comprehensive income.
45
FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014
ZAO CITIBANK ANNUAL REPORT 2014
(b) Cash and cash equivalents
The Bank includes cash and nostro accounts with the CB RF and nostro accounts with banks and other financial institutions in cash and cash equivalents. The obligatory reserve deposit with the CB RF is not considered to be a cash equivalent due to restrictions on its withdrawability. Cash and cash equivalents are carried at amortised cost in the statement of financial position.
(c) Financial instruments
(i) Classification
Financial instruments at fair value through profit or loss are financial assets or liabilities that are: > acquired or incurred principally for the purpose of selling or repurchasing in the near term > part of a portfolio of identified financial instruments that are managed together and for which there is evidence of a recent actual pattern of
short-term profit-taking > derivative financial instruments (except for derivative financial instruments that are designated and effective hedging instruments) or, > upon initial recognition, designated by the Bank as at fair value through profit or loss.
The Bank may designate financial assets and liabilities at fair value through profit or loss where either: > the assets or liabilities are managed, evaluated and reported internally on a fair value basis > the designation eliminates or significantly reduces an accounting mismatch which would otherwise arise or, > the asset or liability contains an embedded derivative that significantly modifies the cash flows that would otherwise be required under the
contract.
All trading derivatives in a net receivable position (positive fair value), as well as options purchased, are reported as assets. All trading derivatives in a net payable position (negative fair value), as well as options written, are reported in financial statements as liabilities.
Management determines the appropriate classification of financial instruments in this category at the time of the initial recognition. Derivative financial instruments and financial instruments designated as at fair value through profit or loss upon initial recognition are not reclassified out of the at fair value through profit or loss category. Financial assets that would have met the definition of loans and receivables may be reclassified out of the at fair value through profit or loss or available-for-sale category if the Bank has an intention and ability to hold them for the foresee-ble future or until maturity. Other financial instruments may be reclassified out of the at fair value through profit or loss category only in rare circumstances. Rare circumstances arise from a single event that is unusual and highly unlikely to recur in the near term.
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market, other than those that the Bank: > intends to sell immediately or in the near term > upon initial recognition designates as at fair value through profit or loss > upon initial recognition designates as available-for-sale, or > may not recover substantially all of its initial investment, other than because of credit deterioration.
Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturity that the Bank has the positive intention and ability to hold to maturity, other than those that: > the Bank upon initial recognition designates as at fair value through profit or loss > the Bank designates as available-for-sale, or > meet the definition of loans and receivables.
Available-for-sale financial assets are those non-derivative financial assets that are designated as available for sale or are not classified as loans and receivables, held-to-maturity investments or financial instruments at fair value through profit or loss.
(ii) Recognition
Financial assets and liabilities are recognised in the statement of financial position when the Bank becomes a party to the contractual provisions of the instrument. All regular way purchases of financial assets are accounted for at the settlement date.
(iii) Measurement
A financial asset or liability is initially measured at its fair value plus, in the case of a financial asset or liability not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition or issue of the financial asset or liability.
Subsequent to initial recognition, financial assets, including derivatives that are assets, are measured at their fair values, without any deduction for transaction costs that may be incurred on sale or other disposal, except for: > loans and receivables which are measured at amortised cost using the effective interest method > held-to-maturity investments that are measured at amortised cost using the effective interest method, and > investments in equity instruments that do not have a quoted market price in an active market and whose fair value cannot be reliably mea-
sured, which are measured at cost.
All financial liabilities, other than those designated at fair value through profit or loss and financial liabilities that arise when a transfer of a financial asset carried at fair value does not qualify for derecognition, are measured at amortised cost.
(iv) Amortised cost
The amortised cost of a financial asset or liability is the amount at which the financial asset or liability is measured at initial recognition, minus principal repayments, plus or minus the cumulative amortisation using the effective interest method of any difference between the initial
46
INTERNATIONAL FINANCIAL REPORTING STANDARDS
amount recognised and the maturity amount, minus any reduction for impairment. Premiums and discounts, including initial transaction costs, are included in the carrying amount of the related instrument and amortised based on the effective interest rate of the instrument.
(v) Fair value measurement principles
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal, or in its absence, the most advantageous market to which the Bank has access at that date. The fair value of a liability reflects its non-performance risk.
When available, the Bank measures the fair value of an instrument using quoted prices in an active market for that instrument. A market is regarded as active if transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis. When there is no quoted price in an active market, the Bank uses valuation techniques that maximise the use of relevant observ-able inputs and minimise the use of unobservable inputs. The chosen valuation technique incorporates all the factors that market participants would take into account in these circumstances.
The best evidence of the fair value of a financial instrument at initial recognition is normally the transaction price, i.e., the fair value of the con-sideration given or received. If the Bank determines that the fair value at initial recognition differs from the transaction price and the fair value is evidenced neither by a quoted price in an active market for an identical asset or liability nor based on a valuation technique that uses only data from observable markets, the financial instrument is initially measured at fair value, adjusted to defer the difference between the fair value at initial recognition and the transaction price. Subsequently, that difference is recognised in profit or loss on an appropriate basis over the life of the instrument, but no later than when the valuation is supported wholly by observable market data or the transaction is closed out.
If an asset or a liability measured at fair value has a bid price and an ask price, the Bank measures assets and long positions at the bid price and liabilities and short positions at the ask price.
Portfolios of financial assets and financial liabilities that are exposed to market risk and credit risk that are managed by the Bank on the basis of the net exposure to either market or credit risk, are measured on the basis of a price that would be received to sell the net-long position (or paid to transfer the net-short position) for a particular risk exposure. Those portfolio-level adjustments are allocated to the individual assets and liabilities on the basis of the relative risk adjustment of each of the individual instruments in the portfolio.
The Bank recognises transfers between levels of the fair value hierarchy as of the end of the reporting period during which the change has occurred.
(vi) Gains and losses on subsequent measurement
A gain or loss arising from a change in the fair value of a financial asset or liability is recognised as follows: > a gain or loss on a financial instrument classified as at fair value through profit or loss is recognised in profit or loss > a gain or loss on an available-for-sale financial asset is recognised as other comprehensive income in equity (except for impairment losses
and foreign exchange gains and losses on debt financial instruments available-for-sale) until the asset is derecognised, at which time the cumulative gain or loss previously recognised in equity is recognised in profit or loss. Interest in relation to an available-for-sale financial asset is recognised in profit or loss using the effective interest method.
For financial assets and liabilities carried at amortised cost, a gain or loss is recognised in profit or loss when the financial asset or liability is derecognised or impaired, and through the amortisation process.
(vii) Derecognition
The Bank derecognises a financial asset when the contractual rights to the cash flows from the financial asset expire, or when it transfers the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred or in which the Bank neither transfers nor retains substantially all the risks and rewards of ownership and it does not retain control of the financial asset. Any interest in transferred financial assets that qualify for derecognition that is created or retained by the Bank is recognised as a separate asset or liability in the statement of financial position. The Bank derecognises a financial liability when its contractual obligations are discharged or cancelled or expire.
The Bank enters into transactions whereby it transfers assets recognised on its statement of financial position, but retains either all risks and rewards of the transferred assets or a portion of them. If all or substantially all risks and rewards are retained, then the transferred assets are not derecognised.
In transactions where the Bank neither retains nor transfers substantially all the risks and rewards of ownership of a financial asset, it derecognis-es the asset if control over the asset is lost.
In transfers where control over the asset is retained, the Bank continues to recognise the asset to the extent of its continuing involvement, deter-mined by the extent to which it is exposed to changes in the value of the transferred assets.
The Bank writes off assets deemed to be uncollectible.
(viii) Derivative instruments
Derivative financial instruments include swaps, forward contracts, futures, spot transactions and options in interest rates, foreign exchanges, precious metals and stock markets, and any combinations of these instruments.
Derivatives are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at fair value. All derivatives are carried as assets when their fair value is positive and as liabilities when their fair value is negative.
47
FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014
ZAO CITIBANK ANNUAL REPORT 2014
Changes in the fair value of derivatives are recognised immediately in profit or loss.
Derivatives may be embedded in another contractual arrangement (a host contract). An embedded derivative is separated from the host con-tract and is accounted for as a derivative if, and only if the economic characteristics and risks of the embedded derivative are not closely related to the economic characteristics and risks of the host contract, a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative; and the combined instrument is not measured at fair value with changes in fair value recognised in profit or loss. Derivatives embedded in financial assets or financial liabilities at fair value through profit or loss are not separated.
Although the Bank trades in derivative instruments for risk hedging purposes, these instruments do not qualify for hedge accounting.
(d) Repurchase and reverse repurchase agreements
Securities sold under sale and repurchase (repo) agreements are accounted for as secured financing transactions, with the securities retained in the statement of financial position and the counterparty liability included in amounts payable under repo agreements within deposits and balances from banks and other financial institutions or current accounts and deposits from customers, as appropriate. The difference between the sale and repurchase prices represents interest expense and is recognised in profit or loss over the term of the repo agreement using the effective interest method.
Securities purchased under agreements to resell (reverse repo) are recorded as amounts receivable under reverse repo agreements within loans and deposits with banks and other financial institutions or loans to customers, as appropriate. The difference between the purchase and resale prices represents interest income and is recognised in profit or loss over the term of the reverse repo agreement using the effective interest method.
If assets purchased under agreement to resell are sold to third parties, the obligation to return securities is recorded as a trading liability and measured at fair value.
(e) Offsetting
Financial assets and liabilities are offset and the net amount reported in the statement of financial position when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously.
(f) Property and equipment
(i) Owned assets
Items of property and equipment are stated at cost less accumulated depreciation and impairment losses. Where an item of property and equip-ment comprises major components having different useful lives, they are accounted for as separate items of property and equipment.
(ii) Leased assets
Leases in terms of which the Bank assumes substantially all the risks and rewards of ownership are classified as finance leases. Property and equipment acquired by way of a finance lease is stated at the amount equal to the lower of its fair value and the present value of the minimum lease payments at inception of the lease, less accumulated depreciation and impairment losses.
Leases in terms of which the Bank does not assume substantially all the risks and rewards of ownership are classified as operating leases and lease payments are expensed as incurred.
(iii) Depreciation
Depreciation is charged to profit or loss on a straight-line basis over the estimated useful lives of the individual assets. Depreciation commences on the date of acquisition or, in respect of internally constructed assets, from the time an asset is completed and ready for use. Land is not depre-ciated. The estimated useful lives are as follows:
Buildings 50 years
Equipment 3 to 12 years
Leasehold improvements 5 to 10 years
(g) Impairment
The Bank assesses at the end of each reporting period whether there is any objective evidence that a financial asset or group of financial assets is impaired. If any such evidence exists, the Bank determines the amount of any impairment loss.
A financial asset or group of financial assets is impaired and impairment losses are incurred if, and only if, there is objective evidence of impair-ment as a result of one or more events that occurred after the initial recognition of the financial asset (a loss event) and that event (or events) has had an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.
Objective evidence that financial assets are impaired can include default or delinquency by a borrower, breach of loan covenants or conditions, restructuring of a financial asset or group of financial assets that the Bank would not otherwise consider, indications that a borrower or issuer will enter bankruptcy, the disappearance of an active market for a security, deterioration in the value of collateral, or other observable data related
48
INTERNATIONAL FINANCIAL REPORTING STANDARDS
to a group of assets such as adverse changes in the payment status of borrowers in the group, or economic conditions that correlate with defaults in the group.
In addition, for an investment in an equity security available-for-sale a significant or prolonged decline in its fair value below its cost is objective evidence of impairment.
(i) Financial assets carried at amortised cost
Financial assets carried at amortised cost consist principally of loans and other receivables (loans and receivables). The Bank reviews its loans and receivables to assess impairment on a regular basis.
Management first assesses whether objective evidence of impairment exists individually for loans and receivables that are individually signifi-cant, and individually or collectively for loans and receivables that are not individually significant. If management determines that no objective evidence of impairment exists for an individually assessed loan or receivable, whether significant or not, it includes the loan in a group of loans and receivables with similar credit risk characteristics and collectively assesses them for impairment. Loans and receivables that are individu-ally assessed for impairment and for which an impairment loss is or continues to be recognised are not included in a collective assessment of impairment.
If there is objective evidence that an impairment loss on a loan or receivable has been incurred, the amount of the loss is measured as the differ-ence between the carrying amount of the loan or receivable and the present value of estimated future cash flows including amounts recover-able from guarantees and collateral discounted at the loan or receivable’s original effective interest rate. Contractual cash flows and historical loss experience adjusted on the basis of relevant observable data that reflect current economic conditions provide the basis for estimating expected cash flows.
In some cases the observable data required to estimate the amount of an impairment loss on a loan or receivable may be limited or no longer fully relevant to current circumstances. This may be the case when a borrower is in financial difficulties and there is little available historical data relating to similar borrowers. In such cases, the Bank uses its experience and judgment to estimate the amount of any impairment loss.
All impairment losses in respect of loans and receivables are recognised in profit or loss and are only reversed if a subsequent increase in recov-erable amount can be related objectively to an event occurring after the impairment loss was recognised.
When a loan is uncollectable, it is written off against the related allowance for loan impairment. The Bank writes off a loan balance (and any related allowances for loan impairment) when management determines that the loans are uncollectible and when all necessary steps to collect the loan are completed.
(ii) Financial assets carried at cost
Financial assets carried at cost include unquoted equity instruments included in available-for-sale financial assets that are not carried at fair value because their fair value can not be reliably measured. If there is objective evidence that such investments are impaired, the impairment loss is calculated as the difference between the carrying amount of the investment and the present value of the estimated future cash flows discount-ed at the current market rate of return for a similar financial asset.
All impairment losses respect of these investments are recognised in profit or loss and can not be reversed.
(iii) Available-for-sale financial assets
Impairment losses on available-for-sale financial assets are recognised by transferring the cumulative loss that is recognised in other compre-hensive income to profit or loss as a reclassification adjustment. The cumulative loss that is reclassified from other comprehensive income to profit or loss is the difference between the acquisition cost, net of any principal repayment and amortisation, and the current fair value, less any impairment loss previously recognised in profit or loss. Changes in impairment allowance attributable to time value are reflected as a compo-nent of interest income. If, in a subsequent period, the fair value of an impaired available-for-sale debt security increases and the increase can be objectively related to an event occurring after the impairment loss was recognised in profit or loss, the impairment loss is reversed, with the amount of the reversal recognised in profit or loss. However, any subsequent recovery in the fair value of an impaired available-for-sale equity security is recognised in other comprehensive income.
(iv) Non financial assets
Other non financial assets, other than deferred taxes, are assessed at each reporting date for any indications of impairment. The recoverable amount of goodwill is estimated at each reporting date. The recoverable amount of non financial assets is the greater of their fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate cash inflows largely independent of those from other assets, the recoverable amount is determined for the cash-generating unit to which the as-set belongs. An impairment loss is recognised when the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount.
All impairment losses in respect of non financial assets are recognised in profit or loss and reversed only if there has been a change in the esti-mates used to determine the recoverable amount. Any impairment loss reversed is only reversed to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. An impairment loss in respect of goodwill is not reversed.
(h) Provisions
A provision is recognised in the statement of financial position when the Bank has a legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are determined
49
FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014
ZAO CITIBANK ANNUAL REPORT 2014
by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability.
A provision for restructuring is recognised when the Bank has approved a detailed and formal restructuring plan, and the restructuring either has commenced or has been announced publicly. Future operating costs are not provided for.
(i) Taxation
Income tax comprises current and deferred tax. Income tax is recognised in profit or loss except to the extent that it relates to items of other comprehensive income or transactions with shareholders recognised directly in equity, in which case it is recognised within other comprehensive income or directly within equity.
Current tax expense is the expected tax payable on the taxable profit for the year, using tax rates enacted or substantially enacted at the report-ing date, and any adjustment to tax payable in respect of previous years.
Deferred tax assets and liabilities are recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax assets and liabilities are not recognised for the following temporary differences: goodwill not deductible for tax purposes, the initial recognition of assets or liabilities that affect neither accounting nor taxable profit and temporary differences related to investments in subsidiaries, where the parent is able to control the timing of the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.
The measurement of deferred tax assets and liabilities reflects the tax consequences that would follow the manner in which the Bank expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date.
Deferred tax assets are recognised only to the extent that it is probable that future taxable profits will be available against which the temporary differences, unused tax losses and credits can be utilised. Deferred tax assets are reduced to the extent that taxable profit will be available against which the deductible temporary differences can be utilized.
(j) Share capital
Ordinary shares
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares and share options are recognised as a deduction from equity, net of any tax effects.
Dividends
The ability of the Bank to declare and pay dividends is subject to the rules and regulations of the Russian legislation.
Dividends in relation to ordinary shares are reflected as an appropriation of retained earnings in the period when they are declared.
(k) Credit related commitments
In the normal course of business, the Bank enters into credit related commitments, comprising undrawn loan commitments, letters of credit and guarantees, and provides other forms of credit insurance.
Financial guarantees are contracts that require the Bank to make specified payments to reimburse the holder for a loss it incurs because a speci-fied debtor fails to make payment when due in accordance with the terms of a debt instrument.
A financial guarantee liability is recognised initially at fair value net of associated transaction costs, and is measured subsequently at the higher of the amount initially recognised less cumulative amortisation or the amount of provision for losses under the guarantee. Provisions for losses under financial guarantees and other credit related commitments are recognised when losses are considered probable and can be measured reliably.
Financial guarantee liabilities and provisions for other credit related commitment are included in other liabilities.
Loan commitments are not recognised, except in the following cases: > loan commitments that the Bank designates as financial liabilities at fair value through profit or loss > if the Bank has a past practice of selling the assets resulting from its loan commitments shortly after origination, then the loan commitments
in the same class are treated as derivative instruments > loan commitments that can be settled net in cash or by delivering or issuing another financial instrument > commitments to provide a loan at a below-market interest rate.
(l) Income and expense recognition
Interest income and expense are recognised in profit or loss using the effective interest method.
50
INTERNATIONAL FINANCIAL REPORTING STANDARDS
Loan origination fees, loan servicing fees and other fees that are considered to be integral to the overall profitability of a loan, together with the related transaction costs, are deferred and amortised to interest income over the estimated life of the financial instrument using the effective interest method.
Other fees, commissions and other income and expense items are recognised in profit or loss when the corresponding service is provided.
The Bank acts as an agent for insurance providers offering their insurance products to consumer loan borrowers. Commission income from insurance represents commissions for such agency services received by the Bank from such partners. It is not considered to be integral to the overall profitability of consumer loans because it is determined and recognised based on the Bank’s contractual arrangements with the insur-ance provider rather than with the borrower. The Bank does not participate in the insurance risk, which is entirely borne by the partner; commis-sion income from insurance is recognised in profit or loss when the Bank provides the agency service to the insurance company. The borrowers have a choice whether to purchase the insurance policy. A consumer loan customer’s decision whether or not to purchase an insurance policy does not effect the stated interest rate offered to that customer.
Dividend income is recognised in profit or loss on the date that the dividend is declared.
Payments made under operating leases are recognised in profit or loss on a straight-line basis over the term of the lease. Lease incentives received are recognised as an integral part of the total lease expense, over the term of the lease.
(m) New standards and interpretations not yet adopted
The following new standard, amendments to standards, and interpretations are not yet effective as at 31 December 2014, and are not applied in preparing these financial statements. The Bank plans to adopt these pronouncements when they become effective. The Bank has not yet anal-ysed the likely impact of the new standard, amendments to standards, and interpretations on its financial position or performance.
IFRS 9 Financial Instruments, published in July 2014, replaces IAS 39 Financial Instruments: Recognition and Measurement. The Bank recognises that the new standard introduces many changes to accounting for financial instruments and is likely to have a significant impact on the financial statements. The Bank has not analysed the impact of these changes yet. The Bank does not intend to adopt this standard early. The standard will be effective for annual periods beginning on or after 1 January 2018 and will be applied retrospectively with some exemptions.
Various Improvements to IFRS are dealt with on a standard-by-standard basis. All amendments, which result in accounting changes for presenta-tion, recognition or measurement purposes, will come into effect not earlier than 1 January 2015. The Bank has not yet analysed the likely impact of the improvements on its financial position or performance.
4 Interest income and interest expense
2014 RUB’000
2013 RUB’000
Interest income
Loans to customers 15,708,684 12,956,550
Loans and deposits with banks and other financial institutions and amounts receivable under reverse repo agreements 3,656,513 2,874,710
Financial instruments held for trading and available-for-sale 3,166,667 5,524,631
22,531,864 21,355,891
Interest expense
Current accounts and deposits from customers 5,854,363 3,990,250
Deposits and balances from banks and other financial institutions and amounts payable under repo agreements 995,934 644,798
6,850,297 4,635,048
51
FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014
ZAO CITIBANK ANNUAL REPORT 2014
5 Fee and commission income and fee and commission expense
2014 RUB’000
2013 RUB’000
Fee and commission income
Settlement fees 3,157,299 2,750,374
Commissions from insurance companies 1,177,500 1,087,654
Guarantees and letter of credit fees 1,086,304 954,086
Cash withdrawal fees 964,969 743,808
Annual credit card maintenance fees 927,350 960,860
Transaction processing fees 893,384 844,678
Custody fees 594,368 467,792
Brokerage and underwriting fees 464,123 338,591
Credit card late payment fees 161,076 313,430
Cash transaction fees 110,944 113,771
Investment fund fees 70,395 98,350
Other 156,523 184,219
9,764,235 8,857,613
Fee and commission expense
Settlement fees 2,577,334 2,150,350
Insurance fees 355,725 371,733
Cash transportation fees 281,343 261,920
Customs card transaction fees 269,410 222,086
Guarantees received fees 240,304 279,796
Franchise fee 5,351 436,041
Other 306,239 204,700
4,035,706 3,926,626
6 Net (losses) gains on securities
2014 RUB’000
2013 RUB’000
Realised and unrealised net loss from financial instruments held for trading (2,030,713) (265,104)
Realised net gain from financial instruments available-for-sale 247,672 705,564
(1,783,041) 440,460
7 Net foreign exchange income
2014 RUB’000
2013 RUB’000
Net (loss) gain from foreign exchange transactions (10,146,758) 2,480,665
Net gain from revaluation of financial assets and liabilities in foreign currency 20,087,808 3,438,537
9,941,050 5,919,202
52
INTERNATIONAL FINANCIAL REPORTING STANDARDS
8 General administrative expenses
2014 RUB’000
2013 RUB’000
Employee compensation and social insurance expenses 7,069,931 5,870,820
Intercompany charges for retail information technical support and other services 3,186,720 2,509,058
Taxes other than income tax 1,681,139 1,383,183
Occupancy 1,379,159 1,174,929
Repairs and maintenance 1,051,220 556,540
Outsourcing costs 531,845 601,721
Communications and information services 514,524 391,855
Advertising and marketing 475,919 667,316
Depreciation 463,109 453,769
Insurance 361,573 200,632
Travel 148,908 96,429
Security 79,548 63,705
Other 1,636,864 1,164,322
18,580,459 15,134,279
9 Income tax expense2014
RUB’0002013
RUB’000
Current tax expense
Current year 1,371,030 2,363,608
Deferred tax expense
Origination and reversal of temporary differences 828,995 65,922
Total income tax expense 2,200,025 2,429,530
In 2014 and 2013 the applicable tax rate for current and deferred tax is 20%.
Reconciliation of effective tax rate
The reconciliation between the expected tax expense to the actual income tax expense is as follows.
2014 RUB’000
2013 RUB’000
Profit before tax 9,579,738 11,558,358
Income tax expense at the applicable statutory tax rate 1,915,948 20% 2,311,672 20%
Non-deductible costs 403,544 4% 341,224 3%
Income taxed at lower tax rates (119,467) (1%) (223,366) (2%)
Income tax expense 2,200,025 23% 2,429,530 21%
Deferred tax assets and liabilities
Temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes give rise to net deferred tax assets as at 31 December 2014 and 31 December 2013.
The deductible temporary differences do not expire under current tax legislation. The tax loss carry-forwards expire in 2024.
53
FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014
ZAO CITIBANK ANNUAL REPORT 2014
Movements in temporary differences during the years ended 31 December 2014 and 2013 are presented as follows:
RUB’000Balance
1 January 2014Recognised in profit or loss
Recognised in other comprehensive income
Balance 31 December 2014
Financial instruments held for trading 28,984 (71,344) - (42,360)
Loans to customers (266,901) (18,486) - (285,387)
Financial instruments available-for-sale 190,384 (787,633) 862,023 264,774
Other assets 15,847 (37,220) - (21,373)
Property and equipment 24,465 16,004 - 40,469
Other liabilities 184,976 (25,936) - 159,040
Tax loss carry-forward - 95,620 - 95,620
177,755 (828,995) 862,023 210,783
RUB’000Balance
1 January 2013Recognised in profit or loss
Recognised in other comprehensive income
Balance 31 December 2013
Financial instruments held for trading (108,860) 137,844 - 28,984
Loans to customers (79,042) (187,859) - (266,901)
Financial instruments available-for-sale (112,720) - 303,104 190,384
Other assets 18,185 (2,338) - 15,847
Property and equipment 24,825 (360) - 24,465
Other liabilities 198,185 (13,209) - 184,976
(59,427) (65,922) 303,104 177,755
Income tax recognised in other comprehensive loss
The tax effects relating to components of other comprehensive loss comprise:
RUB’000
2014 2013
Amount before tax
Tax benefit
Amount net-of-tax
Amount before tax
Tax benefit
Amount net-of-tax
Net change in fair value of financial instruments available-for-sale (4,062,444) 812,489 (3,249,955) (809,955) 161,991 (647,964)
Net change in fair value of financial instruments available-for-sale trans-ferred to profit or loss (247,672) 49,534 (198,138) (705,564) 141,113 (564,451)
Other comprehensive loss (4,310,116) 862,023 (3,448,093) (1,515,519) 303,104 (1,212,415)
54
INTERNATIONAL FINANCIAL REPORTING STANDARDS
10 Cash and cash equivalents2014
RUB’0002013
RUB’000
Cash 12,410,012 5,948,291
Nostro account in the Central Bank of the Russian Federation 9,883,417 11,021,936
Nostro accounts in banks and other financial institutions
Citigroup entities 22,602,045 4,681,731
Other Russian banks and financial institutions
– MICEX Group 16,461,259 4,701,698
– Other banks and financial institutions 875,042 2,280,042
OECD banks 2,851,988 3,306,563
Large Russian banks 473,195 828,399
Total Nostro accounts in banks and other financial institutions 43,263,529 15,798,433
65,556,958 32,768,660
The Bank includes 30 largest Russian banks in terms of total assets in large Russian banks.
No cash and cash equivalents are impaired or past due.
11 Loans and deposits with banks and other financial institutions 2014
RUB’0002013
RUB’000
Loans and deposits
Central Bank of the Russian Federation 36,000,000 12,000,000
Large Russian banks 34,589,140 23,776,402
Citigroup entities 32,868,761 76,222,535
OECD banks 152,237 -
Other Russian banks and financial institutions 4,339,595 15,491,537
107,949,733 127,490,474
Amounts receivable under reverse repo agreements
MICEX Group 7,078,936 1,761,239
Other financial institutions 1,915,638 -
Other Russian banks 348,409 1,157,943
Large Russian banks - 8,100,933
9,342,983 11,020,115
117,292,716 138,510,589
The Bank includes 30 largest Russian banks in terms of total assets in large Russian banks.
No loans and deposits with banks and other financial institutions are impaired or past due.
As at 31 December 2014, the fair value of financial assets collateralizing reverse repo agreements is RUB 10,396,809 thousand (31 December 2013: RUB 11,896,351 thousand).
Concentration of loans and deposits with banks and other financial institutions and amounts receivable under reverse repo agreements
As at 31 December 2014 and 2013, exposures to banks and other financial institutions and amounts receivable under reverse repo agreements, which individually comprised more than 10% of total loans and deposits with banks and other financial institutions and amounts receivable under reverse repo agreements, are as follows:
55
FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014
ZAO CITIBANK ANNUAL REPORT 2014
2014 RUB’000
2013 RUB’000
Central Bank of the Russian Federation 36,000,000 -
Citigroup 32,868,761 76,222,535
68,868,761 76,222,535
12 Financial instruments held for trading
Financial assets held for trading
2014 RUB’000
2013 RUB’000
Unpledged
Debt and other fixed income securities
Russian Government GKO/OFZ 6,748,845 23,638,702
Russian Government Eurobonds 196,188 1,204,984
Agency on Mortgage Crediting (AIZhK) 13,128 35,319
Rosselkhozbank 4,035 10,405
Vnesheconombank 2,323 48,249
OTP Bank 2,020 6,983
Gazprombank 11 12
European Bank for Reconstruction and Development - 26,703
Renaissance Capital - 10,714
Vneshtorgbank - 3,250
Rushydro - 2,470
Credit Europe Bank - 114
6,966,550 24,987,905
Derivative financial instruments
Foreign exchange contracts 19,769,667 1,506,156
Interest rate swaps 41,819 75,597
19,811,486 1,581,753
26,778,036 26,569,658
No financial assets held for trading are past due.
Financial liabilities held for trading
2014 RUB’000
2013 RUB’000
Derivative financial instruments
Foreign exchange contracts 19,664,240 1,591,359
Interest rate swaps 41,846 75,676
19,706,086 1,667,035
As at 31 December 2014 and 2013, the majority of forward exchange contracts and interest rate swaps are entered into with other Citigroup entities.
56
INTERNATIONAL FINANCIAL REPORTING STANDARDS
Interest rate swaps
Notional amountRUB’000
2014 Fair value
AssetRUB’000
LiabilityRUB’000
Interest rate swaps 11,494,537 41,819 (41,846)
Notional amountRUB’000
2013 Fair value
AssetRUB’000
LiabilityRUB’000
Interest rate swaps 29,261,543 75,597 (75,676)
Foreign exchange contracts
The table below summarises, by major currencies, the contractual amounts of forward exchange contracts outstanding at 31 December 2014 and 2013 with details of the contractual exchange rates. Foreign currency amounts presented below are translated at rates ruling at the re-porting date. The resultant unrealised gains and losses on these unmatured contracts are recognised in profit or loss and in financial instruments held for trading, as appropriate.
2014 2013
Nominalbuy amount
RUB’000
Gain (loss)
RUB’000
Weighted aver-age contractedexchange rate
Nominal buy amount
RUB’000
Gain (loss)
RUB’000
Weighted aver-age contractedexchange rate
Spot foreign exchange contracts to buy British Pounds and sell US Dollars 21,230 17 0.64 1,263 (1) 0.61
Spot foreign exchange contracts to buy US Dollars and sell British Pounds 984 - 1.55 - - -
Spot foreign exchange contracts to buy US Dollars and sell Euro 75,896 60 1.22 21,162,868 13,382 1.37
Spot foreign exchange contracts to buy Euro and sell US Dollars 231,024 (300) 0.82 6,437,479 (5,396) 0.73
Spot foreign exchange contracts to buy US Dollars and sell Russian Roubles 13,411,223 (137,660) 0.02 16,562,440 11,428 0.03
Spot foreign exchange contracts to buy Russian Roubles and sell US Dollars 24,198,779 417,452 57.23 53,122,031 (86,703) 32.68
Spot foreign exchange contracts to buy Euro and sell Russian Roubles 285,528 (5,447) 0.01 12,618,681 (11,071) 0.02
Spot foreign exchange contracts to buy Russian Roubles and sell Euro 3,996 103 70.11 12,142 35 45.10
Spot foreign exchange contracts to buy US Dollars and sell Swiss Francs 555 (1) 1.01 1,174 2 1.12
Spot foreign exchange contracts to buy Swiss Francs and sell US Dollars 58,418 123 0.99 1,215 (5) 0.89
Spot foreign exchange contracts to buy US Dollars and sell Swedish Crowns 3 - 0.13 - - -
Spot foreign exchange contracts to buy Swedish Crowns and sell US Dollars 11,821 (25) 7.80 425 (3) 6.47
Spot foreign exchange contracts to buy Euro and sell Swiss Francs 8,249 (25) 0.83 - - -
Spot foreign exchange contracts to buy Swiss Francs and sell Euro 210 1 1.20 - - -
Spot foreign exchange contracts to buy Japanese Yen and sell US Dollars 1,121 1 119.62 2,024 (5) 105.11
Spot foreign exchange contracts to buy British Pounds and sell Euro 1,024 (2) 0.78 - - -
Spot foreign exchange contracts to buy US Dollars and sell Canadian Dollars 2 - 0.86 - - -
Spot foreign exchange contracts to buy Canadian Dollars and sell US Dollars 660 (1) 1.16 188 (1) 1.06
57
FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014
ZAO CITIBANK ANNUAL REPORT 2014
2014 2013
Nominalbuy amount
RUB’000
Gain (loss)
RUB’000
Weighted aver-age contractedexchange rate
Nominal buy amount
RUB’000
Gain (loss)
RUB’000
Weighted aver-age contractedexchange rate
Spot foreign exchange contracts to buy Euro and sell Polish Zloty 81 - 0.23 - - -
Spot foreign exchange contracts to buy New Zealand Dollars and sell US Dollars 67 5 1.28 - - -
Spot foreign exchange contracts to buy Singapore Dollars and sell US Dollars 39 - 1.32 - - -
Spot foreign exchange contracts to buy Czech Crowns and sell US Dollars 35 - 22.78 243 (1) 19.89
Spot foreign exchange contracts to buy Russian Roubles and sell Swiss Francs 11 - 56.15 - - -
Spot foreign exchange contracts to buy Australian Dollars and sell US Dollars 11 - 1.23 - - -
Spot foreign exchange contracts to buy South African Rand and sell US Dollars 1 - 11.65 - - -
Spot foreign exchange contracts to buy US Dollars and sell Danish Crowns - - - 104 - 0.18
Option contracts to buy Russian Roubles and sell US Dollars 21,223,481 - 41.24 - - -
Option contracts to buy US Dollars and sell Russian Roubles 15,558,698 - 0.02 - - -
Option contracts to buy Russian Roubles and sell Euro 20,502,810 - 47.37 161,891,640 - 47.37
Option contracts to buy Euro and sell Russian Roubles 14,210,500 - 0.02 170,526,000 - 0.02
Option contracts to buy US Dollars and sell Euro - - - 10,118,228 - 1.38
Option contracts to buy Euro and sell US Dollars - - - 10,154,359 - 0.73
Non-deliverable forward contracts to buy US Dollars and sell Russian Roubles 270,281 145,350 0.03 755,440 (18,751) 0.03
Non-deliverable forward contracts to buy Russian Roubles and sell US Dollars 71,448 (22,799) 38.33 911,181 3,116 32.98
Deliverable forward contracts to buy US Dollars and sell Euro 1,837,023 83,526 1.29 1,343,839 (41,114) 1.34
Deliverable forward contracts to buy Euro and sell US Dollars 7,758,265 (379,854) 0.78 4,175,612 109,973 0.75
Deliverable forward contracts to buy US Dollars and sell Russian Roubles 42,032,995 13,840,588 0.02 42,297,666 116,812 0.03
Deliverable forward contracts to buy Russian Roubles and sell US Dollars 53,157,945 (12,496,776) 44.46 70,295,563 (213,962) 33.30
Deliverable forward contracts to buy Euro and sell Russian Roubles 6,488,655 1,333,902 0.02 15,150,946 212,811 0.02
Deliverable forward contracts to buy Russian Roubles and sell Euro 16,774,813 (2,336,657) 61.60 12,658,599 (178,002) 45.23
Deliverable forward contracts to buy British Pounds and sell Russian Roubles 515,244 85,791 0.01 269,471 6,928 0.02
Deliverable forward contracts to buy Russian Roubles and sell British Pounds 743,721 (84,816) 82.35 318,683 (6,787) 53.30
Deliverable forward contracts to buy Japanese Yen and sell US Dollars 1,305,253 (72,100) 112.89 670,677 (23,627) 101.61
Deliverable forward contracts to buy Russian Roubles and sell Japanese Yen 1,232,730 (181,548) 0.42 646,640 31,268 0.33
Deliverable forward contracts to buy Swiss Francs and sell Russian Roubles 77,609 18,436 0.02 106,948 116 0.03
Deliverable forward contracts to buy Russian Roubles and sell Swiss Francs 605,666 (38,590) 55.90 236,737 (9,661) 35.68
Deliverable forward contracts to buy Swiss Francs and sell US Dollars 577,724 (12,943) 0.96 227,298 9,588 0.93
58
INTERNATIONAL FINANCIAL REPORTING STANDARDS
2014 2013
Nominalbuy amount
RUB’000
Gain (loss)
RUB’000
Weighted aver-age contractedexchange rate
Nominal buy amount
RUB’000
Gain (loss)
RUB’000
Weighted aver-age contractedexchange rate
Deliverable forward contracts to buy Russian Roubles and sell Chinese Yuan 265,681 3,671 9.28 - - -
Deliverable forward contracts to buy Chinese Yuan and sell US Dollars 264,104 117 6.24 - - -
Deliverable forward contracts to buy Russian Roubles and sell Swedish Crowns 370,021 (58,044) 6.30 - - -
Deliverable forward contracts to buy Swedish Crowns and sell Russian Roubles 34,062 9,733 0.18 - - -
Deliverable forward contracts to buy Swedish Crowns and sell US Dollars 330,786 (22,662) 7.27 - - -
Deliverable forward contracts to buy US Dollars and sell Swedish Crowns 43,779 4,967 0.14 - - -
Deliverable forward contracts to buy British Pounds and sell US Dollars 176,063 (676) 0.64 45,244 (202) 0.60
Deliverable forward contracts to buy US Dollars and sell Kazakhstani Tenge 115,872 (5,484) 0.01 671,866 (5,629) 0.01
Deliverable forward contracts to buy Kazakhstani Tenge and sell US Dollars 11,875 (1,204) 198.50 - - -
Deliverable forward contracts to buy Russian Roubles and sell Kazakhstani Tenge 12,916 1,074 0.30 - - -
Deliverable forward contracts to buy Kazakhstani Tenge and sell Russian Roubles 88,609 18,073 4.25 671,446 553 4.70
Deliverable forward contracts to buy US Dollars and sell British Pounds 849 51 1.65 - - -
Deliverable forward contracts to buy Euro and sell Swedish Crowns 50 - 0.10 - - -
Deliverable forward contracts to buy US Dollars and sell Swiss Francs - - - 13,590 (294) 1.10
13 Loans to customers2014
RUB’0002013
RUB’000
Loans to legal entities
Loans to global corporations 69,864,003 60,331,114
Loans to local corporate customers 34,321,669 12,672,870
104,185,672 73,003,984
Loans to individuals
Consumer loans 27,184,821 25,615,714
Credit cards 23,305,508 20,859,012
Mortgage loans 463,862 484,603
Staff loans 124,365 90,363
Overdrafts 9,070 12,485
51,087,626 47,062,177
Gross loans to customers 155,273,298 120,066,161
Impairment allowance (2,596,151) (1,942,798)
152,677,147 118,123,363
59
FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014
ZAO CITIBANK ANNUAL REPORT 2014
Movements in the loan impairment allowance for the years ended 31 December 2014 and 2013 are as follows:
2014 RUB’000
2013 RUB’000
Balance at the beginning of the year 1,942,798 1,153,595
Net charge 2,640,742 1,935,422
Write-offs (1,987,389) (1,146,219)
Balance at the end of the year 2,596,151 1,942,798
Credit quality of loans to legal entities
The Bank reviewed its loan portfolio to legal entities and did not identify loans that have indicators of impairment as at 31 December 2014.
Global corporations are international public companies, generally with investment grade ratings, for which no defaults have occurred. Local corporate customers are generally large-scale entities established in Russia, for which the Bank has not experienced late payments.
The following table provides information on the credit quality of loans to legal entities as at 31 December 2014:
Gross loansRUB’000
Impairment allowanceRUB’000
Net loansRUB’000
Impairment to gross loans
%
Loans to global corporations
Standard loans non-impaired 69,864,003 649,735 69,214,268 0.9
Loans to local corporate customers
Standard loans non-impaired 34,225,548 318,298 33,907,250 0.9
Overdue less than 30 days 96,121 894 95,227 0.9
Total loans to local corporate customers 34 321 669 319 192 34 002 477 0.9
Total loans to legal entities 104,185,672 968,927 103,216,745 0.9
Loans included in overdue less than 30 days were repaid in January 2015 as delay in repayment was due to technical reasons.
The following table provides information on the credit quality of loans to legal entities as at 31 December 2013:
Gross loansRUB’000
Impairment allowanceRUB’000
Net loansRUB’000
Impairment to gross loans
%
Loans to global corporations
Standard loans non-impaired 60,331,114 555,047 59,776,067 0.9
Loans to local corporate customers
Standard loans non-impaired 12,672,870 116,590 12,556,280 0.9
Total loans to legal entities 73,003,984 671,637 72,332,347 0.9
The Bank estimates loan impairment based on its past historical loss experience on these types of loans, and assumes 0.9% collective rate (31 December 2013: 0.9%).
Changes in these estimates could affect the loan impairment allowance. For example, to the extent that the net present value of the esti-mated cash flows differs by plus/minus one percent, the impairment allowance on loans to legal entities as at 31 December 2014 would be RUB 1,032,167 thousand lower/higher (31 December 2013: RUB 723,323 thousand).
60
INTERNATIONAL FINANCIAL REPORTING STANDARDS
Analysis of movements in the impairment allowance for loans to legal entities
Movements in the loan impairment allowance for loans to legal entities for the years ended 31 December 2014 and 2013 are as follows:
2014 RUB’000
2013 RUB’000
Balance at the beginning of the year 671,637 630,919
Net charge 297,290 51,438
Write-offs - (10,720)
Balance at the end of the year 968,927 671,637
Credit quality of loans to individuals
The following table provides information on the credit quality of loans to individuals collectively assessed for impairment as at 31 December 2014:
Gross loansRUB’000
Impairment allowanceRUB’000
Net loansRUB’000
Impairment to gross loans
%
Consumer loans
Not overdue 25,983,529 299,821 25,683,708 1.2
Overdue less than 30 days 712,257 80,979 631,278 11.4
Overdue 30-59 days 213,350 90,949 122,401 42.6
Overdue 60-89 days 169,307 101,678 67,629 60.1
Overdue 90-120 days 104,228 84,623 19,605 81.2
Overdue more than 120 days 2,150 2,150 - 100.0
Total consumer loans 27,184,821 660,200 26,524,621 2.4
Credit cards
Not overdue 22,172,977 309,982 21,862,995 1.4
Overdue less than 30 days 334,201 61,681 272,520 18.5
Overdue 30-59 days 195,096 89,057 106,039 45.6
Overdue 60-89 days 178,856 100,621 78,235 56.3
Overdue 90-119 days 100,531 75,556 24,975 75.2
Overdue 120-149 days 121,230 101,223 20,007 83.5
Overdue 150-180 days 129,674 117,782 11,892 90.8
Overdue more than 180 days 72,943 72,943 - 100.0
Total credit cards 23,305,508 928,845 22,376,663 4.0
Mortgage loans
Not overdue 427,498 4,656 422,842 1.1
Overdue 36,364 26,239 10,125 72.2
Total mortgage loans 463,862 30,895 432,967 6.7
Staff loans
Not overdue 124,365 1,354 123,011 1.1
Total staff loans 124,365 1,354 123,011 1.1
Overdrafts
Not overdue 3,435 295 3,140 8.6
Overdue 5,635 5,635 - 100.0
Total overdrafts 9,070 5,930 3,140 65.4
Total loans to individuals 51,087,626 1,627,224 49,460,402 3.2
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FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014
ZAO CITIBANK ANNUAL REPORT 2014
The following table provides information on the credit quality of loans to individuals collectively assessed for impairment as at 31 December 2013:
Gross loansRUB’000
Impairment allowanceRUB’000
Net loansRUB’000
Impairment to gross loans
%
Consumer loans
Not overdue 24,651,578 259,879 24,391,699 1.1
Overdue less than 30 days 604,667 69,695 534,972 11.5
Overdue 30-59 days 162,937 83,774 79,163 51.4
Overdue 60-89 days 116,102 79,542 36,560 68.5
Overdue 90-120 days 79,487 72,529 6,958 91.2
Overdue more than 120 days 943 943 - 100.0
Total consumer loans 25,615,714 566,362 25,049,352 2.2
Credit cards
Not overdue 19,920,998 224,292 19,696,706 1.1
Overdue less than 30 days 356,069 51,106 304,963 14.4
Overdue 30-59 days 161,229 66,922 94,307 41.5
Overdue 60-89 days 116,624 66,177 50,447 56.7
Overdue 90-119 days 101,436 78,344 23,092 77.2
Overdue 120-149 days 78,432 65,418 13,014 83.4
Overdue 150-180 days 67,788 61,317 6,471 90.5
Overdue more than 180 days 56,436 56,436 - 100.0
Total credit cards 20,859,012 670,012 20,189,000 3.2
Mortgage loans
Not overdue 462,134 4,621 457,513 1.0
Overdue 22,469 21,074 1,395 93.8
Total mortgage loans 484,603 25,695 458,908 5.3
Staff loans
Not overdue 90,363 1,124 89,239 1.2
Total staff loans 90,363 1,124 89,239 1.2
Overdrafts
Not overdue 4,550 33 4,517 0.7
Overdue 7,935 7,935 - 100.0
Total overdrafts 12,485 7,968 4,517 63.8
Total loans to individuals 47,062,177 1,271,161 45,791,016 2.7
The Bank estimates loan impairment based on its past historical loss experience on these types of loans.
The significant assumptions used in determining the impairment losses for loans to individuals include management’s assumption that loss migration rates are constant and can be estimated based on a 12 month historic loss migration pattern, considering the current economic environment.
Changes in these estimates could affect the loan impairment allowance. For example, to the extent that the net present value of the estimated cash flows differs by plus/minus three percent (31 December 2013: one percent), the impairment allowance on loans to individuals as at 31 De-cember 2014 would be RUB 1,483,812 thousand lower/higher (31 December 2013: RUB 457,910 thousand).
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INTERNATIONAL FINANCIAL REPORTING STANDARDS
Analysis of movements in the impairment allowance for loans to individuals
Movements in the loan impairment allowance by classes of loans to individuals for the year ended 31 December 2014 are as follows:
Consumer loansRUB’000
Credit cardsRUB’000
Mortgage loansRUB’000
Staff loansRUB’000
Over-draftsRUB’000
TotalRUB’000
Balance at the beginning of the year 566,362 670,012 25,695 1,124 7,968 1,271,161
Net charge (recovery) 1,112,685 1,227,375 5,200 230 (2,038) 2,343,452
Write-offs (1,018,847) (968,542) - - - (1,987,389)
Balance at the end of the year 660,200 928,845 30,895 1,354 5,930 1,627,224
Movements in the loan impairment allowance by classes of loans to individuals for the year ended 31 December 2013 are as follows:
Consumer loansRUB’000
Credit cardsRUB’000
Mortgage loansRUB’000
Staff loansRUB’000
Over-draftsRUB’000
TotalRUB’000
Balance at the beginning of the year 211,131 295,921 10,449 225 4,950 522,676
Net charge 948,242 916,579 15,246 899 3,018 1,883,984
Write-offs (593,011) (542,488) - - - (1,135,499)
Balance at the end of the year 566,362 670,012 25,695 1,124 7,968 1,271,161
Industry and geographical analysis of the loan portfolio
Loans to customers were issued primarily to customers located within the Russian Federation who operate in the following economic sectors:
2014 RUB’000
2013 RUB’000
Manufacturing 51,767,659 32,525,993
Individuals 51,087,626 47,062,177
Trade 34,549,234 23,677,561
Mining 6,366,346 2,854,669
Telecommunication 1,670,995 7,847,176
Energy - 42,104
Other 9,831,438 6,056,481
Gross loans to customers 155,273,298 120,066,161
Impairment allowance (2,596,151) (1,942,798)
152,677,147 118,123,363
Analysis of collateral
Analysis of collateral for loans to legal entities
Loans issued to global corporations with a net carrying amount of RUB 52,627,681 thousand (31 December 2013: RUB 48,987,442 thousand) are secured by guarantees of parent companies or other Citigroup entities. Loans to global corporations with a net carrying amount of RUB 16,586,587 thousand (31 December 2013: RUB 10,788,625 thousand) are not secured. Loans to local corporate customers are secured by guarantees of these customers.
Analysis of collateral for loans to individuals
Mortgage loans are secured by underlying residential property. Credit cards, overdrafts and consumer loans are not secured.
For mortgage loans with a net carrying amount of RUB 432,967 thousand (31 December 2013: RUB 458,908 thousand) management believes that the fair value of collateral is at least equal to the carrying amount of individual loans at the reporting date.
During the year ended 31 December 2014, the Bank had obtained assets by taking possession of collateral for loans to individuals with a net carry-ing amount of RUB 10,548 thousand (31 December 2013: nil). Repossessed assets comprise real estate. The Bank did not sell these assets during the year ended 31 December 2014. The Bank’s policy is to sell these assets as soon as it is practicable.
63
FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014
ZAO CITIBANK ANNUAL REPORT 2014
Loan maturities
The maturity of the loan portfolio is presented in Note 32, which shows the remaining periods from the reporting date to the contractual ma-turities of the loans. Due to the short-term nature of the loans issued by the Bank, it is likely that many of the loans will be prolonged at maturity. Accordingly, the effective maturity of the loan portfolio may be significantly longer than the term based on contractual terms.
Concentration of loans to customers
As at 31 December 2014 and 2013, there were no exposure that individually comprise more than 10 percent of total loans to customers.
14 Financial instruments available-for-sale
2014 RUB’000
2013 RUB’000
Unpledged
Debt and other fixed income securities
Russian Government GKO/OFZ 15,791,679 7,655,690
Gazprom Eurobonds 1,270,208 1,086,560
Vneshtorgbank Eurobonds 864,285 527,693
Agency on Mortgage Crediting (AIZhK) Eurobonds 237,898 353,048
Russian Government Eurobonds 20,995 14,748
Vneshtorgbank - 539,466
Rosselkhozbank - 436,997
Sberbank Eurobonds - 123,445
Rossiyskie Zheleznye Dorogi (RZhD) - 80,281
European Bank for Reconstruction and Development - 60,727
Moscow Region Government - 4,632
Equity securities
National Bureau of Credit Histories 4,410 4,410
Other 5 5
Pledged under repo agreements
Debt and other fixed income securities
Russian Government GKO/OFZ - 25,400,819
Pledged under overnight loans
Debt and other fixed income securities
Vnesheconombank 3,915,478 4,067,550
Rosselkhozbank 2,669,976 2,945,621
Russian Government GKO/OFZ 1,955,920 1,453,758
Agency on Mortgage Crediting (AIZhK) 630,727 720,974
European Bank for Reconstruction and Development - 1,015,510
27,361,581 46,491,934
No financial instruments available-for-sale are impaired or past due.
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INTERNATIONAL FINANCIAL REPORTING STANDARDS
15 Property and equipment
RUB’000Land, buildings and leasehold
improvements Equipment Total
Cost
At 1 January 2014 2,675,293 2,991,898 5,667,191
Additions 80,614 102,043 182,657
Disposals (21,779) (396,781) (418,560)
At 31 December 2014 2,734,128 2,697,160 5,431,288
Depreciation
At 1 January 2014 (1,440,711) (2,536,688) (3,977,399)
Depreciation charge (230,428) (232,681) (463,109)
Disposals 17,586 378,251 395,837
At 31 December 2014 (1,653,553) (2,391,118) (4,044,671)
Carrying value at 31 December 2014 1,080,575 306,042 1,386,617
RUB’000Land, buildings and leasehold
improvements Equipment Total
Cost
At 1 January 2013 2,597,288 3,151,172 5,748,460
Additions 78,005 99,113 177,118
Disposals - (258,387) (258,387)
At 31 December 2013 2,675,293 2,991,898 5,667,191
Depreciation
At 1 January 2013 (1,209,392) (2,568,913) (3,778,305)
Depreciation charge (231,319) (222,450) (453,769)
Disposals - 254,675 254,675
At 31 December 2013 (1,440,711) (2,536,688) (3,977,399)
Carrying value at 31 December 2013 1,234,582 455,210 1,689,792
16 Goodwill
Goodwill arose on the acquisition of ABN-Amro’s custody business in January of 2005.
17 Due to the Central Bank of the Russian Federation
2014 RUB’000
2013 RUB’000
Amounts payable under repo agreements - 24,627,807
- 24,627,807
65
FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014
ZAO CITIBANK ANNUAL REPORT 2014
18 Deposits and balances from banks and other financial institutions
2014 RUB’000
2013 RUB’000
Vostro accounts 18,892,895 15,575,806
Term deposits 20,746,048 24,668,055
Amounts payables under repo agreements - 388,636
39,638,943 40,632,497
Concentration of deposits and balances from banks and other financial institutions
As at 31 December 2014 and 2013, exposures that individually comprise more than 10% of total deposits and balances from banks and other financial institutions are as follows:
2014 RUB’000
2013 RUB’000
Citigroup 13,448,315 14,589,272
National Clearing Centre 4,538,363 -
17,986,678 14,589,272
19 Current accounts and deposits from customers
2014 RUB’000
2013 RUB’000
Current accounts and demand deposits 202,644,866 181,149,355
Term deposits 71,631,244 59,460,323
274,276,110 240,609,678
Concentration of current accounts and deposits from customers
As at 31 December 2014 and 2013, there are no current accounts and demand or term deposits from customers that individually exceed 10% of total current accounts and deposits from customers.
20 Transfer of financial assetsFinancial instruments avaliable-for-sale
2014 RUB’000
2013 RUB’000
Carrying amount of assets - 25,400,819
Carrying amount of related liabilities - 25,016,443
The Bank has transactions to lend securities and to sell securities under repo agreements and to purchase securities under reverse repo agreements.
The securities lent or sold under repo agreements are transferred to a third party and the Bank receives cash in exchange. These financial assets may be repledged or resold by counterparties in the absence of any default by the Bank, but the counterparty has an obligation to return the securities when the contract matures. The Bank has determined that it retains substantially all the risks and rewards related to these securities and therefore has not derecognised them. These securities are presented as “pledged under repo agreements” in Note 14. In addition, the Bank recognises a financial liability for cash received as collateral included in deposits and balances from banks and other financial institutions and due to the Central Bank of the Russian Federation.
These transactions are conducted under terms that are usual and customary to standard lending, and securities borrowing and lending activities, as well as the requirements determined by exchanges where the Bank acts as intermediary.
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INTERNATIONAL FINANCIAL REPORTING STANDARDS
21 Other liabilities2014
RUB’0002013
RUB’000
Settlements 3,943,887 3,592,591
Accrued expenses 910,534 1,122,992
Taxes payable 39,842 365,866
Other payables 72,366 86,711
4,966,629 5,168,160
22 Share capital
The Bank converted from a limited liability company to a closed joint-stock company in November 2001. In conjunction with this change in the le-gal form, the Bank issued 1,000 ordinary shares at RUB 1 million per share in exchange for the partner’s previous interest and RUB 763,950 thou-sand in retained earnings. In accordance with the Charter the Bank has the right to issue additional 6,000 ordinary shares at RUB 1 million per share and 2,000 preference shares at RUB 1 million per share. At 31 December 2014, 1,000 ordinary shares remain issued and outstanding. The Bank received additional paid in capital of RUB 1,227,310 thousand from Citigroup in 2007, however no additional shares were issued.
On 6 June 2014, according to the decision of the sole shareholder the Bank declared dividends in the amount of RUB 1,225 thousand per share from retained earnings (31 December 2013: RUB 4,770 thousand), which in total amounts to RUB 1,225,000 thousand (31 December 2013: RUB 4,770,000 thousand). These dividends were paid to Citigroup Netherlands B.V. on 9 June 2014.
23 Corporate governance and internal control
Corporate governance framework
The Bank operates as a closed joint stock company in accordance with the Russian law. The supreme governing body of the Bank is the General Shareholders’ meeting that is called for annual or extraordinary meetings. The General Shareholders’ meeting makes strategic decisions on the Bank’s operations.
The General Shareholders’ meeting elects the Board of Directors. The Board of Directors is responsible for overall governance of the Bank’s activities.
Russian legislation and the Charter of the Bank establish lists of decisions that are exclusively approved by the General Shareholders’ meeting and that are approved by the Board of Directors.
As at 31 December 2014, the Board of Directors includes: > Luet Marc Raoul Marie – Chairman of the Board of Directors > Korshilov Denis Nikolaevich > Petrescu Florin > Karter Emre > Kosyachenko Irina > Nikolaeva Natalia Yurievna > Ivanova Maria Lvovna > Rozhkov Viktor Sergeevich.
During the year ended 31 December 2014 the following changes occurred in composition of the Board of Directors:
From 1 January 2014 to 30 May 2014 the Board of Directors consisted of: Kurilin Andrey Igorevich (Chairman of the Board of Directors), Korshilov Denis Nikolaevich, Ivanova Maria Lvovna, Rozhkov Viktor Sergeevich and Richard Smith. On 30 May 2014 new composition of the Board of Directors had been elected – Luet Marc Raoul Marie (Chairman of the Board of Directors), Korshilov Denis Nikolaevich, Petrescu Florin, Karter Emre, Kosyachenko Irina, Nikolaeva Natalia Yurievna, Ivanova Maria Lvovna, Rozhkov Viktor Sergeevich. This composition had been approved till the next General Shareholders’ meeting.
Operating activities of the Bank are managed by the sole executive body of the Bank (the President) and collective executive body of the Bank (the Management Board). Executive bodies of the Bank are accountable to the Board of Directors and to the General Shareholders’ meeting.
The General Shareholders’ meeting elects the President. The executive bodies of the Bank are responsible for implementation of decisions of the General Shareholders’ meeting and the Board of Directors of the Bank.
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FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014
ZAO CITIBANK ANNUAL REPORT 2014
As at 31 December 2014, the Management Board includes: > Nikolaeva Natalia Yurievna – Acting Chairman of the Management Board > Belyaev Ruslan Valerievich > Korotkov Sergey Aleksandrovich > Belaya Natalia Viktorovna > Berner Mikhail Borisovich.
During the year ended 31 December 2014 no changes occurred in composition of the Management Board.
Internal control policies and procedures
The Board of Directors and the Management Board have responsibility for the development, implementation and maintaining of internal con-trols in the Bank that are commensurate with the scale and nature of operations.
The purpose of internal controls is to ensure: > proper and comprehensive risk assessment and management > proper business and accounting and financial reporting functions, including proper authorization, processing and recording of transactions > completeness, accuracy and timeliness of accounting records, managerial information, regulatory reports, etc. > reliability of IT-systems, data and systems integrity and protection > prevention of fraudulent or illegal activities, including misappropriation of assets > compliance with laws and regulations.
Management is responsible for identifying and assessing risks, designing controls and monitoring their effectiveness. Management monitors the effectiveness of the Bank’s internal controls and periodically implements additional controls or modifies existing controls as considered necessary.
The Bank developed a system of standards, policies and procedures to ensure effective operations and compliance with relevant legal and regu-latory requirements, including the following areas: > requirements for appropriate segregation of duties, including the independent authorization of transactions > requirements for the recording, reconciliation and monitoring of transactions > compliance with regulatory and other legal requirements > documenting of controls and procedures > requirements for the periodic assessment of operational risks faced, and the adequacy of controls and procedures to address the risks
identified > requirements for the reporting of operational losses and proposed remedial action > development of contingency plans > training and professional development > ethical and business standards and > risk mitigation, including insurance where this is effective.
There is a hierarchy of requirements for authorization of transactions depending on their size and complexity. A significant portion of operations are automated and the Bank put in place a system of automated controls.
The internal control system in the Bank comprises: > the governing bodies of the Bank > the revision commission (the controller) > Chief Accountant (and her deputies) of the Bank > Heads of branches (and their deputies) and chief accountants (and their deputies) of branches > the Internal Audit Department is the Bank’s division acting on the basis of the Statute approved by the Board of Directors for the internal
control purposes and assistance to the governing bodies of the Bank in ensuring effective functioning of the Bank, and performing on a constant basis review and assessment of internal control system efficiency based on the principles of independence and impartiality in compliance with the Statute of the Internal Audit Department approved by the Board of Directors and in compliance with the internal audit plan. The Internal Audit Department is headed by the Head of the Internal Audit Department who is elected and dismissed by the Board of Directors. The Head of the Internal Audit Department is accountable to the Board of Directors.
> other employees, divisions and functions that are responsible for compliance with the established standards, policies and procedures, including: - the responsible employee of the Anti-Money Laundering and Financing of Terrorism and Anti-Corruption Department performing
responsibilities in accordance with the Internal Control Rules of Anti-Money Laundering and Financing of Terrorism and Anti-Corruption introduced by the Compliance Department and approved by the President of the Bank
> other divisions and (or) responsible employees of the Bank, including: - the professional securities market participant controller – a regular employee of the Bank satisfying the qualification requirements of
the Federal Service for Financial Markets of the Russian Federation, who is responsible for the arrangement and implementation of the internal control over the Bank’s activity as a professional securities market participant, and acting on the basis of Instructions on Internal Control
- the Compliance and Control Department is the Bank’s division, acting on the basis of the Statute of the Compliance and Control Department, and assisting the management of the Bank in performing control over compliance with the Russian and international legislation (compliance). The Head of the Compliance and Control Department informs the President on the statement of the compli-ance-control in the Bank, disadvantages in the internal compliance-control system, actions on elimination of the detected disadvantages;
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INTERNATIONAL FINANCIAL REPORTING STANDARDS
communicates with the corporate services and regulating authorities of the Russian Federation; consults and organises trainings of the employees on compliance-control issues
- the executive officer – a regular employee of the Bank responsible for the internal control implementation for the purposes of counter-acting unlawful usage of insider information and market manipulation, acting on the basis of Instructions on Internal Control
- the Division of Risk Management and Control over Currency Transactions of the Finance Department is a division of the Bank acting on the basis of the Statute of the Division of Risk Management and Control over Currency Transactions approved by the Chief Financial Officer, specializing on performing control over the compliance of the Bank’s daily transactions with the approved accounting policy and policy of control over expenses for the purposes of correct accounting and recording, on control over the compliance with the market risk limits and independent reconciliation of the financial results of the Bank’s transactions on financial markets, coordinating of the inter-nal control procedures on the faithfulness of the financial statements performed by the divisions of the Bank on routine basis, including reconciliation of the account balances and review of the terms of balances being on the off-balance accounts
- the Currency Control Division of the Operational Department – a division of the Bank acting on the basis of the Statute of the Currency Control Division approved by the Head of the Operational Department and in compliance with the legal acts imposed by the CB RF and internal procedures, approved by the Heads of operational departments of the Bank.
In 2014 new requirements for the organisation of internal control system in credit organisations came into force. The new version of Regulations of the CB RF dated 16 December 2003 No 242-P On the Organisation of Internal Control in Credit Organisations and Banking Groups sets out the specific requirements for the internal audit service and the internal control service (the compliance service).
The main functions of the Internal Audit Department include the following: > audit and efficiency assessment of the system of internal control as a whole, fulfillment of the decisions of key management structures > audit of efficiency of methodology of assessment of banking risks and risk management procedures, regulated by internal documents in
the Bank (methods, programmes, rules and procedures for banking operations and transactions, and for the management of banking risks) > audit of reliability of internal control system over automated information systems > audit and testing of fairness, completeness and timeliness of accounting and reporting function and the reliability (including the trustworthi-
ness, fullness and objectivity) of the collection and submission of financial information > audit of applicable methods of safekeeping the Bank’s property > assessment of economic reasonability and efficiency of operations and other deals > audit of internal control processes and procedures > audit of the Compliance and Control Department and the Risk Department.
Internal control service conducts compliance activities focused primarily on regulatory risks faced by the Bank.
The main functions of the Compliance and Control Department include the following: > identification of compliance risks and regulatory risks > monitoring of events related to regulatory risk, including probability of occurrence and quantitative assessment of its’ consequences > monitoring of regulatory risk > preparation of recommendations on regulatory risk management > coordination and participation of design of measures to decrease regulatory risk > monitoring of efficiency of regulatory risk management > participation in preparation of internal documents on regulatory risk management, anti-corruption, compliance with corporate behaviour
rules, code of professional ethics and minimisation of conflicts of interest > analysis of dynamics of clients’ complaints > analysis of economic reasonableness of agreements with suppliers > participation in interaction with authorities, self-organised organisations, associations and financial market participants.
Russian legislation, including Federal Law dated 2 December 1990 No. 395-1 On Banks and Banking Activity, Direction of the CB RF dated 1 April 2014 No 3223-U On Requirement to the Head of the Risk Management Service, the Head of the Internal Control Service, the Head of the Internal Audit Service of the Credit Organisation establish the professional qualifications, business reputation and other requirements for members of the Board of Directors, the Management Board, Heads of the Internal Audit Department, the Compliance and Control Department and the Risk De-partment and other key management personnel. All members of the Bank’s governing and management bodies meet with these requirements.
Management believes that the Bank complies with the CB RF requirements related to risk management and internal control systems, including requirements related to the Internal Audit Department, the Compliance and Control Department, and that risk management and internal control systems are appropriate for the scale, nature and complexity of operations.
24 Risk management
Management of risk is fundamental to the business of banking and is an essential element of the Bank’s operations. The major (significant) risks faced by the Bank are those related to market risk, credit risk, liquidity risk, and operational, legal and reputational risks.
Risk management policies and procedures
The risk management policies aim to identify, analyse and manage the risks faced and to set appropriate risk limits and controls, and to continu-ously monitor risk levels and adherence to limits. Risk management policies and procedures are reviewed regularly to reflect changes in market conditions, products and services offered and emerging best practice. The Bank has developed a system of reporting on significant risks and capital.
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FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014
ZAO CITIBANK ANNUAL REPORT 2014
As at 31 December 2014, the Bank’s internal documentation establishing the procedures and methodologies for identification, managing and stress-testing the Bank’s significant risks, was approved by the authorized management bodies of the Bank in accordance with regulations and recommendations issued by the CB RF.
The Board of Directors has overall responsibility for the oversight of the risk management framework, overseeing the management of key risks and reviewing its risk management policies and procedures as well as approving significantly large exposures.
The Management Board is responsible for monitoring and implementation of risk mitigation measures and making sure that the Bank operates within the established risk parameters. The Head of the Risk Department is responsible for the overall risk management and compliance func-tions, ensuring the implementation of common principles and methods for identifying, measuring, managing and reporting both financial and non-financial risks. He reports directly to the President and indirectly to the Board of Directors. The Risk Department is not subordinate to, and does not report to, divisions accepting relevant risks.
The Board of Directors and management bodies of the Bank have responsibility for controlling the Bank’s compliance with risk limits and capital adequacy ratios as established by the Bank’s internal documentation. With the view of controlling effectiveness of the Bank’s risk management procedures and their consistent application the Board of Directors and management bodies of the Bank periodically receive reports prepared by the Internal Audit Department and the Risk Department, discuss the contents of these reports and consider proposed corrective actions.
Credit, market and liquidity risks both at the portfolio and transactional levels are managed and controlled through a system of Credit Com-mittees and an Asset and Liability Management Committee (ALCO). In order to facilitate efficient and effective decision-making, the Bank has established a hierarchy of Credit Committees depending on the type and amount of the exposure.
Both external and internal risk factors are identified and managed throughout the organisation. Particular attention is given to identifying the full range of risk factors and determination of the level of assurance over the current risk mitigation procedures. Apart from the standard credit and market risk analysis, the Risk Department monitors financial and non-financial risks by holding regular meetings with operational units in order to obtain expert judgments in their areas of expertise.
In compliance with the Bank’s internal documentation the Risk Department and Internal Audit Department frequently prepare reports, which cover the Bank’s significant risks management. The reports include observations as to assessment of the effectiveness of the Bank’s procedures and methodologies, and recommendations for improvement.
Market risk
Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises currency risk, interest rate risk and other price risks. Market risk arises from open positions in interest rate, currency and equity financial instruments, which are exposed to general and specific market movements and changes in the level of volatility of market prices.
The objective of market risk management is to manage and control market risk exposures within acceptable parameters, whilst optimizing the return on risk.
Overall authority for market risk is vested in the ALCO, which is chaired by the President. Market risk limits are approved based on recommenda-tions of the Risk Department’s Market Risk Management Division.
The Bank manages its market risk by setting open position limits in relation to financial instruments, interest rate maturity and currency positions and stop-loss limits. They are monitored and reassessed on a regular basis.
The Bank monitors market risks by modelling the result of a fixed change in the monitored market factor while keeping other factors constant. The potential change in the portfolio value is then defined depending on the current sensitivity of the opened position to the changes in the market factors.
In addition, the Bank uses a wide range of stress tests to model the financial impact of a variety of exceptional market scenarios on individual trading portfolios and the overall position. Stress tests provide an indication of the potential size of losses that could arise in extreme conditions. The stress tests carried out by the Bank include risk factor stress testing, where stress movements are applied to each risk category and ad hoc stress testing, which includes applying possible stress events to specific positions.
The Bank also utilizes Value-at-Risk (VAR) methodology to monitor market risk of its trading positions. The Bank does not solely rely on its VAR calculations in its market risk measurement due to inherent risk of usage of VAR. The limitations of the VAR methodology are recognised by supplementing VAR limits with other position and sensitivity limit structures, including limits to address potential concentration risks within each trading portfolio, and gap analysis.
Interest rate risk
The Bank is exposed to interest rate risk as its interest bearing assets and liabilities have different maturity dates, periods of interest rate changes and volumes during these periods. For variable interest rates, the Bank is exposed to a basis risk due to the different mechanisms of setting different interest rates, such as Libor or MosPrime. The interest rate risk management activities are aimed at optimising net interest income in accordance with the Bank’s strategy.
The Bank holds trading positions in various financial instruments. The majority of business activities are conducted based on the requirements of customers. In accordance with the estimated demand from customers, the Bank holds a supply of financial instruments and maintains access
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INTERNATIONAL FINANCIAL REPORTING STANDARDS
to the financial markets through the quoting of bid and ask prices and by trading with other market makers. These positions are also held for the purpose of speculation on the expected future developments of financial markets. The speculative expectation and market making thus aims to maximize net income from trading.
An analysis of sensitivity of profit or loss and equity (net of taxes) as a result of changes in the fair value of financial instruments as at 31 Decem-ber 2014 and 2013 due to changes in the interest rates based on a simplified scenario of a 200 basis point (31 December 2013: 100 basis point) (bp) symmetrical fall or rise in all yield curves is as follows:
2014 2013
Profit or loss
RUB’000Equity
RUB’000
Profit or loss
RUB’000Equity
RUB’000
200 (100) bp parallel increase (267,675) (1,853,473) (892,765) (2,334,659)
200 (100) bp parallel decrease 267,675 1,853,473 892,765 2,334,659
An analysis of sensitivity of profit or loss and equity (net of taxes) to changes in interest rate repricing risk based on a simplified scenario of a 200 basis point (31 December 2013: 100 basis point) (bp) symmetrical fall or rise in all yield curves and positions of all interest bearing assets and liabilities existing as at 31 December 2014 and 2013 is as follows:
2014 2013
Profit or loss
RUB’000Equity
RUB’000
Profit or loss
RUB’000Equity
RUB’000
200 (100) bp parallel increase (1,523,841) (1,523,841) (811,271) (811,271)
200 (100) bp parallel decrease 1,523,841 1,523,841 811,271 811,271
Currency risk
The Bank has assets and liabilities denominated in several foreign currencies. Foreign currency risk arises when the actual or forecasted assets in a foreign currency are either greater or less than the liabilities in that currency. For further information on the exposure to currency risk at year end refer to Note 33.
The measurement of the currency risk is based on the currency exposure in the individual currencies. The currency exposure calculated for individual currencies is subject to the simulation of a standardised change in the currency rate in comparison with the functional currency (ap-preciation of the currency monitored), and the value of the currency exposure at the new level of the currency rate is calculated. The difference between the calculated values represents the potential change in the value of the portfolio in a particular currency and is compared with the limit. The limits are usually symmetrical, i.e. limiting the maximum long and short position to the same extent.
A more comprehensive approach is provided by the calculation of VAR. The Bank also carries out stress testing of the currency risk while adher-ing to the same methodology, but the fixed movement in exchange rates is replaced with the movement in currency rates defined for stress testing purposes.
The Bank sets currency risk limits based on its net currency exposure in individual currencies and with respect to the total currency exposure.
An analysis of sensitivity of profit or loss and equity (net of taxes) to changes in the foreign currency exchange rates based on positions existing as at 31 December 2014 and 2013 and a simplified scenario of a 20% (31 December 2013: 10%) change in USD and other currencies to RUB ex-change rates is as follows:
2014 2013
Profit or loss
RUB’000Equity
RUB’000
Profit or loss
RUB’000Equity
RUB’000
20% (10%) appreciation of USD against RUB (280,982) (280,982) 122,016 122,016
20% (10%) depreciation of USD against RUB 280,982 280,982 (122,016) (122,016)
20% (10%) appreciation of other currencies against RUB (770,754) (770,754) 767,940 767,940
20% (10%) depreciation of other currencies against RUB 770,754 770,754 (767,940) (767,940)
Credit risk
Credit risk is the risk of financial loss to the Bank if a customer or counterparty to a financial instrument fails to meet its contractual obligations. The Bank has developed policies and procedures for the management of credit exposures (both for recognised financial assets and unrec-ognised contractual commitments), including guidelines to limit portfolio concentration and the establishment of Credit Committees, which actively monitor credit risk. The credit policy is reviewed and approved by the Management Board.
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FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014
ZAO CITIBANK ANNUAL REPORT 2014
The credit policy establishes: > procedures for review and approval of loan applications > methodology for the credit assessment of borrowers (legal entities and individuals) > methodology for the credit assessment of counterparties, issuers and insurance companies > methodology for the evaluation of collateral > credit documentation requirements > procedures for the ongoing monitoring of loans and other credit exposures.
Corporate loan applications are originated by the relevant client managers and are then passed on to the Loan Department, which is respon-sible for the corporate loan portfolio. Analysts reports are based on a structured analysis focusing on the customer’s business and financial performance. The loan application and the report are then independently reviewed by the Risk Department’s Credit Risk Management Division and a second opinion is given accompanied by a verification that credit policy requirements are met. The Credit Committee reviews the loan application on the basis of submissions by the Loan Department and the Risk Department. Individual transactions are also reviewed by the Legal, Accounting and Tax departments depending on the specific risks and pending final approval of the Credit Committee.
The Bank continuously monitors the performance of individual credit exposures and regularly reassesses the creditworthiness of its borrow-ers. The review is based on the customer’s most recent financial statements and other information submitted by the borrower, or otherwise obtained by the Bank.
Retail loan applications are reviewed by the Retail Lending Division through the use of scoring models and application data verification proce-dures developed together with the Risk Department.
Apart from individual customer analysis, the whole credit portfolio is assessed by the Risk Department with regard to credit concentration and market risks.
The maximum exposure to credit risk is generally reflected in the carrying amounts of financial assets in the statement of financial position and unrecognised contractual commitment amounts. The impact of possible netting of assets and liabilities to reduce potential credit exposure is not significant.
The maximum exposure to credit risk from financial assets at the reporting date is as follows:
2014 RUB’000
2013 RUB’000
ASSETS
Cash equivalents 53,146,946 26,820,369
Loans and deposits with banks and other financial institutions 117,292,716 138,510,589
Financial instruments held for trading 26,778,036 26,569,658
Loans to customers 152,677,147 118,123,363
Financial instruments available-for-sale 27,357,166 46,487,519
Other financial assets 2,660,766 1,423,158
Total maximum exposure 379,912,777 357,934,656
The maximum exposure to credit risk from unrecognised contractual commitments at the reporting date is presented in Note 25.
The Bank monitors concentrations of credit risk by industry/sector and by geographic location. For the analysis of concentration of credit risk in respect of loans to customers refer to Note 13.
As at 31 December 2014, the Bank has no debt securities, credit risk exposure to which individually exceeds 10% of maximum credit risk exposure. As at 31 December 2013, the Bank had debt securities issued by the Government of the Russian Federation, credit risk exposure to whom exceeded 10% of maximum credit risk exposure. The credit risk exposure for these financial instruments as at 31 December 2013 is RUB 59,368,701 thousand.
In accordance with the requirements of the CB RF, the Bank also calculates on a daily basis mandatory maximum risk exposure ratio per borrower or group of related borrowers (N6), which regulates (mitigates) the Bank’s credit risk in respect of a borrower or group of related borrowers and sets the maximum ratio of the total liabilities of a borrower (borrowers within a group of related borrowers) owed to the Bank, to the Bank’s own funds (capital). As at 1 January 2015 and 2014, the maximum level of N6 ratio set by the CB RF was 25%. The N6 ratio calculated by the Bank as at 1 January 2015 was 19.4% (1 January 2014: 21.8%) and was in compliance with limits set by the CB RF.
Offsetting financial assets and financial liabilities
The disclosures set out in the tables below include financial assets and financial liabilities that: > are offset in the Bank’s statement of financial position or > are subject to an enforceable master netting arrangement or similar agreement that covers similar financial instruments, irrespective of
whether they are offset in the statement of financial position.
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INTERNATIONAL FINANCIAL REPORTING STANDARDS
Similar agreements include derivative clearing agreements, global master repo agreements and global master securities lending agreements. Similar financial instruments include derivatives, repo agreements, and reverse repo agreements, and securities borrowing and lending agreements.
The Bank’s derivative transactions that are not transacted on an exchange are entered into under International Derivative Swaps and Dealers Association (ISDA) Master Netting Agreements. In general, under such agreements the amounts owed by each counterparty that are due on a single day in respect of transactions outstanding in the same currency under the agreement are aggregated into a single net amount payable by one party to the other. In certain circumstances, for example when a credit event such as a default occurs, all outstanding transactions under the agreement are terminated, the termination value is assessed, and only a single net amount is due or payable in settlement transactions.
Repo, reverse repo transactions, and securities borrowings and lendings are covered by master agreements with netting terms similar to those of ISDA Master Netting Agreements.
The above ISDA and similar master netting arrangements do not meet the offsetting criteria in the statement of financial position. This is be-cause they create a right of set-off of recognised amounts that is enforceable only following an event of default, insolvency or bankruptcy of the Bank or the counterparties. In addition, the Bank and its counterparties do not intend to settle on a net basis or to realise the assets and settle the liabilities simultaneously.
The Bank receives and accepts collateral in the form of marketable securities in respect of repo, and reverse sale and repo agreements.
Such collateral is subject to the standard industry terms of the ISDA Credit Support Annex. This means that securities received/given as collateral can be pledged or sold during the term of the transaction, but must be returned on maturity of the transaction. The terms also give each coun-terparty the right to terminate the related transactions upon the counterparty’s failure to post collateral.
The tables below show financial assets and financial liabilities subject to offsetting, enforceable master netting arrangements and similar arrange-ments as at 31 December 2014 and 2013:
2014Types of financial assets/liabilities
Gross amounts of recognised
financial asset/liability
RUB’000
Gross amount of recognised
financial liability/asset offset in
the statement of financial position
RUB’000
Net amount of financial assets/li-abilities presented
in the statement of financial
positionRUB’000
Related amounts subject to offset under specific conditions
Financial instruments
RUB’000
Cash collateral received
RUB’000Net amount
RUB’000
Derivative financial instruments - assets 12,794,203 - 12,794,203 8,720,340 - 4,073,863
Total financial assets 12,794,203 - 12,794,203 8,720,340 - 4,073,863
Derivative financial instruments - liabilities 18,792,504 - 18,792,504 8,720,340 - 10,072,164
Total financial liabilities 18,792,504 - 18,792,504 8,720,340 - 10,072,164
2013Types of financial assets/liabilities
Gross amounts of recognised
financial asset/liability
RUB’000
Gross amount of recognised
financial liability/asset offset in
the statement of financial position
RUB’000
Net amount of financial assets/li-abilities presented
in the statement of financial
positionRUB’000
Related amounts subject to offset under specific conditions
Financial instruments
RUB’000
Cash collateral received
RUB’000Net amount
RUB’000
Reverse repo agreements 11,020,115 - 11,020,115 11,020,115 - -
Derivative financial instruments - assets 1,581,753 - 1,581,753 1,581,753 - -
Total financial assets 12,601,868 - 12,601,868 12,601,868 - -
Repo agreements 25,016,443 - 25,016,443 25,016,443 - -
Derivative financial instruments - liabilities 1,667,035 - 1,667,035 1,581,753 - 85,282
Total financial liabilities 26,683,478 - 26,683,478 26,598,196 - 85,282
Liquidity risk
Liquidity risk is the risk that the Bank will encounter difficulty in meeting obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. Liquidity risk exists when the maturities of assets and liabilities do not match. The matching and/or con-trolled mismatching of the maturities and interest rates of assets and liabilities is fundamental to liquidity management. It is unusual for financial institutions ever to be completely matched since business transacted is often of an uncertain term and of different types. An unmatched position potentially enhances profitability, but can also increase the risk of losses.
The Bank maintains liquidity management with the objective of ensuring that funds will be available at all times to honor all cash flow obligations as they become due. The liquidity policy is reviewed and approved by the Management Board.
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FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014
ZAO CITIBANK ANNUAL REPORT 2014
The Bank seeks to actively support a diversified and stable funding base comprising long-term and short-term loans from other Citigroup entities, core corporate and retail customer deposits, accompanied by diversified portfolios of highly liquid assets, in order to be able to respond quickly and smoothly to unforeseen liquidity requirements.
The liquidity management policy requires: > projecting cash flows by major currencies and considering the level of liquid assets necessary in relation thereto > maintaining a diverse range of funding sources > managing the concentration and profile of debts > maintaining debt financing plans > maintaining a portfolio of highly marketable assets that can easily be liquidated as protection against any interruption to cash flow > maintaining liquidity and funding contingency plans > monitoring liquidity ratios against regulatory requirements.
The Bank monitors daily its liquidity position. Liquidity reports covering the liquidity position of the Bank along with the stress testing simulations are regularly presented to the ALCO.
The Bank also calculates mandatory liquidity ratios on a daily basis in accordance with the requirements of the CB RF. As at 1 January 2015 and 2014, the Bank is in compliance with these ratios.
The following table shows the mandatory liquidity ratios calculated as at 1 January 2015 and 2014.
Requirement1 January 2015,
%1 January 2014,
%
Rapid liquidity ratio (Н2) Not less than 15% 51.6 47.4
Current liquidity ratio (Н3) Not less than 50% 93.1 80.1
Non-current liquidity ratio (Н4) Not greater than 120% 28.6 21.0
The following tables show the undiscounted cash flows from financial liabilities and credit related commitments on the basis of their earliest possible contractual maturity. The total gross inflow and outflow disclosed in the tables is the contractual, undiscounted cash flow on the financial liability or commitment. For issued financial guarantee contracts, the maximum amount of the guarantee is allocated to the earliest period in which the guarantee can be called. These expected cash flows can vary significantly from the actual future cash flows.
The liquidity position as at 31 December 2014 is as follows:
RUB’000 Less than 1 month 1 to 3 months 3 to 6 months 6 months to 1 year More than 1 yearTotal gross out-
flow (inflow) Carrying amount
Non-derivative liabilities
Deposits and balances from banks and other financial institutions 39,407,137 290,898 435 11,401 - 39,709,871 39,638,943
Current accounts and deposits from customers 263,458,022 5,229,803 4,743,281 1,446,660 73,700 274,951,466 274,276,110
Other liabilities 4,654,418 241,386 52,892 8,320 9,613 4,966,629 4,966,629
Derivatives
- Inflow (80,166,858) (60,959,638) (14,249,057) (12,056,760) (5,969,160) (173,401,473) (19,811,486)
- Outflow 78,044,260 61,616,437 15,577,920 14,847,742 5,671,757 175,758,116 19,706,086
Total liabilities 305,396,979 6,418,886 6,125,471 4,257,363 (214,090) 321,984,609 318,776,282
Credit related commitments 98,935,994 - - - - 98,935,994 98,935,994
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INTERNATIONAL FINANCIAL REPORTING STANDARDS
The liquidity position as at 31 December 2013 is as follows:
RUB’000 Less than 1 month 1 to 3 months 3 to 6 months 6 months to 1 year More than 1 yearTotal gross out-
flow (inflow) Carrying amount
Non-derivative liabilities
Due to the Central Bank of the Russian Federation 24,627,807 - - - - 24,627,807 24,627,807
Deposits and balances from banks and other financial institutions 40,265,350 130,968 84,339 229,655 - 40,710,312 40,632,497
Current accounts and deposits from customers 242,350,264 2,609,964 808,202 758,282 222,500 246,749,212 240,609,678
Other liabilities 4,386,599 560,667 220,894 - - 5,168,160 5,168,160
Derivatives
- Inflow (160,099,262) (32,431,496) (23,823,334) (23,533,700) (20,844,484) (260,732,276) (1,581,753)
- Outflow 160,141,242 32,467,234 23,761,203 23,441,355 21,086,902 260,897,936 1,667,035
Total liabilities 311,672,000 3,337,337 1,051,304 895,592 464,918 317,421,151 311,123,424
Credit related commitments 91,084,557 - - - - 91,084,557 91,084,557
For further information on the exposure to liquidity risk at year end refer to Note 32.
25 Credit related commitments
Guarantees and letters of credit
The Bank issues guarantees and letters of credit on behalf of its customers. These instruments bear a credit risk similar to that of loans granted. The amounts outstanding based on the contractual maturity of the instruments are as follows:
2014 RUB’000
2013 RUB’000
Guarantees issued maturing in:
2014 - 11,508,853
2015 20,896,307 1,682,954
2016 2,396,091 772,861
2017 191,812 52,267
2018 366,281 90,460
2019 66,679 -
2020 256,079 38,424
2021 3,938 2,291
24,177,187 14,148,110
Letters of credit issued maturing in:
2014 - 495,441
2015 146,063 132,553
146,063 627,994
The contractual maturity of the above instruments is the latest date that the Bank may be called to honour its obligation under the instrument.
Undrawn loan commitments
The Bank has outstanding credit related commitments to extend loans. These credit related commitments take the form of approved loans and credit card limits and overdraft facilities.
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FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014
ZAO CITIBANK ANNUAL REPORT 2014
At 31 December 2014, the Bank had the following undrawn loan commitments:
RUB’000Loans to
individualsLoans to legal
entities Total
Overdrafts 59,639 13,003,790 13,063,429
Credit cards 51,529,076 3,806 51,532,882
Unused credit lines - 10,016,433 10,016,433
51,588,715 23,024,029 74,612,744
At 31 December 2013, the Bank had the following undrawn loan commitments:
RUB’000Loans to
individualsLoans to legal
entities Total
Overdrafts 68,051 9,938,954 10,007,005
Credit cards 52,465,251 1,632,215 54,097,466
Unused credit lines 220 12,203,762 12,203,982
52,533,522 23,774,931 76,308,453
The Bank 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 credit related commitments are set out in the above table by category. The amounts reflected in the table for credit related 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 the counterparties failed completely to perform as contracted.
The total outstanding contractual credit related commitments above do not necessarily represent future cash requirements, as these credit related commitments may expire or terminate without being funded. The majority of loan and credit line commitments do not represent an unconditional credit related commitment by the Bank.
Based on management’s estimate, no provisions are required against guarantees and letters of credit issued by the Bank.
26 Operating leases
Leases as lessee
Future lease payments (net of VAT and operating costs) under operating leases in effect at 31 December 2014 and 2013 are detailed below:
2014 RUB’000
2013 RUB’000
Less than 1 year 1,539,614 1,265,515
Between 1 and 5 years 5,484,626 4,982,472
More than 5 years 2,447,341 2,557,506
9,471,581 8,805,493
During 2014 RUB 1,379,159 thousand is recognised as an expense in profit or loss in respect of operating leases (31 December 2013: RUB 1,174,929 thousand).
27 Contingencies
Taxation contingencies
The taxation system in the Russian Federation is relatively new and is characterised by frequent changes in legislation, official pronouncements and court decisions, which are often unclear, contradictory and subject to varying interpretation by different tax authorities. Taxes are subject to review and investigation by a number of authorities who have the authority to impose severe fines, penalties and interest charges. A tax year remains open for review by the tax authorities during the three subsequent calendar years; however, under certain circumstances a tax year may remain open longer. Recent events within the Russian Federation suggest that the tax authorities are taking a more assertive position in their interpretation and enforcement of tax legislation.
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INTERNATIONAL FINANCIAL REPORTING STANDARDS
These circumstances may create tax risks in the Russian Federation that are substantially more significant than in other countries. Management believes that it has provided adequately for tax liabilities based on its interpretations of applicable Russian tax legislation, official pronouncements and court decisions. However, the interpretations of the relevant authorities could differ and the effect on the financial position, if the authorities were successful in enforcing their interpretations, could be significant.
Starting from 1 January 2012 new transfer pricing rules came into force in Russia. These provide the possibility for tax authorities to make trans-fer pricing adjustments and impose additional tax liabilities in respect of controllable transactions if their prices deviate from the market range or profitability range. According to the provisions of transfer pricing rules, the taxpayer should sequentially apply five market price determination methods prescribed by the Tax Code.
Tax liabilities arising from transactions between companies are determined using actual transaction prices. It is possible, with the evolution of the interpretation of transfer pricing rules in the Russian Federation and changes in the approach of the Russian tax authorities, that such transfer prices could be challenged. Since the current Russian transfer pricing rules became effective relatively recently, the impact of any such challenge cannot be reliably estimated; however, it may be significant to the financial position and/or the overall operations of the Bank.
Insurance
The insurance industry in the Russian Federation is in a developing state and many forms of insurance protection common in other parts of the world are not yet generally available. The Bank does not have full coverage for its premises and equipment, business interruption, or third party li-ability in respect of property or environmental damage arising from accidents on Bank’s property or relating to operations. Until the Bank obtains adequate insurance coverage, there is a risk that the loss or destruction of certain assets could have a material adverse effect on operations and financial position.
Litigation
In the ordinary course of business, the Bank is subject to legal actions and complaints. Management believes that the ultimate liability, if any, arising from such actions or complaints, will not have a material adverse effect on the financial condition or the results of future operations of the Bank.
28 Related party transactions
Control relationships
The Bank’s parent is Citigroup Netherlands B.V., headquartered in Netherlands.
The party with ultimate control over the Bank is Citigroup Inc., which produces publicly available financial statements.
Transactions with directors and executive officers
All remuneration is in the form of short term employee benefits. The total remuneration of directors and executive officers was RUB 248,239 thousand and RUB 185,578 thousand for the years ended 31 December 2014 and 2013, respectively.
Loans to directors and executive officers totalled RUB 40,146 thousand and RUB 46,619 thousand at 31 December 2014 and 2013, respectively. The average effective interest rates for these loans were 8.3% and 8.2% at 31 December 2014 and 2013, respectively.
Transactions with other Citigroup entities
The following balances and average effective interest rates were outstanding with other Citigroup entities at 31 December 2014 and 2013:
2014 2013
Carrying amountRUB’000
Average effective interest rate
Carrying amountRUB’000
Average effective interest rate
Nostro accounts in banks and other financial institutions 22,602,045 - 4,681,731 -
Loans and deposits with banks and other financial institutions 32,868,761 0.37% 76,222,535 0.07%
Financial assets held for trading – derivatives 10,487,012 - 818,996 -
Other assets 942 - 2,781 -
Deposits and balances from banks and other financial institutions 13,448,315 4.63% 14,589,272 3.84%
Financial liabilities held for trading – derivatives 14,902,513 - 1,144,323 -
Other liabilities 5,373 - 2,037 -
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FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014
ZAO CITIBANK ANNUAL REPORT 2014
Amounts included in profit or loss for the years ended 31 December 2014 and 2013 in relation to transactions with other Citigroup entities are as follows:
2014 RUB’000
2013 RUB’000
Interest income 110,552 152,412
Interest expense (155,565) (198,288)
Net loss from foreign exchange contracts (8,023,728) (2,639,598)
Fee and commission income 101,062 164,073
Fee and commission expense (100,612) (549,618)
Other income 290,391 230,655
General administrative expenses (3,186,720) (2,509,058)
Amounts of guarantees issued to other Citigroup entities as at 31 December 2014 and 2013 are as follows:
2014 RUB’000
2013 RUB’000
Guarantees issued to other Citigroup entities 4,373,035 3,839,445
Amounts of guarantees received from other Citigroup entities as at 31 December 2014 and 2013 are as follows:
2014 RUB’000
2013 RUB’000
Guarantees received from other Citigroup entities for corporate loans issued and undrawn facilities 95,017,715 90,247,561
29 Financial assets and liabilities: fair value and accounting classifications
Accounting classifications and fair value
The estimates of fair value are intended to approximate the price that would be received to sell an asset, or paid to transfer a liability in an orderly transaction between market participants at the measurement date. However, given the uncertainties and the use of subjective judgment, the fair value should not be interpreted as being realisable in an immediate sale of the assets or transfer of liabilities.
Fair values of financial instruments held for trading and financial instruments available-for-sale are based on quoted market prices or dealer price quotations at the reporting date without any deduction for transaction costs.
If there are no available quoted market prices, fair value is determined by cash flow discounting and other methods, used by market participants.
The objective of valuation techniques is to arrive at a fair value determination that reflects the price that would be received to sell the asset, or paid to transfer the liability in an orderly transaction between market participants at the measurement date.
As a result of performed assessment as at 31 December 2014 and 2013, management concluded that the fair value of all short-term financial assets and liabilities approximates their carrying amount.
Fair value hierarchy
The Bank measures fair values using the following fair value hierarchy, which reflects the significance of the inputs used in making the measurements: > Level 1: quoted market price (unadjusted) in an active market for an identical instrument. > Level 2: inputs other than quotes prices included within Level 1 that are observable either directly (i.e., as prices) or indirectly (i.e., derived
from prices). This category includes instruments valued using: quoted market prices in active markets for similar instruments; quoted prices for similar instruments in markets that are considered less than active; or other valuation techniques where all significant inputs are directly or indirectly observable from market data.
> Level 3: inputs that are unobservable. This category includes all instruments where the valuation technique includes inputs not based on observable data and the unobservable inputs have a significant effect on the instrument’s valuation. This category includes instruments that are valued based on quoted prices for similar instruments where significant unobservable adjustments or assumptions are required to reflect differences between the instruments.
The tables below analyse financial instruments measured at fair value as at 31 December 2014 and 2013, by the level in the fair value hierarchy into which the fair value measurement is categorised. The amounts are based on the values recognised in the statement of financial position:
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INTERNATIONAL FINANCIAL REPORTING STANDARDS
2014
Total RUB’000
Level 1 Level 2
Market quotes RUB’000
Valuation techniques based on market observable inputs
RUB’000
Financial instruments held for trading - assets 6,966,550 19,811,486 26,778,036
Financial instruments held for trading - liabilities - 19,706,086 19,706,086
Financial instruments available-for-sale 27,357,166 - 27,357,166
2013
Total RUB’000
Level 1 Level 2
Market quotes RUB’000
Valuation techniques based on market observable inputs
RUB’000
Financial instruments held for trading - assets 24,987,905 1,581,753 26,569,658
Financial instruments held for trading - liabilities - 1,667,035 1,667,035
Financial instruments available-for-sale 46,487,519 - 46,487,519
The fair value of unquoted equity securities available-for-sale with a carrying value of RUB 4,415 thousand as at 31 December 2014 (31 December 2013: RUB 4,415 thousand) cannot be determined.
The tables below show analysis of the fair value of financial instruments not measured at fair value as at 31 December 2014 and 2013 by the level in the fair value hierarchy:
2014
Level 2RUB’000
Level 3RUB’000
Total fair valueRUB’000
Total carrying amount
RUB’000
Loans to customers - 149,347,517 149,347,517 152,677,147
Current accounts and deposits from customers 273,376,779 - 273,376,779 274,276,110
2013
Level 2RUB’000
Level 3RUB’000
Total fair valueRUB’000
Total carrying amount
RUB’000
Loans to customers - 117,657,045 117,657,045 118,123,363
Current accounts and deposits from customers 240,620,071 - 240,620,071 240,609,678
30 Capital management
The CB RF sets and monitors capital requirements for the Bank.
The Bank defines as capital those items defined by statutory regulation as capital for credit institutions. Starting from 1 January 2014 the Bank calculates the amount of capital and capital adequacy ratios for prudential purposes in accordance with Provision of the CB RF dated 28 Decem-ber 2012 No 395-P On Methodology of Calculation of Own Funds (Capital) of the Credit Organisations (Basel III), so comparative numbers are not presented. As at 1 January 2015 minimum levels of basic capital ratio (ratio N1.1), main capital ratio (ratio N1.2), own funds (capital) ratio (ratio N1.0) are 5.0%, 5.5% and 10.0%, accordingly. Starting from 1 January 2015 minimum level of ratio N1.2 is 6.0%.
The Bank maintains capital adequacy at the level appropriate to the nature and volume of its operations.
The Bank provides the territorial CB RF that supervises the Bank with information on mandatory ratios in accordance with set form. The Bank controls on a daily basis compliance with capital adequacy ratios.
In case values of capital adequacy ratios become close to limits set by the CB RF and Bank’s internal policy this information is communicated to the Management Board and the Board of Directors. The Bank is in compliance with the statutory capital ratios as at 1 January 2015 and 2014.
The calculation of capital adequacy based on requirements set by the CB RF as at 1 January 2015 is as follows:
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FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014
ZAO CITIBANK ANNUAL REPORT 2014
1 January 2015 RUB’000
Base capital 52,467,544
Main capital 52,467,544
Own funds (capital) 52,467,544
Risk-weighted assets 355,120,316
Ratio N1.1 (%) 14.8
Ratio N1.2 (%) 14.8
Ratio N1.0 (%) 14.8
In 2013 the Bank had to maintain statutory capital ratio (N1) above the minimum level of 10% in accordance with Provision of the CB RF dated 10 February 2003 No 215-P On Methodology of Calculation of Own Funds (Capital) of the Credit Organisations. As at 1 January 2014, it was equal to 17.1%.
31 Average effective interest rates
The table below displays average effective interest rates for interest bearing assets and liabilities as at 31 December 2014 and 2013. These interest rates are an approximation of the yields to maturity of these assets and liabilities.
2014 Average effective interest rate
2013 Average effective interest rate
RUB USD Other currencies RUB USD Other currencies
Interest bearing assets
Loans and deposits with banks and other financial institutions and amounts receivable under reverse repo agreements 16.3% 1.1% - 5.7% 0.2% 3.0%
Financial instruments held for trading 6.6% 10.3% - 6.8% 7.7% -
Loans to customers 19.6% 2.3% 2.4% 13.5% 1.9% 1.7%
Financial instruments available-for-sale 7.1% 6.0% 4.1% 7.3% 5.8% 4.5%
Interest bearing liabilities
Due to the Central Bank of the Russian Federation - - - 5.4% - -
Deposits from banks and other finan-cial insitutions and amounts payable under repo agreements 9.8% - - 4.3% 0.1% -
Current accounts and deposits from customers
- Current accounts and demand deposits 0.5% 0.1% 0.1% 0.8% 0.3% 0.3%
- Term deposits 13.7% 0.5% 0.3% 5.1% 0.3% 0.4%
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INTERNATIONAL FINANCIAL REPORTING STANDARDS
32 Maturity analysis
The following table shows all assets and liabilities as at 31 December 2014 by their remaining contractual maturities with the exception of secu-rities included in financial instruments held for trading and financial instruments available-for-sale except equity instruments. Such securities are shown in the category “Less than 1 month” as management believes they are liquid assets which can be sold quickly in response to liquidity needs, if necessary.
RUB’000 Less than 1 month 1 to 3 months 3 to 6 months 6 months to 1 year More than 1 year No maturity Total
Assets
Cash and cash equivalents 65,556,958 - - - - - 65,556,958
Obligatory reserves with the Central Bank of the Russian Federation - - - - - 2,998,029 2,998,029
Loans and deposits with banks and other financial institutions 102,574,782 7,041,703 875,316 3,501,654 3,299,261 - 117,292,716
Financial instruments held for trading 10,731,706 10,620,326 777,616 3,394,628 1,253,760 - 26,778,036
Loans to customers 74,087,333 25,359,136 3,095,082 13,122,169 37,013,427 - 152,677,147
Financial instruments available-for-sale 27,357,166 - - - - 4,415 27,361,581
Other assets 2,660,198 925,680 201,091 10,790 16,315 10,548 3,824,622
Property and equipment - - - - - 1,386,617 1,386,617
Goodwill - - - - - 199,779 199,779
Deferred tax asset - - - - - 210,783 210,783
Total assets 282,968,143 43,946,845 4,949,105 20,029,241 41,582,763 4,810,171 398,286,268
Liabilities
Financial instruments held for trading 1,656,990 11,023,757 2,195,491 3,973,955 855,893 - 19,706,086
Deposits and balances from banks and other financial institutions 39,340,644 287,155 - 11,144 - - 39,638,943
Current accounts and deposits from customers 263,170,641 5,156,709 4,550,923 1,332,627 65,210 - 274,276,110
Other liabilities 4,654,418 241,386 52,892 8,320 9,613 - 4,966,629
Total liabilities 308,822,693 16,709,007 6,799,306 5,326,046 930,716 - 338,587,768
Net position as at 31 December 2014
(25,854,550) 27,237,838 (1,850,201) 14,703,195 40,652,047 4,810,171 59,698,500
Net position as at 31 December 2013 (30,378,433) 22,750,980 10,105,802 24,105,302 28,336,488 2,071,741 56,991,880
Cumulative net position as at 31 December 2014
(25,854,550) 1,383,288 (466,913) 14,236,282 54,888,329 59,698,500 -
Cumulative net position as at 31 December 2013 (30,378,433) (7,627,453) 2,478,349 26,583,651 54,920,139 56,991,880 -
Management uses deposits and other sources of financing, provided by members of Citigroup for managing negative gap in short-term liquidity. Also, relying on previous experience management believes that current accounts and demand deposits is a stable source of financing, although in accordance with the Russian legislation, term deposits of individuals may be withdrawn before maturity at any time, forfeiting in the most of the cases the accrued interest. Such deposits are shown in the table above in accordance with their contractual maturities.
81
FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014
ZAO CITIBANK ANNUAL REPORT 2014
As at 31 December 2014 and 2013, the contractual maturities of term deposits of individuals are as follows:
2014 RUB’000
2013 RUB’000
Less than 1 month 4,807,485 1,561,909
From 1 to 3 months 4,394,128 1,446,920
From 3 to 6 months 4,362,111 588,029
From 6 months to 1 year 1,290,368 402,904
More than 1 year 72,710 198,003
14,926,802 3,197,765
As at 31 December 2014 and 2013, the contractual maturities of securities included in financial instruments held for trading and financial instru-ments available-for-sale are as follows:
2014 RUB’000
2013 RUB’000
From 1 to 3 months 2,020 889,466
From 3 to 6 months 1,469,872 1,102,940
From 6 months to 1 year - 3,132,961
More than 1 year 32,851,824 66,350,057
34,323,716 71,475,424
33 Currency analysis
The following table shows the currency structure of assets and liabilities at 31 December 2014.
RUB’000 Roubles USD Other currencies Total
Assets
Cash and cash equivalents 23,581,996 15,902,642 26,072,320 65,556,958
Obligatory reserves with the Central Bank of the Russian Federation 2,998,029 - - 2,998,029
Loans and deposits with banks and other financial institutions 70,169,936 47,122,780 - 117,292,716
Financial instruments held for trading 8,499,078 16,630,380 1,648,578 26,778,036
Loans to customers 116,860,278 31,542,161 4,274,708 152,677,147
Financial instruments available-for-sale 25,206,093 885,280 1,270,208 27,361,581
Other assets 1,999,599 541,109 1,283,914 3,824,622
Property and equipment 1,386,617 - - 1,386,617
Goodwill 199,779 - - 199,779
Deferred tax asset 210,783 - - 210,783
Total assets 251,112,188 112,624,352 34,549,728 398,286,268
Liabilities
Financial instruments held for trading 18,660,042 368,425 677,619 19,706,086
Deposits and balances from banks and other financial institutions 35,919,528 3,224,108 495,307 39,638,943
Current accounts and deposits from customers 172,126,656 74,305,546 27,843,908 274,276,110
Other liabilities 4,324,728 430,417 211,484 4,966,629
Total liabilities 231,030,954 78,328,496 29,228,318 338,587,768
Net recognized position as at 31 December 2014 20,081,234 34,295,856 5,321,410 59,698,500
Effect of foreign currency exchange contracts as at 31 December 2014 46,190,614 (36,051,990) (10,138,624)
Net position as at 31 December 2014 66,271,848 (1,756,134) (4,817,214) 59,698,500
82
INTERNATIONAL FINANCIAL REPORTING STANDARDS
The following table shows the currency structure of assets and liabilities at 31 December 2013.
RUB’000 Roubles USD Other currencies Total
Assets
Cash and cash equivalents 19,641,306 7,098,021 6,029,333 32,768,660
Obligatory reserves with the Central Bank of the Russian Federation 2,760,361 - - 2,760,361
Loans and deposits with banks and other financial institutions 52,958,493 82,047,685 3,504,411 138,510,589
Financial instruments held for trading 24,665,471 1,527,228 376,959 26,569,658
Loans to customers 104,332,176 11,995,726 1,795,461 118,123,363
Financial instruments available-for-sale 44,739,398 665,886 1,086,650 46,491,934
Other assets 1,251,623 337,589 815,954 2,405,166
Property and equipment 1,689,792 - - 1,689,792
Goodwill 199,779 - - 199,779
Deferred tax asset 177,755 - - 177,755
Total assets 252,416,154 103,672,135 13,608,768 369,697,057
Liabilities
Financial instruments held for trading 1,026,383 563,348 77,304 1,667,035
Due to the Central Bank of the Russian Federation 24,627,807 - - 24,627,807
Deposits and balances from banks and other financial institutions 35,446,744 4,955,038 230,715 40,632,497
Current accounts and deposits from customers 182,138,202 42,911,573 15,559,903 240,609,678
Other liabilities 4,443,775 599,383 125,002 5,168,160
Total liabilities 247,682,911 49,029,342 15,992,924 312,705,177
Net recognized position as at 31 December 2013 4,733,243 54,642,793 (2,384,156) 56,991,880
Effect of foreign currency exchange contracts as at 31 December 2013 41,134,178 (53,117,587) 11,983,409
Net position as at 31 December 2013 45,867,421 1,525,206 9,599,253 56,991,880
34 Events after the reporting period
On 27 January 2015, according to the decision of the sole shareholder the Bank declared dividends in the amount of RUB 6,250 thousand per share from retained earnings, which in total amounts to RUB 6,250,000 thousand. These dividends were paid to Citigroup Netherlands B.V. on 6 February 2015.
On 6 May 2015 Luet Marc Raoul Marie was elected the President by the General Shareholders’ meeting.
On 26 June 2015, according to the decision of the sole shareholder the Bank declared dividends in the amount of RUB 8,000 thousand per share from retained earnings, which in total amounts to RUB 8,000,000 thousand.
Natalia Nikolaeva Assia Gounko Acting President Deputy Chief Accountant
83
FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014
ZAO CITIBANK ANNUAL REPORT 2014
84
RUSSIAN ACCOUNTING STANDARDS. UNOFFICIAL TRANSLATION, PLEASE REFER TO THE PAGE 85
Statutory Financial StatementsRussian Accounting Standards (RAS)
RUSSIAN ACCOUNTING STANDARDS. UNOFFICIAL TRANSLATION, PLEASE REFER TO THE PAGE 85
Auditors’ report ...86
Balance Sheet ...88
Income Statement ...90
Report on Capital Adequacy for Risk Covering, The Amount of Provisions for Impairment of Doubtful Loans and Other Assets ...92
Statutory Requirements ...100
Cash Flow Statement ...101
EXPLANATORY NOTES To 2014 Annual Financial Report of ZAO CB Citibank ...103
INTRODUCTION ...103
1. General Information ...1031.1. State registration, general and internal subdivisions, Bank ratings ...1031.2. About Bank Group ...1041.3. Licensing Information ...1041.4. Corporate Governance ...104
2. Brief description of Bank’s activities ...104
3. Brief overview of the fundamental principles underlying preparation of Bank’s Annual Accounting (Financial) Reports and key principles of Bank’s Accounting Policy ...1053.1. Fundamental principles underlying preparation of annual financial reports ...1053.2. Summary of the results of balance sheet inventory verification ...1053.3. Information on assumptions and main sources of uncertainty in estimates at end of the reporting period ...1063.4. Principles and methods for valuation and accounting for certain transactions ...1063.5. Nature and magnitude of adjustments due to material changes in accounting policy and calculated estimates that affect comparability of certain business indicators ...1123.6. Changes in Accounting Policy for the following reporting year ...1133.7. Nature and magnitude of material errors in prior periods ...1133.8. Post Balance Sheet Events ...113
4. Notes to the balance sheet items ...1134.1. Cash and cash equivalents ...1134.2. Financial assets evaluated at fair value through profit or loss ...1134.3. Net loans receivable ...1164.4. Provisions for possible losses are established based on the type of portfolio of homogenous loans and the duration of past-due periods. ...1174.5. Financial investments in subsidiaries, dependent organizations and other participation ...1194.6. Fixed assets, intangible assets and real estate property temporarily unused in the core business activity ...1204.7. Other assets ...1214.8. Due to credit institutions ...1214.9. Due to clients other than credit institutions ...1224.10. Debt securities issued ...1224.11. Other liabilities ...1224.12. Share capital ...123
5. Notes to the Report of financial results ...1235.1. Losses from reduction in value ...1235.2. Exchange rate gains (losses) recognized as income (expense) excluding those related to financial instruments evaluated at fair value through profit or loss ...1235.3. Taxes ...1235.4. Employee remuneration ...1245.5. Earnings per share ...124
6. Notes to the Report on capital adequacy for covering risks, size of provisions on doubtful loans and other assets ...125
7. Notes to the Report on cash flows ...126
8. Fair value ...126
9. Corporate governance and internal control ...1289.1. Corporate Governance Structure ...1289.2. Internal control policies and procedures ...129
10. Risk management ...13110.1. Principles and methods of risk assessment and management ...13110.2. Credit risk ...13310.3. Market risk ...14010.4. Operational risk ...14410.5. Liquidity risk ...14610.6. Legal risk ...14810.7. Strategic risk ...14810.8. Reputational risk ...14810.9. Country risk ...148
11. Transactions with related parties ...15011.1. Transactions with executives ...15011.2. Transactions with other related parties ...151
85
STATUTORY FINANCIAL STATEMENTS
ZAO CITIBANK ANNUAL REPORT 2014
Information on the audit firm
Name of the audit firm: Joint Stock Company KPMG.
Location (legal address): 18/1, Olympiysky prospect, Room 3035, Moscow 129110.
Postal address: 10, Presnenskaya Naberezhnaya, Block C, floor 31, Moscow 123317.
State registration: Registered by the Moscow Registration Chamber on 25 May 1992, Registration No. 011.585. Included
in the Unified State Register of Legal Entities on 13 August 2002 by the Moscow Inter-Regional Tax
Inspectorate No. 39 of the Ministry for Taxes and Duties of the Russian Federation, Registration No.
1027700125628, Certificate series 77 No. 005721432.
Membership in a self-regulating
auditors’ organisation:
Member of the Non-commercial Partnership “Chamber of Auditors of Russia”.
The Principal Registration Number of the Entry in the State Register of Auditors and Audit
Organisations: No. 10301000804.
Information on the audited Bank
Name of the audited company: Closed Joint Stock Company Commercial Bank “Citibank”.
Location (legal address): 8/10, building 1, Gasheka street, Moscow 125047.
Postal address: 8/10, building 1, Gasheka street, Moscow 125047.
State registration: Registered by the Central Bank of the Russian Federation on 1 November 1993, Registration
No. 2557. Re-registered as Closed Joint Stock Company Commercial Bank “Citibank”
on 5 November 2001.
Included in the Unified State Register of Legal Entities on 14 November 2002 by the Moscow Inter-
Regional Tax Inspectorate No. 39 of the Ministry for Taxes and Duties of the Russian Federation,
Registration No. 1027700431296, Certificate series 77 No. 00480345.
Set out below is an unofficial translation of the Auditors’ report on the annual accounting (financial) statements of the Closed Joint Stock
Company Commercial Bank “Citibank” as at and for the period from 1 January 2014 to 31 December 2014 prepared in accordance with the
requirements of effective legislation. Also set out below is an extract from the statutory annual accounting (financial) statements as at and for
the period from 1 January 2014 to 31 December 2014 comprising balance sheet (for publication purposes) as at 1 January 2015, income state-
ment (for publication purposes) for 2014 year, statement of cash flows (for publication purposes) for 2014 year, report on capital adequacy, the
amount of provision for impairment of doubtful loans and other assets (for publication purposes) as at 1 January 2015, statutory requirements
(for publication purposes) as at 1 January 2015. This unofficial translation does not include translation of explanatory information. The statuto-
ry annual accounting (financial) statements to which the Auditors’ report relates have been prepared in accordance with the accounting and
reporting regulations of the Russian Federation. Russian accounting and reporting regulations differ from accounting framework requirements
in other jurisdictions. Consequently, the accompanying financial statements, compiled in accordance with the aforementioned requirements,
are not intended to present the financial position and results of operations of the Closed Joint Stock Company Commercial Bank “Citibank” in
accordance with accounting principles and practices generally accepted in countries and jurisdictions other than the Russian Federation.
ZAO KPMG10 Presnenskaya NaberezhnayaMoscow, Russia 123317
Telephone +7 (495) 937 4477Fax +7 (495) 937 4400/99Internet www.kpmg.ru
86
RUSSIAN ACCOUNTING STANDARDS. UNOFFICIAL TRANSLATION, PLEASE REFER TO THE PAGE 85
Auditors’ report
To the shareholder of the Closed Joint Stock Company Commercial Bank “Citibank”
We have audited the accompanying annual accounting (financial) statements of the Closed Joint Stock Company Commercial Bank “Citibank” (hereinafter the “Bank”) for the 2014 reporting year.
The annual accounting (financial) statements of the Bank, set on 94 (ninety four) pages, comprise: > balance sheet (for publication purposes) as at 1 January 2015; > income statement (for publication purposes) for the year 2014; > the appendices to the balance sheet and the income statement including: > report on capital adequacy for risk covering, the amount of provisions for impairment of doubtful loans and other assets (for publication
purposes) as at 1 January 2015; > statutory requirements (for publication purposes) as at 1 January 2015; > cash flow statement (for publication purposes) for the year 2014; > explanatory information.
Management’s Responsibility for the Annual Accounting (Financial) Statements
Management of the Bank is responsible for the preparation and reliability of these annual accounting (financial) statements in accordance with the Russian reporting principles related to the annual accounting (financial) statements preparation by credit institutions and for the system of internal control necessary for the preparation of the annual accounting (financial) statements which are free from material misstatements, whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on the annual accounting (financial) statements in all material respects based on our audit. We conducted our audit in accordance with the Federal Standards on Auditing. These standards require that we comply with relevant ethical require-ments and planning and performing the audit in order to obtain sufficient assurance as to whether the annual accounting (financial) statements are free from material misstatements.
The audit included performing procedures to obtain audit evidence confirming the amounts and disclosures in the annual accounting (financial) statements. The selection of the procedures is a matter of our judgment, which is based on the assessment of risk of material misstatement, whether due to fraud or error. In the process of risk assessment we considered the system of internal control relevant to the preparation and reliability of the annual accounting (financial) statements in order to select appropriate audit procedures, but not for the purpose of expressing an opinion on the effectiveness of internal control system.
The audit also included an assessment of the appropriateness of the Bank’s accounting policy and the reasonableness of the estimates made by management, as well as the evaluation of the overall presentation of the annual accounting (financial) statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion on the reliability of the annual accounting (financial) statements.
Opinion
In our opinion, the accompanying annual accounting (financial) statements present fairly, in all material respects, the financial position of the Bank as at 1 January 2015 and its financial performance and its cash flows for 2014 in accordance with the Russian reporting principles related to the annual accounting (financial) statements preparation by credit institutions.
87
STATUTORY FINANCIAL STATEMENTS
ZAO CITIBANK ANNUAL REPORT 2014
Report of findings from procedures performed in accordance with the requirements of Article 42 of the Federal Law dated 2 December 1990 No 395-1 On Banks and Banking Activity
Management is responsible for the Bank’s compliance with mandatory ratios as established by the Bank of Russia, and for maintaining internal control and organising risk management systems in accordance with requirements established by the Bank of Russia.
In accordance with Article 42 of the Federal Law dated 2 December 1990 No 395-1 On Banks and Banking Activity (the “Federal Law”), we have performed procedures to examine: > the Bank’s compliance with mandatory ratios as at 1 January 2015 as established by the Bank of Russia; and > compliance of elements of the Bank’s internal control and organisation of its risk management systems with requirements established by
the Bank of Russia.
These procedures were selected based on our judgment and were limited to enquiries, analyses, inspections of documents, comparisons of the Bank’s internal policies, procedures and methodologies to applicable requirements established by the Bank of Russia, as well as recalculations, comparisons and reconciliations of numerical data and other information.
Our findings from the procedures performed are reported below. > Based on our procedures with respect to the Bank’s compliance with mandatory ratios as established by the Bank of Russia, we found that
the Bank’s mandatory ratios as at 1 January 2015 were within the limits established by the Bank of Russia. > We have not performed any procedures on the accounting records maintained by the Bank other than those which we considered neces-
sary to enable us to express an opinion as to whether the Bank’s accounting (financial) statements present fairly, in all material respects, the financial position of the Bank as at 1 January 2015, and its financial performance and its cash flows for 2014 in accordance with the Russian reporting principles related to the annual accounting (financial) statements preparation by credit institutions.
> Based on our procedures with respect to compliance of the Bank’s internal control and organization of its risk management systems with requirements established by the Bank of Russia, we found that:
> as at 31 December 2014, the Bank’s internal audit function was subordinated to, and reported to, the Board of Directors, and the risk manage-ment function was not subordinated to, and did not report to, divisions accepting relevant risks in accordance with regulations and recom-mendations issued by the Bank of Russia; - the Bank’s internal documentation, effective on 31 December 2014, establishing the procedures and methodologies for identifying and
managing the Bank’s significant credit, operational, market, interest rate, legal, liquidity and reputational risks, and for stress-testing was approved by the authorized management bodies of the Bank in accordance with regulations and recommendations issued by the Bank of Russia;
- as at 31 December 2014, the Bank maintained a system for reporting on the Bank’s significant credit, operational, market, interest rate, legal, liquidity and reputational risks, and on the Bank’s capital;
- the frequency and consistency of reports prepared by the Bank’s risk management and internal audit functions during 2014, which cover the Bank’s credit, operational, market, interest rate, legal, liquidity and reputational risk management, was in compliance with the Bank’s internal documentation. The reports included observations made by the Bank’s risk management and internal audit functions as to their assessment of the effectiveness of the Bank’s procedures and methodologies, and recommendations for improvement.
- as at 31 December 2014, the Board of Directors and executive management of the Bank had responsibility for monitoring the Bank’s compliance with risk limits and capital adequacy ratios as established by the Bank’s internal documentation. With the objective of monitoring effectiveness of the Bank’s risk management procedures and their consistent application during 2014 the Board of Directors and executive management of the Bank periodically discussed reports prepared by the risk management and internal audit functions, and considered proposed corrective actions.
Our procedures with respect to elements of the Bank’s internal control and organization of its risk management systems were performed solely for the purpose of examining whether these elements, as prescribed in the Federal Law and described above, are in compliance with the require-ments established by the Bank of Russia.
Director JSC “KPMG” Lukashova Natalia Viktorovna (power of attorney dated 16 March 2015, № 14/15)
26 June 2015
88
RUSSIAN ACCOUNTING STANDARDS. UNOFFICIAL TRANSLATION, PLEASE REFER TO THE PAGE 85
Balance Sheet(for publication purposes) as at 1 January 2015
Credit institution Closed Joint Stock Company Commercial Bank “Citibank”/ CJSC CB “Citibank”Postal address 8/10, bld.1, Gasheka street, Moscow 125047.Form Code 0409806Quarterly (Annual)
(Thousands of Russian Roubles)
№ Name of line item Note numberAmounts as at the
reporting date
Amounts as at the corresponding
reporting date for the prior year
1 2 3 4 5
I. ASSETS
1 Cash 4.1 11 415 696 5 251 357
2 Placements of credit institutions with the Central Bank of the Russian Federation 4.1 12 881 446 13 782 297
2.1 Mandatory reserves 2 998 029 2 760 361
3 Placements with credit institutions 4.1 29 767 613 12 264 399
4 Financial assets at fair value through profit or loss 4.2 29 825 594 26 628 546
5 Net loans to customers 4.3 280 783 714 256 917 504
6 Net investments in securities and other financial assets available-for-sale 4.4 27 435 870 48 239 384
6.1 Investments in subsidiaries and associates 4.5 0 0
7 Net investments in securities held-to-maturity 0 0
8 Current income tax receivable 0 0
9 Deferred tax asset 190 943 0
10 Fixed assets, intangible assets and materials 4.6 1 093 834 1 177 600
11 Other assets 4.7 5 057 588 3 579 898
12 Total assets 398 452 298 367 840 985
II. LIABILITIES
13 Loans, deposits and other funds from the Central Bank of the Russian Federation 0 24 624 052
14 Amounts due to credit institutions 4.8 19 043 551 21 588 333
15 Customer accounts (non-credit institutions) 4.9 284 385 221 249 644 017
15.1 Deposits from individuals and individual entrepreneurs 4.9 95 450 668 71 506 796
16 Financial liabilities at fair value through profit or loss 27 759 289 5 763 979
17 Debt securities issued 0 0
18 Current income tax payable 0
19 Deferred tax liability 354 642
20 Other liabilities 4.11 9 407 719 10 215 653
21 Provisions for possible losses on credit related commitments, oth-er possible losses and settlements with offshore zones residents 2 141 901 1 607 965
22 Total liabilities 343 092 323 313 443 999
89
STATUTORY FINANCIAL STATEMENTS
ZAO CITIBANK ANNUAL REPORT 2014
№ Name of line item Note numberAmounts as at the
reporting date
Amounts as at the corresponding
reporting date for the prior year
1 2 3 4 5
III. EQUITY
23 Funds of shareholders (participants) 1 000 000 1 000 000
24 Own shares (share of stock) repurchased from shareholders (participants) 0 0
25 Share premium 0 0
26 Reserve fund 150 000 150 000
27 Fair value revaluation of securities available-for-sale net of de-ferred tax liability (net of deferred tax asset) -5 079 105 -836 081
28 Revaluation of fixed assets net of deferred tax liability 97 330 97 330
29 Retained earnings (accumulated losses) of prior years 52 760 736 46 550 411
30 Unused profit (loss) for the reporting period 6 431 014 7 435 326
31 Total equity 55 359 975 54 396 986
IV. OFF-BALANCE SHEET LIABILITIES
32 Irrevocable commitments of credit institution 378 212 235 345 225 068
33 Guarantees and sureties issued by credit institution 24 323 251 14 776 104
34 Non-credit related commitments 0 0
Acting President Nikolaeva N. Y. StampDeputy Chief Accountant Gounko A. B.
26 June 2015
90
RUSSIAN ACCOUNTING STANDARDS. UNOFFICIAL TRANSLATION, PLEASE REFER TO THE PAGE 85
Income Statement(for publication purposes)for the year 2014
Credit institution Closed Joint Stock Company Commercial Bank “Citibank”/ CJSC CB “Citibank”Postal address 8/10, bld.1, Gasheka street, Moscow 125047.Form Code 0409807Quarterly (Annual)
(Thousands of Russian Roubles)
№ Name of line item Note numberAmounts for the reporting
periodAmounts for the correspond-
ing period of the prior year
1 2 3 4 5
1 Total interest income, including: 22 786 708 21 869 952
1.1 Placements with credit institutions 3 656 513 2 874 710
1.2 Loans to customers (non-credit institutions) 15 963 528 13 470 611
1.3 Services under finance lease 0 0
1.4 Investments in securities 3 166 667 5 524 631
2 Total interest expense, including: 6 868 841 4 644 370
2.1 Amounts due to credit institutions 997 341 644 443
2.2 Customer accounts (non-credit institutions) 5 871 500 3 999 927
2.3 Debt securities issued 0 0
3 Net interest income (negative interest margin) 15 917 867 17 225 582
4 Movement in the provision for possible losses on loans and loan equivalents, placements on correspondent accounts and accrued interest income, total including: 5.1 -3 213 254 -2 985 480
4.1 Movement in the provision for possible losses on accrued interest income 5.1 -95 227 -27 260
5 Net interest income (negative interest margin) after provision for possible losses 12 704 613 14 240 102
6 Net gain from operations with financial assets at fair value through profit or loss -7 862 565 -1 015 590
7 Net gain from operations with securities available-for-sale 247 672 705 564
8 Net gain from operations with securities held-to-maturity 0 0
9 Net gain from operations with foreign currency 5.2 -4 542 267 3 583 120
10 Net gain on revaluation of accounts in foreign currency 5.2 20 087 809 3 438 537
11 Gain on participation in other legal entities capital 0 0
12 Fee and commission income 8 950 155 7 945 140
13 Fee and commission expense 3 806 179 3 554 893
14 Movement in the provision for possible losses on securities available-for-sale 5.1 -8 260 -5
15 Movement in the provision for possible losses on securities held-to-maturity 0 0
16 Movement in the provision for other losses 5.1 -662 398 -945 142
17 Other operating income 2 258 016 1 584 956
18 Net income (loss) 27 366 596 25 981 789
91
STATUTORY FINANCIAL STATEMENTS
ZAO CITIBANK ANNUAL REPORT 2014
№ Name of line item Note numberAmounts for the reporting
periodAmounts for the correspond-
ing period of the prior year
1 2 3 4 5
19 Operating expense 17 540 480 14 793 772
20 Profit (loss) before taxation 9 826 116 11 188 017
21 Tax benefit (tax expense) 5.3 3 395 102 3 752 691
22 Profit (loss) after taxation 6 431 014 7 435 326
23 Total payments out of profit after taxation including: 0 0
23.1 Distribution between shareholders (participants) in the form of dividends 0 0
23.2 Reserve fund charge 0 0
24 Unused profit (loss) for the reporting period 6 431 014 7 435 326
Acting President Nikolaeva N. Y. StampDeputy Chief Accountant Gounko A. B.
26 June 2015
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RUSSIAN ACCOUNTING STANDARDS. UNOFFICIAL TRANSLATION, PLEASE REFER TO THE PAGE 85
Report on Capital Adequacy for Risk Covering, The Amount of Provisions for Impairment of Doubtful Loans and Other Assets(for publication purposes)as at 1 January 2015
Credit institution Closed Joint Stock Company Commercial Bank “Citibank”/ CJSC CB “Citibank”Postal address 8/10, bld.1, Gasheka street, Moscow 125047.Form Code 0409808Quarterly (Annual)
Section 1. Information on Capital Adequacy
(Thousands of Russian Roubles)
Name of indicator Note number
Amounts as at the beginning of the reporting period
Increase (+ ) /decrease(-) for the
reporting period
Amounts as at the date of the
reporting period
1 2 3 4 5 6
1 Own funds (capital) (thousand Roubles), total, including: 6 53 135 862.0 -668 318 52 467 544.0
1.1 Sources of basic capital: 6 47 394 230.0 6 461 256 53 855 486.0
1.1.1 Share capital, total, including that formed by: 6 1 000 000.0 0 1 000 000.0
1.1.1.1 ordinary shares (interest) 6 1 000 000.0 0 1 000 000.0
1.1.1.2 preference shares 0.0 0 0.0
1.1.2 Share premium 0.0 0 0.0
1.1.3 Reserve fund 6 150 000.0 0 150 000.0
1.1.4 Retained earnings: 6 46 244 230.0 6 461 256 52 705 486.0
1.1.4.1 of prior years 6 46 244 230.0 6 461 256 52 705 486.0
1.1.4.2 for the reporting year 0.0 0 0.0
1.2 Indicators that decrease the amount of sources of basic capital: 6 0.0 1 387 942 1 387 942.0
1.2.1 Intangible assets 6 0.0 8 748 8 748.0
1.2.2 Deferred tax assets 6 0.0 190 943 190 943.0
1.2.3 Own shares (interest) repurchased from shareholders (participants) 0.0 0 0.0
1.2.4 Loss: 0.0 0 0.0
1.2.4.1 of prior years 0.0 0 0.0
1.2.4.2 for the reporting year 0.0 0 0.0
1.2.5 Investments in capital of financial institutions: 0.0 0 0.0
1.2.5.1 immaterial 0.0 0 0.0
1.2.5.2 material 0.0 0 0.0
1.2.5.3 cumulative sum of material investments and cumulative sum of deferred tax assets 0.0 0 0.0
1.2.6 Negative amount of additional capital 6 0.0 1 188 251 1 188 251.0
1.2.7 Obligations of purchase of sources of basic capital 0.0 0 0.0
1.2.8 Funds received as payment for shares (interest), included in basic capital 0.0 0 0.0
1.3 Basic capital 6 47 394 230.0 5 073 314 52 467 544.0
1.4 Sources of additional capital: 0.0 0 0.0
1.4.1 Share capital formed by preference shares, total, including: 0.0 0 0.0
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STATUTORY FINANCIAL STATEMENTS
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Name of indicator Note number
Amounts as at the beginning of the reporting period
Increase (+ ) /decrease(-) for the
reporting period
Amounts as at the date of the
reporting period
1 2 3 4 5 6
1.4.1.1 those issued in accordance with Federal Law No. 181-FZ of 18 July 2009 On Use of State Securities of the Russian Federation for Increas-ing Capitalisation of Banks <1> 0.0 0 0.0
1.4.2 Share premium 0.0 0 0.0
1.4.3 Subordinated loan with additional terms 0.0 0 0.0
1.4.4 Subordinated loan (deposit, borrowing or bonded loan) without limita-tion of maturity 0.0 0 0.0
1.5 Indicators that decrease the amount of sources of additional capital 6 73 661.0 1 114 590 1 188 251.0
1.5.1 Investments in own preference shares 0.0 0 0.0
1.5.2 Investments in capital of financial institutions: 0.0 0 0.0
1.5.2.1 immaterial 0.0 0 0.0
1.5.2.2 material 0.0 0 0.0
1.5.3 Subordinated loan (deposit, borrowing or bonded loan) issued to financial institutions 0.0 0 0.0
1.5.3.1 immaterial 0.0 0 0.0
1.5.3.2 material 0.0 0 0.0
1.5.4 Negative amount of additional capital 0.0 0 0.0
1.5.5 Obligations of purchase of sources of additional capital 0.0 0 0.0
1.5.6 Funds received as paying up of shares (interest), included in the additional capital 0.0 0 0.0
1.6 Additional capital 0.0 0 0.0
1.7 Main capital 6 47 320 569.0 5 146 975 52 467 544.0
1.8 Sources of additional capital: 6 5 815 293.0 -5 641 061 174 232.0
1.8.1 Share capital formed by preference shares, total, including: 0.0 0 0.0
1.8.1.1 after March 1, 2013 0.0 0 0.0
1.8.2 Share capital formed through capitalization of property value appreciation 0.0 0 0.0
1.8.3 Profit: 6 5 717 963.0 -5 641 061 76 902.0
1.8.3.1 of the current year 6 5 717 963.0 -5 641 061 76 902.0
1.8.3.2 of prior years 0.0 0 0.0
1.8.4 Subordinated loan (deposit, borrowing or bonded loan), total, including that: 0.0 0 0.0
1.8.4.1 attracted (placed) before 1 March 2013 0.0 0 0.0
1.8.4.2 Issued in accordance with Federal Law No. 173-FZ of 13 October 2008 On Additional Measures for Support of Financial System of the Russian Federation <2> and Federal Law No. 175-FZ of 27 October 2008 On Additional Measures for Supporting Stability of Banking System in the Period until 31 December 2014 <3> 0.0 0 0.0
1.8.5 Property value appreciation 6 97 330.0 0 97 330.0
1.9 Indicators that decrease the amount of sources of additional capital: 0.0 1 061 992 1 061 992.0
1.9.1 Investments in own preference shares 0.0 0 0.0
1.9.2 Investments in capital of financial institutions: 0.0 0 0.0
1.9.2.1 immaterial 0.0 0 0.0
1.9.2.2 material 0.0 0 0.0
1.9.3 Subordinated loan (deposit, borrowing or bonded loan) issued to financial institutions 0.0 0 0.0
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RUSSIAN ACCOUNTING STANDARDS. UNOFFICIAL TRANSLATION, PLEASE REFER TO THE PAGE 85
Name of indicator Note number
Amounts as at the beginning of the reporting period
Increase (+ ) /decrease(-) for the
reporting period
Amounts as at the date of the
reporting period
1 2 3 4 5 6
1.9.3.1 immaterial 0.0 0 0.0
1.9.3.2 material 0.0 0 0.0
1.9.4 Obligations of purchase of sources of additional capital 0.0 0 0.0
1.9.5 Funds received as payment of shares (interest), included in the addi-tional capital 0.0 0 0.0
1.10 Indicators that decrease the amount of main and additional capital: 0.0 1 061 992 1 061 992.0
1.10.1 Accounts receivable overdue for more than 30 calendar days 0.0 0 0.0
1.10.2 Subordinated loans, whose value does not exceed 1 percent of the share capital of the borrower credit institution 0.0 0 0.0
1.10.3 Excess of the total amount of loans, bank guarantees and sureties provided to own participants (shareholders) and insiders over its max-imum amount in accordance with Federal Laws and regulatory acts of the Bank of Russia 0.0 0 0.0
1.10.4 Excess of investments in construction, manufacture and purchase of fixed assets over the amount of sources of main and additional capital 0.0 0 0.0
1.10.5 Excess of actual value of share of a participant that exited the limited liability company over the value at which such share was sold to other participant of the limited liability company 0.0 0 0.0
1.11 Additional capital 6 5 815 293.0 -5 815 293 0.0
2 Risk-weighted assets (thousands of Roubles): X X X
2.1 necessary for calculation of basic capital adequacy 319 869 138.0 35 286 171 355 155 309.0
2.2 necessary for calculation of main capital adequacy 6 319 795 477.0 35 324 839 355 120 316.0
3 Capital adequacy (percent): X X X
3.1 Basic capital adequacy 6 14,8 Х 14,8
3.2 Main capital adequacy 6 14,8 Х 14,8
3.3 Own funds (capital) adequacy 6 16,6 Х 14,8
<1> Federal Law No. 181-FZ of 18 July 2009 On Use of State Securities of the Russian Federation for Increasing Capitalisation of Banks (Sobra-nie Zakonodatelstva Rossiyskoy Federatsii, 2009, No. 29, Article 3618; 2014, No. 31, Article 4334).
<2> Federal Law No. 173-FZ of 13 October 2008 On Additional Measures for Supporting Financial System of the Russian Federation (Sobranie Zakonodatelstva Rossiyskoy Federatsii, 2008, No. 42, Article 4698; 2009, No. 29, Article 3605; No. 48, Article 5729; No. 52, Article 6437; 2010, No. 8, Article 776; No. 21, Article 2539; No. 31, Article 4175).
<3> Federal Law No. 175-FZ of 27 October 2008 On Additional Measures for Supporting Stability of the Banking System in the Period until 31 December 2014 (Sobranie Zakonodatelstva Rossiyskoy Federatsii, 2008, No. 44, Article 4981; 2009, No. 29, Article 3630; 2011, No. 49, Article 7059; 2013, No. 19, Article 2308).
95
STATUTORY FINANCIAL STATEMENTS
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Section 2. Information on the Level of Credit, Operating and Market Risks Covered by Capital
Subsection 2.1. Credit Risk
(Thousands of Russian Roubles)
№ Name of indicator Note number
Amounts as at the date of the reporting period Amounts as at the beginning of the reporting period
Value of assets (instruments)
Assets (instru-ments) net of
the formed reserves for
possible losses
Value of risk-weight-
ed assets (instruments)
Value of assets (instruments)
Assets (instru-ments) net of
the formed reserve s for
possible losses
Value of risk-weight-
ed assets (instruments)
1 2 3 4 5 6 7 8 9
1 Credit risk on assets rec-ognised on balance sheet accounts 240 261 184 235 393 244 91 600 696 201 334 580 197 891 951 79 927 904
1.1 Assets with the risk factor <1> of 0 percent, total, including: 63 581 124 63 552 833 0 31 048 442 31 048 442 0
1.1.1 Funds and obligatory reserves deposited in the Bank of Russia 60 297 142 60 297 142 0 31 033 654 31 033 654 0
1.1.2 Credit and other claims secured with guarantees of the Russian Federation, the Ministry of Finance of the Russian Federation, the Bank of Russia and pledge of state debt securities of the Russian Federation, the Ministry of Finance of the Russian Federation and the Bank of Russia 3 283 982 3 255 691 0 14 788 14 788 0
1.1.3 Credit and other claims to central banks or govern-ments of countries having country ratings «0» or «1»<2>, including those secured with guarantees of such countries and so forth 0 0 0 0 0 0
1.2 Assets with the risk factor of 20 percent, total, including: 99 812 560 99 426 719 19 885 344 107 712 680 107 705 058 21 541 012
1.2.1 Credit and other claims to the Russian Federa-tion constituent entities, municipal entities and other organizations secured with guarantees and pledge of securities of the Russian Federation constituent enti-ties and municipal entities 0 0 0 0 0 0
1.2.2 Credit and other claims to central banks or govern-ments of countries having country ratings «2», in-cluding those secured with their guarantees (pledge of securities) 0 0 0 0 0 0
1.2.3 Credit and other claims to credit institutions that are residents of countries hav-ing country ratings of «0» or «1», with the long-term credit rating <3>, including those secured by their guarantees 58 471 696 58 453 117 11 690 623 88 258 939 88 251 578 17 650 316
1.3 Assets with the risk factor of 50 percent, total, including: 1 398 652 1 398 652 699 326 1 514 294 1 505 272 752 636
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RUSSIAN ACCOUNTING STANDARDS. UNOFFICIAL TRANSLATION, PLEASE REFER TO THE PAGE 85
№ Name of indicator Note number
Amounts as at the date of the reporting period Amounts as at the beginning of the reporting period
Value of assets (instruments)
Assets (instru-ments) net of
the formed reserves for
possible losses
Value of risk-weight-
ed assets (instruments)
Value of assets (instruments)
Assets (instru-ments) net of
the formed reserve s for
possible losses
Value of risk-weight-
ed assets (instruments)
1 2 3 4 5 6 7 8 9
1.3.1 Credit and other claims in foreign currency secured with guarantees of the Russian Federation, the Ministry of Finance of the Russian Federation, the Bank of Russia and pledge of state debt securities of the Russian Federation, the Ministry of Finance of the Russian Federation and the Bank of Russia, denominat-ed in foreign currency 1 353 667 1 353 667 676 834 0 0 0
1.3.2 Credit and other claims to central banks or govern-ments of countries having country ratings «3», in-cluding those secured with their guarantees (pledge of securities) 44 985 44 985 22 492 1 514 294 1 505 272 752 636
1.3.3 Credit and other claims to credit institutions that are residents of countries having country ratings of «0» or «1», without the long-term credit rating, and to credit institutions that are residents of countries having country ratings «2», including those secured with their guarantees 0 0 0 0 0 0
1.4 Assets with the risk factor of 100 percent, total, including: 75 466 877 71 013 069 71 013 069 61 057 010 57 631 025 57 631 025
1.4.1 Loan debt 64 462 393 64 031 511 64 031 511 56 724 312 55 595 406 55 595 406
1.4.2 Other claims 11 004 484 6 981 558 6 981 558 4 332 698 2 035 619 2 035 619
1.5 Assets with the risk factor of 150 percent - credit and other claims to central banks or governments of countries having country ratings «7» 1 971 1 971 2 957 2 154 2 154 3 231
2 Assets with the increased risk factors total, including: 87 415 078 86 103 694 116 200 406 73 493 373 72 232 158 93 237 431
2.1 with the risk factor of 110 percent 33 032 469 32 387 838 35 626 622 38 294 572 37 777 017 41 554 719
2.2 with the risk factor of 150 percent 54 382 609 53 715 856 80 573 784 35 198 801 34 455 141 51 682 712
3 Consumer loans, total, including: 22 970 517 21 833 194 24 509 586 21 542 211 20 745 229 23 239 597
3.1 with the risk factor of 110 percent 21 891 729 20 830 545 22 913 600 20 201 128 19 479 048 21 426 953
3.2 with the risk factor of 140 percent 971 617 902 763 1 263 868 1 212 487 1 144 744 1 602 642
3.3 with the risk factor of 170 percent 0 0 0 116 115 109 572 186 272
3.4 with the risk factor of 200 percent 0 0 0 12 481 11 865 23 730
3.5 with the risk factor of 300 percent 95 757 89 066 267 198 0 0 0
97
STATUTORY FINANCIAL STATEMENTS
ZAO CITIBANK ANNUAL REPORT 2014
№ Name of indicator Note number
Amounts as at the date of the reporting period Amounts as at the beginning of the reporting period
Value of assets (instruments)
Assets (instru-ments) net of
the formed reserves for
possible losses
Value of risk-weight-
ed assets (instruments)
Value of assets (instruments)
Assets (instru-ments) net of
the formed reserve s for
possible losses
Value of risk-weight-
ed assets (instruments)
1 2 3 4 5 6 7 8 9
3.6 with the risk factor of 600 percent 11 414 10 820 64 920 0 0 0
4 Credit risk on contingent credit commitments, total, including: 99 277 481 97 146 680 25 337 127 91 084 558 89 541 117 38 440 506
4.1 on high-risk financial instruments 24 559 623 24 276 480 21 007 469 14 776 104 14 617 435 11 690 089
4.2 on medium-risk financial instruments 7 905 469 7 896 737 3 948 368 54 613 940 53 478 836 26 750 417
4.3 on low-risk financial instruments 1 920 514 1 906 450 381 290 0 0 0
4.4 on zero-risk financial instruments 64 891 875 63 067 013 0 21 694 514 21 444 846 0
5 Credit risk on financial derivatives 0 0 19 968 459 0 0 3 770 173
<1> Assets are classified by risk groups in accordance with Item 2.3 of Instruction of the Bank of Russia No. 139-I.
<2> Country ratings are given in accordance with classification of Export Credit Agencies participating in the Agreement of countries that are members of the Organization for Economic Cooperation and Development (OECD) On Basic Principles for Granting and Utilization of Export Loans having Official Support (the information on country ratings is published on the official website of the Bank of Russia in the section «Bank supervision»).
<3> Long-term ratings of a credit institution shall be defined on the basis of ratings assigned by international rating agencies: Standard & Poor’s, Fitch Rating’s or Moody’s Investors Service.
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RUSSIAN ACCOUNTING STANDARDS. UNOFFICIAL TRANSLATION, PLEASE REFER TO THE PAGE 85
Subsection 2.2. Operating Risk
(Thousands of Russian Roubles) / (quantity)
№ Name of indicator Note number
Amounts as at the date of the
reporting period
Amounts as at the beginning of the reporting period
1 2 3 4 5
6 Operating risk, total, including: 9.4 3 709 500.0 3 491 946.0
6.1 Income for the purpose of calculation of capital for operating risk coverage, total, including: 9.4 24 729 998.0 23 279 641.0
6.1.1 Net interest income 9.4 16 363 202.0 15 043 016.0
6.1.2 Net non-interest income 9.4 8 366 796.0 8 236 625.0
6.2 Number of years preceding the date of operating risk level calculation 3.0 3.0
Subsection 2.3. Market risk
(Thousands of Russian Roubles)
№ Name of indicator Note number
Amounts as at the date of the
reporting period
Amounts as at the beginning of the reporting period
1 2 3 4 5
7 Cumulative market risk, total, including: 9.3 10 877 850.0 27 839 846.0
7.1 interest risk, total, including: 9.3 870 228.0 2 227 187.7
7.1.1 general 9.3 757 779.3 1 990 092.2
7.1.2 specific 9.3 112 448.7 237 095.5
7.2 stock market risk, total, including: 9.3 0.0 0.0
7.2.1 general 9.3 0.0 0.0
7.2.2 specific 9.3 0.0 0.0
7.3 currency risk 9.3 0.0 0.0
Section 3. Information on the amount of provision for coverage of doubtful loans and other assets
(Thousands of Russian Roubles)
№ Name of indicator Note number
Amounts as at the beginning of the reporting period
Increase (+ ) /decrease(-) for the
reporting period
Amounts as at the date of the
reporting period
1 2 3 4 5 6
1 Actual provisions for possible losses, total, including: 5 115 100.0 1 913 432 7 028 532.0
1.1 on loans and loan equivalents 3 305 885.0 1 187 724 4 493 609.0
1.2 on other balance sheet assets bearing the risk of loss and on other losses 201 250.0 191 773 393 023.0
1.3 on contingent credit commitments and securities, the rights to which are certified by depositories, that do not meet the criteria of the Bank of Russia, recognised on off-balance sheet accounts 1 548 791.0 582 010 2 130 801.0
1.4 against operations with offshore zones residents 59 174.0 -48 075 11 099.0
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STATUTORY FINANCIAL STATEMENTS
ZAO CITIBANK ANNUAL REPORT 2014
For information purposes: Information on movement of provisions for possible losses on loans and loan equivalents.
1. Total charge (additional charge) of provision for the reporting period, in the amount of 71 861 231 thousands of Russian Roubles, including those as a result of:
1.1. Issue of loans – 58 791 241 thousands of Russian Roubles; 1.2. Change in loans quality – 4 988 270 thousands of Russian Roubles; 1.3. Change in official foreign currency exchange rate to Russian Rouble set by the Central Bank of the Russian Federation
in the amount of 1 029 897 thousands of Russian Roubles; 1.4. Other reasons – 7 051 823 thousands of Russian Roubles.
2. Total recovery (decrease) of provision for the reporting period, in the amount of 70 673 507 thousands of Russian Roubles, including those as a result of:
2.1. Bad loans write-off – 1 969 596 thousands of Russian Roubles; 2.2. Repayment of loans – 51 496 571 thousands of Russian Roubles; 2.3. Change in loans quality – 9 984 829 thousands of Russian Roubles; 2.4. Change in official foreign currency exchange rate to Russian Rouble set by the Central Bank of the Russian Federation
in the amount of 632 266 thousands of Russian Roubles; 2.5. Other reasons – 6 590 245 thousands of Russian Roubles.
Acting President Nikolaeva N. Y. StampDeputy Chief Accountant Gounko A. B.
26 June 2015
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RUSSIAN ACCOUNTING STANDARDS. UNOFFICIAL TRANSLATION, PLEASE REFER TO THE PAGE 85
Statutory Requirements(for publication purposes)as at 1 January 2015
Сredit institution Closed Joint Stock Company Commercial Bank “Citibank”/ CJSC CB “Citibank”Postal address 8/10, bld.1, Gasheka street, Moscow 125047. Form Code 0409813Quarterly (Annual)
(Percent)
№ Name of indicator Note number Normative value
Actual value
as at the reporting date
as at the prior reporting date
1 2 3 4 5 6
1 Basic capital ratio (N1.1) 6 ≥ 5.0 14.8 14.8
2 Main capital ratio (N1.2) 6 ≥ 5.5 14.8 14.8
3 Own funds (capital) ratio (N1.0) 6 ≥ 10.0 14.8 16.6
4 Capital adequacy ratio of non-banking credit institution entitled to money transfers without opening bank accounts and to other related banking transactions (N1.3) X X X
5 Momentary liquidity ratio (N2) ≥ 15.0 51.6 47.4
6 Current liquidity ratio (N3) ≥ 50.0 93.1 80.1
7 Long-term liquidity ratio (N4) ≤ 120.0 28.6 21.0
8 Maximum amount of risk per borrower or per group of related borrowers (N6) ≤ 25.0
Maximum 19.6 Maximum 21.8
Minimum 0.6 Minimum 0.5
9 Maximum amount of exposure to large credit risks (N7) ≤ 800.0 221.9 156.1
10 Maximum amount of loans, bank guarantees and sureties issued by the bank to its participants (shareholders) (N9.1) ≤ 50.0 0.0 0.0
11 Aggregate amount of exposure to the bank’s insiders (N10.1) ≤ 3.0 0.5 0.5
12 Ratio for the use of equity (capital) of the bank to acquire shares (share of stock) in other legal entities (N12) ≤ 25.0 0.0 0.0
13 Ratio of liquid assets maturing within the next 30 calendar days to total liabilities of payment-processing non-banking credit institution (N15) X X X
14 Liquidity ratio of non-banking credit institution entitled to money transfers without opening bank accounts and to other related banking transactions (N15.1) X X X
15 Maximum aggregate amount of loans to customers - settlements participants for settlements operations (N16) X X X
16 Ratio of loans issued by non-banking credit institution on its behalf and for its own expense to customers, except for customers - settlements participants (N16.1) X X X
17 Minimum ratio of the mortgage coverage amount and the vol-ume of issue of the mortgage covered bonds (N18) X X X
Acting President Nikolaeva N. Y. StampDeputy Chief Accountant Gounko A. B.
26 June 2015
101
STATUTORY FINANCIAL STATEMENTS
ZAO CITIBANK ANNUAL REPORT 2014
Cash Flow Statement(for publication purposes) for the year 2014
Credit institution Closed Joint Stock Company Commercial Bank “Citibank”/ CJSC CB “Citibank”Postal address 8/10, bld.1, Gasheka street, Moscow 125047. Form Code 0409814Quarterly (Annual)
(Thousands of Russian Roubles)
№ Name of line item Note numberCash flows for the
reporting period
Cash flows for the previous reporting
period
1 2 3 4 5
1 Net cash flows from (used in) operating activities
1.1 Total cash flows from (used in) operating activities before changes in operating assets and liabilities, including: -9 492 318 10 018 258
1.1.1 Interest receipts 22 795 377 23 572 400
1.1.2 Interest payments -6 688 487 -4 660 605
1.1.3 Fee and commission receipts 8 950 155 7 945 140
1.1.4 Fee and commission payments -3 806 179 -3 554 893
1.1.5 Gain less losses on financial assets at fair value through profit or loss, available-for-sale -7 687 242 -116 539
1.1.6 Gain less losses on securities held-to-maturity 0 0
1.1.7 Gain less losses on foreign exchange -4 542 267 3 583 120
1.1.8 Other operating income 2 258 016 1 584 956
1.1.9 Operating expense -17 228 141 -14 322 811
1.1.10 Tax expense (benefit) -3 543 550 -4 012 510
1.2 Total increase (decrease) in net cash flows from operating assets and liabilities, including: 271 722 -62 320 404
1.2.1 Net increase (decrease) in mandatory reserves with the Central Bank of the Russian Federation -237 668 629 849
1.2.2 Net increase (decrease) in investments in securities at fair value through profit or loss -24 410 088 -14 101 155
1.2.3 Net increase (decrease) in loans 4 146 657 -84 232 547
1.2.4 Net increase (decrease) in other assets -4 485 377 1 164 120
1.2.5 Net increase (decrease) in loans, deposits and other funds from the Central Bank of the Russian Federation -24 624 052 6 431 771
1.2.6 Net increase (decrease) in amounts due to other credit institutions -2 164 037 8 491 506
1.2.7 Net increase (decrease) in customer accounts (non-credit institutions) 9 479 562 18 075 627
1.2.8 Net increase (decrease) in financial liabilities at fair value through profit or loss 43 250 416 4 178 505
1.2.9 Net increase (decrease) in debt securities issued 0 0
1.2.10 Net increase (decrease) in other liabilities -683 691 -2 958 080
1.3 Total for section 1 (lines 1.1 and 1.2) -9 220 596 -52 302 146
2 Net cash flows from (used in) investing activities
2.1 Purchase of securities and other financial assets available-for-sale -866 433 -40 409 057
2.2 Proceeds from sale and redemption of securities and other financial assets available-for-sale 18 493 317 96 703 902
2.3 Purchase of securities held-to-maturity 0 0
2.4 Proceeds from redemption of securities held-to-maturity 0 0
2.5 Purchase of fixed assets, intangible assets and materials -177 937 -176 011
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RUSSIAN ACCOUNTING STANDARDS. UNOFFICIAL TRANSLATION, PLEASE REFER TO THE PAGE 85
№ Name of line item Note numberCash flows for the
reporting period
Cash flows for the previous reporting
period
1 2 3 4 5
2.6 Proceeds from disposal of fixed assets, intangible assets and materials -76 757 -181 241
2.7 Dividends received 0 0
2.8 Total for section 2 (lines from 2.1 to 2.7) 17 372 190 55 937 593
3 Net cash flows from (used in) financing activities
3.1 Shareholders’ (participants’) contributions to charter capital 0 0
3.2 Purchase of own shares (share of stock) repurchased from shareholders (participants) 0 0
3.3 Sale of own shares (share of stock) repurchased from shareholders (participants) 0 0
3.4 Dividends paid -1 225 000 -4 770 000
3.5 Total for section 3 (lines from 3.1 to 3.4) -1 225 000 -4 770 000
4 Effect of changes in official foreign currency exchange rates to Russian Rouble set by the Central Bank of the Russian Federation on cash and cash equivalents 11 530 832 1 283 042
5 Increase (decrease) in cash and cash equivalents 18 457 426 148 489
5.1 Cash and cash equivalents as at the beginning of the reporting period 28 521 767 28 373 278
5.2 Cash and cash equivalents as at the end of the reporting period 4.1 46 979 193 28 521 767
Acting President Nikolaeva N. Y. StampDeputy Chief Accountant Gounko A. B.
26 June 2015
103
STATUTORY FINANCIAL STATEMENTS
ZAO CITIBANK ANNUAL REPORT 2014
EXPLANATORY NOTES To 2014 Annual Financial Report of ZAO CB Citibank
INTRODUCTION
These Explanatory Notes are an integral part of the Annual Accounting (Financial) Report of Closed Joint Stock Company Commercial Bank Citibank (hereinafter the Bank) as of January 1, 2015, and for the year 2014, prepared in accordance with the requirements of Ordinance No. 3054-U of the Central Bank of the Russian Federation (hereinafter CBR) dated September 4, 2013, “On the Procedure for Annual Accounts (Financial Statement) Preparation by Credit Institutions” (hereinafter CBR Ordinance No. 3054-U).
The Annual Accounting (Financial) Report is prepared in Russian rubles and rounded to the nearest thousand rubles.
In accordance with the Federal Law No. 208-FZ dated December 26, 1995 “On Joint-Stock Companies,” General Shareholders’ Meeting has the authority to approve the Annual Accounting (Financial) Report. The General Shareholders’ Meeting where this Annual Accounting (Financial) Report will be discussed is scheduled for June 26, 2015.
The 2014 Annual Accounting (Financial) Report will be posted on the Bank’s website at http://citibank.ru.
1. General Information
1.1. State registration, general and internal subdivisions, Bank ratings > Full name: Closed Joint Stock Company Commercial Bank Citibank > Short name: ZAO CB Citibank > Location (registered address): Russia, 125047, Moscow, Gasheka St., 8-10, bld. 1 > Location (mailing address): Russia, 125047, Moscow, Gasheka St., 8-10, bld. 1 > Bank identification code (BIC): 044525202 > Taxpayer identification number (TIN): 7710401987 > Contact number (telephone, fax): +7 (495) 725-1000 (tel), +7 (495) 725-6700 (fax). > Website: www.citibank.ru > Main state registration number: 1027700431296 > Date of registration with the Unified State Register of Legal Entities: November 14, 2002
As of January 1, 2015, and January 1, 2014, the Bank had 7 branch networks and 52 internal divisions, including additional offices, back offices and standalone cash desks, covering 8 regions of the Russian Federation. The table below represents the Bank’s regional network structure:
Regional Office Location Federal District
St. Petersburg (11 branches) St. Petersburg Northwest Federal District
Don (2 branches) Rostov-on-Don South Federal District
Urals (3 branches) Yekaterinburg Urals Federal District
Srednevolzhsky (1 branch) Samara Volga Federal District
Privolzhsky (1 branch) Nizhny Novgorod Volga Federal District
Bashkortostan (1 branch) Ufa Volga Federal District
Volgogradsky (1 branch) Volgograd South Federal District
As of January 1, 2015, and January 1, 2014, the Bank also had an office in the Novosibirsk region.
Currently, regional offices (with the exception of St. Petersburg regional office) only offer retail banking services; provision of corporate banking services could be considered in the future.
Until March 21, 2014, the Bank had a long-term BBB+ rating with stable outlook (assigned by Fitch Ratings). However, due to the general political situation the rating was downgraded by Fitch Ratings to BBB+ with a negative outlook. On July 29, 2014, Fitch Ratings further downgraded the long-term ratings of thirteen foreign bank subsidiaries from BBB+ with a negative outlook to BBB with a negative outlook.
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RUSSIAN ACCOUNTING STANDARDS. UNOFFICIAL TRANSLATION, PLEASE REFER TO THE PAGE 85
1.2. About Bank Group
The Bank is a subsidiary of the international banking group Citigroup.
The consolidated financial reporting of Citigroup is available online on the Citigroup website.
1.3. Licensing Information
The Bank operates under a General License № 2557 dated November 5, 2001, with no expiration date, issued by the CBR. The Bank is a subject of the Federal Law No. 395-1 dated December 2, 1990, on Banks and Banking Activities (hereinafter Federal Law No. 395-1) and other legislative acts of the Russian Federation.
In addition to the General License issued by the CBR, the Bank operates under the following licenses and permits: > Professional Securities Market Custodian License No. 177-02719-000100 issued by the Federal Financial Markets Service on November 1,
2000; > Professional Securities Market Broker License No. 177-02738-100000 issued by the Federal Financial Markets Service on November 9, 2000; > Professional Securities Market Dealer License No. 177-02751-010000 issued by the Federal Financial Markets Service on November 9, 2000; > The Bank is a participant of the retail deposit insurance system mandatory for banks operating in the Russian Federation.
1.4. Corporate Governance
The governing bodies of the Bank are: the General Shareholders’ Meeting, the Board of Directors, the Executive Board and the President.
Natalia Nikolaeva was appointed Acting President of the Bank on June 29, 2013.
Effective May 30, 2014, as per decision of the sole shareholder of ZAO CB Citibank on the competence of the Annual Shareholders’ Meeting, the Board of Directors of the Bank is composed as follows: > Marc Luet – Chairman of the Board of Directors > Natalia Nikolaeva > Denis Korshilov > Maria Ivanova > Viktor Rozhkov > Florin Petrescu > Emre Karter > Irina Kosyachenko
As of January 1, 2015, the Executive Board was composed as follows: > Natalia Nikolaeva – Acting Chairman of the Executive Board > Michael Berner > Ruslan Belyaev > Sergey Korotkov > Natalia Belaya
No members of the Board of Directors or the Executive Board or the President own any shares of the Bank.
As of January 1, 2015, the Bank had a workforce of 4,858 employees (4,551 as of January 1, 2014). As of January 1, 2015, the Bank had 13 senior managers, including the Chief Accountant (11, including the Chief Accountant as of January 1, 2014).
2. Brief description of Bank’s activities
The Bank’s core business activities are lending to credit institutions and legal entities, including participation in syndicates, transactions with securities and foreign currencies, factoring, trade finance, deposit business, cash management and payment services. Throughout the course of the reporting period, the Bank saw a significant increase in volume of transactions in the money market as well as operations with derivatives. In addition to corporate services, the Bank is actively participating in the retail banking market and offers a broad range of services to retail clients.
As of January 1, 2015, the Bank’s assets increased by 30,611,313 thousand rubles (8.3%) compared to January 1, 2014. The increase was primarily due to growth in funds held with other credit institutions as well as loans outstanding.
As of January 1, 2015, the Bank’s liabilities rose by 29,648,324 thousand rubles (9.5%). The increase was mainly due to growth in client account balances, including retail deposits.
The structure of assets changed, with 43.1% decline in net investments in securities and other financial assets available for sale, an increase of 142.7% in funds held with other credit institutions and 9.3% increase in net loans outstanding. The structure of liabilities also changed, with 100% decline in CBR loans, deposits and other assets, 13.9% increase in account balances held by clients other than credit institutions and 381.6% increase in financial liabilities evaluated at fair value through profit or loss.
Net income in 2014 declined by 1,004,312 thousand rubles (13.5%) mainly due to lower net interest income, increased expenses from transactions with financial assets evaluated at fair value through profit or loss, as well as higher operating costs.
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The structure of the Bank’s income and expenses did not change significantly in 2014.
The General Shareholders’ Meeting held on June 6, 2014, decided to pay 1,225,000 thousand rubles in 2014 dividend from retained earnings of previous years. Also, the General Shareholders’ Meeting held on January 27, 2015, decided to pay 6,250,000 thousand rubles in dividend from retained earnings of previous years.
Since the Bank operates within the borders of the Russian Federation, it is exposed to the economic and financial risks in the Russian markets which are generally typical for emerging markets. The regulatory framework and tax legislation continue to evolve and are subject to varying interpretations and frequent changes, which, along with other legal and fiscal impediments, contribute to the challenges faced by companies operating in the Russian Federation.
Recent political events have provoked a number of negative factors that had a significant impact on the Russian economy in 2014 and increased the risks of doing business in the Russian Federation. Economic sanctions imposed by the European Union, the United States, Japan, Canada, Australia and other countries against Russian individuals and legal entities, as well as retaliatory sanctions by the Russian government, led to an increase in the level of economic uncertainty, including massive capital outflows, a substantial weakening of the ruble, a decline in both domestic and foreign direct investments in the Russian economy, the tightening of monetary policy aimed to curb rising inflation and a significant reduc-tion in the range of available borrowing mechanisms. In particular, some Russian companies, including banks, are facing difficulties accessing for-eign capital markets (both equity and debt financing) and their activities could become strongly dependent on funding by Russian state-owned banks. The longevity of the effect of the newly imposed sanctions is difficult to forecast as is the threat of additional sanctions in the future.
According to the World Bank report on the state of the Russian economy published on April 1, 2015, the main risks to Russia’s medium-term economic growth are the continuing shortage of available credit resources and low investment rating. Among other risks, the World Bank men-tioned the anticipated global economic slowdown. Russia’s medium-term economic growth will also depend on the country’s ability to adapt to shocks caused by falling oil prices and sanctions that pose a threat to financial stability and fiscal sustainability.
Consumer demand is also expected to slow down, while high inflation will put pressure on household incomes; at the same time, a weak ruble could create incentives to expand production in a number of export-oriented sectors.
This Annual Accounting (Financial) Report reflects the Bank management’s assessment of the possible impact of the current financial and eco-nomic environment on the Bank’s operations and financial position. The Bank’s management believes it is taking all the necessary measures to maintain the stability of the Bank’s activities in the current circumstances. However, a sudden further deterioration in the areas described above could negatively affect the Bank’s results and financial standing.
3. Brief overview of the fundamental principles underlying preparation of Bank’s Annual Accounting (Financial) Reports and key principles of Bank’s Accounting Policy
3.1. Fundamental principles underlying preparation of annual financial reports
The Bank’s accounting is performed in compliance with the requirements of CBR Regulation No.385-P dated July 16, 2012, “Accounting rules for credit organizations located on the territory of the Russian Federation” (with addendums and amendments) (hereinafter CBR Regulation No.385-P) and other regulatory documents.
The Annual Report was prepared in compliance with the requirements of CBR Ordinance No.3054-U and CBR Ordinance No.3081-U dated Octo-ber 25, 2013, “On the disclosure of information on business activities by credit organizations” (hereinafter – CBR Instruction No.3081-U).
In 2013, the Bank exercised its right not to provide explanatory information stipulated in CBR Instruction No.3081-U as part of its financial report. For this reason, comparative 2013 data has been provided in the 2014 Annual Financial Report, in accordance with the Ordinance referenced above.
3.2. Summary of the results of balance sheet inventory verification
In accordance with the year-end closing schedule, the Bank conducted an inventory of balance sheet items as of January 1, 2015. The Bank conducted an inventory of fixed assets, intangible assets and materials as of November 1, 2014. Furthermore, all cash offices of all of the Bank’s branches and satellite offices were inventoried as of January 1, 2015. The results of the inventory were duly recorded.
The Bank conducts verification of written notes confirming balances in client accounts. On January 14, 2015, the Bank sent statements showing account balances as of January 1, 2015, to all clients holding any type of account (settlement, loan, current, correspondent, savings, deposit etc). The Bank performs verification of interbank loans and deposits balances using SWIFT.
No discrepancies between records and physical presence have been found during inventory of balance sheet items.
Discrepancies in the amount of 1,592 thousand rubles have been uncovered as a result of the inventory of fixed assets. This did not cause any material misrepresentation in the financial reports. Presently, the Bank continues its efforts to locate these fixed assets. Those fixed assets which are not recovered by the end of the allotted time period will be written off the balance sheet.
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3.3. Information on assumptions and main sources of uncertainty in estimates at end of the reporting period
In the course of annual financial reports preparation, the management is obligated to make conclusions, calculate estimates and make assump-tions that affect the application of accounting policy and value of assets, liabilities, income and expenses represented in the Annual Financial Report. Actual results may differ from such estimates.
Estimates and the underlying assumptions are subject to regular review. Adjustments to estimates are recognized in the same accounting period in which the estimates are revised and in any and all subsequent periods affected by the revisions.
Information on uncertain material estimates and reasonably substantiated judgments in application of the accounting policy principles with regards to possible losses from loans and equivalent liabilities is presented in Section 4.3 below.
3.4. Principles and methods for valuation and accounting for certain transactions
Assets
Assets are recorded at cost. Subsequently, assets are valued (revalued) at current (fair) value or through provisions for impairment in compli-ance with CBR regulations.
Cash and its equivalents
For the purposes of annual financial reporting, the term cash equivalents denotes short-term high-liquidity investments, readily convertible into cash and not subject to any significant risks of changing in value. Cash and its equivalents include the following articles of schedule 0409806 “Ac-counting Balance Sheet (published form)”: cash, cash balances held by banks with CBR (other than mandatory reserves held at CBR) and cash held on accounts with credit institutions (excluding assets that carry a risk of loss). Mandatory reserves held with CBR are not considered cash or cash equivalents due to their limited availability for immediate use.
Loans granted and their equivalents, provisions on possible losses on loans and their equivalents
Loans granted and their equivalents are recorded at their actual value as of the disbursement date.
In compliance with CBR Regulation No. 254-P dated March 26, 2004, “On the procedure for creation of provisions on loans, loan receivables and equivalents by credit organizations” (as changed and amended) (hereinafter CBR Regulation No. 254-P) and the Bank’s internal Credit Policies & Procedures for corporate and retail lending, provisions for possible losses from loans are created for issued loans and their equivalents.
Provisions are formed when loans decline in value, i.e. when the loan loses value due to non-fulfillment or improper fulfillment of the borrow-er’s obligations to the credit institution under the loan agreement, or when an imminent threat of such non-fulfillment exists.
Provisions are formed in the amount of the principal loan amount (balance sheet carrying amount). The following amounts are not included into the principal loan amount: amounts due as interest for the use of money as defined in the loan agreement, legal acts or customary business practices; commissions, penalties or any other amounts due to the Bank under the terms of loan agreement. Provisions on this type of assets are formed in accordance with the CBR Regulation No.283-P dated March 20, 2006, “On the formation of provisions by credit organizations for possible losses” (with amendments and addendums) (hereinafter CBR Regulation No.283-P).
Provisions are formed on a specific loan or a portfolio of homogenous loans, i.e. a group of loans with similar credit risk parameters which com-ply with the CBR Regulation No. 254-P and had been isolated for the purposes of forming the provision.
Loans granted to corporate clients
Provisions for possible losses on loans granted to corporate clients are formed separately for each loan based on evaluation (professional opin-ion) of credit risk of each such loan.
The professional opinion is formed as a result of a comprehensive and objective analysis of the borrower’s operations with regard to their finan-cial position, quality of servicing the loan and all other information about the borrower available to the Bank. Based on the professional opinion, loans are classified into one of five quality categories per the CBR Regulation No. 254-P.
The Bank analyzes the borrower’s financial reports and other available information on their operations and financial performance to estimate the presence and influence of risk factors. Evaluation of the borrower’s financial position is conducted by the Bank based on that estimate. The Bank uses mass media and other sources to obtain information on potential risk factors.
Loans classified as quality categories II through V are deemed by the Bank to have lost their value.
For loans classified as quality categories II through V, provisions are formed after taking into account category I and II collateral listed in the CBR Regulation No. 254-P.
The amount of provisions is reviewed on an onoing basis simultaneously with the evaluation of credit risks on loans.
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Retail loans
Provisions for possible losses on retail loans are formed by the Bank for portfolios of homogenous loans. The Bank distinguishes the following portfolios by loan type:1. Consumer loans PIL2. Consumer loans – PIL – TopUp3. Consumer loans – PIL – Extensions4. Consumer loans – PIL – Re-write5. Credit cards CC6. Credit cards СС Re-age7. Credit cards СС IB 8. Consumer loans CFinPIL9. Consumer loans CFinPIL – Renewal10. Credit lines Ready credit11. Debit cards DC12. Debit cards DC for non-residents13. Mortgage loans Purchase Mortgage14. Mortgage loans Home Equity
Provisions for homogenous loan portfolios are formed in accordance with the risk evaluation protocol established by the Bank on the following portfolios of homogenous loans: > portfolio of loans without past-due payments; > portfolio of loans with past-due payments with a term of 1 to 30 calendar days; > portfolio of loans with past-due payments with a term of 11 to 59 calendar days; > portfolio of loans with past-due payments with a term of 60 to 90 calendar days; > portfolio of loans with past-due payments with a term of 91 to 119 calendar days; > portfolio of loans with past-due payments with a term of 120 to 149 calendar days; > portfolio of loans with past-due payments with a term of 150 to 180 calendar days; > portfolio of loans with past-due payments with a term of 181 to 360 calendar days.
The Bank continuously assesses the credit risk for portfolios of homogenous loans. In accordance with the CBR Regulation No. 254-P, the Bank classifies the assembled portfolios of homogenous loans into five quality categories.
The Bank writes off uncollectable loans against previously established loan-specific provisions in accordance with the internal “Operating proce-dure for declaring loans outstanding past-due and writing them off”.
For evaluation and establishing provisions for retail loans not included into any portfolio of homogenous loans, the Bank uses a procedure similar to the one used for evaluation and establishing provisions for loans granted to other credit institutions and corporate clients.
Acquisition of receivables arising from agreements on the provision (placement) of funds
Acquired rights to receivables arising from agreements on the provision (placement) of monetary funds are accounted for at the cost of acquisi-tion on the date of acquisition as stipulated by the conditions of the agreement.
Income from factoring transactions is recorded by the Bank as commission receivable and is subject to monthly accrual on separate subac-counts of the sub-ledger account 47423 “Claims on Other Operations” in correspondence with account 70601 “Income” expressed by the symbol 12401 with the subsequent creation of 100% impairment provisions for clients of the fourth and fifth quality categories.
The date of liability retirement is the date of the fulfillment of the debtors’ obligations or the date of the concession of receivables to third parties (date of sale) stipulated by the sale agreement.
The financial result from retirement of a receivable is determined as either the difference between the purchase price of the receivable and its selling price or the amount paid by the debtor (borrower) as stipulated by the agreement whereby the receivable was acquired. When the pay-ment for the sold (redeemed) receivable is made in parts, the financial result is calculated as the difference between the partial payment amount and the sold (redeemed) portion of the receivable calculated in proportion to the ratio between the partial payment amount and the nominal value of the receivable.
Interest income arising from the conditions of the underlying agreement on investment (provision) of funds but not included in the volume of acquired receivables is recognized as income and recorded in the books as interest income from investment operations.
The following portfolios have been created from receivables acquired under loan agreements with individuals:1. Acquired receivables on consumer loans2. Acquired receivables on mortgage loans
Evaluation of credit risk arising from acquired receivables as well as calculations and establishment of impairment provisions are conducted by the Bank in accordance with the CBR Regulation No. 254-P using the methodology similar to the one used for evaluation of outstanding loans.
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Securities
The Bank classifies securities according to purchase objectives into the following categories: > Investment in securities evaluated at fair value through profit or loss; > Investment in securities available for sale.
Investments in securities evaluated at fair value through profit or loss include bonds purchased for resale in the short-term (under 1 year) whose current (fair) value can be reliably determined.
Investments in securities available for sale include bonds other than those included in “securities evaluated at fair value through profit or loss” and “held to maturity” at the time of acquisition.
Once securities are recorded in the books, their carrying value is adjusted for the amount of discount (premium) and coupon (interest) income accrued and received between their acquisition and retirement.
Investments in securities classified upon initial recognition as “evaluated at fair value through profit or loss” as well as those classified as “available for sale” are accounted at current (fair) value.
For the securities classified as “available for sale”, the Bank establishes impairment provisions if it is not possible to reliably determine their current (fair) value and there are indications of their impairment in accordance with the CBR Regulation No. 283-P and the internal “Operating procedure for calculation and establishment of impairment provisions”.
In order to determine the amount of the impairment provision, reasonable judgment is used to classify account balances into one of five quality categories. For each of the five quality categories, the Bank uses appropriate provision percentage as defined in the CBR Regulation No. 283-P.
When classifying account balances, the Bank evaluates the counterparty’s financial position in order to estimate the probability of non-fulfillment or improper fulfillment of contractual obligations.
The Bank analyzes the counterparty’s financial reports and other available information on their operations and financial performance to esti-mate the presence and influence of risk factors. The Bank evaluates the counterparty’s financial position based on that estimate.
The Bank uses mass media and other sources to obtain information on potential risk factors. Absence of information about the counterparty is considered by the Bank as a risk factor, which is taken into account while forming the professional opinion.
The Bank conducts risk assessment on a continuous basis.
When companies in which the Bank had previously contributed capital are reorganized into joint-stock companies, the equity securities received by the Bank as a result of such reorganization are recorded at cost. Such securities are not re-evaluated at fair value; the Bank sets up an impair-ment provision in the amount of 100% of their carrying value.
In accordance with the CBR Regulation No. 283-P, the Bank also creates possible loss provisions for debt securities not redeemed at maturity. Such provisions are established using a similar procedure to the one used for securities “available for sale».
Current (fair) value of securities is established on a daily basis. The bank uses the following methods to establish current (fair) value of securities.
If there is an active market and price quotations, the current (fair) value of securities is defined by the Bank as weighted average price disclosed by the securities market operator in accordance with paragraph 7.7 of the Securities Trading Statute enacted by the order of the Federal Finan-cial Markets Authority No. 10-78/pz-n dated December 28, 2010. The Bank recognizes the Moscow Stock Exchange (MICEX) as a reliable source of information. When securities are traded on established foreign markets, the current (fair) value is defined as weighted average price disclosed in accordance with the procedure determined by national legislation (authority). The Bank recognizes the international information agencies Reuter and Bloomberg as reliable sources of information.
If there is no active market, the bank re-evaluates securities on a daily basis. If an active market is unavailable during a calendar month, re-eval-uation is conducted on a monthly basis, on the last business day of the current month. The fair value of such securities is assumed equal to the last weighted average price disclosed by MICEX during that calendar month. If there is no data on the weighted average market price for such securities on MICEX, their current (fair) value is assumed equal to their demand price (BID) published by Reuter as of 5.00 pm Moscow time on the last business day. If such information is not available from Reuter, the Bank uses the demand price (BID) reported by Bloomberg as of 5.00 pm Moscow time on the last business day. If the fair value of a security cannot be determined for a given calendar month, a provision for possible loss on such security is created.
The Bank has established a valuation method for retired (sold) securities based on the FIFO principle.
Acquisition (transfer) of ownership of securities via transactions on conditions of maturity, repayment and interest payment is not grounds for the initial recognition (de-recognition) of securities if it does not entail transfer of all risks and advantages (or a substantial portion thereof) relat-ed to the ownership of the transferred securities.
For reverse repurchase (repo) transactions where the Bank acts as the initial purchaser of securities, the Bank does not assume the risk and advantages related to the ownership of these securities. Securities received during the first stage of a reverse repo transaction are accounted without recognition as an asset of the Bank and are reflected on off-balance sheet accounts. Monies paid during the first stage of a reverse repo transaction are recorded in the balance sheet accounts for other invested assets.
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For repo transactions where the Bank acts as the initial seller of securities, the Bank does assume the risk and advantages related to the owner-ship of these securities. Transfer of securities via repo transactions is conducted without de-recognition as assets of the Bank. Monies received during the first stage of a repo transaction are recorded in the balance sheet accounts for other borrowed funds.
Derivative financial instruments and other agreements (transactions) settled and executed not earlier than the day following the date of the agreement (transaction)
Methods used by the bank to classify transactions recorded in accordance with requirements of the CBR Regulation No.372-P “On the procedure for maintaining accounting records for derivative financial instruments” dated July 4, 2011, are based on criteria set out in the directive of the Federal Financial Markets Authority No.10-13/pz-n dated March 4, 2010, on types of derivative financial instruments.
Derivatives are recorded in the Bank’s balance sheet Section A accounts at fair value. Derivatives with positive fair value are carried as assets in the account “Financial assets evaluated at fair value through profit or loss” of form 0409806 “Balance Sheet” (published form). Derivatives with negative fair value are carried as liabilities in the account “Financial liabilities evaluated at fair value through profit or loss” of form 0409806 “Bal-ance Sheet” (published form).
The Bank conducts daily re-evaluation of the following types of derivatives: foreign currency forward, foreign currency swap, foreign currency option, fixed maximum exchange rate transaction, non-deliverable foreign currency forward, non-deliverable foreign currency option and fixed minimum foreign currency transaction.
For the purposes of determining fair value of foreign currency forwards, foreign currency swaps and similar contracts which are considered derivatives, as well as transactions subject to CBR Regulation No. 372-P, the Bank utilizes the Net Present Value (NPV) method. Detailed method-ology for calculating fair value, testing the model for market compatibility and analysis of changes in forward exchange rate was developed by Citigroup’s Risk Analysis Department and described in a separate document “E-dealer: methodology of profit and loss determination” approved by the Risk Management Committee on June 30, 2008.
For the purposes of determining fair value of foreign currency options and similar contracts, the Bank utilizes the Black-Scholes model. Detailed methodology for calculating fair value (premium) and model testing scenarios for market compatibility have been developed and described in a separate Citigroup document.
The Bank evaluates the fair value of derivative instruments and reflects its fluctuation in its accounts on the last business day of a month, on the day of derivative’s de-recognition as well as on the day claims and/or obligations for interim payments arise in accordance with the agreement for interim payments as part of the derivative’s settlement for the following types of derivative instruments: interest rate swap, interest rate op-tion, interest rate forward, fixed maximum exchange rate transaction, fixed minimum exchange rate transaction, foreign currency interest rate swap, swaption, commodity option, cap, floor, collar for which the underlying asset is a commodity, commodity swap, basic swap.
Re-evaluation of the fair value of interest rate, commodity transactions and similar contracts is uploaded and calculated in a separate module of the front office OASYS/VELOCITY system per the methodology approved by Citigroup.
The Bank accepts the assessments of international information agencies such as Reuters and Bloomberg as well as the Moscow Stock Exchange as reliable sources of information for the assessment of the fair value of both exchange traded and over-the-counter derivatives.
For forward contracts and other derivatives, claims and liabilities on delivery of the underlying (base) asset in the form of securities, precious metals and foreign currencies are recorded in the accounts of part G “Derivative Financial Instruments and Forward Transactions” of the Bank’s balance sheet. The transactions are reflected in the accounts from the date of signing to the date of receipt of the first settlement.
Agreements (transactions) which do not stipulate delivery of the underlying (base) asset (i.e., settlement derivatives) are also accounted for in part G “Derivative Financial Instruments and Forward Transactions”.
Claims and liabilities carried in part G accounts are re-evaluated in accordance with changes in official foreign currency exchange rates of the Central Bank of Russia, its official precious metals prices, current fair value of securities and other variables. In accordance with the requirements of CBR Regulation No. 385-P, when re-evaluation adjustments are posted to asset accounts, the corresponding debit (credit) is applied to account 99997; when adjustments are posted to liability accounts, the corresponding debit (credit) is applied to account 99996.
Fixed assets
The term fixed assets denotes property with a useful life in excess of 12 months used as means for providing services, managing an organization and also in instances stipulated by health and hygienic, operational, and other special technical norms and requirements. In order to be classified as fixed, cost of the asset must exceed RUB 40,000 per unit excluding VAT.
Fixed assets are recorded at original cost. Original cost of fixed assets is derived from actual expenses incurred to acquire the assets and prepare them for utilization.
The Bank defines the useful life for all fixed assets and amortizes them in accordance with their useful life. Depreciation of fixed assets is calcu-lated based on either straight-line or declining balance method. The Bank applies straight-line method of depreciation to buildings, structures and transfer units included in the 8th-10th depreciation groups regardless of the date when such fixed assets were placed in operation. The Bank applies declining balance method of depreciation to other fixed assets placed in operation before January 1, 2008. The straight-line method of depreciation is applied to other fixed assets placed in operation after January 1, 2008.
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The useful life of fixed assets is defined by the Bank based on the Government Decree No. 1 “On classification of fixed assets included in amortiza-tion groups” dated January 1, 2002. For those types of fixed assets which are not listed in amortization groups, the useful life is set in accordance with technical specifications and manufacturers’ recommendations.
The Bank does not re-evaluate fixed assets.
Intangible assets
Intangible assets are recorded at the actual (original) cost as of their acquisition date. Intangibles which do not depreciate in value in the course of their utilization (e.g., perpetual rights of use) are not amortized. Depreciation factors for those intangible assets that are subject to amorti-zation are calculated based on their useful life. The duration of useful life is defined based on patent (or certificate) expiry date and other time limitations on the use of objects of intellectual property in accordance with relevant legislation. If the useful life of an intangible asset cannot be reasonably defined, depreciation is calculated based on five-year time period (not to exceed the Bank’s operating period).
Depreciation is calculated using the straight-line method.
The Bank does not re-evaluate intangible assets.
Materials
The Bank has an internal procedure for requisitioning spare parts, materials, publications and office supplies which are acquired strictly through applications approved by business division directors within established limits and delivered by the supplier directly to the business division. Due to the existence of this procedure, the Bank does not record materials on sub-ledger balance sheet accounts 61002-61010.
Materials are expensed at actual cost, which includes all expenses related to acquisition, delivery and preparation for use.
Liabilities
Liabilities are reflected on the books in accordance with the terms of respective agreements in order to ensure control over timely and complete fulfillment of related obligations. Liabilities can be re-evaluated to their current (fair) value in instances stipulated by the CBR Regulation No. 385-P and other regulatory documents.
The Bank does not issue debt securities.
Share capital, dividend
The registered share capital of the Bank comprises 1,000 uncertified common registered shares recorded in the account “Shareholders’ (partici-pants’) funds” of the balance sheet (published form). 100% of shares belong to the sole shareholder Citigroup Netherlands B.V.
Operating leases
Lease payments made under operating leases are expensed by the Bank over the term of the lease on a straight-line basis.
Income tax
Income tax is calculated on a quarterly basis and accrued monthly. The total amount of income tax includes both current and deferred components.
The Bank does business in various tax jurisdictions. While doing business, the management must interpret and apply the existing legal norms with regard to transactions with third parties and the Bank’s own operations. At present, Russian tax legislation, as a rule, is based on how business operations are documented and how they are accounted for in accordance with the Russian accounting principles. Interpretation of Russian tax legislation by tax authorities as well as judicial practice in this regard are in a state of constant flux and in the future could focus attention not on the form but rather on the economic substance of a transaction. Recent tax court cases demonstrate that tax authorities are taking a stricter po-sition with regard to interpretation and application of tax legislation. Tax authorities have the right to audit documentation related to a particular tax year at any time during the subsequent three calendar years. Throughout this period, any changes in the interpretation of tax legislation and its practical implementation, even without any changes in Russian tax law, could be applied retroactively.
In the opinion of the Bank’s management, all relevant provisions of tax legislation as of January 1, 2015, have been correctly interpreted and there is a high likelihood that the Bank will retain its current position in terms of compliance with tax, foreign currency and customs legislation.
Deferred income tax
Deferred income tax assets and liabilities arise from temporary differences between balances in assets (liabilities) accounts recorded in accordance with analytical accounting methodology and the underlying tax base used to calculate income tax as per applicable tax and excise legislation of the Russian Federation. Tax base means the amount recorded as asset or liability for tax purposes. Deferred tax assets and liabilities are not recognized with regards to balances in liability (asset) balance sheet capital accounts.
Temporary differences are calculated until balances in asset (liability) accounts are completely written off or until the results of operations or events (including those occurring in prior reporting periods) reflected in the Bank’s books cease to affect the amount of taxable income.
Deferred tax liability is recognized when temporary differences result in deferral of taxable income. Deferred tax asset arises from deferral of deductible items and unused losses which allow the Bank to reduce income tax payable.
Deferred tax assets are recorded on the books when temporary differences arise and it is likely that the Bank will earn taxable income in the future reporting periods.
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The Bank considers the following conditions when estimating the likelihood of earning taxable income which the Bank can legitimately reduce by the amount of deductible temporary differences: > Whether the Bank has a sufficient amount of taxable temporary differences which will result in taxable income which the Bank is allowed to
reduce for tax purposes by the amount of deductibles due to temporary differences; > Whether the Bank anticipates earning taxable income in the reporting period in which the Bank will be allowed to reduce taxable income for
tax purposes by the amount of deductible temporary differences.
Part of the deferred tax asset (or the entire asset) proportionately related to the probability of not earning taxable income which would allow the Bank to benefit from the part (or all) of the deferred tax asset is not recognized.
Deferred tax assets arising from deferred unused losses from prior periods are reflected in the books if it is likely that the Bank will receive tax-able income in the future reporting periods.
The Bank considers the following conditions when estimating the likelihood of earning taxable income which the Bank can legitimately reduce by the amount of unused losses carried over from prior periods: > Whether the Bank has sufficient taxable temporary differences which will result in receiving taxable income which the Bank is allowed to
reduce for tax purposes by the amount of unused losses carryover within the time period defined by the tax and excise legislation of the Russian Federation;
> Whether it is likely that the Bank will receive taxable income before expiry of the allowable loss carryover period defined by the tax and excise legislation of the Russian Federation which will allow the Bank to benefit by deducting unused losses carried over from prior periods;
> Whether the reasons for deferral of unused losses may re-emerge in the future; > Whether the Bank anticipates receiving taxable income in the reporting period in which the Bank will be allowed to reduce taxable income
for tax purposes by the amount of deferred unused losses carried over within the period defined by the tax and excise legislation of the Russian Federation.
The part of the deferred unused losses carried over from prior periods proportionately related to the probability of not earning taxable income which would allow the Bank to benefit from the deductibility of the deferred unused losses carried over within the period defined by the tax and excise legislation of the Russian Federation is not recognized.
Recognition of income and expenses
Income and expenses are recorded using the method of accruals, in compliance with the CBR requirements, except income which is subject to uncertainty. Such income is recorded on a cash basis. The accrual principle means that financial results of operations (income and expenses) are recognized in accounting records when the corresponding service is provided and not upon receipt (or payment) of cash or its equivalents.
Analytical accounting on the income and expense accounts is performed in Russian rubles only. Income and expense accounts reflect ruble equivalents of sums in foreign currencies based on the official exchange rate on the date when income or expense is recognized.
Amounts received (collected) subject to remittance in favour of third parties are not recognized as income. Costs and charges subject to reim-bursement are not recognized as expenses and are recorded on appropriate receivables accounts.
Interest on the Bank’s investments, including reverse repo transactions, is recorded in the books on a daily basis. Interest income expected to be received with certainty is recognized on the accrual basis. Interest income of uncertain nature is recognized on the cash basis.
Absence or presence of uncertainty in receiving income on loans and equivalent operations is defined based on an estimate of loan quality or level of risk of losses on the underlying asset (claim): > for loans and assets (claims) classified by the Bank as quality category I through III, receipt of income is considered certain (high probability
and/or certainty of receiving income); > for loans and assets (claims) classified by the Bank as quality category IV and V, receipt of income is considered uncertain (poor to no
chance of receiving income).
Interest expenses incurred as compensation to individual and corporate clients for the use of funds held in their current (demand) and term deposit accounts (including correspondent accounts) and on direct repo operations are expensed daily.
Discount (premium) amounts as well as coupon (interest) income on securities are considered interest income and are accrued over the life of the underlying security.
On the last business day of a month ending on a non-business day, the Bank expenses all interest which is to be accrued over the remaining calendar (non-business) days of the month.
With the aim of optimizing and increasing efficiency of the Bank’s operations, the following assumptions are made: > materiality threshold for received/paid commissions on credit and other operations is set to USD 100,000 equivalent, i.e. commission
amounts below the set equivalent may be charged to income/expenses in a single entry regardless of the length of the period they are received/paid for;
> payroll costs are expensed at the time of accrual; travel and entertainment expenses are recorded at the time of approval; > depreciation is charged on or before the last business day of the month, taxes and levies are recorded on or before their respective due dates; > prepaid lease payments are expensed monthly at the end of the actual occupancy period; > costs of subscription to publications are expensed on the date of payment; > services are deemed received by the Bank on the day of their acceptance.
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Commissions payable and receivable as well as miscellaneous income and expenses are recognized on the day when the underlying service is rendered.
Re-evaluation of assets denominated in foreign currencies
Re-evaluation of assets denominated in foreign currencies is based on changes in the official CBR exchange rates, with resulting adjustments posted to income and expense accounts on a daily basis.
Re-evaluation of assets denominated in foreign currencies which are not included in the list of official exchange rates set by the CBR is conduct-ed when exchange rates calculated per the methodology described in the CBR letter No. 6-T dated January 15, 2010, change, with the resulting adjustments posted to income and expense accounts on a daily basis.
Exchange rate gains or losses arising from foreign currency conversion transactions are included in the Bank’s financial result at the exchange rate in effect on the day of transaction. The day of transaction means either the date of delivery of funds or the date of receipt, whichever comes earlier.
Re-evaluation of foreign currency assets is carried out at the beginning of the operational day, before any transactions are posted to accounts. The opening balance of each account is subject to re-evaluation, excluding any advances paid to (or received from) non-resident entities for goods shipped and/or maintenance services rendered.
Netting
Financial assets and liabilities are offset (netted) only in situations in which the governing currency conversion agreement includes an offsetting (netting) provision in effect as of the date of execution.
3.5. Nature and magnitude of adjustments due to material changes in accounting policy and calculated estimates that affect comparability of certain business indicators
The Bank’s Accounting Policy for 2014 was approved by the Board of Directors per the meeting minutes dated February 28, 2014.
The CBR Regulation No. 409-P dated November 25, 2013, “On the accounting treatment of deferred tax liabilities and deferred tax assets” (hereinafter CBR Regulation No. 409-P) and CBR Instruction No. 3121-U dated November 25, 2013, amending CBR Regulation No. 385-P came into force effective January 25, 2014. These documents introduce the procedure for accounting treatment of deferred tax liabilities and deferred tax assets. CBR Regulation No. 409-P stipulates accounting treatment of amounts sufficient to increase (decrease) income tax payable to the state budget of the Russian Federation in future reporting periods, in accordance with the tax and excise legislation of the Russian Federation. Require-ments contained in these legal documents have been applied starting with interim accounting (financial) reports for the first quarter of 2014.
In accordance with the CBR Letter No. 50-T dated March 28, 2014, “On peculiarities of accounting treatment of deferred tax assets and deferred tax liabilities by credit institutions”, credit institutions were given the option to apply the requirements of the CBR Regulation No, 409-P either retroactively or proactively at their discretion.
The Bank decided to apply the requirements of the CBR Regulation No, 409-P proactively. Nominal value of deferred tax liabilities and deferred tax assets subject to recognition in the books in correspondence to additional capital and income accounts set as of the nominal prior period was set to equal zero.
Therefore, income tax expense data in the report on financial results and values of deferred tax assets and liabilities in the balance sheet are not comparable with the data for the year 2013 and the data as of January 1, 2014.
Effective April 1, 2014, CBR Ordinance No. 3134-U amending CBR Regulation No. 385-P added balance sheet account 50709 “Equity securities valued at cost” to the Bank’s chart of accounts. In addition, the document clarified the term current (fair) value of a security, which means the price at which the security could be sold by one securities market participant to another on voluntary basis on the date of valuation. Estimate of current (fair) value is calculated using methodology defined in the International Financial Reporting Standard (IFRS) 13 “Fair Value Measurement” (hereinafter IFRS 13) enacted on the territory of the Russian Federation by the order of the Minister of Finance No. 106n dated July 18, 2012.
In accordance with CBR Ordinance No. 3106-U dated November 6, 2013, amending CBR Regulation No. 372-P dated July 4, 2011, and CBR Ordinance No. 3107-U amending CBR Regulation No. 385-P dated July 16, 2012, effective January 1, 2014, the authority of CBR Regulation No. 372-P was extended to include purchase and sale agreements for foreign currency, precious metals and securities other than derivatives stipu-lating the transfer of title and payment not earlier than the third day after the date of signing. The amendments also introduced the term other agreements (transactions) stipulating settlement and delivery not earlier than the day following the date of signing and defined the accounting procedure for such agreements. In addition, the amendments revised the accounting procedure for operations related to de-recognition of a de-rivative financial instrument in accordance with agreements stipulating purchase and sale of an underlying (base) asset as well as other changes in accounting treatment of derivative financial instruments.
Effective July 1, 2014, CBR Ordinance No. 3269-U amended the CBR Ordinance No. 2332-U “On the list, forms and procedure of compilation and submission of reports by credit institutions” to revise the report on capital adequacy for covering risks, size of provisions for doubtful loans and other assets (published form) No. 0409808 as it relates to capital requirements for credit, market and operating risks as well as other indicators needed to define the denominator of the capital adequacy ratio.
No event related to the Bank’s property and financial results failed to be reliably represented in its financial reporting.
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3.6. Changes in Accounting Policy for the following reporting year
For the reporting year 2015, the Bank’s accounting policy will be amended to reflect changes in applicable legislation, including disclosure of the procedure for uncovering inappropriate assets for the purposes of defining the Bank’s equity capital (Basel III) as well as methodologies for estimating fair value of securities in accordance with IFRS 13.
The Bank did not conduct any analysis of possible impact of changes on its financial position or results of operations.
3.7. Nature and magnitude of material errors in prior periods
In the course of compiling the annual accounting (financial) statements, the Bank did not uncover any material errors in prior period reports which affected the reported parameters.
3.8. Post Balance Sheet Events
The Annual Report contains adjustments for events after the end of the reporting period (hereinafter PBSE).
For the purpose of correctly compiling the Bank’s 2014 Annual Report, the following PBSE adjustments were recorded: > transfer of balances recorded on balance sheet accounts 706 “Current period financial result” to balance sheet accounts 707 “Previous
period financial result”; > transfer of balances from balance sheet accounts 707 “Previous period financial result” to balance sheet account 70801 “Previous Period
Profit” in the amount of RUB 6,431,014 thousand.
As part of 2014 PBSE adjustments, the following operations have been included for the total amount of RUB 984,608 thousand: > over-accrual of 2014 income taxes in the amount of RUB 234,162 thousand; > over-accrual of taxes on interest income from government and municipal securities for November-December 2014 in the amount of
RUB 14,255 thousand; > top-up of the 2014 employee bonus reserve fund in the amount of RUB 244,628 thousand; > maintenance and other non-operating expenses in the amount of RUB 988,397 thousand.
No PBSE indicating appearance of circumstances materially affecting the Bank’s financial position, assets and liabilities occurred as of the date of compilation of the annual financial reports.
4. Notes to the balance sheet items
4.1. Cash and cash equivalents
January 1, 2015 thousands of rubles
January 1, 2014 thousands of rubles
Cash 11,415,696 5,251,357
Mandatory cash balances held with the CBR 9,883,417 11,021,936
Cash balances on correspondent accounts with credit institutions: 25,680,080 12,248,474
Russian Federation 226,159 4,260,180
Other countries 25,453,921 7,988,294
Total 46,979,193 28,521,767
Cash and cash equivalents are neither past-due nor restructured.
4.2. Financial assets evaluated at fair value through profit or loss
January 1, 2015 thousands of rubles
January 1, 2014 thousands of rubles
Debt securities 7,153,915 25,047,566
Derivative financial instruments 22,671,679 1,580,980
Total 29,825,594 26,628,546
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Detailed analysis of debt securities by type is shown below:
January 1, 2015 thousands of rubles
January 1, 2014 thousands of rubles
Bonds issued by Russian federal and municipal governments 7,131,789 24,902,826
Federal loan bonds (OFZ) 6,941,920 23,693,656
Eurobonds issued by the government of the Russian Federation 189,869 1,209,170
Corporate bonds 22,126 144,740
Bonds issued by Russian corporations 13,486 38,120
Bonds issued by foreign corporations - 26,704
Bonds issued by Russian credit institutions 8,640 79,916
Total 7,153,915 25,047,566
Information on the terms of circulation and coupon rates on each series of debt securities is shown below as of January 1, 2015:
Series of securities Number of securities held, units Term of circulation, days Coupon rate, %
41103349B 2,052 3,640 8.20
41203349B 1,981 3,640 7.70
4B02-01-00004-T 2,571 1,092 7.65
4B020202766B 2,037 1,092 7.50
4-04-36400-R 11 1,820 7.55
4-15-00739-A 13,474 6,959 10.75
46005RMFS 42 5,808 -
46014RMFS 192,341 5,656 7.00
46017RMFS 2,837,157 4,186 6.50
46018RMFS 888,678 6,097 7.00
46021RMFS 189 4,186 5.50
46022RMFS 159,165 5,656 6.00
25079RMFS 84,083 1,463 7.00
25080RMFS 693,893 1,820 7.40
25081RMFS 149,066 1,820 6.20
26203RMFS 952,913 2,191 6.90
26204RMFS 77,655 2,549 7.50
26205RMFS 98,699 3,654 7.60
26208RMFS 727,901 2,548 7.50
26210RMFS 4,160 2,548 6.80
26214RMFS 581 2,548 6.40
26216RMFS 75,396 2,009 6.70
SK-0-CM-128 19,507 10,957 7.50
XS0504954180 5,664 1,826 3.63
MK-0-CM-119 52,848 10,958 12.75
MK-0-CM-126 2,783 7,305 11.00
49001RMFS 109,068 2,557 7.85
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Information on the terms of circulation and coupon rates on each series of debt securities is shown below as of January 1, 2014:
Series of securities Number of securities held, units Term of circulation, days Coupon rate, %
40202766B 3,284 1,092 8.25
40501000B 3,248 3,640 7.58
40603311B 121 1,099 9.50
41103349B 2,085 3,640 8.20
41203349B 2,048 3,640 7.70
41303349B 6,331 3,640 7.70
4-26-00004-T 2 7,280 8.40
4B02-01-00004-T 48,295 1,092 7.65
4B020202766B 2,090 1,092 10.50
4B020302766B 1,654 1,092 9.20
4B020303354B 10,759 1,096 9.90
4-02-72301-H 1,575 11,817 9.00
4-04-36400-R 12 1,820 7.55
4-08-55038-E 2,476 3,640 8.50
4-15-00739-A 34,057 6,959 10.75
4-04-00001-L 17,067 1,820 6.80
4-05-00001-L 9,637 1,820 7.00
46005RMFS 25,469 5,808 -
46014RMFS 481,879 5,656 7.00
46017RMFS 239,426 4,186 6.50
46018RMFS 1,400,788 6,097 7.00
46020RMFS 5,604 6,097 6.90
46021RMFS 1,691,500 4,186 6.00
46022RMFS 91 5,656 6.50
46023RMFS 1,044 5,410 8.16
25068RMFS 137,584 1,820 12.00
25071RMFS 673,223 1,820 8.10
25075RMFS 669,285 1,813 6.88
25076RMFS 120,273 1,149 7.10
25077RMFS 555,129 1,820 7.35
25079RMFS 12,450 1,463 7.00
25080RMFS 869,561 1,820 7.40
25081RMFS 3,220,544 1,820 6.20
25082RMFS 59,795 1,092 6.00
26203RMFS 29,920 2,191 6.90
26204RMFS 118,243 2,549 7.50
26205RMFS 58,030 3,654 7.60
26206RMFS 1,132,370 2,198 7.40
26209RMFS 603,776 3,640 7.60
26210RMFS 3,354,619 2,548 6.80
26214RMFS 3,036,124 2,548 6.40
26215RMFS 2,686,682 3,633 7.00
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Series of securities Number of securities held, units Term of circulation, days Coupon rate, %
26216RMFS 2,510,246 2,009 6.70
SK-0-CM-128 836,080 10,957 7.50
XS0504954180 3,404 1,826 3.63
MK-0-CM-119 54,175 10,958 12.75
49001RMFS 315,511 2,557 7.85
The Bank does not invest in equities that are evaluated at fair value through profit or loss.
The table below shows a detailed breakdown of derivative financial instruments by type of underlying (base) asset and type of derivative.
January 1, 2015 thousands of rubles
January 1, 2014 thousands of rubles
Forwards:
- Foreign currency 4,541,134 489,066
Swaps:
- Foreign currency 5,976,875 430,401
- Foreign currency & interest rate 6,106,107 414,855
- Interest rate 41,819 75,597
Options 3,422,672 146,147
Other 2,583,072 24,914
22,671,679 1,580,980
4.3. Net loans receivable
Detailed breakdown of loans receivable by type of loan:
January 1, 2015
thousands of rublesJanuary 1, 2014
thousands of rubles
Loans to credit institutions 128,438,807 138,903,024
Loans to corporations other than credit institutions, including 106,209,318 74,214,417
- Financing of current operations 104,570,969 70,464,507
- Factoring 1,638,349 3,749,910
Retail loans 50,689,572 47,093,632
- Consumer loans 26,973,443 25,634,801
- Credit cards and overdrafts 23,130,055 20,883,589
- Mortgage loans 586,074 575,242
Total loans receivable 285,337,697 260,211,073
Provisions for possible losses on loans 4,553,983 3,293,569
Total net loans receivable 280,783,714 256,917,504
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Breakdown of loans by type of borrowers’ economic activity (before provisions for possible losses):
January 1, 2015
thousands of rublesJanuary 1, 2014
thousands of rubles
Interbank loans 128,438,807 45.0% 138,903,024 53.4%
Other non-retail loans – total, including by type of economic activity: 106,209,318 37.2% 74,214,417 28.5%
Wholesale and retail trade 34,602,293 12.1% 23,840,976 9.2%
Processing industry 53,065,642 18.6% 36,597,113 14.1%
Transportation and communications 2,521,725 0.9% 7,562,248 2.9%
Real estate operations, leasing and services 845,446 0.3% 497,594 0.2%
Agriculture 405,613 0.1% 336,485 0.1%
Construction - - 70,480 0.0%
Mining 6,651,667 2.3% 209,720 0.1%
Generation and distribution of electrical energy, natural gas and water 458,000 0.2% 328,000 0.1%
Other types of activity 7,658,932 2.7% 4,771,801 1.8%
Loans to small and medium-sized businesses, of total non-retail loans 1,445,829 0.5% 1,049,040 0.4%
Retail loans – total, including 50,689,572 17.8% 47,093,632 18.1%
Consumer loans 26,973,443 9.5% 25,634,801 9.9%
Credit cards and overdrafts 23,130,055 8.1% 20,883,589 8.0%
Mortgage loans 586,074 0.2% 575,242 0.2%
Total loans 285,337,697 260,211,073
Provisions for possible losses on loans 4,553,983 3,293,569
Total net loans receivable 280,783,714 256,917,504
Loans to credit institutions and corporations other than credit institutions
When forming the professional opinion about the amount of provisions, the Bank made the following assumptions: > on loans classified as quality categories 2 through 4, per CBR Regulation No. 254-P, the Bank defines the calculated provision value as the
lowest end of the range set for such credit quality group; > when defining fair value of collateral, the Bank assumes that it can be sold within a reasonably short time not exceeding 180 calendar days.
Retail loans
The Bank establishes provisions on portfolios of homogenous loans where each loan on its own is immaterial in value. Loans provided to the same borrower and satisfying homogeneity criteria are considered ineligible for portfolio approach to provisions if value of such loans exceeds 0.5% of the Bank’s capital as of the risk assessment date. The bank considers purpose, amount, term and presence or absence of collateral as criteria for homogeneity.
4.4. Provisions for possible losses are established based on the type of portfolio of homogenous loans and the duration of past-due periods.
Investments in debt and equity securities available for sale
January 1, 2015 thousands of rubles
January 1, 2014 thousands of rubles
Debt securities 27,435,870 48,239,384
Total 27,435,870 48,239,384
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Breakdown of debt securities by type:
January 1, 2015 thousands of rubles
January 1, 2014 thousands of rubles
Owned by the Bank:
Bonds issued by the government of the Russian Federation and municipalities 15,732,316 7,710,539
Federal loan bonds (OFZ) 15,713,893 7,691,065
Eurobonds issued by the government of the Russian Federation 18,423 14,824
Other bonds issued by local governments and municipalities - 4,650
Corporate bonds 2,204,274 4,883,724
Bonds issued by Russian corporations - 80,281
Bonds issued by foreign corporations 2,204,274 4,803,443
Pledged as collateral under repo agreements:
Bonds issued by the government of the Russian Federation and municipalities - 25,430,210
Federal loan bonds (OFZ) - 25,430,210
Pledged as collateral under overnight loans:
Bonds issued by the government of the Russian Federation and municipalities 2,047,375 1,462,793
Federal loan bonds (OFZ) 2,047,375 1,462,793
Corporate bonds 7,451,905 8,752,118
Bonds issued by Russian corporations 667,005 721,006
Bonds issued by foreign corporations 6,784,900 8,031,112
Total 27,435,870 48,239,384
In addition, the Bank holds equity securities evaluated at cost in the amount of RUB 4,415 thousand which represent payment for participation in several organizations. A provision is set up for 100% of the amount of these investments.
Information on maturity dates of debt securities available for sale as of January 1, 2015, is shown below:
Type of security
Maturity date (dd.mm.yyyy)
Minimum Maximum
Owned by the Bank:
Government debt securities 03 June 2015 31 March 2030
Debt securities issued by credit institutions 15 July 2016 23 Sept 2032
Corporate debt securities 01 Nov 2022 15 Nov 2024
Debt securities issued by non-residents 15 March 2017 25 July 2018
Pledged as collateral under overnight loans:
Government debt securities 03 June 2015 24 Nov 2021
Debt securities of credit institutions 15 July 2016 23 Sept 2032
Corporate debt securities 01 Nov 2022 15 Nov 2024
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Information on maturity dates of debt securities available for sale as of January 1, 2014, is shown below:
Type of security
Maturity date (dd.mm.yyyy)
Minimum Maximum
Owned by the Bank:
Government debt securities 13.03.2014 31.03.2030
Municipal debt securities 21.07.2014 21.07.2014
Debt securities issued by credit institutions 19.01.2016 23.09.2032
Corporate debt securities 15.07.2014 15.11.2024
Debt securities issued by non-resident banks 09.04.2014 09.04.2014
Debt securities issued by non-residents 31.10.2014 25.07.2018
Pledged as collateral under repo agreements:
Government debt securities 03.06.2015 25.01.2023
Pledged as collateral under overnight loans:
Government debt securities 20.08.2014 24.11.2021
Debt securities issued by credit institutions 15.07.2016 23.09.2032
Corporate debt securities 15.07.2014 15.11.2024
Debt securities issued by non-resident banks 09.04.2014 09.04.2014
Analysis of investments in debt and equity securities available for sale by key industries and types of economic activity is as follows:
January 1, 2015 thousands of rubles
January 1, 2014 thousands of rubles
Debt securities: 27,444,240 48,239,384
Bonds issued by financial organizations 9,664,549 13,553,085
- Credit institutions 6,779,785 9,069,229
- Other 2,884,764 4,483,856
Bonds issued by non-financial organizations 17,779,691 34,686,299
- Arterial railroad transportation - 80,281
- Electricity generation - 2,476
- Bonds issued by the government of the Russian Federation and municipalities 17,779,691 34,603,542
Equity securities: 4,415 4,415
Shares of financial organizations 5 5
- Other 5 5
Shares of non-financial organizations 4,410 4,410
- Information services 4,410 4,410
27,448,655 48,243,799
4.5. Financial investments in subsidiaries, dependent organizations and other participation
The Bank has no investments in subsidiaries and dependent organizations as well as other participation interests.
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4.6. Fixed assets, intangible assets and real estate property temporarily unused in the core business activity
The breakdown of fixed assets, intangible assets and real estate properties temporarily unused in the core business activity as of January 1, 2015, and January 1, 2014, respectively, as well as changes in value during the year 2014 are outlined below:
thousands of rubles
Land and buildings Equipment Intangible assetsReal estate property tempo-
rarily unused in core business Total
Actual cost/Current (replacement) cost
Balance as of January 1, 2014 795,182 2,204,594 202,475 - 3,202,251
Additions 56,040 201,126 - 10,548 267,714
Disposals (39,506) (446,620) - - (486,126)
Balance as of January 1, 2015 811,716 1,959,100 202,475 10,548 2,983,839
Depreciation
Balance as of January 1, 2014 (120,582) (1,771,019) (133,050) - (2,024,651)
Accumulated depreciation for the year (26,072) (180,370) (29,920) - (236,362)
Disposals 15,936 355,072 - - 371,008
Balance as of January 1, 2015 (130,718) (1,596,317) (162,970) - (1,890,005)
Balance sheet carrying cost
As of January 1, 2015 680,998 362,783 39,505 10,548 1,093,834
Real estate property temporarily unused in the core business activity represents an apartment repossessed by the Bank as collateral against past-due mortgage loan. The Bank did not conduct re-evaluation of fixed assets in 2014.
The breakdown of fixed assets, intangible assets and real estate properties temporarily unused in the core business activity as of January 1, 2011, and January 1, 2013, respectively, as well as changes in value during the year 2013 are outlined below:
thousands of rubles
Land and buildings Equipment Intangible assetsReal estate property tempo-
rarily unused in core business Total
Actual cost/Current (replacement) cost
Balance as of January 1, 2013 740,625 2,349,752 202,475 - 3,292,852
Additions 54,557 112,106 - - 166,663
Disposals - (257,264) - - (257,264)
Balance as of January 1, 2014 795,182 2,204,594 202,475 - 3,202,251
Depreciation
Balance as of January 1, 2013 (101,624) (1,806,855) (95,065) - (2,003,544)
Accumulated depreciation for the year (18,958) (217,276) (37,985) - (274,219)
Disposals - 253,112 - - 253,112
Balance as of January 1, 2014 (120,582) (1,771,019) (133,050) - (2,024,651)
Balance sheet carrying cost
As of January 1, 2014 674,600 433,575 69,425 - 1,177,600
The Bank did not conduct re-evaluation of fixed assets in 2013.
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4.7. Other assets
January 1, 2015 thousands of rubles
January 1, 2014 thousands of rubles
Other receivables 2,044,826 1,104,409
Accrued interest receivable 1,115,680 804,876
Provision for impairment (265,313) (132,865)
Total other financial assets 2,895,193 1,776,420
Prepayments 57,621 39,429
Materials and trade receivables 365,291 150,666
Prepaid expenses of future periods 1,147,631 1,493,441
Other 598,132 123,770
Provision for impairment (6,280) (3,828)
Total other non-financial assets 2,162,395 1,803,478
Total other assets 5,057,588 3,579,898
Information on changes in other assets due to their reduction in value in 2014 is outlined below:
Other financial assets, thousands of rubles
Other non-financial assets, thousands of rubles
Total thousands of rubles
Provision for reduction in value as of the beginning of the year 132,865 3,828 136,693
Net additions to provision for reduction in value 180,339 2,452 182,791
Deductions (47,891) - (47,891)
Provision for reduction in value as of the end of the year 265,313 6,280 271,593
Information on changes in other assets due to their reduction in value in 2013 is outlined below:
Other financial assets, thousands of rubles
Other non-financial assets, thousands of rubles
Total thousands of rubles
Provision for reduction in value as of the beginning of the year 130,290 2,917 133,207
Net additions to provision for reduction in value 23,706 911 24,617
Deductions (21,131) - (21,131)
Provision for reduction in value as of the end of the year 132,865 3,828 136,693
4.8. Due to credit institutions
January 1, 2015 thousands of rubles
January 1, 2014 thousands of rubles
Loro accounts 6,192,638 5,975,100
Interbank loans and deposits 12,850,913 15,613,233
Total 19,043,551 21,588,333
The bank did not attract any syndicated loans.
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4.9. Due to clients other than credit institutions
January 1, 2015 thousands of rubles
January 1, 2014 thousands of rubles
Current accounts and demand deposits 208 966 859 184 077 781
- Retail 80 723 135 67 353 644
- Corporate 128 243 724 116 724 137
Term deposits 74 349 384 65 377 462
- Retail 14 727 533 4 153 152
- Corporate 59 621 851 61 224 310
Due to brokerage clients 1 068 978 188 774
Total 284 385 221 249 644 017
Analysis by industry and type of economic activity of accounts held by corporate clients other than credit institutions is as follows:
January 1, 2015
thousands of rublesJanuary 1, 2014
thousands of rubles
Trade 51,703,617 53,018,708
Manufacturing 55,866,515 40,196,025
Transportation and communications 8,510,714 10,278,713
Mining and metallurgy 8,844,469 11,289,094
Financial services 12,085,717 9,146,129
Real estate 2,445,940 2,538,531
Agriculture, forestry and wood processing 2,666,445 358,194
Other 45,892,542 51,274,915
Total 188,015,959 178,100,309
4.10. Debt securities issued
The bank did not issue any debt securities.
4.11. Other liabilities
January 1, 2015 thousands of rubles
January 1, 2014 thousands of rubles
Interest payable 258,288 77,934
Amounts held on correspondent accounts until clarification is received 4,624,241 5,183,965
Funds in settlement 11,989 4
Settlements on foreign exchange operations, derivatives and forwards 276,856 194
Other payables 3,400,259 3,580,973
Total other financial liabilities 8,571,633 8,843,070
Current taxes payable 43,377 365,868
Payable to employees 13,212 20,325
Reserve for future expenses 586,789 560,667
Estimated provisions for liabilities of non-lending nature 21 64,495
Deferred revenues 192,687 361,228
Total other non-financial liabilities 836,086 1,372,583
Total other liabilities 9,407,719 10,215,653
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4.12. Share capital
The Bank’s registered issued share capital in circulation comprises 1,000 (one thousand) common registered uncertified shares. Each share has a nominal value of RUB 1,000,000 (one million).
Each common registered share entitles its holder to one vote when decision are made at the general shareholders’ meeting and participates in distribu-tion of net income after creation of the necessary provisions, tax and other mandatory payments as well as dividend payout on preferred shares.
5. Notes to the Report of financial results
5.1. Losses from reduction in value
Information by type of asset on losses from reduction in value during 2014 is outlined below:thousands of rubles
Loans and equivalent debt
Securities available for sale Other assets Total
Provisions for reduction in value as of the beginning of the year 3,293,569 4,415 136,693 3,434,677
Net additions to provisions for reduction in value 3,182,119 8,370 182,791 3,373,280
Deductions (1,921,705) - (47,891) (1,969,596)
Provisions for reduction in value as of the end of the year 4,553,983 12,785 271,593 4,838,361
Information by type of asset on losses from reduction in value during 2013 is outlined below:thousands of rubles
Loans and equivalent debt
Securities available for sale Other assets Total
Provisions for reduction in value as of the beginning of the year 1,446,265 4,410 133,207 1,583,882
Net additions to provisions for reduction in value 2,955,875 5 24,617 2,980,497
Deductions (1,108,571) - (21,131) (1,129,702)
Provision for reduction in value as of the end of the year 3,293,569 4,415 136,693 3,434,677
5.2. Exchange rate gains (losses) recognized as income (expense) excluding those related to financial instruments evaluated at fair value through profit or loss
2014 thousands of rubles
2013 thousands of rubles
Net income from foreign exchange operations 2,450,001 1,309,461
Net income from re-evaluation of foreign currencies 20,087,809 3,438,537
Total 22,537,810 4,747,998
5.3. Taxes
Details of the Bank’s current tax expense are outlined below:
2014 thousands of rubles
2013 thousands of rubles
Income tax 1,678,834 2,363,613
Other taxes, including 1,716,268 1,389,078
VAT 1,681,867 1,349,823
Property tax 19,825 22,939
Transportation tax 16 16
Other taxes 332 332
Duties 14,228 15,968
Total tax expense 3,395,102 3,752,691
Income tax rate was 20% in 2014 (2013: 20%).
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Key components of the current income tax payable are outlined below:
2014 thousands of rubles
2013 thousands of rubles
Current income tax payable calculated at 20% 1,012,670 1,693,582
Current income tax payable calculated at 15% 358,344 669,993
Current income tax payable at 9% 16 29
Current income tax underpaid during prior periods 48,783 9
Total income tax payable 1,419,813 2,363,613
Breakdown of income taxes into current tax payable and deferred income tax is outlined below:
2014 thousands of rubles
2013 thousands of rubles
Income tax payable 1,419,813 2,363,613
Changes in deferred income tax 259,021 -
Total income tax 1,678,834 2,363,613
In 2014, income tax rate for both current and deferred components was 20%, except for interest income on government and municipal bonds for which the tax rates were 15% and 9%, respectively.
Deferred tax assets and deferred tax liabilities
Temporary differences arising from balances in asset/liability balance sheet accounts (other than capital accounts) for accounting purposes and their respective values for tax purposes give rise to deferred tax assets/liabilities as of January 1, 2015.
Russian tax law does not impose time restrictions on the usage of temporary differences that reduce taxable income. As of January 1, 2015, deferred tax assets in the amount of RUB 95,619 thousand are carried on the balance sheet account 61703 “Deferred tax asset on loss carry-over”. These deferred tax assets arose from losses incurred by the Bank on over-the-counter forward financial instruments which had not been cleared off prior to January 1, 2010, when the federal act No. 281-FZ dated November 25, 2009 amending the Tax Code and related legislation entered into force, and which have not been cleared off as of January 1, 2015. Such losses are deductible from total taxable income in the future reporting (tax) periods starting January 1, 2015 by no more than 20% of the original amount of the loss defined as of December 31, 2014, in each year until January 1, 2025. Loss carried over is set to expire in 2024.
Reconciliation of changes in temporary differences during 2014 cannot be provided as calculation of deferred taxes began in 2014.
5.4. Employee remuneration
Total amounts of employee remuneration included in the Operating Expenses section of the Reports of financial results for the years 2013 and 2014 are detailed below:
2014 thousands of rubles
2013 thousands of rubles
Short-term remuneration 6,450,678 5,650,226
Employee payroll 5,508,877 4,791,640
Payroll taxes and related expenses 941,801 858,586
Total employee remuneration 6,450,678 5,650,226
5.5. Earnings per share
The Bank does not disclose in its annual financial report the information on earnings (loss) per share which reflects possible dilution of earnings (loss) per share due to absence of convertible securities and purchase & sale agreements on common shares at prices below the market price.
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6. Notes to the Report on capital adequacy for covering risks, size of provisions on doubtful loans and other assets
CBR sets and monitors compliance with requirements for the Bank’s capital adequacy.
The Bank defines as capital the balance sheet items identified as equity (capital) of credit institutions by the legislation of the Russian Federation. The Bank calculates the amount of capital in accordance with CBR Regulation No. 215-P dated February 10, 2003, “On methods of defining equity (capital) of credit institutions” (hereinafter CBR Regulation No. 215-P) and CBR Regulation No. 395-P dated December 28, 2012, “On methods of defining the size and adequacy of equity (capital) of credit institutions (Basel III)” (hereinafter CBR Regulation No. 395-P). The amount of capital calculated in accordance with CBR Regulation No. 215-P was used for the purposes of prudential oversight until January 1, 2014. The amount of capital calculated in accordance with CBR Regulation No. 395-P has been used for the purposes of prudential oversight since January 1, 2014, as well as for information purposes between April 1, 2013, and January 1, 2014.
In accordance with CBR Instruction No. 139-I dated December 2, 2012, “On banks’ required ratios” (hereinafter CBR Instruction No. 139-I), the minimum value of the ratio of equity (capital) to risk-weighted assets (required capital adequacy ratio) was set to 10% as of January 1, 2014. In accordance with CBR Instruction No. 139-I, the minimum levels for basic capital adequacy ratio, core capital ratio (hereinafter N1.2 required ratio) and equity (capital) adequacy ratio are set at 5.0%, 5.5% and 10.0%, respectively as of January 1, 2015. Beginning January 1, 2015, the minimum level for N1.2 required ratio is set to 6.0%.
The Bank maintains capital adequacy at the level sufficient for the nature and size of its operations.
On a monthly basis, the Bank submits information, as of the first calendar day of each month, on required ratios in the prescribed format to the local CBR office responsible for oversight of the Bank’s operations. Financial Control Department monitors compliance with capital adequacy requirements on a daily basis.
When levels of required capital adequacy ratios approach threshold values set by the CBR and the Bank’s internal policy, the Bank’s management is notified. During both 2013 and 2014, the Bank’s required capital adequacy ratios satisfied the legally mandated requirements.
The detailed breakdown of the Bank’s equity (capital) per CBR Regulation No. 395-P is as follows:
January 1, 2015 thousands of rubles
January 1, 2014 thousands of rubles
Core capital 52,467,544 47,320,569
Basic capital 52,467,544 47,394,230
Supplementary capital - -
Additional capital - 5,815,293
Total capital 52,467,544 53,135,862
Risk-weighted assets 355,120,316 319,795,477
Owned capital adequacy ratio N1.0 (%) 14.8 16.6
Basic capital adequacy ratio N1.1 (%) 14.8 14.8
Core capital adequacy ratio N1.2 (%) 14.8 14.8
Core capital includes the bank’s Contributed capital in the amount of RUB 1,000,000 thousand comprised of common shares on which the Bank’s statute does not define dividend.
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Information on the Bank’s key capital instruments is as follows:
January 1, 2015 thousands of rubles
January 1, 2014 thousands of rubles
Equity (capital) – total, including 52,467,544 53,135,862
Core capital 52,467,544 47,320,569
Sources of basic capital:
Contributed capital 1,000,000 1,000,000
Share premium - -
Reserves formed from retained earnings of past periods 150,000 150,000
Reserves formed from current year retained earnings - -
Current year income validated by independent audit - -
Retained earnings of prior periods validated by independent audit 52,705,486 46,244,230
Parameters reducing the amount of basic capital sources 1,387,942 -
Sources of supplementary capital:
Contributed capital raised through preferred share issue - -
Share premium - -
Subordinated loan with additional covenants - -
Subordinated loan without limitation for the term set by the agreement subject to foreign jurisdiction - -
Parameters reducing the amount of supplementary capital sources
Parameters reducing the amount of core capital sources - 73,661
Sources of additional capital 174,232 5,815,293
Contributed capital raised through preferred share issue - -
Contributed capital originating from capitalization of the increase in property value at re-evaluation time before disposal - -
Share premium - -
Reserves formed from current year net income - -
Current year net income (part) not validated by auditor 76,902 5,717,963
Subordinated loan at residual value - -
Increase in the Bank’s property value due to re-evaluation 97,330 97,330
Parameters reducing the amount of additional capital sources 1,061,992 -
Parameters reducing the amounts of core and additional capital sources 1,061,992 -
52,467,544 53,135,862
7. Notes to the Report on cash flows
As of January 1, 2015, and January 1, 2014, the Bank had no cash and cash equivalents unavailable for use.
The Bank has no publicly invested securities therefore it does not disclose segment information.
8. Fair value
Fair value is the proceeds which would have been received from the sale of an asset (or the amount paid upon the disposal of a liability) on the valuation date under normal circumstances between market participants on the primary market or, if primary market does not exist, the market with most favourable conditions to which the Bank has access at the time.
Where possible, the Bank estimates fair value of an instrument using market prices the instrument is traded at in the active market. The market is deemed active if asset or liability is traded with sufficient frequency and sufficient volume for obtaining the price quotations on a regular basis. When current price quotations from the active market are not available, the Bank utilizes methodologies based on publicly available inputs to
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the highest possible extent and utilizes the minimum amount of non-publicly available inputs. Valuation methodologies include all factors which market participants would have paid attention to for the purpose of setting the price.
Never the less, taking into account uncertainty and the use of subjective opinions, fair value should not be interpreted as attainable in case of immediate sale of assets or disposal of liabilities.
The Bank carries the following assets at fair value: > securities evaluated at fair value through profit or loss; > securities available for sale; > derivative financial instruments.
Fair value of financial assets traded in an active market is based on market price quotations or dealer quotations. The Bank does not use other valuation methodologies to estimate fair value of all of its other assets.
The Bank utilizes widely accepted valuation models for estimating fair value of standard and less complex financial instruments such as interest rate swaps and foreign currency swaps. Such evaluations rely solely on publicly available market data and do not require judgements or assump-tions from the management. Publicly available price quotations and model inputs for market-traded debt and equity securities, exchange-traded derivatives and ordinary over-the-counter derivative financial instruments such as interest rate swaps and foreign currency swaps are usually accessible from the marketplace.
The Bank utilizes proprietary valuation models for the more complex instruments. All meaningful data inputs for the models are either publicly available in the marketplace or derived from market quotations and rates.
The Bank utilizes the following valuation methods: net present value model, discounted cash flow model, comparison to similar instruments with known market prices, Black-Scholes pricing models and polynomial option pricing models and other valuation methodologies. Judgements and assumptions utilized for valuation include risk-free and basic interest rates, credit spreads and other adjustments used to estimate discounting rates, price quotations for equities and bonds, foreign exchange rates, stock indices as well as expected price volatility and comparison of prices. Re-evaluation of fair value of interest rate transactions, commodities transactions and similar contracts is also calculated based on publicly available inputs.
Throughout 2014, valuation models for fair value estimates remained unchanged.
Hierarchy of fair value estimates
The Bank estimates fair value using the following hierarchy of fair value estimates which takes into account materiality of inputs used to arrive at such estimates. > Level 1: (unadjusted) price quotations in the active marketplace for identical financial instruments. > Level 2: data, available directly or indirectly, other than quotations mentioned in Level 1 (i.e., data derived from quotations). This category
includes instruments evaluated with following inputs: market price quotations in active markets for similar instruments, market price quo-tations for similar instruments in markets other than those deemed active or other valuation methods based on inputs directly or indirectly derived from publicly available information.
> Level 3: data not available to the public. This category includes instruments evaluated using inputs not based on publicly available infor-mation, when such non-public information has significant impact on valuation of an instrument. This category also includes instruments evaluated based on price quotations for similar instruments for which material inputs must be based on non-public data or judgments on differences between instruments.
The Bank does not use Level 3 methodologies for calculating fair value of assets and liabilities, i.e. those that utilize non-public inputs.
Methods of valuation at fair value and input assumptions
In the course of conducting trading operations with clients and other banks, the Bank enters into transactions with structured financial deriva-tives traded on over-the-counter market which are indexed to foreign exchange rates, interest rates and prices of other base assets.
The Bank accepts valuations of such international information agencies as Reuter and Bloomberg and the Moscow Stock Exchange as reliable sources of information for estimating fair value of derivative financial instruments traded both on stock markets and over-the-counter.
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Analysis of assets and liabilities carried at fair value is shown in the table below by level of fair value estimate as of January 1, 2015. All amounts are reported as per the balance sheet (published form).
thousands of rubles
Level 1 Level 2 Total
Financial assets and liabilities
Financial instruments evaluated at fair value through profit or loss:
- Debt securities 7,153,915 - 7,153,915
- Derivative financial instruments – assets - 22,671,679 22,671,679
- Derivative financial instruments – liabilities - 22,840,580 22,840,580
- Obligations to return borrowed securities to lenders-credit institutions 4,918,709 - 4,918,709
Financial assets available for sale:
- Debt securities 26,607,284 828,586 27,435,870
Analysis of assets and liabilities carried at fair value is shown in the table below by level of fair value estimate as of January 1, 2014. All amounts are reported as per the balance sheet (published form).
thousands of rubles
Level 1 Level 2 Total
Financial assets and liabilities
Financial instruments evaluated at fair value through profit or loss:
- Debt securities 25,047,566 - 25,047,566
- Derivative financial instruments – assets - 1,580,980 1,580,980
- Derivative financial instruments – liabilities - 1,585,474 1,585,474
- Obligations to return borrowed securities to lenders-credit institutions 3,452,136 - 3,452,136
- Obligations to return borrowed securities to lenders-credit institutions 726,369 - 726,369
Financial assets available for sale:
- Debt securities 48,239,384 - 48,239,384
9. Corporate governance and internal control
9.1. Corporate Governance Structure
The Bank has been established as a closed joint stock company in accordance with the legislation of the Russian Federation. The supreme gov-erning body of the Bank is the General Shareholders’ Meeting convened for the annual and extraordinary meetings. The General Shareholders’ Meeting makes strategic decisions on the Bank’s activities.
General Shareholders’ Meeting elects the Board of Directors, which is responsible for the governance over the Bank’s affairs.
The powers of the General Shareholders’ Meeting and the Board of Directors are set out in the Russian legislation and the Bank’s Charter.
As of January 1, 2015, the Board of Directors, elected May 30, 2014, consists of the following members: > Marc Luet - Chairman of the Board of Directors > Denis Korshilov > Florin Petrescu > Emre Karter > Irina Kosyachenko > Natalia Nikolaeva > Maria Ivanova > Viktor Rozhkov
The previous Board of Directors, elected June 27, 2013, comprised the following members: > Andrey Kurilin - Chairman of the Board of Directors > Denis Korshilov > Viktor Rozhkov > Maria Ivanova > Richard Smith
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Operational management of the Bank is carried out by the President and the Executive Board, both appointed by the General Shareholders’ Meeting. The Bank’s executive bodies are responsible for implementing decisions adopted by the General Shareholders’ Meeting and the Board of Directors. The executive bodies of the Bank report to the Board of Directors and General Shareholders’ Meeting.
As of January 1, 2015, the Executive Board comprised the following members: > Natalia Nikolaeva - Acting Chairman of the Board > Ruslan Belyaev > Sergey Korotkov > Natalia Belaya > Michael Berner
No changes were made to the composition of the Executive Board in 2014.
9.2. Internal control policies and procedures
The Board of Directors and the Executive Board are responsible for the development, implementation and maintaining of the Bank’s internal controls commensurate to the nature and scale of operations.
The purpose of internal control is to ensure the following:
1. Effectiveness and efficiency of financial and economic activities upon conducting banking operations and other transactions, the effec-tiveness of asset and liability management, including safeguarding of assets, and bank risk management, which is defined as > control by the executive bodies over the Bank’s activities > control over the bank risk management system and assessment of bank risks > control over delegation of authority in conducting banking operations and other transactions > control over data flow and IT security > continuous monitoring of the internal controls system in order to assess the degree of its compliance with the Bank’s objectives,
identify gaps, develop proposals and monitor the implementation of solutions aimed at improving the system of internal controls (hereinafter monitoring the system of internal controls)
2. Accuracy, fullness, objectivity and timeliness of preparation and submission of financial, accounting, statistical and other reports for inter-nal and external users
3. Protection of the Bank’s interests (objectives) in the infosphere, which includes data, data infrastructure, entities that collect, create, distrib-ute and use data, and information security
4. Compliance with regulations, standards of self-regulatory organizations, statutory requirements and the Bank’s internal instructions, the Bank and its employees’ non-involvement in unlawful activities including legalizing (laundering) of proceeds from crime and terrorist financing, as well as submission of information to appropriate government agencies and the CBR in a timely manner and in accordance with the Russian legislation (compliance control)
The management is responsible for risk identification and assessment as well as development of the control system and monitoring of its effectiveness. The management oversees the effectiveness of the Bank’s internal controls and regularly introduces new controls or changes to existing controls as necessary.
The Bank has developed a system of standards, policies and procedures aimed at ensuring proper execution of operations and compliance with the corresponding legislative and statutory requirements, including the following: > requirements for proper delegation of authority, including independent transaction authorization > requirements for transaction accounting, verification and monitoring > compliance with legislative and statutory requirements > keeping records of controls and procedures > requirements for periodic assessment of operational risks facing the Bank and adequacy of risk management controls and procedures > requirements for preparation of reports on operational losses and proposed measures to reduce operational risks > development of contingency plans to restore operations > training and professional development > ethical standards, and > risk reduction, including through insurance where it is deemed effective.
The Bank has a hierarchy of requirements for authorization of transactions depending on their scale and complexity. A substantial portion of transactions is automated; the Bank also employs an automated control system.
Monitoring of the internal controls system is accomplished by management and employees of various departments, including the depart-ments carrying out banking operations and other transactions, accounting and reporting, as well as the Internal Audit Department. The latter is independent from the Bank’s management and reports directly to the Board of Directors. The results of audits conducted by the Internal Audit Department are discussed with staff responsible for carrying out financial and economic activity. Audit reports are brought to the attention of the Bank’s Board of Directors and senior management.
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The Bank’s internal controls system consists of: > management bodies, including Board of Directors, Executive Board and the President > auditor > Chief Accountant (and deputies) of the Bank > branch managers (and deputies) and chief accountants (and deputies) of the Bank’s branches > Business units (officers) of the Bank in charge of internal controls in accordance with the authority granted by the Bank’s internal policies,
including - Internal Audit Department - Internal Controls Service - Risk Management Service - Controller of the Bank’s operations in securities market
Officer (business unit) in charge of counteracting legalization (laundering) of proceeds of crime and terrorist financing
The new requirements for internal control in credit institutions came into force in 2014. The December 16, 2003 revision of the CBR Regulation No. 242-P «On the Organization of Internal Control in Credit Institutions and Banking Groups» (hereinafter CBR Regulation 242-P) sets out the requirements for segregation of duties (responsibilities) of the Internal Control Service and the Internal Audit Department. By October 1, 2014, the Bank brought its internal procedures and documentation in line with the amended requirements of the CBR Regulation 242-P. As a result of organizational changes, the Internal Audit Department was established as a separate unit headed by the Department Manager.
The core responsibilities of the Bank’s Internal Audit Department are as follows: > Auditing the effectiveness of the Bank’s management system, risk management, internal controls system, implementation of decisions of
the Bank’s management and the Bank’s ability to respond to current and emerging risks, which helps improve the internal controls system > Auditing the efficiency of banking risk assessing methodology and banking risk management, set out in the Bank’s internal documents
(methods, programs, regulations, rules and procedures for banking operations and transactions and banking risk management), and utiliza-tion of the above documents to the full extent
> Auditing the reliability of internal controls over the use of automated IT systems, including monitoring database integrity and protecting the databases from unauthorized access and/or use, including measures taken in case of non-standard and emergency situations in accor-dance with the action plan aimed at ensuring business continuity and/or recovery of the Bank’s operation in the event of non-standard and emergency situations
> Auditing and testing the accuracy, completeness and timeliness of accounting and reporting, as well as reliability (including the accuracy, completeness and timeliness) of data collection/submission and reporting
> Auditing measures taken to safeguard the Bank’s property > Auditing of internal control processes and procedures > Audit of the efficiency of the Bank’s Internal Control Department > other issues stipulated by the Bank’s internal instructions
Internal Audit Department develops an annual audit plan based on risk-based methodology and the CBR requirements. The annual plan may change reflecting evolving risks inherent in the Bank’s activities and priorities. The annual plan and amendments, if any, require approval of the Board of Directors. Internal Audit Department carries out audits in accordance with approved methodology, informs the Bank’s Board of Direc-tors and senior management of identified internal control flaws and the proposed measures to address these flaws, and follows up to ensure the flaws are eliminated.
Internal Control Service is not an independent unit within the Bank; it consists of the structural units (senior officials) of the Bank in charge of internal controls in accordance with the powers granted by the Bank’s internal documents.
The core responsibilities of the Internal Control Service are as follows: > identification of compliance and regulatory risks > monitoring of events related to the regulatory risk, evaluation of likelihood of their occurrence and quantitative assessment of potential
consequences > monitoring of regulatory risks > making recommendations on regulatory risk management > coordination and participation in the development of measures aimed at regulatory risk reduction > monitoring the effectiveness of the regulatory risk management > participation in the development of internal regulatory risk management procedures, as well as instruments aimed at combating commer-
cial bribery and corruption, enforcing corporate code of conduct and professional ethics and minimizing conflicts of interests; > identification of conflicts of interests in activities of the Bank and its employees and participation in the development of internal documents
aimed at minimizing conflicts of interests > analysis of trends in client complaints > feasibility studies for agreements with suppliers > participation in the credit institution’s interactions with regulators, self-regulatory organizations, associations and financial market
participants
Head of Compliance and Control at the Bank is in charge of coordinating Internal Control Service’s activities and its management. Head of Compliance and Control is appointed by the President of the Bank. The Internal Control Service is given the powers in accordance with Russian legislation as well as the Bank’s Internal Control Service regulation and other internal instructions.
The Russian laws, including the Federal Law No. 395-1 and CBR Ordinance No. 3223-U dated April 1, 2014, «On the requirements for chief risk officers, internal control service and the internal audit of a credit institution», specify the requirements for professional qualifications, business
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reputation and other competencies for the members of the Board of Directors and the Executive Board, Chief Executive Officer, heads of units within the Internal Audit Department and the Internal Control Service and Risk Management Service as well as other senior executives. All mem-bers of the governing and executive bodies of the Bank are in full compliance with the aforementioned requirements.
The Bank’s management believes that the Bank meets the CBR requirements for the risk management and internal controls systems, including the requirements for the Department of Internal Audit and the Internal Control Service, while the risk management and internal controls sys-tems are adequate to the scale, nature and complexity of operations.
10. Risk management
10.1. Principles and methods of risk assessment and management
No changes were made to the Bank’s risk assessment and management system in 2014.
The main risks the Bank is exposed to are credit risk, market risk, liquidity risk and operational risk.
The Bank’s risk management policy is aimed at identifying, assessing and managing the risks the Bank is exposed to, set risk limits and appropri-ate controls, as well as continuously monitoring risks to assure they do not exceed the set limits. Risk management policies and procedures are reviewed regularly to reflect changes in market conditions, products and services offered as well as emerging best practices.
In order to avoid concentration of operations in a single market segment, the Bank adheres to risk diversification policy through the develop-ment and introduction of new products and expanding business into the economic sectors previously unexplored by the Bank. The Bank practic-es very cautious approach to high-risk transactions and makes every possible effort to avoid doubtful and risky investments. This policy helps to significantly reduce the liquidity, price and market risks. The fact that the Bank operates in various financial market segments and avoids focusing on narrow segments also contributes to the reduction of the risks mentioned above. Additionally, the Bank’s earnings are evenly distributed across all types of transactions, which helps mitigate the risk of changes in certain indicators.
The Bank’s management implements risk management system, approves the authority and composition of collegial risk management bodies, adopts decisions on certain types of risks and approves the Bank’s lending policy as well as policy governing other asset and liability transactions.
The distribution of authority in the Bank is as follows:
The Board of Directors approves the Bank’s policy on operational risk management and risk and control assessment, which regulates the general risk management principles, allowable risk levels, strategic risk management objectives and priorities for the development of the risk manage-ment system.
The Board of Directors assures the risk management system is improved continuously, approves drafts of internal risk management policies, the terms and conditions of standard products and programs offered by the Bank, oversees and controls risk management system components, approves the allowable risk level as part of the approved development strategy, supervises the Bank operations’ compliance with the basic principles of credit policy and other asset transaction policies, develops, implements and defines who in the Bank is authorized to make lending decisions.
The Bank’s Credit Committee is responsible for optimizing the Bank’s credit risks and creating a loan portfolio with the optimal risk/reward ratio, and exercises control over risks to both the portfolio as a whole and individual transactions.
Risk Assessment and Monitoring Department is responsible for operational risk management, identification of key operational risks, analysis of managers’ assessment of controls for the purpose of defining and developing activities that allow predicting and managing the situations that could lead to operational risks.
Risk Assessment and Monitoring Department aggregates the data and analyzes the testing methodology and test results in order to detect signs of the internal controls system inefficiency in the discovered irregularities. All identified flaws are discussed with heads of relevant departments and their superiors, if required. All significant flaws of the internal controls system are reported to the Board of Directors.
Bank units manage risks within their functional duties. The Internal Audit Service audits the Bank’s units for compliance with internal regulations and no less than twice a year submits reports to the Board of Directors and other Bank management bodies on the identified issues, proposes measures to solve such issues and assures the issues are resolved (this was valid until September 2014).
Assets and Liabilities Committee (hereinafter ALCO) is responsible for planning and coordinated management of the Bank’s balance sheet in Russia; ALCO develops and makes strategic and tactical decisions on managing risks as well as all balance sheet components. ALCO oversees and manages changes in the Bank’s assets, liabilities and capital, funding volumes, liquidity indicators and the structure of the Bank’s investment portfolio.
In order to ensure effective risk management and functioning of the Internal Control Service, President of the Bank and/or the Board of Direc-tors approve the following internal policies and regulations: > Internal Control Service policy > accounting policy > measures designed to ensure continuity of operations and transactions > information security policy
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> credit policy > operational risk management and risk appraisal and monitoring policy > foreign currency operations control procedure > liquidity management and control procedure > deposit policy > interest rate policy > banking rules governing the process of opening, maintaining and closing of bank accounts, deposit accounts and deposits > non-cash transaction procedure > bank guarantee issue procedure > cash transaction procedure > internal control rules for prevention of legalization (laundering) of proceeds of crime and terrorist financing > procedure for accessing insider information > rules on protection of confidentiality of insider information, and compliance with the requirements of the Federal Law No. 224-FZ dated July
27, 2010 “On countering the illegitimate use of insider information and market manipulation and on amending certain laws of the Russian Federation”
> list of measures aimed at preventing conflicts of interest that could arise in the process of conducting professional activities in the securities market
> list of measures aimed to mitigate risks associated with professional activity in the securities market, including risks arising from combining different types of professional activity in the securities market
> procedure for providing securities information to investors > procedure to qualify a person as accredited investor > human resources policy including remuneration.
The Bank’s internal controls system is aimed at mitigating the following risk groups:
Strategic risk is the risk of losses resulting from errors in making decisions defining the Bank’s business and development strategy. Such errors may include failure to consider or fully consider potential risks that could threaten the Bank’s business; incorrectly or insufficiently substantiated determination of promising business areas in which the Bank could achieve a competitive advantage; lack (or insufficient amount) of resources and organizational measures needed to ensure the Bank’s strategic objectives are achieved.
Credit risk group, which includes a) inherent credit risk, or risk of losses resulting from debtor insolvency, and b) country risk, including transfer risk, or risk of losses resulting from failure of a foreign counterparty to fulfill the obligations due to economic, political or social changes as well as inability to pay in currency of obligation due to particular aspects of national legislation.
Market risk group, which includes: a) market risk, or risk of losses resulting from changes in the market price of securities portfolio and deriv-atives influenced by factors related to the issuers of securities and derivatives as well as general fluctuations in the market prices of financial in-struments, b) interest rate risk, or risk of losses resulting from changes in interest rates affecting the Bank’s assets, liabilities and off-balance sheet instruments, c) currency risk, or risk of losses resulting from unfavourable changes in foreign exchange rates and/or precious metals prices on the Bank’s open positions in foreign currencies and/or precious metals, and d) liquidity risk, or risk of losses resulting from the Bank’s inability to fulfil its obligations in full.
Operational risk group, which includes: a) operational risk, or risk of losses caused by internal policies and banking transaction standards not be-ing in line with the nature and scale of the Bank’s business and/or current legislation, violation of these policies and standards by the Bank’s em-ployees and/or other persons, as well as external factors, b) technological (system) risk, or risk of financial loss due to lost data, IT systems failure, unauthorized access to IT systems, risk of emergency situations and IT systems’ inability to perform specific tasks, c) risk of misreporting, or risk of financial loss caused by incorrect and/or untimely reporting, d) legal risk, or risk of losses resulting from the Bank’s failure to comply with legal requirements, agreements and contracts, legal errors, deficiencies of the legal system, violation of legislative acts and/or agreement terms by counterparties, and e) business reputation risk, or risk of losses resulting from negative public perception of the Bank’s financial stability, quality of services provided or the nature of the Bank’s business in general.
The procedure of identifying, assessing and mitigating risks in the groups listed above is governed by the Bank’s internal policies as well as corpo-rate policies of Citigroup.
Risk identification and assessment
For the purpose of risk management, the Bank classifies risks into two categories: > Intrinsic risk, or the potential negative impact of the Bank’s activities on its capital and/or liquidity as if there were no risk management and
internal control > Residual risk, or the potential negative impact on the Bank’s capital and/or liquidity with risk management and internal control in place
Risk identification and assessment is a process that spans the entire life cycle of a product, from development stage to financial and manage-ment reporting. The process is applied to all risk groups and includes the following stages: > Identification of potential negative events or factors that could cause financial loss, i.e. product-specific events and factors > Intrinsic risk assessment and determination of anticipated and acceptable level of residual risk.
Technological risk is monitored by the Bank as follows:
Currently, the Bank employs several operating systems. In FLEXCUBE, a corporate operating system common to most banks comprising Citi-group, accounting records are maintained in accordance with the Generally Accepted Accounting Principles (US GAAP). The SOBOS operating system has been developed by the Bank to keep track of transactions involving securities. The Systematics operating system had been used by
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the Bank to keep track of retail operations until August, 2014, when it was replaced by Rainbow, an upgraded version of the legacy system. The Total Ledger OS, developed specifically to comply with the CBR’s accounting standards, receives interface files from FLEXCUBE, SOBOS and Systematics/Rainbow on a daily basis. All financial reporting submitted to the CBR is prepared using the Total Ledger database. Special account balance reconciliation software is used daily to confirm data identity in all these systems. As an additional measure of controlling technological risk, every new software product purchased by the Bank undergoes mandatory testing by the Bank’s IT department.
Operating and overhead expenses (risk of inefficiency) are overseen by the Bank’s Finance Department in accordance with internal procedures developed and implemented by the Bank. Finance Department produces an 18-month budget split by month which is communicated to business units after receiving approval from the Bank’s management. Additional control over budget implementation is done by the Finance Department on a monthly basis. Any overspending needs to be reviewed and approved by the Bank’s management in advance, which significantly decreases the risk of incurring unauthorized expenses.
Prior to introduction of new products and technologies (implementation risk) a project team is set up to prepare a comprehensive and detailed analysis of the product. The team includes employees from the Bank’s departments involved in the process, which enables the Bank to conduct a comprehensive analysis of the new product, including IT support, prospects for marketing, financial evaluation and risks of possible losses. Procedures developed by the team are subject to review and approval by heads of all departments related to the product directly or indirectly.
Bank units manage risks within their areas of responsibility.
As part of planning process, the Internal Audit Department runs an annual study on activities of all the Bank’s units in order to identify, assess and document all key risks using Risk Assessment Form. The Internal Audit Department audits the Bank’s units and business areas in order to assess the effectiveness of the Bank’s management system, risk management, internal controls system, and implementation of the decisions adopted by the Bank’s governing bodies, including the General Shareholders’ Meeting, the Board of Directors, the Executive Board and the President. The Internal Audit Department also verifies compliance with Russian legislation and the Bank’s internal policies. The Internal Audit Department informs the Bank’s management of the identified issues, proposes measures to solve such issues and assures they are successfully resolved.
10.2. Credit risk
Credit risk is the risk of financial loss resulting from failure of borrowers or counterparties to fulfil their obligations to the Bank.
The Bank has developed a credit policy and procedures governing the assessment of the borrower’s financial standing, the lending decision making process and the procedure allowing the Bank to monitor timely repayment of loans.
The risk per borrower or a group of affiliated borrowers, the maximum exposure to large credit risks, the aggregate insider risk, as well as the maximum amount of loans, bank guarantees and sureties provided by the Bank to its shareholder are additionally capped by internal thresholds set below the CBR’s mandatory standards. The Bank’s business units ensure the risks do not exceed these thresholds through monitoring risks on a daily basis.
The Bank has not violated any of the CBR’s mandatory standards aimed at limiting exposure to credit risks in 2013, and 2014.
The Bank limits risk concentration per individual client, counterparty and securities issuer, as well as groups of affiliated clients.
Exposure to credit risk is managed through regular analysis of the borrower’s creditworthiness and by changing / adjusting lending limits when required.
The table below represents credit risk distribution (requirements for equity (capital) in relation to credit risk) across the Bank’s business lines as of January 1, 2015:
thousands of rubles
Retail banking Corporate banking Retained assets Total
Cash assets - - 11,415,696 11,415,696
Cash balances held with CBR, including - - 12,881,446 12,881,446
- Mandatory reserves - - 2,998,029 2,998,029
Due from credit institutions - 29,767,613 - 29,767,613
Financial assets evaluated at fair value through profit or loss 475 29,825,119 - 29,825,594
Net loans outstanding 48,467,800 232,315,914 - 280,783,714
Net investments in securities and other financial assets available for sale - 27,435,870 - 27,435,870
Other financial assets 362,108 651,332 1,881,753 2,895,193
Total 48,830,383 319,995,848 26,178,895 395,005,126
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The table below represents credit risk distribution (requirements for equity (capital) in relation to credit risk) across the Bank’s business lines as of January 1, 2014:
thousands of rubles
Retail Banking Corporate banking Retained assets Total
Cash assets - - 5,251,357 5,251,357
Cash balances held with CBR, including - - 13,782,297 13,782,297
- Mandatory reserves - - 2,760,361 2,760,361
Due from credit institutions - 12,264,399 - 12,264,399
Financial assets evaluated at fair value through profit or loss 348 26,628,198 - 26,628,546
Net loans outstanding 45,502,101 211,415,403 - 256,917,504
Net investments in securities and other financial assets available for sale - 48,239,384 - 48,239,384
Other financial assets 176,997 567,679 1,031,744 1,776,420
Total 45,679,446 299,115,063 20,065,398 364,859,907
The table below represents credit risk distribution by type of economic activity of borrowers (counterparties) as of January 1, 2015:thousands of rubles
Manufac-
turing ConstructionService
industry TradeFinancial
sectorPrivate
individuals State sector Other Total
Cash assets - - - - - - - 11,415,696 11,415,696
Cash balances held with CBR - - - - - - 12,881,446 - 12,881,446
Due from credit institutions - - - - 29,767,613 - - - 29,767,613
Financial assets evaluated at fair value through profit or loss - - - - 22,126 - 7,131,789 22,671,679 29,825,594
Loans outstanding 53,523,642 - 845,446 34,602,293 99,337,700 50,689,572 36,000,000 10,339,044 285,337,697
Provisions for possible losses on loans ХХХ ХХХ ХХХ ХХХ ХХХ ХХХ ХХХ ХХХ 4,553,983
Net loans outstanding ХХХ ХХХ ХХХ ХХХ ХХХ ХХХ ХХХ ХХХ 280,783,714
Net investments in securities and other financial assets available for sale - - - - 9,656,179 - 17,779,691 - 27,435,870
Other financial assets 133,460 - 2,108 86,280 403,703 362,108 - 1,907,534 2,895,193
Total 53,657,102 - 847,554 34,688,573 139,187,321 51,051,680 73,792,926 46,333,953 395,005,126
The table below represents credit risk distribution by type of economic activity of borrowers (counterparties) as of January 1, 2014:thousands of rubles
Manufac-
turing ConstructionService
industry TradeFinancial
sectorPrivate
individuals State sector Other Total
Cash assets - - - - - - - 5,251,357 5,251,357
Cash balances held with CBR - - - - - - 13,782,297 - 13,782,297
Due from credit institutions - - - - 12,264,399 - - - 12,264,399
Financial assets evaluated at fair value through profit or loss - - - - 1,723,245 - 24,902,826 2,475 26,628,546
Loans outstanding 28,152,086 70,480 480,000 36,626,811 131,235,268 47,093,632 12,000,000 4,552,796 260,211,073
Provisions for possible losses on loans ХХХ ХХХ ХХХ ХХХ ХХХ ХХХ ХХХ ХХХ 3,293,569
Net loans outstanding ХХХ ХХХ ХХХ ХХХ ХХХ ХХХ ХХХ ХХХ 256,917,504
Net investments in securities and other financial assets available for sale - - - - 13,555,560 - 34,603,542 80,282 48,239,384
Other financial assets 36,734 92 626 47,793 476,494 176,997 - 1,037,684 1,776,420
Total 28,188,820 70,572 480,626 36,674,604 159,254,966 47,270,629 85,288,665 10,924,594 364,859,907
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The table below represents credit risk distribution by counterparty type as of January 1, 2015:thousands of rubles
Corporate clients Correspondent banks Private individuals Other Total
Cash assets - - - 11,415,696 11,415,696
Cash balances held with CBR - - - 12,881,446 12,881,446
Due from credit institutions - 29,767,613 - - 29,767,613
Financial assets evaluated at fair value through profit or loss 11,732,108 10,961,222 475 7,131,789 29,825,594
Net loans 117,711,041 78,604,873 48,467,800 36,000,000 280,783,714
Net investments in securities and other financial assets available for sale 2,871,279 6,784,900 - 17,779,691 27,435,870
Other financial assets 268,696 382,636 362,108 1,881,753 2,895,193
Total 132,583,124 126,501,244 48,830,383 87,090,375 395,005,126
The table below represents credit risk distribution by counterparty type as of January 1, 2014:
thousands of rubles
Corporate clients Correspondent banks Private individuals Other Total
Cash assets - - - 5,251,357 5,251,357
Cash balances held with CBR - - - 13,782,297 13,782,297
Due from credit institutions - 12,264,399 - - 12,264,399
Financial assets evaluated at fair value through profit or loss 870,661 854,711 348 24,902,826 26,628,546
Net loans outstanding 76,062,138 123,353,265 45,502,101 12,000,000 256,917,504
Net investments in securities and other financial assets available for sale 4,528,493 9,107,349 - 34,603,542 48,239,384
Other financial assets 96,838 470,841 176,997 1,031,744 1,776,420
Total 81,558,130 146,050,565 45,679,446 91,571,766 364,859,907
Asset classification by risk group (in accordance with paragraph 2.3 of CBR Instruction No. 139-I) as of January 1, 2015, and January 1, 2014, is dis-closed in the Report on capital adequacy, provisions for non-performing loans and other assets (form 0409808) section 2 «Credit, operational and market risks covered by capital».
Overdue and restructured debt
A loan is considered restructured if, upon mutual agreement between the Bank and the borrower, essential terms of the original loan contract are changed to more favourable terms, except when payments on a restructured loan are made on time and in full or in case of one late pay-ment within the past 180 days, in accordance with the time limits specified in the CBR Regulation No. 254-P, and the borrower’s financial standing during the last full year and the current year can be rated at or above average.
The Bank uses a uniform approach to debt restructuring across all business lines and geographical areas. Under normal circumstances, the Bank does not restructure the debt of credit institutions. The Bank also does not restructure small retail loans. Debt restructuring decision on each individual loan to legal entities other than credit institutions is made on a case-by-case basis.
As of January 1, 2015, no loans to legal entities other than credit institutions were restructured. As of January 1, 2015, the value of restructured retail loans was 417,509 thousand rubles (178,866 thousand rubles in provisions on retail loans), which represents 0.8% of the total retail loans outstanding and 0.1% of the Bank’s total assets.
As of January 1, 2014, no loans to legal entities other than credit institutions were restructured. As of January 1, 2014, the value of restructured retail loans was 494,605 rubles (201,392 thousand rubles in provisions on retail loans), which represents 1.1% of the total retail loan debt and 0.1% of the Bank’s total assets.
No overdue corporate debt was written off against provisions for possible losses in 2014; a total of 1,969,596 thousand rubles in retail loans was written off in 2014.
As of both January 1, 2015, and January 1, 2014, the Bank had no restructured debt on other assets and other balance sheet items.
A loan is considered delinquent when at least one payment on principal amount and/or interest is missed.
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The table below represents overdue loans as of January 1, 2015:
Loans to credit institutionsthousands of rubles
Loans to legal entities other than credit institutions
thousands of rublesRetail loans
thousands of rublesTotal
thousands of rubles
Loans receivable not past due 128,438,807 106,090,409 50,568,629 285,097,845
Overdue loans:
- less than 30 days - 94,509 13,405 107,914
- between 31 and 90 days - - 22,205 22,205
- between 91 and 180 days - - 11,719 11,719
- between 181 and 360 days - 24,400 71,638 96,038
- over 360 days - - 1,976 1,976
Total overdue loans - 118,909 120,943 239,852
128,438,807 106,209,318 50,689,572 285,337,697
As of January 1, 2015, overdue loans represented 0.08% of total amount of loans outstanding and 0.06% of the Bank’s total assets.
The table below represents overdue loans as of January 1, 2014:
Loans to credit institutionsthousands of rubles
Loans to legal entities other than credit institutions
thousands of rublesRetail loans
thousands of rublesTotal
thousands of rubles
Loans receivable not past due 138,903,024 74,214,417 46,995,905 260,113,346
Overdue loans:
- less than 30 days - - 11,614 11,614
- between 31 and 90 days - - 17,496 17,496
- between 91 and 180 days - - 10,467 10,467
- between 181 and 360 days - - 56,479 56,479
- over 360 days - - 1,671 1,671
Total overdue loans - - 97,727 97,727
138,903,024 74,214,417 47,093,632 260,211,073
As of January 1, 2014, overdue loans represented 0.04% of total amount of loans outstanding and 0.03% of the Bank’s total assets.
The table below represents overdue debt on other assets as of January 1, 2015:
Interest receivablethousands of rubles
Other receivablesthousands of rubles
Totalthousands of rubles
Receivables in good standing 1,083,030 4,053,649 5,136,679
Overdue receivables:
- less than 30 days 7,614 42,965 50,579
- between 31 and 90 days 10,748 99,301 110,049
- between 91 and 180 days 3,878 16,627 20,505
- between 181 and 360 days 10,290 959 11,249
- over 360 days 120 - 120
Total overdue receivables 32,650 159,852 192,502
1,115,680 4,213,501 5,329,181
As of January 1, 2015, overdue debt on other assets represented 3.6% of the total value of other assets and 0.05% of the Bank’s total assets.
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The table below represents overdue debt on other assets as of January 1, 2014:
Interest receivablethousands of
rubles
Other receivablesthousands of
rubles
Totalthousands of
rubles
Receivables in good standing 788,691 2,792,187 3,580,878
Overdue receivables:
- less than 30 days 5,350 24,327 29,677
- between 31 and 90 days 7,747 93,957 101,704
- between 91 and 180 days 2,970 1,244 4,214
- between 181 and 360 days 110 - 110
- over 360 days 9 - 9
Total overdue receivables 16,186 119,528 135,714
804,877 2,911,715 3,716,592
As of January 1, 2014, overdue debt on other assets represented 3.7% of the total value of other assets and 0.04% of the Bank’s total assets.
The Bank had no overdue debt on any other balance sheet items.
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The table below represents information on calculated and actual provisions for possible losses in thousands of rubles as of January 1, 2015:
Amount
Category of Quality Provisions for possible losses
I II III IV V Calculated provisionsCalculated provisions
less collateral
Actual provisions
II III IV V Total
Cash assets 11,415,696 11,415,696 - - - - - - - - - - -
Due from credit institutions 29,815,883 25,680,080 4,121,697 14,106 - - 48,270 48,270 41,217 7,053 - - 48,270
Loans outstanding 285,337,697 80,992,327 141,544,096 17,023 992 26,997,819 18,779 463 38,464,951 4,553,983 2,237,762 648,805 527,596 1,139,820 4,553,983
Net investments in securities and other financial assets available for sale 27,448,655 26,607,284 836,956 - - 4,415 12,785 12,785 8,370 - - 4,415 12,785
Other assets 5,329,181 1,949,542 3,058,819 93,029 41,197 186,594 271,593 271,593 49,438 17,208 21,550 183,397 271,593
Total 359,347,112 146,644,929 149,561,568 17,131 127 27,039,016 18,970,472 38,797,599 4,886,631 2,336,787 673,066 549,146 1,327,632 4,886,631
The table below represents information on calculated and actual provisions for possible losses in thousands of rubles as of January 1, 2014:
Amount
Quality Provisions for possible losses
I II III IV V
Calculated provisionsCalculated less
collateral
Actual provisions
II III IV V Total
Cash assets 5,251,357 5,251,357 - - - - - - - - - - -
Due from credit institutions 12,272,361 12,256,436 - 15,925 - - 7,962 7,962 - 7,962 - - 7 962
Loans outstanding 260,211,073 137,439,662 68,098,421 23,751,069 19,853,459 11,068,462 27,083,363 3,293,569 958,432 454,648 1,000,649 879,840 3 293 569
Net investments in securities and other financial assets available for sale 48,243,799 48,239,384 - - - 4,415 4,415 4,415 - - - 4,415 4 415
Other assets 3,716,592 2,242,355 1,201,906 131,653 29,509 111,169 136,694 136,694 13,272 8,591 4,094 110,737 136 694
Total 329,695,182 205,429,194 69,300,327 23,898,647 19,882,968 11,184,046 27,232,434 3,442,640 971,704 471,201 1,004,743 994,992 3 442 640
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Analysis of collateral
The Bank uses collateral as a credit risk reduction instrument.
For loans (including equivalent debt and conditional obligations of credit nature) classified as quality category II through V, the Bank creates provisions after taking into account collateral that belongs to quality categories I-II. Collateral quality category is determined in accordance with the CBR Regulation No. 254-P.
The table below represents the nature and value (as of January 1, 2015) of collateral received from corporate clients which is used to reduce the amount of provisions calculated in accordance with the Bank’s policies:
Loan debtthousands of rubles
Conditional obligations of credit nature
thousands of rubles
Total collateral used to reduce provisions
thousands of rubles
Collateral on loans category I: 65,714,122 8,816,564 74,530,686
Guarantees 65,714,122 8,816,564 74,530,686
Loans/liabilities without collateral or with collateral which is not used to reduce provisions 219,623,575 39,211,533 -
285,337,697 48,028,097 74,530,686
The table below represents the nature and value (as of January 1, 2014) of collateral received from corporate clients which is used to reduce the amount of provisions calculated in accordance with the Bank’s policies:
Loan debtthousands of rubles
Conditional obligations of credit nature
thousands of rubles
Total collateral used to reduce provisions
thousands of rubles
Collateral on loan category I: 66,222,938 15,610,689 81,833,627
Guarantees 66,222,938 15,610,689 81,833,627
Loans/liabilities without collateral or with collateral which is not used to reduce provisions 193,988,135 18,748,336 -
260,211,073 34,359,025 81,833,627
The table below represents information on calculated and actual provisions for possible losses in thousands of rubles as of January 1, 2015:
Amount
Category of Quality Provisions for possible losses
I II III IV V Calculated provisionsCalculated provisions
less collateral
Actual provisions
II III IV V Total
Cash assets 11,415,696 11,415,696 - - - - - - - - - - -
Due from credit institutions 29,815,883 25,680,080 4,121,697 14,106 - - 48,270 48,270 41,217 7,053 - - 48,270
Loans outstanding 285,337,697 80,992,327 141,544,096 17,023 992 26,997,819 18,779 463 38,464,951 4,553,983 2,237,762 648,805 527,596 1,139,820 4,553,983
Net investments in securities and other financial assets available for sale 27,448,655 26,607,284 836,956 - - 4,415 12,785 12,785 8,370 - - 4,415 12,785
Other assets 5,329,181 1,949,542 3,058,819 93,029 41,197 186,594 271,593 271,593 49,438 17,208 21,550 183,397 271,593
Total 359,347,112 146,644,929 149,561,568 17,131 127 27,039,016 18,970,472 38,797,599 4,886,631 2,336,787 673,066 549,146 1,327,632 4,886,631
The table below represents information on calculated and actual provisions for possible losses in thousands of rubles as of January 1, 2014:
Amount
Quality Provisions for possible losses
I II III IV V
Calculated provisionsCalculated less
collateral
Actual provisions
II III IV V Total
Cash assets 5,251,357 5,251,357 - - - - - - - - - - -
Due from credit institutions 12,272,361 12,256,436 - 15,925 - - 7,962 7,962 - 7,962 - - 7 962
Loans outstanding 260,211,073 137,439,662 68,098,421 23,751,069 19,853,459 11,068,462 27,083,363 3,293,569 958,432 454,648 1,000,649 879,840 3 293 569
Net investments in securities and other financial assets available for sale 48,243,799 48,239,384 - - - 4,415 4,415 4,415 - - - 4,415 4 415
Other assets 3,716,592 2,242,355 1,201,906 131,653 29,509 111,169 136,694 136,694 13,272 8,591 4,094 110,737 136 694
Total 329,695,182 205,429,194 69,300,327 23,898,647 19,882,968 11,184,046 27,232,434 3,442,640 971,704 471,201 1,004,743 994,992 3 442 640
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Loans to legal entities
In 2013 and 2014 the Bank did not take collateral into account when establishing provisions for possible losses on loans to the following types of corporate clients: > credit institutions > legal entities other than credit institutions, except for legal entities that provided category I collateral in the form of guarantees (sureties) by
legal entities with an investment grade rating not lower than Standard & Poor’s BBB- or similar of Fitch Ratings and Moody’s > private entrepreneurs
Retail loans
The Bank estimates provisions for possible losses on retail loans in the context of homogeneous loan portfolios. No assessment of the value of collateral is performed on these loans.
Mortgage loans are secured by value of purchased property. According to the Bank’s policy, the mortgage loan amount to collateral ratio must not exceed 85% on the disbursement date.
For certain mortgage loans the Bank revises the value of the mortgaged collateral to its current value, taking into account approximate changes in property value since the disbursement date. The Bank may also carry out an individual assessment of collateral as of each balance sheet date if there are indications of possible impairment. The fair value of collateral for mortgage loans is estimated by a third party appraiser, OOO NEO Center Ipoteka. Value of collateral for all other mortgage loans is determined on the mortgage date and is not adjusted for subsequent changes as of balance sheet date. For certain mortgage loans, where the amount of provisions is determined on case by case basis, 100% provision is required, with no reduction for the appraised value of the collateral.
Overdrafts, credit card debt and consumer loans are not secured.
Repossessions
In 2014, the Bank acquired a number of assets through repossession of loan collaterals at net carrying value of 10,548 thousand rubles. As of January 1, 2015, and January 1, 2014, the total repossessions were as follows:
January 1, 2015thousands of rubles
January 1, 2014thousands of rubles
Real estate 10, 548 -
Total repossessions 10,548 -
The Bank’s policy requires the repossessed assets to be sold as quickly as possible.
10.3. Market risk
Market risk is the risk of changes in fair value or future cash flows for a financial instrument as a result of changes in market prices. Market risk includes currency risk, interest rate risk and other price risks. Market risk arises from open positions on interest rates and equity instruments exposed to general and specific market fluctuations and changes in the level of market prices and exchange rate volatility.
Market risk management is aimed at maintaining an acceptable level of assumed risk, as defined by the Bank’s business strategy. The primary goal is to ensure preservation of assets and capital through reduction or elimination of possible losses and income shortfalls from the Bank’s fi-nancial market activities as well as other transactions where potential market risk is expected.
The Bank manages its market risk by setting open position limits against the value of certain financial instruments in its portfolio, interest rate change dates, currency positions, stop loss limits and regular monitoring of the above measures.
The Bank also utilizes Value-at-Risk (VAR) methodology to monitor market risk on its trading positions.
Value-at-Risk (VAR) methodology
The VaR methodology is a way to estimate potential losses that could occur on risk positions as a result of changes in market rates and prices over a specified period of time at a predefined confidence inteval. The VaR model used by the Bank is based on the 99% confidence interval and assumes financial instrument holding period of up to 1 day depending on the type of position. The VaR model is a forecast based largely on historical data. The model derives plausible future scenarios based on historical market rate time series, and interdependence between different markets and rates. Potential market price changes are determined based on market data collected over the last 12 months or longer.
Even though the VaR methodology is an important tool to assess the likely magnitude of market risk, it has some limitations, especially in low liquidity markets, which can be represented as follows: > Use of historical data as a basis for determining future events may not encompass all possible scenarios (especially of the extreme nature). > Use of 99% confidence interval does not take into account losses that might occur beyond this level. There is still a 1% chance the loss may
exceed the value at risk. > Since the VaR calculation is based on the trading session’s closing data, it does not necessarily reflect daily fluctuations. > The magnitude of the risk, calculated using VaR depends on the position and the volatility of market prices. The VaR for the fixed position
goes down if market volatility declines and vice versa.
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The table below shows the VaR estimate of possible losses as of January 1 on the portfolio of financial instruments evaluated at fair value:
January 1, 2015thousands of rubles
January 1, 2014thousands of rubles
Exchange rate fluctuation risk 2,742,259 343,635
Interest rate fluctuation risk 27,375,562 165,018,761
28,429,339 164,991,654
The VaR calculation is not the only methodology the Bank relies upon to assess market risks due to certain limitations mentioned above. The VaR limitations are offset by introduction of additional limits on open positions as well as sensitivity limits.
The Bank has developed a Market Risk Control Policy which regulates market risk assessment and management.
Market risk assessment is conducted in accordance with the requirements of CBR Regulation No. 387-P «On Market Risk Calculation by Credit Institutions.»
Breakdown of market risk components as of January 1, 2015, and January 1, 2014, is presented below:
January 1, 2015thousands of rubles
January 1, 2014thousands of rubles
Market risk, total, including 10,877,850 27,839,846
Interest rate risk, including 870,228 2,227,188
- General interest rate risk 757,779 1,990,092
- Special interest rate risk 112,449 237,096
Stock market risk, including - -
- Special stock market risk - -
- Total stock market risk - -
Exchange rate risk - -
Market risk, total 10,877,850 27,839,846
The Bank’s trading portfolio includes the following financial instruments that are subject to market risk: > Securities at fair value classified by the Bank as at fair value through profit or loss and acquired with the purpose of selling in the near future,
or as available for sale with the Bank’s officially documented intention to sell in the near future > Open positions in ruble and foreign currencies, affected by the changes in ruble exchange rate set by the CBR > Derivatives
Interest rate risk
Interest rate risk arises from changes in the financial instrument’s fair value or future cash flows as a result of market interest rate fluctuations.
The main sources of interest rate risk are: > Mismatching of the maturities of assets, liabilities and off-balance sheet assets and liabilities of instruments with fixed interest rate. > Mismatching of the maturities of assets, liabilities and off-balance sheet assets and liabilities of instruments with variable interest rate (re-pric-
ing risk). > Changes in the yield curve for long and short maturities on a single issuer’s financial instruments, which create the risk of loss resulting from
the excess of potential expenses over income at maturity date (yield curve risk). > For financial instruments with fixed interest rates with coinciding maturities - mismatching of the degree of changes in interest rates on
borrowed and invested resources; for financial instruments with variable interest rates and the same frequency of the variable interest rate revisions - mismatching of the degree of changes in interest rates (basis risk).
The Bank’s financial standing and cash flows are affected by fluctuations in prevailing market interest rates. These fluctuations could cause the interest margin to shrink or expand, or could lead to losses in case of unexpected changes in interest rates.
Interest rate risk is mainly managed through interest gap monitoring. ALCO with the assistance of the Treasury reviews and approves interest rate exposure (IRE) limits, monitored on a daily basis.
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The table below represents average effective interest rates on interest-bearing assets and liabilities as of January 1, 2015, and January 1, 2014. These rates are an approximation of the yield-to-maturity on specific assets and liabilities.
January 1, 2015Average effective interest rate
January 1, 2014Average effective interest rate
Rubles US Dollars Other currencies Rubles US Dollars Other currencies
Interest-bearing assets
Net investments in securities at fair value through profit or loss 6.6% 10.3% - 6.8% 7.7% -
Net loans outstanding 16.6% 1.3% 2.4% 9.3% 0.8% 2.6%
Net investments in securities and other financial assets available for sale 7.1% 6.0% 4.1% 7.3% 5.8% 4.5%
Interest-bearing liabilities
CBR loans, deposits and other assets - - - 5.4% - -
Due to credit institutions 9.8% - - 4.3% 0.1% -
Due to clients other than credit institutions
- Current accounts and demand deposits 0.5% 0.1% 0.1% 0.8% 0.3% 0.3%
- Term deposits 13.7% 0.5% 0.3% 5.1% 0.3% 0.4%
Bank portfolio’s exposure to interest rate risk
Volume and structure of the Bank’s financial instruments portfolio can be summarized as follows:
January 1, 2015 January 1, 2014
Investmentsthousands of
rubles % of portfolio
Investmentsthousands of
rubles % of portfolio
ASSETS
Due from credit institutions 29,767,613 9% 12,264,399 4%
Net loans outstanding 280,783,714 83% 256,917,504 81%
Net investments in securities and other financial assets available for sale 27,435,870 8% 48,239,384 15%
337,987,197 100% 317,421,287 100%
LIABILITIES
CBR loans, deposits and other assets - - 24,624,052 8%
Due to credit institutions 19,043,551 6% 21,588,333 7%
Due to clients other than credit institutions 284,385,221 94% 249,644,017 85%
Retail deposits 95,450,668 31% 71,506,796 24%
303,428,772 100% 295,856,402 100%
Currency risk
Currency risk is the risk of changes in the financial instrument’s fair value or future cash flows as a result of changes in currency exchange rates.
The Bank has assets and liabilities denominated in several foreign currencies.
The Bank manages currency risk by limiting its open currency position (hereinafter OCP) on a daily basis.
At the end of each trading day the Bank sets risk limits for each of the main foreign currencies, and monitors them on a daily basis. Currency risk is minimized through balanced OCP sufficient to provide the required foreign currency liquidity.
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The following table represents structure of assets and liabilities by currency as of January 1, 2015:
Russian Ruble thousands of
rublesU.S. Dollar thou-sands of rubles
Other currencies thousands of
rublesTotal thousands of
rubles
ASSETS
Cash assets 6,677,922 3,147,367 1,590,407 11,415,696
Cash balances held with CBR, including 12,881,446 - - 12,881,446
- Mandatory reserves 2,998,029 - - 2,998,029
Due from credit institutions 4,674,335 12,653,107 12,440,171 29,767,613
Financial assets evaluated at fair value through profit or loss 8,705,320 19, 471, 696 1,648,578 29,825,594
Net loans outstanding 187,414,413 77,374,965 15,994,336 280,783,714
Net investments in securities and other financial assets available for sale 25,441,374 847,009 1,147,487 27,435,870
Deferred tax assets 190,943 190,943
Fixed assets, intangible assets and inventories 1,093,834 - - 1,093,834
Other assets 3,861,795 182,677 1,013,116 5,057,588
Total assets 250,941,382 113,676,821 33,834,095 398,452,298
LIABILITIES
Due to credit institutions 19,027,884 8,753 6,914 19,043,551
Amounts due to clients, other than credit institutions, including 179,224,538 76,946,565 28,214,118 284,385,221
- Retail deposits 43,371,648 38,532,549 13,546,471 95,450,668
Financial liabilities at fair value through profit or loss 23,578,751 3,502,919 677,619 27,759,289
Deferred tax liability 354,642 - - 354,642
Other liabilities 8,902,933 375,262 129,524 9,407,719
Provisions for possible losses on conditional obligations of credit nature, other possible losses and transactions with offshore residents 2,133,259 1,589 7,053 2,141,901
Total liabilities 233,222,007 80,835,088 29,035,228 343,092,323
Net position 17,719,375 32,841,733 4,798,867 55,359,975
Impact of derivatives 46,190,614 (36,051,990) (10,138,624)
Net position including impact of derivatives 63,909,989 (3,210,257) (5,339,757) 55,359,975
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The following table represents structure of assets and liabilities by currency as of January 1, 2014:
Russian Ruble thousands of
rublesU.S. Dollar thou-sands of rubles
Other currencies thousands of
rublesTotal thousands of
rubles
ASSETS
Cash assets 4,114,873 886,286 250,198 5,251,357
Amounts due to credit institutions with the CBR, including 13,782,297 - - 13,782,297
- Mandatory reserves 2,760,361 - - 2,760,361
Due from credit institutions 4,356,377 5,567,687 2,340,335 12,264,399
Financial assets evaluated at fair value through profit or loss 24,718,824 1,532,763 376,959 26,628,546
Net loans outstanding 155,878,791 92,391,609 8,647,104 256,917,504
Net investments in securities and other financial assets available for sale 44,850,402 2,302,422 1,086,560 48,239,384
Fixed assets, intangible assets and inventories 1,177,600 - - 1,177,600
Other assets 2,789,503 97,370 693,025 3,579,898
Total assets 251,668,667 102,778,137 13,394,181 367,840,985
LIABILITIES
CBR loans, deposits and other assets 24,624,052 - - 24,624,052
Due to credit institutions 21,573,525 14,575 233 21,588,333
Amounts due to clients, other than credit institutions, including 186,803,062 47,143,379 15,697,576 249,644,017
- Retail deposits 43,040,657 21,009,672 7,456,467 71,506,796
Financial liabilities at fair value through profit or loss 5,123,327 563,348 77,304 5,763,979
Other liabilities 9,391,646 704,372 119,635 10,215,653
Provisions for possible losses on conditional obligations of credit nature, other possible losses and transactions with offshore residents 796,980 88,144 722,841 1 607 965
Total liabilities 248,312,592 48,513,818 16,617,589 313,443,999
Net position 3,356,075 54,264,319 (3,223,408) 54,396,986
Impact of derivatives 41,134,178 (53,117,587) 11,983,409
Net position including impact of derivatives 44,490,253 1,146,732 8,760,001 54,396,986
10.4. Operational risk
Operational risk is one of the major risks the Bank is exposed to.
Operational risk is caused by internal policies and banking transaction standards not being in line with the nature and scale of the Bank’s business and/or current legislation and violation of these policies and standards by Bank employees and/or other persons as a result of unintentional or intentional actions or failure to act, IT and other systems’ inability to perform specific tasks and/or failures, as well as external events.
Operational risk management policy adopted by the Bank is based on the guidelines set out in the following documents:
The CBR letter No. 76-T, dated May 24, 2005 “On Managing Operational Risks in Credit Institutions;” the CBR letter No. 96-T dated May 27, 2014, “On Recommendations of the Basel Committee on Banking Supervision “Principles for Effective Risk Data Aggregation and Risk Reporting;”” the CBR letter No. 26-T dated March 23, 2007 “On Methodological Recommendations on Conducting Inspections of the Banking Risk Management System in a Credit Institution or a Branch of a Credit Institution;” the CBR letter No. 69-T dated May 16, 2012, “On BCBS Principles for the Sound Management of Operational Risk.”
The documents set out the basic principles of identification, assessment, management and continuous monitoring of operational risk, as well as the principles of reporting and informing the appropriate Bank management on the operational risk exposure.
Operational risk management system is based on the principle of distribution of authority and responsibilities between all levels of management. The Board of Directors participates in the development, approval and implementation of internal procedures, which define the principles of inter-nal control and capital adequacy assessment. The Board of Directors approves the risk management strategy and oversees its implementation.
The President and the Executive Board approve the risk and capital management procedures based on the risk management strategy approved by the Board of Directors, and ensure compliance with internal procedures.
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To ensure effective operational risk management in all Bank departments, the risk management structure contains three lines of defence, described below.
The first line of defence is the Bank units themselves, which are responsible for assessing and managing risks, including operational risk.
The Bank units are required to identify operational risks as they arise and pass the information to both Risk Management Service and Internal Control Service, which compile a comprehensive risk assessment. Heads of departments and units bear the main responsibility for the imple-mentation of Managers Control Assessment (MCA), as well as for the identification of inefficient controls, and passing the information to Risk Management Service and Internal Control Service.
The second line of defence is independent Risk Management Service and Internal Control Service. Risk Monitoring and Assessment Department at ZAO CB Citibank is an operational risk management unit which oversees identification of key operational risks, analyzes the MCA results in order to define and work out measures that would allow the Bank to predict and manage factors related to emerging operational risks.
The third line of defence is the Internal Audit Department, which provides recommendations for improvement on an ongoing basis, and per-forms an independent assessment and analysis.
ZAO CB Citibank employs the following controls: > preliminary (preventive) control carried out at the stage of planning and development of new products or introduction of new processes > real-time monitoring of banking operations and other transactions > follow-up on the results of banking operations and other transactions.
The annual risk assessment includes identification and documenting of risks significant to business objectives and activities. Existing controls are assessed for effectiveness and feasibility with a view to reduce risks and the likelihood of operational risk emergence. Effectiveness of the internal controls system is monitored on an ongoing basis through testing and certification of controls.
Operational risk events related to operating losses are recorded in the Bank’s EDCS. Each Bank unit assigned MCA functions is responsible for timely reporting of operational risk events and assigns the employee in charge for proper documentation of operational risk events.
Operational risk assessment is carried out in accordance with the CBR Regulation No. 346-P dated November 3, 2009 “On the Procedure for Calculating Operational Risk.”
Income information used to calculate capital requirements for operational risk is presented below:
2014thousands of rubles
2013thousands of rubles
Net interest income 16,363,202 15,043,016
Non-interest income 11,452,524 10,792,608
Net income from operations with securities at fair value through profit or loss 720,383 834,733
Net income from foreign exchange operations 2,042,825 2,166,264
Income from participation in capital of other legal entities 3,819 3,819
Fee and commission income 6,958,424 5,992,989
Other operating income 1,727,073 1,794,803
Less:
Fines and penalties 2505 2,218
Miscellaneous income 85,489 115,385
Fee and commission expenses 2,997,734 2,438,380
24,729,998 23,279,641
Operational risk 3,709,500 3,491,946
During the years 2014 and 2013, the Bank fully complied with mandatory standards set by the CBR.
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10.5. Liquidity risk
Liquidity risk is a risk specific to the situations when the Bank may be unable to meet its debt obligations, or make current payments on behalf of clients without asset restructuring and/or urgent mobilization of all required resources. Liquidity risk arises from mismatch of maturities between assets and liabilities.
The Bank has developed a liquidity management policy aimed at ensuring the Bank’s ability to maintain control over liquidity and pay its current liabilities in full in a timely manner. The liquidity management policy includes the following: > projecting cash flows in major currencies and calculating the necessary level of liquid assets to support these cash flows > maintaining a diverse range of funding sources > managing composition and concentration of liabilities > developing plans to raise funds through borrowing > maintaining a high-liquidity asset portfolio that can easily be sold to offset liquidity gap > developing contingency plans to maintain liquidity and required level of funding > monitoring compliance with regulatory requirements on liquidity ratios.
The Treasury Department monitors liquidity ratios on a daily basis and runs stress tests under various possible scenarios of market conditions, including normal and adverse circumstances. Liquidity management decisions are made by ALCO and implemented by the Treasury.
During the years 2014 and 2013, the Bank has not violated any mandatory liquidity ratios set by the CBR.
The following table shows an analysis (by expected maturities) of assets and liabilities reflected in the balance sheet (published form) as of January 1, 2015
thousands of rubles
On demand and less than
1 month 1-3 months 3-12 months 1-5 years Over 5 years No maturity
date Overdue Total
ASSETS
Cash assets 11,415,696 - - - - - - 11,415,696
Cash balances held with CBR, including 12,881,446 - - - - - - 12,881,446
- Mandatory reserves 2,998,029 - - - - - - 2,998,029
Due from credit institutions 29,767,613 - - - - - - 29,767,613
Financial assets evaluated at fair value through profit or loss 10,699,288 10,620,346 7,249,873 1,256,087 - - - 29,825,594
Net loans outstanding 186,243,450 34,633,521 20,316,209 38,988,628 528,608 - 73,298 280,783,714
Net investments in securities and oth-er financial assets available for sale - - 1,379,263 19,191,875 6,864,732 - - 27,435,870
Deferred tax assets - - - - - 190,943 - 190,943
Fixed assets, intangible assets and inventories - - - - - 1,093,834 - 1,093,834
Other assets 3,903,713 925,679 211,880 16,316 - - - 5,057,588
Total assets 254,911,206 46,179,546 29,157,225 59,452,906 7,393,340 1,284,777 73,298 398,452,298
LIABILITIES
Due to credit institutions 19,043,551 - - - - - - 19,043,551
Amounts due to clients other than credit institutions, including 283,109,317 1,033,510 239,894 2,500 - - - 284,385,221
- Retail deposits 95,450,668 - - - - - - 95,450,668
Financial liabilities evaluated at fair value through profit or loss 6,630,217 11,023,757 9,247,095 858,220 - - - 27,759,289
Debt securities issued - - - - - - - -
Deferred tax liability - - - - - 354,642 - 354,642
Other liabilities 9,117,851 240,616 49,252 - - - - 9,407,719
Provisions for possible losses on conditional obligations of credit nature, other possible losses and transactions with offshore residents - - - - - 2,141,901 - 2,141,901
Total liabilities 317,900,936 12,297,883 9,536,241 860,720 - 2,496,543 - 343,092,323
Net position (62,989,730) 33,881,663 19,620,984 58,592,186 7,393,340 (1,211,766) 73,298 55,359,975
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The following table shows an analysis (by expected maturities) of assets and liabilities reflected in the balance sheet (published form) as of January 1, 2014
thousands of rubles
On demand and less than
1 month 1-3 months 3-12 months 1-5 years Over 5 years No maturity
date Overdue Total
ASSETS
Cash assets 5,251,357 - - - - - - 5,251,357
Cash balances held with CBR, including 13,782,297 - - - - - - 13,782,297
Mandatory reserves 2,760,361 - - - - - - 2,760,361
Due from credit institutions 12,264,399 - - - - - - 12,264,399
Financial assets evaluated at fair value through profit or loss 25,447,546 265,288 820,443 95,269 - - - 26,628,546
Net loans outstanding 164,080,998 26,419,910 38,145,502 27,802,357 447,833 - 20,904 256,917,504
Net investments in securities and oth-er financial assets available for sale - 765,969 5,025,907 18,084,358 24,363,150 - - 48,239,384
Fixed assets, intangible assets and inventories - - - - - 1,177,600 - 1,177,600
Other assets 2,739,118 209,155 300,016 331,609 - - - 3,579,898
Total assets 223,565,715 27,660,322 44,291,868 46,313,593 24,810,983 1,177,600 20,904 367,840,985
LIABILITIES
CBR loans, deposits and other assets 24,624,052 - - - - - - 24,624,052
Due to credit institutions 21,588,333 - - - - - - 21,588,333
Amounts due to clients other than credit institutions, including 247,990,383 1,132,060 521,574 - - - - 249,644,017
- Retail deposits 71,506,796 - - - - - - 71,506,796
Financial liabilities evaluated at fair value through profit or loss 4,567,990 384,362 654,569 157,058 - - - 5,763,979
Other liabilities 9,434,092 560,667 220,894 - - - - 10,215,653
Provisions for possible losses on conditional obligations of credit nature, other possible losses and transactions with offshore residents - - - - - 1,607,965 - 1,607,965
Total liabilities 308,204,850 2,077,089 1,397,037 157,058 - 1,607,965 - 313,443,999
Net position (84,639,135) 25,583,233 42,894,831 46,156,535 24,810,983 (430,365) 20,904 54,396,986
Management expects that cash flows from certain financial assets and liabilities may deviate from contract terms, either because the manage-ment is empowered to direct cash flows or because past experience suggests that the timing of future cash flows from financial assets and liabilities may differ from the contractual terms. The tables below show financial assets and liabilities by maturity period, during which cash flows from these assets and liabilities are expected.
Contractual maturities of securities can be represented as follows:
January 1, 2015thousands of rubles
January 1, 2014thousands of rubles
1-3 months 2,037 123,678
3-12 months 89,747 849,925
1-5 years 5,825,146 9,452,663
Over 5 years 1,236,985 14,621,300
7,153,915 25,047,566
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Russian legislation allows private individuals to withdraw their term deposits at any time but, in most cases, withdrawal on demand voids eligibility for receiving accrued interest. These deposits, excluding accrued interest, are shown in the tables above in the “On demand and less than 1 month” category. Contractual maturities of these deposits were as follows:
January 1, 2015thousands of rubles
January 1, 2014thousands of rubles
On demand and less than 1 month 4,761,555 1,527,834
1-3 months 4,307,808 1,438,382
3-12 months 5,585,650 989,256
1-5 years 72,520 197,680
Over 5 years - -
No maturity date - -
14,727,533 4,153,152
The Bank adopted the following strategies to reduce liquidity risk: > to maintain an adequate level of liquidity > to keep highly liquid securities that can be pledged as collateral for CBR loans > to keep unused lines of credit with CBR and other banks rated “BBB» by Standard & Poor’s, etc.
10.6. Legal risk
Legal risk to the Bank might arise from the following: > transactions deemed invalid by the current Russian legislation > contracts containing inadequate provisions on the Bank’s liability or provisions that could lead to substantial impairment of assets or increase
the Bank’s liabilities > adverse outcome of litigation involving the Bank > changes in exchange rates, taxes, banking legislation, and/or judicial practice related to the Bank’s core business > The factors listed above are not specific to the Bank; all credit institutions are subject to these factors.
Existing and potential lawsuits where the Bank acts as defendant
In the course of their business, the Bank clients and counterparties might file lawsuits against the Bank.
As of January 1, 2015, the Bank had no ongoing risks of litigation that could have a significant impact on its financial and economic activities in the future.
The Bank’s management believes that the total value of liabilities that may arise as a result of any legal actions against the Bank will have no material adverse effect on the Bank’s financial standing.
As of January 1, 2015, the value of contingent liabilities of non-lending nature related to unsettled lawsuits at the balance sheet date where the Bank acts as defendant, was not recognized due to its immateriality and inability to affect the Bank’s financial standing.
10.7. Strategic risk
Strategic risk is the risk of losses resulting from errors (flaws) in making decisions that determine the Bank’s development strategy, due to neglect or underestimation of potential threats to the Bank’s business, wrong or ill-founded decisions on promising areas of development where the Bank could achieve a competitive advantage, as well as lack or insufficiency of resources (financial, logistical, etc.) required to achieve set targets.
The Executive Board develops the Bank’s strategy for a period of three to five years, as well as a business plan for the current fiscal year. Both the strategy and the business plan require approval by the Board of Directors. The Bank’s units report to the Executive Board and the Board of Directors on the progress of business plan implementation for the current fiscal year (quarterly) and on implementation of the strategy (annual-ly). If needed, the Executive Board amends the strategy and the business plan. All amendments require approval by the Board of Directors.
10.8. Reputational risk
The Bank has a solid business reputation. The Bank promotes a positive perception of the Bank, quality of its services and its business in general, based on objective business outcomes. The management estimates that the risk of financial losses resulting from loss of goodwill is negligible.
10.9. Country risk
Country risk (including transfer risk) is the risk of losses occurring as a result of a full or partial failure of foreign counterparties’ (both companies and private individuals) to fulfil their obligations due to economic, political and social changes, as well as inability to pay in currency of obligation due to particular aspects of national legislation, regardless of the counterparties’ financial situation.
The Bank is a resident of the Russian Federation and operates on the territory of the Russian Federation.
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The bulk of the Bank’s credit risk falls on borrowers, issuers and counterparties whose main activity is carried out on the territory of the Russian Federation. Credit risk to residents of other countries shall only be assumed following special analysis.
The table below represents the concentration of assets and liabilities by geographical regions as of January 1, 2015, as reflected in the reporting form 0409806 «Balance sheet (published form).» Information is provided separately for the Russian Federation (RF), CIS countries, the group of developed countries (DCG) and other countries (OC).
thousands of rubles
Total RF CIS DCG OC
ASSETS
Cash assets 11,415,696 11,415,696 - - -
Cash balances held with the CBR 12,881,446 12,881,446 - - -
Due from credit institutions 29,767,613 4,313,691 2,356 25,421,278 30,288
Net investments in securities evaluated at fair value through profit or loss 29,825,594 19,338,602 - 10,486,992 -
Net loans outstanding 280,783,714 241,707,904 124,615 10,262,568 28,688,627
Net investments in securities and other financial assets available for sale 27,435,870 25,231,596 - 2,204,274 -
Deferred tax assets 190,943 190,943 - - -
Fixed assets, intangible assets and inventories 1,093,834 1,093,834 - - -
Other assets 5,057,588 5,027,853 2,228 26,098 1,409
Total assets 398,452,298 321,193,196 129,199 48,409,579 28,720,324
LIABILITIES
Due to credit institutions 19,043,551 5,876,070 895,987 12,175,334 96,160
Amounts due to clients other than credit institutions, 284,385,221 271,566,615 1,442,354 9,695,832 1,680,420
including retail deposits 95,450,668 87,803,596 1,395,402 4,823,721 1,427,949
Financial liabilities evaluated at fair value through profit or loss 27,759,289 7,938,067 - 19,821,222 -
Deferred tax liability 354,642 354,642 - - -
Other liabilities 9,407,719 9,208,513 750 196,735 1,721
Provisions for possible losses on conditional obligations of credit nature, other possible losses and transactions with offshore residents
2,141,901 2,082,575 695 45,762 12,869
Total liabilities 343,092,323 297,026,482 2,339,786 41,934,885 1,791,170
OFF-BALANCE SHEET LIABILITIES
Irrevocable liabilities of the Bank 378,212,235 216,915,543 215,686 160,792,141 288,865
Guarantees issued by the Bank 24,323,251 19,535,614 - 3,702,09 1,085,542
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The table below represents the concentration of assets and liabilities by geographical regions as of January 1, 2014, as reflected in the reporting form 0409806 «Balance sheet (published form).» Information is provided separately for the Russian Federation (RF), CIS countries, the group of developed countries (DCG) and other countries (OC).
thousands of rubles
Total RF CIS DCG OC
ASSETS
Cash assets 5,251,357 5,251,357 - - -
Cash balances held with the CBR 13,782,297 13,782,297 - - -
Due from credit institutions 12,264,399 4,283,466 28,897 7,946,078 5,958
Net investments in securities at fair value through profit or loss 26,628,546 25,853,672 79 770,979 3,816
Net loans outstanding 256,917,504 180,410,041 85,780 1,069,744 75,351,939
Net investments in securities and other financial assets available for sale 48,239,384 43,435,942 - 4,803,442 -
Fixed assets, intangible assets and inventories 1,177,600 1,177,600 - - -
Other assets 3,579,898 3,593,083 18 -3,231 -9,972
Total assets 367,840,985 277,787,458 114,774 14,587,012 75,351,741
LIABILITIES
CBR loans, deposits and other assets 24,624,052 24,624,052 - - -
Due to credit institutions 21,588,333 5,935,823 299,439 15,184,497 168,574
Amounts due to clients other than credit institutions 249,644,017 234,229,358 1,050,638 9,581,307 4,782,714
including retail deposits 71,506,796 64,592,386 996,802 4,535,884 1,381,724
Financial liabilities at fair value through profit or loss 5,763,979 4,541,769 - 1,222,210 -
Other liabilities 10,215,653 10,003,298 430 210,587 1,338
Provisions for possible losses on conditional obligations of credit nature, other possible losses and transactions with offshore residents 1,607,965 1,476,474 518 109,889 21,084
Total liabilities 313,443,999 280,810,774 1,351,025 26,308,490 4,973,710
OFF-BALANCE SHEET LIABILITIES
Irrevocable liabilities of the Bank 345,225,068 195,198,453 193,897 148,846,443 986,275
Guarantees issued by the Bank 14,776,104 10,576,960 - 2,753,150 1,445,994
11. Transactions with related parties
Citigroup Netherlands B.V. (the Netherlands) became the Bank’s parent company on June 27, 2012, after receiving 99.9% of the shares previous-ly held by Citibank Overseas Investment Corporation (USA) and 0.1% of the shares previously held by Foremost Investment Corporation (USA).
The Bank has no subsidiaries or dependent organizations.
11.1. Transactions with executives
The President, Executive Board members, members of the Board of Directors and Chief Accountant are considered the Bank’s executives.
In 2014, on average, the Bank employed 4,225 staff (in 2013 – 4,052 staff).
The average number of executives employed by the Bank was 13 people in 2014 (11 in 2013).
None of the Bank’s executives own the Bank’s shares.
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Total employee remuneration included in the Operating Expenses total reported on the form 0409807 “Financial results report” for 2014 and 2013 is outlined below:
2014 thousands of rubles
Share in total remuneration
2013 thousands of
rublesShare in total remuneration
Short-term employee remuneration 248,239 3.85% 185,578 3.08%
248,239 3.85% 185,578 3.08%
11.2. Transactions with other related parties
The Bank considers Citibank N.A., its subsidiaries and affiliates worldwide as related (non-arms’ length) entities. The Bank’s insiders are also con-sidered related (non-arms’ length) parties. The Bank made the decision not to set internal limits for the legal entities listed above.
Details on operations and transactions with related parties itemized per form 0409806 balance sheet (published form) are shown below as of January 1, 2015.
Total thousands of
rubles
Subsidiaries thousands of
rubles
Key executivesthousands of
rubles
Other related parties
thousands of rubles
Accounts with credit institutions 22,601,934 - - 22,601,934
Financial assets evaluated at fair value through profit or loss 10,487,012 - - 10,487,012
Loans outstanding, before provisions for possible losses on loans 32,908,072 - 40,146 32,867,926
Provisions for possible losses on loans 401 - 401 -
Other assets, before provisions for possible losses 942 - 84 858
Provisions for possible losses on other assets 1 - 1 -
Total assets 65,997,558 - 39,828 65,957,730
Due to credit institutions 10,412,294 - - 10,412,294
Due to clients other than credit institutions 3,200,383 - 177,506 3,022,877
Retail deposits 177,506 - 177,506 -
Financial liabilities evaluated at fair value through profit or loss 14,902,513 - - 14,902,513
Other liabilities 5,373 - 82 5,291
Provisions for possible losses on conditional liabilities of credit nature, other possible losses and operations with residents of off-shore zones 337 - 72 265
Total liabilities 28,520,900 - 177,660 28,343,240
Irrevocable obligations of the credit institution 157,379,581 - 7,174 157,372,407
Guarantees and sureties issued by the credit institution 4,373,035 - - 4,373,035
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Details on operations and transactions with related parties itemized per form 0409806 balance sheet (published form) are shown below as of January 1, 2014.
Total thousands of
rubles
Subsidiaries thousands of
rubles
Key executivesthousands of
rubles
Other related parties
thousands of rubles
Accounts with credit institutions, before provision for reduction in value 4,681,731 - - 4,681,731
Provisions for possible losses on accounts with credit institutions - - - -
Financial assets evaluated at fair value through profit or loss 748,091 - - 748,091
Loans outstanding, before provisions for possible losses on loans 76,269,145 - 46,619 76,222,526
Provisions for possible losses on loans 466 - 466 -
Other assets, before provisions for possible losses 2,781 - 75 2,706
Provisions for possible losses on other assets 1 - 1 -
Total assets 81,701,281 - 46,227 81,655,054
Due to credit institutions 13,710,826 - - 13,710,826
Due to clients other than credit institutions 943,075 - 65,140 877,935
Retail deposits 65,140 - 65,140 -
Financial liabilities evaluated at fair value through profit or loss 1,222,210 - - 1,222,210
Other liabilities 2,037 - 33 2,004
Provisions for possible losses on conditional liabilities of credit nature, other possible losses and operations with residents of off-shore zones 270 - 56 214
Total liabilities 15,878,418 - 65,229 15,813,189
Irrevocable obligations of the credit institution 146,165,887 - 5,584 146,160,303
Guarantees and sureties issued by the credit institution 3,839,445 - - 3,839,445
Details on income and expenses from operations with related parties itemized per form 0409807 financial results report (published form) for 2014 are shown below.
Total
thousands of rublesSubsidiaries
thousands of rublesKey executives
thousands of rublesOther related parties
thousands of rubles
Interest income 110,552 - - 110,552
Interest expense 155,565 - - 155,565
Net expense from operations with financial assets 8,023,728 - - 8,023,728
Commission income 101,062 - - 101,062
Commission expenses 100,612 - - 100,612
Other operating income 290,391 - - 290,391
Operating expense 3,434,959 - 248,239 3,186,720
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Details on income and expenses from operations with related parties itemized per form 0409807 financial results report (published form) for 2013 are shown below.
Total
thousands of rublesSubsidiaries
thousands of rublesKey executives
thousands of rublesOther related parties
thousands of rubles
Interest income 152,412 - - 152,412
Interest expense 198,288 - - 198,288
Net expense from operations with financial assets 2,639,598 - - 2,639,598
Commission income 164,073 - - 164,073
Commission expenses 549,618 - - 549,618
Other operating income 230,655 - - 230,655
Operating expense 2,694,636 - 185,578 2,509,058
As of January 1, 2015, and January 1, 2014, none of the receivables from related parties were past-due.
In 2014, all operations with related parties have been conducted on market terms.
During 2014 and 2013, the Bank did not write off any debt owed by related parties.
Acting President Nikolaeva N. Y. StampDeputy Chief Accountant Gounko A. B.
June 26, 2015
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