ANNUAL REPORT 2016 25 YEARS OF GROWTH IN HARMONY WITH OUR CUSTOMERS Highlights 1. Strategic Report 5. For Shareholders and Investors Key Financial Performance Indicators 2. Overview of Operations 6. Sustainable Development Mission and Values 3. Financial Results Contacts 2 / 197 4. Corporate Governance System Appendices www.mkb.ru Annual Report 2016 / Table of Contents Table of Contents Highlights Key Financial Performance Indicators Mission and Values 1. Strategic Report 2. Overview of operations 5. For shareholders and investors Appendices 1.1. Address of the Chairman of the 2.1. Corporate banking 6. Sustainable development Appendix 1. Supervisory Board IFRS Statements 2.2. Retail banking 6.1. Human Resources 1.2. Address of the Chairman of the Appendix 2. Management Board 2.3. Cash handling 6.2. Corporate Culture RAS Statements and Social Responsibility 1.3. Management Responsibility 3. Financial results Appendix 3. Statement 6.3. Information technologies List of interested party transactions 3.1. Income statement analysis made in the reporting year (2016) 1.4. Economy and banking sector 6.4. Society 3.2. Key Results List of major transactions made in 1.5. Business model. 6.5. Environmental Management the reporting year (2016) Competitive advantages. 3.3. Income statement analysis Position in the industry. Contacts List of transactions requiring 3.4. Structure of assets and liabilities approval under the Charter made in 1.6. Strategy under IFRS the reporting year (2016) 1.7. Risk Management 4. Corporate governance system Appendix 4. Report on Compliance with the Principles and Recommendations of the Corporate Governance Code. Highlights 1. Strategic Report 5. For Shareholders and Investors Key Financial Performance Indicators 2. Overview of Operations 6. Sustainable Development Mission and Values 3. Financial Results Contacts 3 / 197 4. Corporate Governance System Appendices www.mkb.ru Annual Report 2016 / Highlights Highlights February March May June CBM received Banki.ru prize in CBM’s Solid History TV CBM’s online acquiring was The Moscow Exchange the nomination Deposit of the commercial was awarded as acclaimed as the most included CBM’s shares in its Year the Best TV Sport Commercial effective service in the market MICEX and RTS indices in the Internet Acquiring Rank 2016 survey July August October October MOEX Excellence Award in the CBM acquired SKS Bank to CBM launched an online CBM successfully placed a USD special nomination The best IR develop its investment banking acquiring service for 500 mln Eurobond among companies that closed e-commerce start-ups their IPO on the Moscow Exchange in 2015 more information at CBM website Highlights 1. Strategic Report 5. For Shareholders and Investors Key Financial Performance Indicators 2. Overview of Operations 6. Sustainable Development Mission and Values 3. Financial Results Contacts 4 / 197 4. Corporate Governance System Appendices www.mkb.ru Annual Report 2016 / Key financial performance indicators Key financial performance indicators Assets, RUB bln Capital adequacy ratios (Basel III), % Net interest margin, % Gross loan portfolio, RUB bln Assets, RUB bln Capital adequacy ratios (Basel III), % Net interest margin, % Gross loan portfolio, RUB bln 1,568 15.8% 16.5% 667 1,208 1,568 5.8% 630 1,568 15.8% 16.5% 667 15.8% 14.7% 5.8% 394 630 667 585 1,208 5.8% 3.9% 3.3% 630 14.7% 3.9% 394 585 14.7% 3.9% 3.3% 394 2014 2015 2016 2014 2015 2016 2014 2015 2016 2014 2015 2016 2014 2015 2016 2014 2015 2016 2014 2015 2016 2014 2015 2016 Net prot, RUB bln ROAE, % Customer accounts, RUB bln Net interest income, RUB bln Net prot, RUB bln ROAE, % Customer accounts, RUB bln Net interest income, RUB bln 10.9 899 40,3 10.9 10.9 899 689 29,3 40,3 5.6 11.1% 899 25,9 10.1% 689 29,3 5.6 11.1% 335 689 25,9 1.5 10.1% 11.1% 10.1% 2.1% 335 1.5 1.5 2.1% 2014 2015 2016 2014 202.1%15 2016 2014 2015 2016 2014 2015 2016 2014 2015 2016 2014 2015 2016 2014 2015 2016 2014 2015 2016 ROAA, % Equity, RUB bln Fee and commission income, RUB bln Cost-to-income, % ROAA, % Equity, RUB bln Fee and commission income, RUB bln Cost-to-income, % 103 13.4 33.9% 92 13.4 1.1% 103 9.0 9.3 13.4 26.4% 0.8% 60 92 33.9% 24.6% 1.1% 9.0 9.3 1.1% 9.0 9.3 26.4% 0.8% 60 24.6% 0.2% 2014 0.2%2015 2016 2014 2015 2016 2014 2015 2016 2014 2015 2016 2014 2015 2016 2014 2015 2016 2014 2015 2016 2014 2015 2016 Highlights 1. Strategic Report 5. For Shareholders and Investors Key Financial Performance Indicators 2. Overview of Operations 6. Sustainable Development Mission and Values 3. Financial Results Contacts 5 / 197 4. Corporate Governance System Appendices www.mkb.ru Annual Report 2016 / Mission and Values Mission and Values Mission Values RELIABILITY We help customers make their way to the accom- The Bank’s operations are based on a transparent We are committed to long-term friendly relations plishment of their aims, aspirations and desires, business model, effective management and good with our customers and treat them like we would by satisfying their need for high quality financial corporate governance matching international stan- like to be treated ourselves. services and offering mass market and exclusive dards. The Bank’s primary values are: banking products designed on the basis of best international and Russian experience. CONSTANT DEVELOPMENT SOCIAL RESPONSIBILITY We are not self-complacent with our achievements We are responsive to social needs and environmen- and seek to attain new goals. tal concerns, which is reflected in the transparency of our activities, ethical conduct, respect for third parties’ interests and rights, commitment to strict UNITED PROFESSIONAL TEAM principles formulated and propagated by the Bank and laying the framework for all its operations. Efficient and coherent performance of the whole team and each individual employee is ensured by common and clear understanding of moral and pro- EFFICIENCY fessional reference points and values. We emphasise efficient use of internal and external resources. 6 / 197 1. Strategic Report 1.1. Address of the Chairman of the Supervisory Board The content section 1.2. Address of the Chairman of the Management Board 1.3. Management Responsibility Statement 1.4. Economy and banking sector 1.6. Business model. Competitive advantages. Position in the industry. 1.7. Strategy 1.8. Risk Management Highlights 1. Strategic Report 5. For Shareholders and Investors Key Financial Performance Indicators 2. Overview of Operations 6. Sustainable Development Mission and Values 3. Financial Results Contacts 7 / 197 4. Corporate Governance System Appendices www.mkb.ru Annual report 2016 / 1. Strategic Report / 1.1. Address of the Chairman of the Supervisory Board 1.1. Address of the 2016 was an important year of transition for the Russian economy: the downturn in the country’s industrial production and business Chairman of the activity, observed during the last few years, is gradually reversing Supervisory Board and the economy’s recovery is becoming more stable. Dear Shareholders, Investors, Customers and Partners, 2016 was an important year of tran- sition for the Russian economy: the downturn in For a detailed information, see the Economy and banking sector the country’s industrial production and business section activity, observed during the last few years, is p. 12 gradually reversing and the economy’s recovery is becoming more stable. This is witnessed by the base GDP growth consensus forecast for 2017 of Improvements in the Russian regulatory envi- at least 1%, to be driven by growing consumption as ronment, along with changes in international re- real household income is expected to rise. While the quirements placed on the banking sector, play an past years’ crisis once again highlighted the Russian increasingly important role in any bank’s activities. economy’s sensitivity to oil prices, steps are being CREDIT BANK OF MOSCOW supports and is aligned taken to lessen that dependence and switch to a with these reforms and has always been committed more balanced economic development model. to the highest international standards and regulato- ry requirements. Its Supervisory Board has focused Positive trends at the macro level will certainly be fa- on improving its internal management systems, with vourable for the Russian banking sector. In particular, an emphasis on risk management, stress tests and we believe that the worst of the 2014-2016 crisis, with capital planning. During 2016, the Bank improved its its higher provisioning rates, falling profits and rising risk management strategy to align with the current operating expenses, is now behind us and the banking operating environment, placing a top priority on sector is stabilising as asset quality and other perfor- enhanced risk management in line with the latest William Forrester CHAIRMAN OF THE mance indicators improve. CREDIT BANK OF MOSCOW regulatory requirements. The Bank also focused Owens SUPERVISORY BOARD was no exception, and in 2016 it once again showed in 2016 on updating and improving its internal risk strong results, confirming its ranking as a reliable and management policies, sectoral and product strate- For a detailed biography, trusted leader in the Russian banking sector, whose gies, including further automation of and improve- see the Corporate strategy and business model have proven to be effec- ment of its credit processes. The Bank also retained governance system section tive even during times of crisis. an outside risk management consulting firm to p. 88 Highlights 1. Strategic Report 5. For Shareholders and Investors Key Financial Performance Indicators 2. Overview of Operations 6.