bnpparibas.ru Annual Report 2010

Contents:

I. INTRODUCTION The message of the Supervisory Board 3 about the BNP Group 4 Management 8

II. STRATEGY AND RESULTS 2010 Macroeconomics and Russian banking industry in 2010 12 statutory Financial results 2010 13 Corporate investment 20 Consumer financing 23 risk Management 25 Human Resources Management 27 Corporate Code of Conduct 29

III. ADDITIONAL INFORMATION State Registration Information 30 associations participation 32 Contact Information 32

2 BNP Paribas ZAO · Annual Report 2010 3 BNP Paribas ZAO · Annual Report 2010 Introduction

The message of the Supervisory Board

After a challenging year 2009, Russia more than 52% of the Russian foreign trade, and by the fact showed again impressive GDP growth that BNP Paribas is a top player in the Eurozone (second figures in 2010. Main triggers for this largest bank by market capitalization according to The 4% growth come from high Energy & Banker magazine). This is why very logically Russia is seen as Commodities prices, huge investment a strategic market for BNP Paribas. needs and the further development of the consuming society in Russia. These are “BNP PARIBAS” ZAO results for 2010 reflect this global solid fundamentals for further economical context, with an important growth of the consumer finance growth and “BNP PARIBAS” ZAO naturally for individuals (under “Cetelem” commercial brand), a new benefited in 2010 from this Russian global context. growth of the corporate loan activity and major hedging transactions performed with Russian Corporates. 2010 “BNP PARIBAS” ZAO takes advantage of being the subsidiary of saw also the reorganization of BNP Paribas Commercial BNP Paribas S.A. which was ranked as per Dealogics in 2010: banking activity for Multinationals and Russian non-Energy & Commodities counterparts. Today, all this Commercial - № 1 MLA on the Russian loan syndication market in 2010, banking activity is concentrated in “BNP PARIBAS” ZAO under the Corporate & Transaction Banking (CTBE) name, an - № 8 bookrunner on the Eurobonds Debt for approach developed by BNP Paribas in most of the European Russian counterparts, countries in order to build an efficient continental commercial banking platform for our clients. Last but not the least, the - №6 advisor for M&A deals executed in 2010, after-crisis period sees a revival of the M&A and Cash Equity markets. - №7 Bookrunner on the Equity Cash Market for Russian counterparts. “BNP PARIBAS” ZAO posted very solid 2010 results. Net profit after tax was 656 millions RUR, increased by 33% compared This leading position on the Russian market is certainly partly to 2009. The second important point is the good balance of explained by the fact that the European Union is the first contributions from the Bank’s activities: Consumer finance commercial partner of the Russian Federation, representing increased its outstanding portfolio 4.7 times, which is a

3 BNP Paribas ZAO · Annual Report 2010 substantial improvement in its results; Corporate & Investment framework, the after-crisis world is far from being certain Banking contributed very positively in 2010 by increasing its and predictable. However, we see that Russia has important portfolio of interbank loan by 103%, and corporate portfolio trump cards in its hands, such as Energy and Commodities by 30%. Finally, these results also benefited from a release of wealth, well-educated and dynamic business community, and a governmental policy dedicated to modernization and reserves in 2010. Net allocation to loan loss provisions and diversification of the economy. Along with the Standard reserves for other losses (lines 4, 14 and 16 of Statutory Profit & Poor’s, which upgraded the Bank’s local rating to BBB in and Loss Report), i.e. the cost of risk, is positive in 2010 and March 2010, we are confident in the further development of amount to 140 M RUB due to net release of reserves created in our banking activity and position in Russia. previous years. The cost of the risk stays at a very reasonable level. These very good results demonstrated a better financial balance and a significant growth by Consumer finance. The excellent results of “BNP PARIBAS” ZAO in 2010 allow us to further invest in Cetelem – the local consumer finance Laurent COURAUDON business line and be prepared for the future. Member of the Supervisory Board European sovereign debt crisis, Muslim and Arabic revolutions “BNP PARIBAS” ZAO, Moscow in North Africa and in the Gulf, Japanese crisis, USD liquidity BNP Paribas Country Manager Russia and Belarus constrains, redefinition of the international regulatory CEO “BNP PARIBAS” ZAO, Moscow.

About the BNP Paribas Group

“The bank for a changing world” · More than 200 000 employees in 80 countries BNP Paribas boasts strong advantages, with its well-balanced and successful business portfolio, high potential of synergies · 4 domestic markets: France, Italy, Belgium, and through cross-selling, true control over costs, good command Luxembourg of risk, and strong dynamic towards innovation, all directed · Leading European bank for corporates and institutionals at serving its clients. In each of its business lines, the bank · One of the 6 most solid in the world strives to maintain a position among leading establishments, · 3 core businesses: Retail Banking, Investment Solutions, both in terms of product quality and effectiveness. BNP and Corporate & Paribas is bank number 2 in Euro Zone.

BNP Paribas ranks as the world’s 11th largest company in the BNP Paribas Group is one of the largest banking groups head- rating of the world largest companies by sales, profits, assets quartered in Europe and one of the six strongest banks in the and market value, and 7th in the banking sector worldwide. world (S&P). In Europe, the Group has four domestic markets (‘Global 2000 Forbes’ 2010) (Belgium, France, Italy and Luxembourg) and BNP Paribas Personal Finance is the leader in consumer lending. BNP Paribas ranks as France’s bank number one and the 6th most valuable international banking brand, 3rd in Europe (Brand Finance February 2010). Its brand value in 2010 BNP Paribas is rolling out its integrated retail banking model was estimated by Interbrand/Challenge Magazine as 14.060 across the Europe-Mediterranean zone and boasts a large million USD. network in the western part of the United States. In its Corporate & Investment Banking and Investment Solutions The Group has one of the highest ratings assigned by all three activities, BNP Paribas also enjoys top positions in Europe, a leading rating agencies: long-term rating АА by Standard & strong presence in the Americas and solid and fast-growing Poor’s, Аa2 by Moody’s and АА- by Fitch, which perform a businesses in . stable and positive outlook.

4 BNP Paribas ZAO · Annual Report 2010 5 BNP Paribas ZAO · Annual Report 2010 BNP Paribas operates in 80 countries, and has over 200 000 employees, including 160 000 in Europe.

The Group constantly demonstrates high growth rates of key business indicators. In 2010, the Group generated 43,880 million euros in revenues, up 9.2% compared to 2009 (-0.1% at constant scope and exchange rates). Operating expenses totalled 26,517 million euros (+13.6%; +3.3% at constant scope and exchange rates). Gross operating income was therefore virtually stable at 17,363 million euros (+3.0%; -5.1% at constant scope and exchange rates). Thanks to the sharp decline in the cost of risk (-42.6% at 4,802 million euros; -50.0% at constant scope and exchange rates) due to the improved economic environment, pre-tax income soared to 13,020 million euros, up 44.7% (+36.5% at constant scope and exchange rates).

BNP Paribas and Tennis Long-standing partner to the sport of tennis since 1973, BNP Paribas is actively involved in the game at both local and international level, and in club, schools and social tennis as well as professional events. BNP Paribas has gradually become the number one sponsor in world tennis: official sponsor of Roland Garros since 1973 and sponsor of five ATP Masters events - the BNP Paribas Masters since 1986, Monte Carlo Masters since 2005, Internazionali BNL d’Italia in Rome since 2006, BNP Paribas Open in Indian Wells since 2009 and the Shanghai Masters since 2010. The Group is also title sponsor of the Davis Cup by BNP Paribas since 2001 and the Fed Cup by BNP Paribas since 2005, as well as being actively involved in many other international competitions including the Classic in California, the Grand Prix Hassan II in Casablanca, the Open 13 in Marseille and the BNP Paribas Showdown in Мы - этоЛЮБИТЕЛИ теннис • ВОСХОДЯЩИЕ ЗВЕЗДЫ • ПРОФЕССИОНАЛЫ New York. The Group’s new sponsorship slogan ‘We are tennis’ ИГРЫ ДОБРОЙ ВОЛИ • underlines the fact that BNP Paribas promotes tennis for all, at all levels.

5 BNP Paribas ZAO · Annual Report 2010

ищение , чтобы ого из ных и Теннис – это достижение результатов, создание новых возможностей, предвосх - это событий, способность оказываться в нужном месте в нужное время и делать все nte- быть первым. Это основные принципы банковского бизнеса BNP Paribas - одн ее 500 международных лидеров в сферах Розничных банковских услуг, Корпоратив инвестиционных банковских услуг и Инвестиционных решений. BNP Paribas официальный спонсор турниров Roland Garros, Кубка Дэвиса и Кубка Федерации, Mo Carlo Masters Series, турниров BNP Paribas Masters и Internazionali BNL d’Italia и бол других теннисных соревнований во всем мире. BNP Paribas – это и есть теннис. www.tennis.bnpparibas.com BNP Paribas Group in Russia

BNP Paribas was one of the first foreign banks to come Paribas never stopped its activity in Russia even during in Russia, it started its activity in Moscow through a the 1998 crisis and accompanied the largest Russian Representative Office opened in 1974.I n the 1990’s BNP companies from their start until now. Today BNP Paribas Paribas adapted for the Russian market the Commodity has a very much diversified activity in Russia, being & activity that the bank was the very first active in 3 core businesses: Retail Banking, Investment to develop in the world at the beginning of the 70’s. BNP Solutions and Corporate & Investment Banking.

BNP Paribas Group in Russia has strong Corporate and Investment Banking positions in the market and favorable prospects on the future In Russia the Group has several legal entities:

1. “BNP PARIBAS” ZAO (Laurent COURAUDON, Global Country Manager for BNP Paribas in Russia, President of “BNP PARIBAS” ZAO) “BNP PARIBAS” ZAO was rated BBB/Stable/A-3 by Standard & Poor’s. “BNP PARIBAS” ZAO comprises two business CIB’s operations regard approx 200 employees of this bank segments: and include: • Corporate and Investment Banking 1. Energy & Commodities Finance • Consumer Finance working under Cetelem brand name 2. CTBE (Corporate & Transaction Banking Europe – flow bank- (Philippe BEZIEAU, Managing Director of Cetelem) ing products including corporate loans, trade services, cash 2. CB “BNP Paribas Vostok” LLC - Retail Banking for individuals management and flow Foreign Exchange products) (Vincent OLLIVIER, CEO) 3. Fixed Income – Debt Capital Markets services, Derivatives, 3. LLC “Arval” - Operational leasing (Sergey DIANIN, General Foreign Exchange) Director) 4. Asset Liability Management / Treasury 4. LLC « company ” - Insurance (Konstantin 5. (Mergers & Acquisitions, Primary Equity KOZLOV, General Director) Capital markets, Advisory to listed companies) 5. TKB BNP Paribas Investment Partners - (where BNP Paribas 6. Global Coverage of the biggest Russian corporates and IP holds 50% stake, ( Vladimir KIRILLOV, CEO) financial institutions.

“BNP PARIBAS” ZAO Our local bank also very much benefits from the global started its activity in 2002 being first focused on Energy CIB activity that the group BNP Paribas has on the Russian and Commodity financing, it quickly diversified its range market. According to Dealogic BNP Paribas was in 2010 the of products and types of counterparts in order to offer the first MLA and second Bookrunner for the Russian syndicated full scope of Corporate and Investment Banking products to loan market, the eighth Bookrunner for the Russian Russian and foreign, big and mid-size corporate. Eurobonds market. BNP Paribas is also among the top players In 2007 BNP Paribas further diversified its activity by in the Russian market, including the Commodities launching consumer finance in point-of-sale under the brand Derivative market and took a leading position in 2010 on the of Cetelem. IPO market.

6 BNP Paribas ZAO · Annual Report 2010 7 BNP Paribas ZAO · Annual Report 2010 Cetelem are available at the point of sale – in retail outlets and car dealerships. End of 2010, the outstanding portfolio of Cetelem totaled to more than 10 billion Rubles, which increased by 4.7 times compared to 2009.

The outlook for 2011 There will be changes for the financial market in Russia in 2011, and BNP Paribas is well equipped to succeed in any new context thanks to its global financial strength, balanced Cetelem, a commercial brand of BNP Paribas Personal model and risk policy. Finance, a part of the BNP Paribas Group, specializing in personal financing through its consumer credit and mortgage BNP Paribas is a large banking group that has adapted well to activities. The company was the pioneer of consumer credit the post-crisis context, and it is well equipped to perform for in 1953 and on-line credit in 1997 and is now with 29,000 clients and finance the real economy in the coming months employees in more than 30 countries across 4 continents, and years. BNP Paribas Personal Finance is N°1 in France and Europe. Throughout the world, BNP Paribas is “celebrating” and In Russia, Cetelem (operates since 2007 as a structural unit backing its clients’ projects and is telling them - via a new of “BNP PARIBAS” ZAO) offers a full range of consumer credit global corporate campaign - to “keep reaching”, which also products (consumer loans, car loans and credit cards) that applies for its Russian clients.

7 BNP Paribas ZAO · Annual Report 2010 Management

Supervisory Board (as of January 1, 2011) The Supervisory Board controls the activities of the Management Board, considers and approves its main initiatives, agrees strategic and business plans, as well as arranges the audit and monitoring of the financial and business activities. Also, the Supervisory Board makes decisions regarding establishment, reorganization and liquidation of subsidiaries and representative offices of the Bank.

JEAN LAURENT ALAIN DOMINIQUE LEMIERRE COURAUDON VAN GROENENDAEL REMY 06.06.1950 22.02.1965 13.04.1961 04.03.1954

POSITION: POSITION: POSITION: POSITION: “BNP PARIBAS Bank” Closed “BNP PARIBAS Bank” Closed “BNP PARIBAS Bank” Closed “BNP PARIBAS Bank” Closed joint stock company joint stock company joint stock company joint stock company Chairman of the Supervisory Member of the Supervisory Member of the Supervisory Member of the Supervisory Board, since 2009 Board, since 2004 Board, since 2009 Board, since 2002. BNP PARIBAS S.A. (France) Chairman of the Management BNP PARIBAS S.A. (France) BNP PARIBAS S.A. (France) (BNP Paribas) Board, “BNP PARIBAS” ZAO, (BNP Paribas) CEO, since (BNP Paribas) Advisor to Chairman of the since 2004 2008 Member of the Executive Board, since 2008 President, «BNP PARIBAS Has neither ordinary stocks Committee, Corporate and Has neither ordinary stocks Bank» ZAO since 2006. of the joint-stock company Investment Banking, since of the joint-stock company Head of BNP Paribas Group nor share of participation in 2000. nor share of participation in in Russia. the authorised capital of the Head of Global Energy, Com- the authorised capital of the Has neither ordinary stocks joint-stock company. modities, Export and Project joint-stock company. of the joint-stock company Finance, since 2002. nor share of participation in EDUCATION Has neither ordinary stocks EDUCATION the authorised capital of the I.C.H.E.C. University in Brus- of the joint-stock company Institute of Political joint-stock company. sels, 1984, degree in econom- nor share of participation in Studies, 1971, degree in eco- ics. the authorised capital of the nomics, 1972, degree in Law. EDUCATION joint-stock company. National School of Adminis- Ecole Spéciale Militaire de tration, 1976. Saint Cyr Coëtquidan – mili- EDUCATION tary school in France, 1988, Higher School of Economic Specialist for International Science, 1976, degree in policy strategics. Economics. Robert Schumann University Institute of Political Science, in Strasbourg, 1993, Master’s 1979, degree in Finance. degree in International trade.

8 BNP Paribas ZAO · Annual Report 2010 9 BNP Paribas ZAO · Annual Report 2010 Supervisory Board (as of January 1, 2011)

ALFONSO JACQUES-OLIVIER LODEWIJK CAMILLE PALLAVICINI THOMANN SPOORENBERG FOHL 05.07.1964 13.04.1956 10.03.1960 15.01.1956

POSITION: POSITION: POSITION: POSITION: “BNP PARIBAS Bank” Closed “BNP PARIBAS Bank” Closed “BNP PARIBAS Bank” Closed “BNP PARIBAS Bank” Closed joint stock company joint stock company joint stock company joint stock company Member of the Supervisory Member of the Supervisory Member of the Supervisory Member of the Supervisory Board, since 2010 Board, since 2003. Board, since 2009 Board, since 2009 BNP PARIBAS S.A. (France) BNP PARIBAS S.A. (Suisse) BNP PARIBAS (Brussels) (BNP BNP Paribas A.S. (BNP Paribas) (Switzerland) (BNP Paribas Paribas (Bruxelles) Director of Retail services Head of Corporate Trans- (Suisse)) Head of Energy and Com- department, Member of the actions Banking Europe of Head of Energy, Commodi- modities Coverage in Europe, Board, Member of the Execu- Corporate and Investment ties, Export transactions and Middle East and Africa, since tive Committee, since 2008. Banking, since 2005. , since 2002. 2009. Has neither ordinary stocks Has neither ordinary stocks Has neither ordinary stocks Has neither ordinary stocks of the joint-stock company of the joint-stock company of the joint-stock company of the joint-stock company nor share of participation in nor share of participation in nor share of participation in nor share of participation in the authorised capital of the the authorised capital of the the authorised capital of the the authorised capital of the joint-stock company. joint-stock company. joint-stock company. joint-stock company. EDUCATION EDUCATION EDUCATION EDUCATION UCL University in Belgium, Vienna Economic Univer- Geneva University, 1977, Tillburg Catholic Higher 1979, degree in economics. sity (Wirtschaftsuniversität degree in Economics. School (Netherlands), 1985, Master degree of INSEAD Wien), 1988, degree in busi- degree in law. Business School. ness administration. Venice University (Universita Degli Studi di Venezia), 1990, doctor decree in Business administration.

9 BNP Paribas ZAO · Annual Report 2010 Supervisory Board (as of January 1, 2011)

BRUNO DAVID JEAN-PIERRE BOUSSARD BRUNNER AUTELLI 05.01.1964 16.03.1955 03.09.1949

POSITION: POSITION: POSITION: “BNP PARIBAS Bank” Closed “BNP PARIBAS Bank” Closed “BNP PARIBAS Bank” Closed joint stock company joint stock company joint stock company Member of the Supervisory Member of the Supervisory Member of the Supervisory Board, since 2008. Board, since 2009. Board, since 2002 BNP PARIBAS S.A. (France) BNP PARIBAS S.A. (France) Representative office of BNP (BNP Paribas) (BNP Paribas) PARIBAS S.А. (France) in Head of International Deputy Head of Fixed Income Moscow. Emerging Markets Treasury, Department, since 2005. Head of the Representative since 2004. Has neither ordinary stocks Office, since 2000 Has neither ordinary stocks of the joint-stock company Has neither ordinary stocks of the joint-stock company nor share of participation in of the joint-stock company nor share of participation in the authorised capital of the nor share of participation in the authorised capital of the joint-stock company. the authorised capital of the joint-stock company. joint-stock company. EDUCATION EDUCATION Cornell University, 1977, EDUCATION Institute of Political Science engineer. Toulouse University of Social (I.E.P. – Bordeaux), 1984, Stanford University, 1981, Science, 1973, degree in law. degree in economics. MBA degree. Sorbonne Paris University, 1985, degree in economic relations. East China Normal University, 1986. Additional training at ISIGE (Higher Institute of Nature and Environmental Manage- ment), 2003.

Changes in the composition of the Board of directors (the Supervisory board) of the joint-stock company made within the reporting year: 29 October 2010 Alfonso Pallavicini was included to the Supervisory Board (Minute № ОСА-034/2010).

10 BNP Paribas ZAO · Annual Report 2010 11 BNP Paribas ZAO · Annual Report 2010 Management Board (as of January 1, 2011)

LAURENT ANDREY MARGARITA SERGEI COURAUDON BATIOUKOV TRAVKINA AVRAMOV

POSITION: POSITION: POSITION: POSITION: “BNP PARIBAS Bank” Closed Head of Trade and Structured Chief Financial Officer Head of Legal department, joint stock company Finance Department, Member of the Board of “BNP since 2006. Member of the Member of the Supervisory Member of the Board of PARIBAS” ZAO, since 2009 Board of “BNP PARIBAS” ZAO, Board, since 2004 “BNP PARIBAS” ZAO since Has neither ordinary stocks since 2008. Has neither ordi- Chairman of the Management 2004 of the joint-stock company nary stocks of the joint-stock Board, “BNP PARIBAS” ZAO, Has neither ordinary stocks nor share of participation in company nor share of par- since 2004 of the joint-stock company the authorised capital of the ticipation in the authorised President, “BNP PARIBAS nor share of participation in joint-stock company. capital of the joint-stock Bank” ZAO since 2006. the authorised capital of the company. Head of BNP Paribas Group joint-stock company. EDUCATION in Russia. Moscow State University, EDUCATION Has neither ordinary stocks EDUCATION Department of Applied Math- Maurice Thorez Moscow of the joint-stock company MEPhI (Moscow Engineer- ematics and Cybernetics, State Pedagogical Institute nor share of participation in ing Physics Institute), 1995, degree in Mathematics. of Foreign Languages, 1985, the authorised capital of the theoretical physics and International University in interpreter and translator. joint-stock company. mathematics. Moscow, Graduate School of Academic Law University State University – Higher Finance, degree in Econimics under Institute of State and EDUCATION School of Economics, 1996, Certified accountant, ACCA Law of Russian Academy of Ecole Spéciale Militaire de degree in economics member. Sciences (ISL RAS), 1998, PhD Saint Cyr Coëtquidan – mili- degree in Political Science. tary school in France, 1988, Specialist for International policy strategics. Robert Schumann University in Strasbourg, 1993, Master’s degree International trade.

11 BNP Paribas ZAO · Annual Report 2010 Strategy and results 2010

Macroeconomics and Russian banking industry in 2010

Recovery was relatively strong in 2010… project (including social modernization, infrastructure modernization and innovations) to reduce notoriously known In 2010, Russia delivered relatively strong macro economic dependence on oil prices. Structural reforms promotion is the results, assuring solid recovery from the recession of 2009. only way to make economic growth sustainable in the medium Economic growth accelerated to 4%y/y in 2010, budget deficit term. In 2010, the government approved RUB 1826 bn from dropped to 3.9% of GDP, inflation slowed to 8.8%y/y and the the budget to materialize the project in 2011- 2013. rouble remained stable. These achievements have become possible even in very unfavourable climate conditions with …and we are even more bullish on 2011 - 2012 anomaly fronts in winter and extreme heat and draught in summer of 2010. Indeed, acceleration in food inflation in We see the recent spike in oil prices above USD110/bb as H2’10 was mainly attributed to the heat impact. Climate sustainable for 2011-12. This view boosts our optimism on anomaly affected GDP growth by 0.5ppt, but this effect is economic acceleration in 2011-12. We forecast GDP growth likely to be temporary and over in H1’11. to reach 5% and 5.7% in 2011 and 2012 respectively. We see domestic demand (as a function of high oil prices) to remain Capital outflow, which significantly accelerated in H2’10, the main locomotive of growth. We expect government to raised more concerns. Sizable capital outflow ofUS D38.4bn continue boosting pensions and salaries of government shows structural weakness of economic institutions and employee, which is typical for election period. This will necessity of structural reforms. The rouble was strongly additionally support consumption, pulling its growth to 5.1- affected by the outflow. It underperformed all commodity 5.3% y/y in 2011- 2012. currencies - which reduced investors’ interests to the Russian financial markets. Nevertheless, strong current account Inflation may remain the main challenge of 2011. We see CPI helped to offset negative impact from capital outflow and acceleration on the back of high food prices, more expensive keep the rouble stable. fuel and rebound in domestic demand. We forecast CPI to average 10% this year, or to reach 9.2% by 2011-end. The CBR We believe that despite improvements in oil conjuncture, the insists that it is possible to limit CPI by 6-7% in 2011, which government continues strongly supporting modernization may not be realistic, in our view. However, the gap between

12 BNP Paribas ZAO · Annual Report 2010 13 BNP Paribas ZAO · Annual Report 2010 actual trend and the CBR’s expectation strengthens incentives Higher oil prices strengthen balance of payments. We see to make monetary tightening more aggressive. The bank has current account surplus to approach 5% of GDP in 2011. already started tightening cycle in February, hiking key rates We also expect net capital inflow in 2011 as higher oil by 25bp, and then made a pause in March. We see more hikes makes investors’ sentiment better. As the CBR continues in the nearest future and forecast the refinancing rate to liberalizing FX regime and moving to dirty free floating, we reached 9% by the end of 2011. see appreciation pressure on the rouble to strengthen on the back of fundamental factors and CBR’s policy choice. High oil prices are very supportive for fiscal performance (oil and gas revenues account to more than 50% of federal budget Appreciation is becoming the only likely scenario for 2011. revenues). In 2011, Russia is likely to return to balanced This is not supportive for domestic producers but may make budget and even slightly contribute to the Reserve Fund. consumers happier. Consequently, services sector of economy Consequently, we expect sovereign borrowing appetite to be is likely to deliver stronger results as it is not vulnerable to relatively low (no new Eurobond issuances in the rest of 2011 appreciation story. We expect financial sector (banking) and and 2012). The government will get more financial resources retail trade sector to become the main beneficiaries of high to promote ambitious diversification and modernization oil prices. Oil and gas sector are benefiting less as their tax projects and further increase in social spending. burden is too strong.

Statutory Financial results 2010

Report on paying declared (accrued) An interested-party transactions dividends on stocks of the joint-stock In 2010, the Bank had no interested party transactions. An company interested-party transaction is a transaction with respect to General Shareholders meeting held on May,13th, 2011 decided which a member of the board of directors, a CEO, a member not to pay dividends, to allocate 32 808 423,44 Rub to Reserve of the collective executive body, a shareholder owning 20 % Fund and to allocate remaining 2010 Net Profit 623 360 045, or more of the company’s shares, a person entitled to issue 43 Rub to Retained earnings. instructions binding thereon, or their spouses, parents, children, brothers and sisters, step-parents and step-children Major transactions and/or their affiliates - either (i) is a party, beneficiary, In 2010, the Bank had no major transactions. A major transac- mediator or representative in the transaction; (ii) owns 20 % tion, according to art. 78 of the Law on Joint-Stock Companies, or more of the shares of the legal entities being (i) above; means a transaction (including a loan, credit, pledge or sure- or (iii) holds management position in the legal entities being tyship) or several interrelated transactions relating to the (i) above; or (iv) in other cases stipulated by the company’s acquisition, alienation or possibility of alienation of assets by charter. a company directly or indirectly, with the value of the assets being 25 % or more of the balance sheet value of the com- pany’s assets appraised according to its financial statements as of the last accounting date, except for the transactions ac- complished in the course of the ordinary economic activity of the company, transactions relating to placement through subscription of ordinary shares of the company and the secu- rities convertible into ordinary shares of the company.

13 BNP Paribas ZAO · Annual Report 2010 Key Financial Indicators “In 2010 total Bank’s assets increased by 85%, coming back to precrisis level. Net profit increased by 33% YoY” mln rubles Assets 2010 2009 2008 2010/2009 Total assets 61 561 33 321 65 401 85% Cash 4 4 7 -6% Due from other banks 19 799 9 757 20 037 103% Loans and advances to customers 34 204 20 519 43 228 67% Investments into securities 5 916 1 684 967 251% Other assets 1 638 1 356 1 162 21%

Liabilities Total liabilties 56 470 28 864 61 478 96% Due to other banks 46 641 16 889 43 914 176% Customer accounts 9 338 11 231 15 783 -17% Other liabilities 491 744 1 781 -34%

Equity Equity capital 5 091 4 457 3 923 14%

Income statement 2010 2009 2008 2010/2009 Total Revenue 3 361 2 283 4 026 47% Total Cost of Risk* 140 596 (1 713) -77% Administrative and operating expenses (2 625) (2 050) (1 585) 28% Profit before tax 875 829 728 6% Net pro t after tax 656 493 384 33%

Ratios 2010 2009 2008 RoE (before tax) 18.3% 19.8% 19.6% RoE (after tax) 13.7% 11.8% 10.3% Cost/income ratio ** 78.1% 89.8% 39.4% Interest Margin on earning assets 5.9% 3.1% 2.3% Capital adequacy ratio (N1) 16.4% 20.6% 15.7%

* Total Cost of Risk comprises lines 4, 14 and 16 of Statutory Pro t and Loss Statement being Change in Reserves for Loans, Reserves for Other Losses (including Off Balance Sheet Commitments, Reserves for Term deals and Reserves for Securities) ** Total Expenses / Total Revenue

Information about the volume of each kind of energy resources used by the Bank in 2010 Energy resource Volume Mln. Rubles Electric Power - included into rental payment Motor Gasoline - 1. 1

14 BNP Paribas ZAO · Annual Report 2010 15 BNP Paribas ZAO · Annual Report 2010 Assets Assets, mln rubles

65 401 61 561

Corporate loan -49% +85% portfolio 24 012 Investments into 42 315 33 321 securities 5 916 Retail loan portfolio

10 192 Other assets 18 457 Due from other banks 2 062 20 037 19 799 9 757

2008 2009 2010

In 2010 total Bank’s assets increased by 85% (from 33 321 mln rubles to 61 561 mln rubles), coming back to precrisis level. Such growth significantly exceeded overall market growth of 14.9%*. The main drivers of assets growth are: 1. growth of total loan portfolio (net of reserves) by 67%: corporate loan portfolio increased by 30% and retail loan portfolio increased by 394%. 2. growth of interbank loans by 103%. 3. growth of investments into securities by 251%. The structure of Bank’s assets is presented on diagram below:

Structure of Bank’s assets as of 31.12.2010 Structure of Bank’s assets as of 31.12.2009

10% 3% 5%4% Due from other banks 6% Due from other banks 32% 29% 17% Corporate loan portfolio Corporate loan portfolio Retail loan portfolio Retail loan portfolio Investments into securities Investments into securities 55% 39% Other assets Other assets

In 2010 total loan portfolio represents 56% of total assets (2009: 61%), where corporate loans are 39% (2009: 55%), and retail loans are 17% (2009: 6%). Share of Investments into securities increased from 5% to 10%.

* www.cbr.ru /“Report on the development of the banking sector and banking supervision in 2010”, p.21 (“Development of banking industry in 2010”, page 21).

15 BNP Paribas ZAO · Annual Report 2010 LOAN PORTFOLIO GROWTH Total Loan Portfolio (including Loans to Banks) Net of Reserves grew by 86% in 2010 YoY. Gross corporate loan portfolio, mln rubles Gross retail loan portfolio, mln rubles

-55% +29% +371% 42 784 10 458

19 287 24 793 +135% 2 222 947 2008 2009 2010 2008 2009 2010

Corporate loans Retail loans

Loan Portfolio Gross (excluding Loans to banks) grew by 64%, 2. Decrease of LLP level for retail loans was due to growth including growth by business segment: of auto loans share in total retail loan portfolio (being collateralized therefore less risky, car loans require lower 1. gross corporate loan portfolio increased by 29% (which is provisions); much above market growth of 12.1%*); and

2. gross retail loan portfolio increased by 371% (which exceeds market growth of 14.3%**).

Net interest margin on earning assets (including loan portfolio, LLP / Gross loans, % interbank loans, and investments into securities) increased from 3.1% in 2009 to 5.9% in 2010.

R growth YoY (from 2 222 mln rubles to 10 458 mln rubles). Such impressive growth was mainly due to Cetelem’s aggressive 7.2% marketing policy in the car loans segment. Car loans share 4.3% 4.6% in the Bank’s retail portfolio increased from 17.6% in 2009 to 3.6% 3.1% 2.5% 3.0% 44.3% in the end of 2010. 1.1% 1.1% 2008 2009 2010 Loan loss provision level decreased from 4.6% in 2009 to 3.0% in 2010 (which is below average 8.5% LLP level as of 31.12.2010)***. This is explained mainly by: Retail loans Corporate loans 1. Decrease of LLP level for corporate loans was due to Total loans

which led to release of corporate loan loss provisions;

* www.cbr.ru / “Report on the development of the banking sector and banking supervision in 2010”, p.22 ** www.cbr.ru / “Report on the development of the banking sector and banking supervision in 2010”, p.23 *** www.cbr.ru / “Report on the development of the banking sector and banking supervision in 2010”, p.32

16 BNP PARIBAS ZAO · ANNUAL REPORT 2010 LIABILITIES The share of Liabilities to Banks in total liabilities increased from 59% to 83%. The major part of the Bank’s interbank liabilities (88%) is liabilities to BNP PARIBAS Group entities as of 31.12.2010.

The share of customer’s accounts decreased from 39% in 2009 to 17% in 2010.

Structure of Bank’s liabilities as of 31.12.2010 Structure of Bank’s liabilities as of 31.12.2009

1% 3% 17% Due from other banks Due from other banks Customer accounts Customer accounts 39% 59% Other liabilities Other liabilities

83%

EQUITY In 2010 the share capital was increased from 1 750 mln rubles to 4 162 mln rubles by capitalisation of retained earnings. PROFITS AND LOSSES

+33% +28%

656 493 384

2008 2009 2010

The main reason of the growth was increase of Total Revenue by 47% in 2010.

17 BNP PARIBAS ZAO · ANNUAL REPORT 2010 Revenue, mln rubles

4 026

3 361 -43% +47% 353 Net trading result 2 940 2 283 Net interest income

803 Net other operating income 2 729 (expense)

1 203 1 474 (117) 7 278 2008 2009 2010

The share of Net Interest income in total revenue increased from 65% to 81%. The increase of Net Interest income by 1 255 mln rubles (+85%) was partly compensated by decrease of Net Trading result.

The growth of net interest income was driven by portfolio growth, growth of margin in corporate segment and growing Cetelem activity with higher interest margin on retail loans versus corporate loans.

Profit before tax by source, mln rubles

4 026 2 283 3 361 Total revenue

728 596 829 140 875 Cost of risk

(1 585) (2 050) Total expenses (2 625)

(1 713)

2008 20092010

Profit before tax for 2010 year increased by 46 mln rubles (+6%) and amounted to 875 mln rubles.

Net allocation to loan loss provisions and reserves for other losses, including off balance sheet commitments and term foreign exchange deals (cost of risk) was positive for both years 2009 and 2010 due to net release of reserves created in 2008. The level of loan loss provisions decreased in 2010 versus previous year due to the following factors:

1. Improvement of financial position of major corporate clients;

2. Growth of auto loans share in total retail loan portfolio (being collateralized therefore less risky, car loans require lower provisions);

Administrative and other operating expenses demonstrates growth in 2010 (+28% YoY) and in 2009 (+29% YoY), mainly explained by expansion of retail business.

18 BNP Paribas ZAO · Annual Report 2010 19 BNP Paribas ZAO · Annual Report 2010 Profit before tax by segments, mln rubles

CIB 1 534 1 539 Cetelem 1 306 728 829875

(431) (807) (710)

2008 2009 2010

In 2010 corporate and investment banking remains the main profitable business of the Bank. However, retail segment demonstared substantial growth during 2010 and should become profitable in 2011.

19 BNP Paribas ZAO · Annual Report 2010 Corporate investment bank

BNP Paribas Corporate & Investment Banking: presents an extensive expertise to all of its Russian a European leader in Global banking and corporate clients, supported by a world-wide network in more than 80 countries and a very strong presence in the financial markets. “BNP ARIP BAS” ZAO is a large Russian bank in terms of capital, its capital amounts 5.74 In July 2002 BNP Paribas received its first Russian billion rubles and total assets are 61.6 billion rubles as banking license under the name of “BNP PARIBAS” at 01 January 2011. BNP Paribas CIB provides first-class ZAO and developed its local Corporate and Investment solutions that help clients to achieve their goals. Banking activity under this license. Today, with 200 personnel BNP Paribas Corporate and Investment offers “BNP PARIBAS” ZAO was rated BBB/Stable/A-3 a full range of corporate and investment products and by Standard & Poor’s.

“BNP PARIBAS” ZAO business model consists of: composition of raised resources shall be defined on the basis of the target structure of assets and liabilities of the Bank, Fixed Income & ALM Treasury as well as currency and interest-rate risks. “BNP PARIBAS” BNP Paribas’ Fixed Income business offers a broad range of ZAO is the key division of BNP PARIBAS Group in Russia, and products and services in the global interest rate, credit and this is why the significant share of long-term financing of the currency markets. We help our global franchise of clients find Bank has historically been sourced from the parent bank – the effective ways to raise and invest capital as well as manage average indicator for 2010 is around 60% of total liabilities. their exposure to risk. This client base comprises hundreds of corporations, institutional investors, banks, governments and Liquidity management policy allowed “BNP PARIBAS” ZAO to supranational organizations. expand its footprint on the interbank market. The amount of interbank loans has increased by 103% YoY. In 2010, the bank ALM Treasury fulfills the missions of the Group’s liquidity, increased investments into the securities portfolio of high- operational and structural foreign exchange risks and interest quality issuers by 351%, which totaled 5.9 bln. Rubles. rate risks in the balance sheet management. In 2010-2011 Fixed Income department in Russia has In the context of economic turbulence, capital management successfully introduced new format of derivatives became one of the most challenging aspects of Bank’s strategy. documentation to Russian Corporate clients - Russian ISDA. The average level of capital adequacy according to Russian statutory accounting data in 2010 was 18.1%, which supports Based on high level of confidence of Russian clients to the approach followed by “BNP PARIBAS” ZAO with regard to documentation proposed by FSRF to Russian market, several capital management. derivatives deals with strategic Russian corporate clients have being done. In 2010, under implementation of the resource base diversification strategy the Bank decided to approach the On treasury side, “BNP PARIBAS” ZAO has been an active public debt capital market in order to issue ruble bonds. Rubles liquidity provider for clients, during this period BNP Paribas was able to expand its franchise in Russia among its Corporate Transaction Banking Europe clients’ base and new customers. Corporate Transaction Banking Europe (CTBE) is a business line and client relationship unit created in February 2010 as a Funding strategy of “BNP PARIBAS” ZAO is based on the unified platform in order to reinforce itsE uropean commercial principle of the maximum possible diversification of funding and investment banking offer to address the flow banking sources. The preference is given to one or another instrument needs of BNP Paribas’ corporate clients in 18 countries in depending on the current market conditions, and the overall Europe, including Russia.

20 BNP Paribas ZAO · Annual Report 2010 21 BNP Paribas ZAO · Annual Report 2010 Products · Transactional financing of trading operations in Russia and cross-border · Short term trade and pre-financing · Working capital products · Borrowing base financing · Structured inventory financing (includingS pecialized Inven- tory Finance through Esomet / Utexam) · Reserve based lending

CTBE helps to position BNP Paribas as the benchmark in Europe Energy & Commodity financing consists of Commodity Finance for day-to-day corporate banking services, in cooperation and Energy & Commodity Structured Debt. with the other competence centres and business lines as well as to be at the heart of BNP Paribas’ strategy of becoming “the Clients bank for corporate clients in Europe”. · Producers of energy and commodities

CTBE division specializes in communicating with two major · Traders groups of clients: Russian subsidiaries of global clients of BNP · Logistics companies (terminals, storage facilities, etc.) Paribas Group, as well as with the group of Russian companies from non-commodity sectors, such as telecommunications, BNP Paribas’s leadership positions in Energy & Commodities electronics, retail, transport, power, leasing, pharmaceuticals, sector evidenced by the industry awards and rankings automotive, construction materials, etc. which we received. The Bank is well-positioned to expand its businesses in all global markets and to continue to better In 2010, the loan portfolio of CTBE grew by 4% to 7.1 bln rubles. serve its clients. The loan portfolio of CTBE showed its extremely high level In 2010 loan portfolio E&C finance has demonstrated a good of quality during the post-crisis period: only one company in quality and increased by 46% to 16.8 bln rubles. Portfolio the CTBE’s portfolio went through the restructuring process, increase based on a chosen strategy for 2010 which intends however, all amounts were repaid on time and in full. the following:

In 2011, the CTBE loan portfolio will largely grow due to the · selective marketing on new names, growth of ruble loans. · diversification to new sectors, Products that CTBE clients enjoy include working capital · increase business with core clients, financing (short-term) and investment program financing (long-term), export finance (subject to guarantees from · strict monitoring of exposure: duly interests payments and international export credit agencies), risk management loan prepayments, collateral, mark-to-market, credit profile. instruments (interest-rate and foreign exchange risks), trade finance, cash flow management as well as corporate finance. Client’s Coverage Due to market conditions in 2010, CTBE clients raised neither BNP Paribas distinguishes itself as a provider of innovative syndicated loans, nor placed any Eurobonds. solutions by blending the expertise of the bank’s various business lines. The quality of our financing and consulting Energy & Commodity Financing services depends on our understanding the needs of our BNP Paribas is longstanding leader in the energy & commodi- clients, wherever in the world they operate. Our relationship ties businesses worldwide and in Russia in particular. with our client therefore lies at the heart of our activities. As a pioneer in the energy & commodities (E&C) finance busi- ness, our group is widely recognized as a worldwide leader and one of the most innovative houses in the world with a high capacity to engineer creative structured solutions. BNP Paribas offers sophisticated financing solutions to players in each segment of the energy industry, offering Financing of commodity trading companies, marketing companies and mono-activity industrialized groups.

21 BNP Paribas ZAO · Annual Report 2010 5. In support of its global Equity Capital Markets (ECM) platform, execution of equity and equity-linked offerings on off-shore stock exchanges.

The Corporate Finance Department targets the corporate clients of BNP PARIBAS, as well as with other eligible clients providing sufficient deal size. In particular, the Corporate Finance Department aims at working with the Russian authorities and the State-run companies to assist them in the upcoming privatisations.

A specific team, CTI (Coverage and Territories International), Revenue and achievements is set up within BNP Paribas for the coverage of its clients in Since its establishment in Russia, the Corporate Finance the world. Within this team, a special Group: FIG (Financial Department of BNP PARIBAS ZAO became a visible player in the Institutions Group) is dedicated to the coverage of Financial Russian M&A and ECM markets, having worked, in cooperation and Institutional clients worldwide. with the global BNP PARIBAS Corporate Finance franchise, on the following large and visible assignments, such as, inter alia: The mission of CTI is to identify products and services that correspond to a client’s local needs. 1. Advisory to RusHydro for its reorganisation, capital increase and consolidation (2008); The Group’s international network, organized along business lines, enables the bank to accompany local businesses with 2. Advisory to OAO Novatek for its USD650m acquisition their international endeavors. Throughout the BNP Paribas of a 51% stake in OAO Yamal LNG (2009); network, CTI focuses on developing and managing global long-term client relationships with large corporations across 3. Advisory to OAO Novatek for its USD1,233m acquisition various industries. Additionally, CTI ensures streamlined of a 51% stake in OAO Sibneftegas (2010); client coverage through Relationship Managers offering global 4. Global Joint Coordinator and Joint Bookrunner of the USD2.2bn financial solutions. IPO of UC Rusal on the HKSE and Euronext NYSE (2010). In Russia CTI is represented by Oil&Gas, Metals&Mining and BNP PARIBAS was ranked No. 5 by the value of completed M&A FIG teams. deals with Russian targets or seller, according to Thomson Reuters, for the cumulative period of the 2008-2010 years, Corporate Finance: growing presence and and No. 7 in 2010 by ECM deal value, according to Dealogic. visibility in the Russian market Organisation Strategy and commercial policy The Corporate Finance Department of BNP PARIBAS ZAO was The Corporate Finance Department plans to reinforce its established on January 1, 2008, as part of the global BNP positions in the Russian markets by: PARIBAS Corporate Finance franchise, which - with more than 1. Leveraging on existing Energy & Commodity clients, but 400 professionals worldwide - functions on a matrix basis, also sectors outside the natural resources, such as Consumer with geographical offices, sector groups and product teams. Goods, Retail, Utilities, Capital Goods, Telecommunications & Media, etc. As of the end of 2010, the Corporate Finance Department of BNP PARIOBAS ZAO has established a solid team of 2. Reinforcing its communication with the Russian authorities professionals and plans to increase the team further in 2011 and State-run companies, focusing on BNP PARIBAS’ leading with this growing business activity. experience in the privatisation field worldwide (No.4 by completed privatisation deals in 2008-2010, according to Products and target clients Thomson Financial). The Corporate Finance Department offers the following services: 3. Accelerating its cross-selling policy with the global BNP 1. Merger & Acquisition (M&A) and restructuring advisory, PARIBAS Wealth Management Department.

2. Privatisation-related advisory 4. Recruiting additional resources, notably originators. 3. Valuation and fairness opinion, Developing its activity in Russia, remains on of the top 4. Private equity placements, priorities of the global Corporate Finance department.

22 BNP Paribas ZAO · Annual Report 2010 23 BNP Paribas ZAO · Annual Report 2010 Consumer financing

Cetelem: a new dimension vision of Cetelem consists of performing of a sustained Within the “BNP PARIBAS”** Bank, Cetelem, is a contribution to improving the quality of daily life for commercial brand of BNP Paribas Personal Finance, the customers. Cetelem provides households with the specializes in consumer finance. With nearly 3.000 necessary information to draw up their budget and employees in more than 61 regions of Russia, Cetelem decide how much they can sensibly afford to borrow today is one of the emerging players on the Russian via its communication program Responsible Lending. market. Thus, it places the information on the ABC of Personal Cetelem markets a broad range of solutions available at Finance on the special page on its web-site Cetelem.ru the point of sale: retail stores and car dealerships. The – Responsible Lending.

Consumer Finance – Results overview more than in January 2010. In 2010, expanded greatly the car For the whole of 2010, in a changing business environment, finance business by forming a partnership with Ford with the Cetelem continued its efforts initiated in 2009 to reinforce its access to a network of 100 centers in Russia, and large auto business model as well as its sustained growth strategy in the dealerships. Point of Sales (POS) lending and Auto businesses. Cetelem by adjusting its development, operating costs and Cetelem has a number of strengths to help it to boost sales cost of risk to the ambitious goals, has achieved its targets and consolidate its position, including its membership of in lending volumes. As a result, the loan portfolio of Cetelem the BNP Paribas Group, a comprehensive range of financial enjoyed a notable growth. Compared to the level of 2009 its services, and operations on the major part of the Russian size has increased by 4.7 times, which totaled to 10 billion territory. Hence, Cetelem demonstrated a consistent rubles. development in 2010, showing the maximum acceleration thanks to cooperation with major partners - retail chains and End of 2010, a focus on POS and Car loans resulted into car dealers. product portfolio breakdown: the share of POS-loans grew up to 54,6% of gross portfolio (RUB 5.71 billion), car loans Over the past year the number of regions has tripled, increased up to over 43.4% (RUB 4.54 billion), credit cards expanding the coverage of Cetelem’s presence on the territory share still is low compared to other product lines and stays at of Russia, and at the end of December 2010, Cetelem operated almost 2,0% (RUB 0.21 billion). in 61 regions of Russia. Significant events in 2010 End of 2010, Cetelem has been making POS loans granting 2010 - a year of a buoyant business growth aimed to boost via more than 2.400 points of sales, which is almost 6 times the Bank’s competitiveness and to increase customer loyalty more than in 2009. In December 2010 the number of car through an expanded network and range of consumer loan points of sales totaled to more than 800, which is 18 times products.

** « BNP Paribas Bank» ZAO, Banking Licence of Central Bank of Russian Federation to perform banking operations № 3407 from 10.07.2002 and 21.04.2005. Address: 125009, Moscow, Bolshoy Gnezdnikovsky Pereulok 1, bldg 2. Principal State Registration Number: 1027700045780.

23 BNP Paribas ZAO · Annual Report 2010 One of the significant events of the year is a partnership A global commitment to clients and partners: Cetelem with Ford. The partnership aims to offer top quality services delivered a new promise: “Let’s give a future to your plans” to the dealer network and to provide new and attractive starting from May 2010 in Russia. Mr Credito, the Cetelem financial package to the end-customers. Extensive know- mascot that embodies this promise has been incorporated how of Consumer Financing by Cetelem presents new into the Cetelem logo. powerful preposition to Ford dealers all over Russia and final customers. On December 2nd, Cetelem in Russia won in the category “Breakthrough of the Year” in the 4th annual ceremony Regional expansion – Cetelem continued to strengthen its “RETAIL FINANCE AWARDS – 2010” for the achievements in commercial activities and implemented the organic growth developing consumer finance business in Russia. model targeted for 2010 to meet client needs, by expansion of the network and rationalization of the product range. The key priority for Cetelem has been the support of development and work of its partners both federal and regional in the retail and auto market and bringing more opportunities via consumer lending to more Russian clients. Thus, end of 2010, Cetelem has had more than 3.700 points of sales across 61 region in Russia, which is a sharp increase from fewer than 20 regions in December 2009.

New management structure on 1 March 2010, following the appointment of Philippe Bezieau, Managing Director of Cetelem in Russia. Cetelem has created a management structure geared to its strong growth ambitions, with the goal to improve the position in the new “after-crisis” environment by better efficiency, client-centric approach, a better control over the company’s development, as well as responsibility and communication improvement.

Cetelem launched a new interactive internet site - www.cetelem.ru - in 2010 to promote its financial products, underscoring its role as a responsible company.

The new version of the site offered multiple options to its visitors: access to interactive applications explaining in a simple way the principle of work of credit cards, the credit calculator for monthly repayments on car loans based upon the parameters of car value.

Repayment channels network - new openings Cetelem’s repayment channels network has been experiencing a period of an active development by adding new leading payment partners, and therefore by rolling-out a greater number of points of repayment in order to expand the remote client service. End of 2011, Cetelem payment services network covered 12 Repayment partners with more than 88.000 terminals.

24 BNP Paribas ZAO · Annual Report 2010 25 BNP Paribas ZAO · Annual Report 2010 Risk Management

Credit Risks assessment and management has helped the Bank to The bank is part of BNP Paribas Group (the “Group”). The successfully pass through the period of economic slowdown, methods and procedures that are common for all Group and today it allows to maintain the loan portfolio quality at members are applied within the Group and are aimed at a high level – overdue indebtedness share in the total loan efficient financial risk management. portfolio of the Bank is only 2%.

Core principles regulating the Bank’s loan policy include Consumer Lending Risks compliance with the Bank’s code of ethics, clear definition With regard to consumer lending (i.e. loans issued to of duties, availability and compliance with the procedures as individuals who are not registered as entrepreneurs and who well as careful risk analysis. The general loan policy includes use the loans to purchase consumer and other related goods a series of dedicated procedures regarding issuance of loans and services not for profit generation purposes), provisions taking into account each type of business or counterparty. are created; the Bank applies constant criteria to portfolio/ subportfolio of loans and does not defines depreciation on the There is a full-scale risk control and reporting system in individual basis. A loan is deemed depreciated as soon as any the Bank, that complies with the Group standards. The part of the loan amount becomes overdue. responsible divisions of the Bank prepare reports regarding unusual positions within the loan portfolio on a daily basis. The Bank uses various means for monitoring to ensure early identification of potential credit risks increase. Control is carried out in accordance with certain lending limits.

The Bank has its own internal rating system (IRBA). The Bank makes periodic assessments and checks the adequacy of this system as well as the correctness of its application. With regard to corporate borrowers, the system is based on three parameters: probability of counterparty’s default represented through the assessment category, total debt recovery amount (or loss in case of default), that depends on the deal structure, and the factor affecting the loan quality change that determines the amount of the off-balance sheet risk.

In addition to careful selection and assessment of individual risks, the Bank also uses a portfolio policy aimed at the diversification of risks according to borrowers, industries and countries. The Bank controls credit risk by setting limits per one borrower or a group of related borrowers, as well as by setting limits according to geographical and industry segments. Credit risk limits according to product types and industries are regularly approved by the Bank as well as by the Group. Such risks are regularly monitored, and in addition, the limits are revised at least annually.

The detailed and multi-level approach to credit risk

25 BNP Paribas ZAO · Annual Report 2010 management system that is able to respond to modern challenges, has always been and is the top priority, which allows to demonstrate the soundness and reliability of the Bank, even amid volatility. Operational Risks In 2010, the Bank continued to implement operational risk management standards according to the requirements of Basel Committee on Banking Supervision, as well as the Russian statutory requirements. In order to do this, the Bank is actively using the knowledge of BNP PARIBAS Group which is based on many years’ experience in implementing advanced approaches (AMA) with regard to operational risks assessment in compliance with the Basel II provisions, and adapting it to the specifics of the Russian legislation and the market of Russia, as well as the existing business processes.

In 2010, significant improvements have been introduced Provisions are created with regard to all depreciated loans to the process of operation risks control. For this purpose, in accordance with the migration model. The objective of the measures were introduced in Bank’s divisions with regard migration model is to assess the probability of the event if to operational risks assessment, main control procedures the amount overdue during one specific period (for instance, were identified and formalized, dedicated procedures were from 30 to 60 days) will stay overdue during the next period regarding accounting records analysis and reconciliation. (for instance, from 60 to 90 days) and further until the court In addition, in order to increase control and assessment quality of potential losses, such operational risk management proceedings stage. Provision rates are applied to the current instruments as key operational risk indicators and scenario outstanding amount depending on the overdue level. analyses were extended. The credit risk with regard to off-balance sheet financial In 2010, for the first time ever, operational risk control instruments is defined as the probability of loss due to system was inspected by BNP Paribas Group Inspection as default of another transaction participant with that financial to its compliance with the Group’s requirements and the instrument to comply with the contract terms. The Bank recommendations of the Bank of Russia. According to the applies the same loan policy to the contingent liabilities as auditor’s opinion, Group’s standards and Bank of Russia to the balance sheet financial instruments, which is based recommendations have been successfully implemented. on the loan approval procedures, the application of limits limiting the risk, as well as the monitoring procedures. In 2011, the system approach to operational risk management will be further enhanced and improved, which is especially Market Risks important amid the increase of internal and external factors 2010 was more quiet for the financial markets as compared to affecting the Bank’s operational risk exposure. 2008 and 2009 recession years. Market risk and liquidity risk management system of the Bank is based on the international and Group standards taking into consideration the local specifics, and it continues to have a positive impact on the financial strength of the Bank according to both, international and Russian standards. Basis spread risk control is worth mentioning, as well as the foreign exchange derivatives policy introduced by the Bank during the recession.

The Bank has access to currency liquidity of the Group and continues to diversify ruble liquidity sources. The Bank has a sufficient reserve of ruble liquidity which can be used in a crisis situation.

Establishment of an adequate market and liquidity risk

26 BNP Paribas ZAO · Annual Report 2010 27 BNP Paribas ZAO · Annual Report 2010 Human Resources Management

In all its core businesses, BNP Paribas is determined to be a We believe that our values should be embraced by everyone benchmark banking group, focusing on customer satisfaction in the Group and guide our daily actions. These values help and actively pursuing the improvement of its earning motivate people and foster a sense of unity and common capacity. purpose across the entire Group.

Created as a collective project, conceived by a group of men and women at the service of their customers and shareholders, the Michel Pebereau, “bank for a changing world” has adopted, from the very start, four corporate values that together encapsulate the essence of Chairman of the Board of Directors of BNP Paribas. its action: Responsiveness, Creativity, Commitment, Ambition. These core values all come together under the umbrella of the BNP Paribas signature and logo, the four stars “taking flight” emblem, a symbol of dynamism and progress.

RESPONSIVENESS Management Operation Principles CREATIVITY Сorporate CORPORATE Code SO CIAL of Conduct RESPONSIBILITY COMMITMENT Personnel Management Principles

AMBITION

27 BNP Paribas ZAO · Annual Report 2010 · Responsiveness

Speed in the assessment of new situations and developments, and in identifying opportunities and risks. Efficiency in decision making and in action.

· Creativity

Encouraging initiatives and new ideas. Recognising contributions.

· Commitment

Commitment to the service of clients and collective accomplishment. Exemplary behaviour.

· Ambition

Aspiration for challenge and leadership. Desire to obtain team success in a competition where the referee is the client already taken summer internship programs at our Bank and Recruitment in Russia BNP Paribas Group one person is currently employed with the Bank. BNP Paribas is one of the leading global companies ranked Remuneration Approach 6th in the banking industry worldwide. The bank is present The remuneration approach is performance-oriented in 80 countries on 5 continents and has more than 200 000 considering the business strategy, interest of employees and employees, including 160 000 people in Europe. management. Our employees are excellent, active and motivated people One of the key drivers of Bank’s development is the who are able to work as a team and oriented for professional connection between the reliability of business processes and growth and successful business development of the Bank. the profitability in the long run.I n this way, the remuneration BNP Paribas continued its work under employer brand of top management is directly related to strong profitability development program in order to raise brand awareness of the Bank. among potential candidates of the Bank and other companies, The remuneration amount of top management (including as well as successful positioning of the Bank as the most payroll, bonuses, commissions, benefits and/or reimbursement attractive employer. We are also interested in attracting of expenses as well as other material provisions) paid by the young specialists and recent graduates to our successful Bank in 2010 was 50,561,498.13 Rubles (including taxes), and team. In order to implement this strategy the Bank annually in particular: arranges a series of events including the Banking Game – Ace Manager. Payroll – 29,160,199.70 Rubles;

Ace Manager is the first banking online game in the world Bonuses – 13,716.701.01 Rubles; created by BNP Paribas in 2008. Game format was chosen for a reason – it allow the company and young people to get to know Reimbursement of expenses – 7,684,597.42 Rubles. each other more closely during the events: campus tours and training games, i.e. under a more accustomed circumstances No remuneration is paid to members of the Supervisory Board for the youth instead of an interview in the office. The fact, of the Bank. that the game was transferred to the virtual space, allows the Bank to attract students from all over the world. The Group is presented in more than 80 countries and the online version of the game enables every person to participate. The potential of the online game make it available in every corner of the world at any given time. The winners get money prizes as well as the opportunity to undertake an internship. Three finalists have

28 BNP Paribas ZAO · Annual Report 2010 29 BNP Paribas ZAO · Annual Report 2010 Corporate Code of Conduct

“BNP PARIBAS” ZAO strictly adheres to the Corporate Code of Conduct of BNP PARIBAS Group; the revised version of the Code was approved by the President . This document contains fundamental principles that all employees and representatives of BNP PARIBAS shall be guided by. These principles reflect the essential values of the Group. When reaching any commercial, professional or personal goals, these principles must be strictly observed.

The key principles are as follows: 1 Act fairly, honestly and transparently 2 Respect others 3 Comply with the law, the regulations and professional standards 4 Comply with instructions 5 Work in the customers’ best interests 6 Ensure that market integrity is respected 7 Manage conflicts of interest 8 Behave professionally 9 Protect BNP Paribas’s interests 10 Report any irregularities observed Compliance department shall observe the Bank’s compliance with the Corporate Code of Conduct, carry out regular trainings of employees based on the principles of the Code and control the compliance of all Bank’s internal procedures with the Code.

29 BNP Paribas ZAO · Annual Report 2010 Additional information

State Registration Information:

Principal State Registration Number (Ministry for Taxes and 1027700045780 Levies of the Russian Federation)

Date of entry on establishment (on first provision of data) to 22.07.2002 the UnifiedS tate Register of Legal Entities

Name of the registration authorities according to the data Interdistrict Inspection of the Ministry for Taxes and Levies specified in the Certificate on entry to the Unified State of the Russian Federation No.39 for the City of Moscow Register of Legal Entities

Date of Registration with the Bank of Russia 28.05.2002

Banking License Number 3407

Date of Banking License 10.07.2002

30 BNP Paribas ZAO · Annual Report 2010 31 BNP Paribas ZAO · Annual Report 2010 All types of licenses based on which the credit institution performs its activities:

License Type Banking License (License to perform banking operations with funds in rubles and in foreign currency (without the right to attract monetary funds of individuals to deposits) License Number 3407 License Date 10.07.2002 License Issued by Central Bank of the Russian Federation Validity Issued for an indefinite term License Type Banking License (License to attract monetary funds of indi- viduals in rubles and in foreign currency to deposits) License Number 3407 License Date 21.04.2005 License Issued by Central Bank of the Russian Federation Validity Issued for an indefinite term License Type License of a professional securities market participant to perform brokerage activities License Number 077-12623-100000 License Date 20.10.2009 License Issued by Federal Financial Markets Service of the Russian Federation Validity Issued for an indefinite term License Type License of a professional securities market participant to perform dealership activities License Number 077-12627-010000 License Date 20.10.2009 License Issued by Federal Financial Markets Service of the Russian Federation Validity Issued for an indefinite term License Type License of a professional securities market participant to perform depository activities License Number 177-13111-000100 License Date 06.05.2010 License Issued by Federal Financial Markets Service of the Russian Federation Validity Issued for an indefinite term

31 BNP Paribas ZAO · Annual Report 2010 Associations participation

The Bank is honoured to be the member of the following organizations and associations: 1. Association of Russian Banks (ARB), www.arb.ru; 2. Association of Regional Banks of Russia (Association “Russia”), Moscow; www.asros.ru; 3. National Securities Market Association (NSMA), www.nfa.ru; 4. National Foreign Exchange Association (NFEA), www.nva.ru; 5. Not-for-profit partnership A“ ssociation of European Businesses” (former «European Business Club»), www.aebrus.ru; 6. La Chambre de commerce et d’industrie franco-russe (CCIFR) (French-Russian Chamber of Commerce and Industry), www.ccifr.ru; 7. MasterCard International Incorporated; www. mastercard.com.

Contact Information

Contact Information “BNP PARIBAS” ZAO, Central Office Legal and actual address: Bolshoy Gnezdnikovsky Pereulok 1, bldg.2 Moscow 125009, Russian Federation Tel.: +7 495 785 60 00 Fax: +7495 785 60 01

Cetelem (“BNP PARIBAS” ZAO) Central Office: Ul.Pravdy 26 125040 Moscow, Russian Federation Tel: +7 495 660 91 81 Fax: +7 495 660 91 82

32 BNP Paribas ZAO · Annual Report 2010