GAzPROMBANK GROuP • annual report 2016 financial statements on ifrs consolidated annual report based Gazprombank Group Gazprombank Group Annual Report Based on IFRS Consolidated Financial Statements 3 Gazprombank ANNUAL REPORT 2016 Table of Contents

Statement of the Chairman of the Board of Directors 4 Statement of the Chairman of the Management Board 6 Key performance indicators 9 Main results for the year and business development objectives 10 External environment in 2016 12 Financial performance 14 Positioning 18 Ratings 19 Business development strategy and objectives 20 Sustainable Development 22 Corporate business Customer base 24 Commercial lending 28 Retail business Retail business 30 Private banking: 2016 full-year results and development prospects 34 Investment banking Project and structured finance 36 Most significant project finance and financial advice transactions in 2016 39 Commodity and capital market operations 40 Asset management 44 Privaty equity 45 Machine-building assets: principal areas of operations and key projects 47 Resource base development 48 Depository operations, specialized depository services 50 Risk management 51 Bank GPB (JSC) regional network 57 Regional network map 58 HR policy and employee development and motivation 60 Development of information technologies 63 Social responsibility and international cultural cooperation 64 Corporate Governance 66 Shareholders of Bank GPB (JSC) 68 Board of Directors of Bank GPB (JSC) 69 Management Board of Bank GPB (JSC) 71 Corporate governance system of Bank GPB (JSC) 76 Organizational management flowchart of Bank GPB (JSC) 77 Internal control system 78 FINANCIAL STATEMENTS 80 Reference Information 98 Branches of Bank GPB (JSC) 100 Representative offices of Bank GBP (JSC) in other countries 102 Subsidiary and affiliated banks with an ownership of more than 5% 103 Licenses 105 Contact information and bank details 108 4 Gazprombank ANNUAL REPORT 2016 5 Gazprombank ANNUAL REPORT 2016 STATEMENT OF THE CHAIRMAN OF THE BOARD OF DIRECTORS

Dear Shareholders, The reporting year was busy and fruitful and also to financial advisory services for Gazprombank. The Bank achieved signi­ as well as services related to placement ficant financial results and reaffirmed once of the Group’s securities in the Russian again its strong reliability and resilience. and international markets. As one of the country’s key systemically­- Work was continued to enhance tech- important banks, Gazprombank success- nology capability of Gazprombank Group’s fully pursued collaboration with corporate industrial assets. It also was performed customers, including enterprises of key in the interests of Gazprom, a large industries of the Russian economy, in 2016. consumer of the products manufac- Within the framework of an approved tured by the domestic machine-building plan of the Bank’s interaction with Public industry. Joint-Stock Company Gazprom, measures The Board of Directors has positively were taken last year to make arrange- evaluated the Bank’s performance, ments for provision of integrated banking and expresses its conviction that imple- services to Gazprom and its employees. mentation of a well-thought and well-bal- A great deal of attention was paid anced strategy will allow the Bank to cooperation in management of money to reinforce its competitive positions flows of Gazprom Group companies, in the banking sector even further.

Alexey B. Miller Chairman of the Board of Directors, Bank GPB (JSC) Chairman of the Management Committee, Gazprom 6 Gazprombank ANNUAL REPORT 2016 7 Gazprombank ANNUAL REPORT 2016 STATEMENT OF THE CHAIRMAN OF THe manaGEMENT BOARD

Dear Shareholders, An ability to respond timely to external indicators of a financial institution’s ope­- Customers and Partners challenges and to adapt to a new reality rations, to the pre-crisis level, with its value of the Bank, was probably the most necessary quality reaching 3.0% in 2016. in the past few years. Difficulties of that In 2016, a number of loans were period, which were caused by macro­ successfully restructured, with PJSC economic instability and various external Mechel’s indebtedness taking a special shocks, gave a powerful impetus place in those efforts. Interaction to re-­adjustment of the outlook, including with the company fell on hard times, the perspective about the hierarchy but it reflected in full measure Gazprom- of targets and prioritizing in everyday bank’s commitment to principles activities. The 2016 outcome showed that of responsible work with customers. Gazprombank was able to make use of all The restructuring will allow PJSC Mechel available opportunities in the best possible to pursue actively investment projects that way, in order to cope with challenges, have priority significance for the country move ahead and solidify its fundamental and will ensure the company’s solvency strengths in the Russian financial market. in the future. Today, it can be said with conviction that Achievements attest to the Bank’s effective our efforts have contributed to serious work, which required mobilization of all achievements. Last year, Gazprombank internal resources. Last year, Gazprombank generated a considerable profit — took a tough stance administering its RUB 29.0 billion. One important aspect operating costs, and, as a result, they did of that success was growth of stable core not exceed the 2015 level, with business banking income: in 2016, that indicator performance still improving. In 2016, was up by 22.1% from a year before. work to improve operating efficiency was While foreign currency loans were continued; its elements were staff optimi- devalued because the ruble was getting zation, a program to centralize supporting stronger, the Bank kept its aggregate loan functions, carrying out projects portfolio at the level of end-2015 last year. to enhance the quality of the services At the same time, we managed to increase provided by the Bank, and cutting costs volumes of new ruble loans and to enlarge of transactions. the Bank’s share in the lending market both Owing to a correct choice of priorities, for legal entities and private individuals. coherent teamwork and support from Another event that can be considered the government, Gazprombank has favorable for the Bank was recovery managed to achieve performance targets. of the interest margin, one of essential Key factors of success were continuous 8 Gazprombank ANNUAL REPORT 2016

development and consolidation field will provide feedstock for the facility. Among international events that of competitive strengths, with universality Once a powerful enterprise of that sector occurred in 2016, I would like to empha- of business and a strategic partnership appears in the region, reserves of Yamal size Gazprombank’s collaboration with with major enterprises of main industries hydrocarbons will be supplied to inter- the State Oil Company of the Azerbaijan of Russian economy traditionally being national markets, which will reinforce Republic (SOCAR). Among joint projects, the principal ones among them. positions of the Russian Federation there is construction of gas processing Gazprom and its subsidiaries take a special as an exporter of LNG. It must be noted and polymer plants in Garadagh. The gas place among the Bank’s customers. that the production-supporting infrastruc- processing plant will have a capacity We develop mutually beneficial cooper- ture will be widely used for community of 10 bcm of processed natural gas ation in many areas, everywhere across needs. People living in the peninsula a year, and the polymer plant will be able Russia and abroad. The Bank is actively will be getting new housing, good roads to produce 570,000 tons of polyethylene involved in preparation and implemen- and advanced modes of transportation and 120,000 tons of polypropylene annu- tation of large-scale investment projects and means of telecommunications. ally. The Bank was a financial consultant of Gazprom Group. For instance, last year, In association with Rosneft, our Bank for the project. Gazprombank acted as financial consultant is involved in the construction of Zvezda, Moreover, an agreement was signed of Gazprom Pererabotka Blagoveschensk the biggest ship-building facility in the Far in 2016 between SOCAR and Cryogen- LLC in a project of construction of the Amur East. Implementation of that project mash, an enterprise of Gazprombank Gas Processing Plant with a capacity will help build a new industrial cluster Group, to design and supply a nitrogen of 42 bcm a year. The new plant to be set in the Primorye and will produce a signif- unit for a project to build high-density up within the framework of the Eastern Gas icant multiplication effect for a number polypropylene and polyethylene plants Program will become one of the world’s of associated industries. Well-known in Azerbaijan, which the company biggest helium producers. The construc- international companies have displayed is carrying out in association with the Bank. tion project will focus on protection their interest in the enterprise’s products. It is another concrete example of effective of the environment and creation Vladimir Putin, President­ of the Russian work of Gazprombank Group’s industrial of an infrastructure required for efficient Federation, took part in the cere- enterprises in the increase of exports work of the new enterprise and comfor­ monial commissioning of the first of the domestic hi-tech sector. Products table living conditions of local residents. stage of the ship-building factory, of the machine-building industry were also In 2016, the Bank continued to carry which confirms strategic importance exported to Kazakhstan and India in 2016. out the nation’s strategically important of the project forthe entire Russian ship- As far as funding of investment projects projects in partnership with other leaders building industry. is concerned, Gazprombank is among global of the domestic oil and gas industry. Another project also got presidential leaders in the Global Advisories Closed cate- In association with NOVATEK, its subsi­ approval — the Western High-Speed gory (according to Project Finance Interna- diaries and affiliated companies, financing Diameter in St. Petersburg; it is based tional) and as a financial consultant in infra- of the Yamal LNG project was arranged, on a public-private partnership, structure finance (according to IJGlobal). and also funding for another project — and the Bank is very actively involved in it. To summarize, we can tell that 2016 development of a gas field in the Yamal- It is hard to overestimate the meaning was a period of a search for new solu- Nenets Autonomous Area of the Western High-Speed Diameter tions, of major and intense efforts (JSC ARCTICGAZ). Within the framework for the city’s life and development; once in all areas of operations. Developing of the Yamal LNG project, which was opened, this arterial road will help unclog and perfecting its business, Gazprombank a pivotal one in 2016, there are plans the historical center of St. Petersburg, has reiterated once again its willingness to build a large integrated natural gas the Ring Road, and the urban traffic across to pursue most complicated missions. liquefaction facility in the Yamal Penin- the city’s districts. Moving around the city We have overcome temporary difficulties, sula. The South-Tambey gas condensate will become much faster. and we are marching ahead!

Andrey I. Akimov Chairman of the Management Board, Bank GPB (JSC) 9 Gazprombank ANNUAL REPORT 2016 KEY PERFORMANCE INDICATORS

Assets, Equity (capital), Loans provided RUB billion RUB billion to corporate customers 5,122 530 before deducting loan 3,198 3,175 4,769 4,879 495 loss provisions, 2,847 439 RUB billion 403 3,647 364 2,147 2,841 1,613

12 13 14 15 16 12 13 14 15 16 12 13 14 15 16

Amounts Retail loans before Amounts owed owed to corporate deducting loan loss to individuals, customers, provisions, RUB billion 2,623 2,653 330 329 678 RUB billion RUB billion 314 659 2,375 288

1,868 492 210 393 1,428 316

12 13 14 15 16 12 13 14 15 16 12 13 14 15 16

Net profit (loss), Core banking income, Capital adequacy RUB billion RUB billion (Basel I, II), %

33 137 13.9 14.2 14.2 31 29 13.5 12.4 111 112 97

73 14 15

12 13 16

–14

12 13 14 15 16 12 13 14 15 16 –48

Tier 1 capital adequacy Ratio of non-performing Ratio of loan loss provisions (Basel I, II), % loans to loan portfolio, % to loan portfolio, % 11.0 10.9 3.0 8.9 10.2 10.0 9.2 7.3

2.0 1.6 4.9 3.6 1.0 1.1 3.2

12 13 14 15 16 12 13 14 15 16 12 13 14 15 16 10 Gazprombank ANNUAL REPORT 2016 11 Gazprombank ANNUAL REPORT 2016 1 MAIN RESULTS HISTORY OF THE PRESENT FOR THE YEAR Cryogenmash’s new R&D and production AND BUSINESS facility based DEVELOPMENT in Balashikha OBJECTIVES 12 Gazprombank ANNUAL REPORT 2016 EXTERNAL ENVIRONMENT IN 2016

Growing oil prices, import substitution and product exports stabilized the situation in Russia’s economy.

DECLINING CONSUMER n 2016, global economic growth Lower volatility in financial markets helped ACTIVITY AND DWINDLING Iremained low, at 3.0% versus 3.1% stabilize currencies of emerging countries INVESTMENTS PREVENTED in 2015. and spurred capital inflow in their assets. TRANSITION TO A STABLE The world’s largest economies were rising Gradual recovery of oil prices, the finan- GROWTH, BUT INFLATION slowly amidst low commodity prices cial system’s diminished need of foreign RATES DECELERATED BY HALF and risk of deflation. Monetary and credit currency and a downturn in capital flight THEREBY. policies of the greater part of developed helped the ruble get much stronger (from countries were still focused on incen- RUB 77.9/$1 in January to RUB 62.1/$1 INCREASE OF REVENUES tives, on keeping up economic activity in December), with economic expec- GENERATED BY EXPORTS and combating deflation, but efficiency tations stabilizing. Low annual average AND STEPPED-UP of those measures was weak. oil prices (USD 41/brl versus USD 51/brl EXPECTATIONS OF SEEING Emerging economies adapted to fluctua- a year before) sent the annual average THE RUBLE GROW HAVE tions of commodity prices, but their growth ruble rate downhill, from RUB 61.3/$1 BROUGHT CONSIDERABLE remained stable. Oil exporting nations to RUB 67.2/$1, which boosted the process FUNDS TO THE RUSSIAN were piling up debt and using their gold of import substitution and active exports STOCK MARKET. and currency reserves to stabilize budgets. of non-commodity products from Russia. Prices of financial assets and commo­ In 2016, evolution of net exports helped WORK TO IMPROVE BALANCE dities had displayed high volatility earlier Russia’s economy move from a slump SHEETS HAS ALLOWED in the year, but by year’s end the situa- in 2015 to stabilization in 2016 (–0.2%). THE BANKING SYSTEM tion stabilized. The oil price, which was A weaker ruble preserved high annual TO QUINTUPLE PROFIT. USD 28/brl in the beginning of last year, average inflation (7.4%), which exceeded surged to USD 53/brl by its end, as a result the incremental growth of nominal house- of an oil production cut agreement within hold incomes. Real disposable income was the OPEC (Russia also joined that agreement down (–5.9% YoY), leading to a decline later) and oil production cuts in the U.S. of real consumer spending (–4% YoY) Commodity price growth boosted infla- and maintaining high propensity tionary pressure and created prerequisites to save (16% of revenues), with people’s for a more hawkish monetary and credit credit activity also dwindling. Declining policy pursued by the U.S. Federal Reserve consumer activity and a continuing slump System, and harsher rhetoric on the part of investments in fixed assets (–1.4%) have of the ECB. Hiking the rate by 0.25 p. p. not allowed economy so far to make a tran- in December, the U.S. Federal Reserve sition from stabilization to stable growth. signaled the beginning of a long cycle A rise in federal budget spending from of rate hikes, and the ECB confirmed RUB 15.6 trillion to RUB 16.6 trillion it was going to fold its quantitative easing was caused by premature repayments program in 2017. of long-term financial liabilities under 13 Gazprombank ANNUAL REPORT 2016

Assets and banking system Growth of assets and banking capital, as % of GDP system capital, as % year-on-year ■ Assets Capital ■ Assets ■ Capital Sources: Bank of Russia, Sources: Rosstat. 98.1 99.7 Bank of Russia, 35.2 93.2 Rosstat.

80.9 74.0

10.8 10.9 9.9 10.0 18.9 9.1 16.6 15.6 16.0 13.6 12.2 6.9

4.2

2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 –3.5

GDP Trade Energy, Agribusiness Other transport services the volume of foreign currency refinancing 1.0 2.6 Manufacturing Real estate, Construction Production supplied within the framework of anti-crisis finance of minerals measures. As a result, rates in the money market went down, and by the end 0.5 0.6 0.6 0.5 of the year were below the key rate

0.2 0.2 0.2 of the Bank of Russia. 0.2 0.1 0.1 0.0 0.0 0.0 Assets of banks, in view of the currency revalu- 0.0 0.1 0.0 0.0 0.0 ation, climbed only slightly last year (by 1.9%), –0.1 and the loan portfolio dipped somewhat –0.2 –0.2 –0.3 –0.3 –0.3 (–2.4%). Deterioration of financial standing –0.5 –0.5 –0.5 of most borrowers and growing risks because Annual GDP growth of lesser income as a result of economic dece­ by sectors, p. p. –1.0 leration made banks stick to cautious policies. ■ 2015 –1.1 Nominal loan and deposit portfolios of legal ■ 2016 Delta entities declined in a major way as a result –2.0 of currency revaluation (loans to non-financial Source: Rosstat. entities were cut by 9.5%, deposits by 10.1%). –2.8 The ratio of overdue loans was increasingly a number of defense-related programs, of investments in securities climbed from growing last year (rising to 7.8%), but it ulti- with current spending in most of other RUB 640 billion to RUB 996 billion. mately reverted to the January level (7%) on sectors having been cut to 11%. As a result Year-end inflation, kept in check by a down- the back of the work to improve balance sheets. of plummeting oil and gas revenues and turn in consumer activity and a stronger December’s write-off of a part of reserves growing total expenditure, federal budget ruble, decelerated from 12.9% in December previously piled up as provision for potential deficit was up from 2.7% to 4% of GDP. 2015 to 5.4% in December 2016. Responding losses helped generate a profit in the amount To offset the deficit, the Ministry of Finance to that trend, the Bank of Russia contended of RUB 930 billion (1.2% of the annual average increased domestic loans by one third, with cutting the key rate only slightly from assets versus 0.2% a year before) and increase and accelerated the privatization program. 11% to 10%, in order to bring inflation equity capital of the banking sector by 4.2% Growing oil prices and heightened to its target of 4% by the end of 2017. (+RUB 380 billion). expectations of seeing the ruble get Keeping high real interest rates amidst By year’s end, the capital adequacy ratio stronger amidst traditional undervaluation a lack of high-quality borrowers and a small was up from 12.5% to 13.1%. A large capital of Russian companies in stock exchanges demand for loans helped stabilize reserve with respect to the statutory brought significant funds to the Russian the interest margin of banks and build minimum (8%) and excess liquidity attest stock market. As a result, the annual average up surplus of ruble liquidity in the banking to a considerable growth of lending potential RTS index was up from 918 to 1,163 points, system, which was RUB 1.5 trillion in economy, which heretofore has remained the MICEX index from 1,685 to 1,934 points, in December. Stabilization of the FX market untapped amidst a weak demand and high and income of the banking system in terms also allowed simultaneously to slash estimated risks. 14 Gazprombank ANNUAL REPORT 2016 FINANCIAL PERFORMANCE

2016 turned out to be rather thriving for the Bank. Faced with a complicated market environment, the Bank generated net profit, kept its share in terms of core banking business, improved the quality of a number of loans, and was successful in managing changes in its operating costs.

Key financial indicators of Gazprombank Group (the Group) for the year ended 31 December 2016 as provided by consolidated financial statement prepared in accordance with International Financial Reporting Standards (IFRS) are presented below (RUB billion)

31.12.2016 31.12.2015 Change

Assets 4,879.2 5,122.2 –4.7 % Shareholders’ equity 494.5 530.4 –6.8 % Cash and cash equivalents 473.5 633.5 –25.3 % Loans to customers ¹ 3,174.8 3,198.0 –0.7 % Retail loans ¹ 329.1 314.4 +4.7 % Securities ² 589.1 707.9 –16.8 % Customer accounts 2,652.5 2,623.0 +1.1 % Retail customer accounts 678.3 658.7 +3.0 % Capital markets funding ³ 317.3 475.3 –33.2 % Subordinated debts 182.8 207.7 –12.0 % 2016 2015 Change in 2016/2015

Net income / (loss) 29.0 (47.7) – Comprehensive income / (loss) 8.1 (24.9) – 31 December 31 December Change 2016/ 2015/ 12 months of 2016 12 months of 2015 Total capital adequacy ratio ⁴ 13.5 % 14.2 % –0.7 p. p. Tier 1 capital adequacy ratio ⁴ 10.0 % 10.2 % –0.2 p. p. Non-performing loans ⁵ (NPL) % gross loans 3.0 % 2.0 % +1.0 p. p. Allowance for impairment to gross loans to customers 7.3 % 8.9 % –1.6 p. p. Loans-to-deposit ratio ¹ 105.2 % 107.0 % –1.8 p. p. Net interest margin ⁶ 3.0 % 2.5 % +0.5 p. p. Cost of risk ⁷ 0.1 % 3.7 % –3.6 p. p. Cost-to-income ratio ⁸ 46.5 % 41.8 % +4.7 p. p.

¹ Before deducting loan loss provisions. ⁵ Loans are qualified as non-performing in case of failure ⁷ The ratio of expenditure on provisioning for depreciation ² Including securities for trading, investments available to repay the principal amount or interest for 90 days of interest-earning assets in the reporting period to the time for sale, investments in associates and investments held or longer, or in case of the counterparty default. average of interest-earning assets as of the end of each to maturity. ⁶ The ratio of net interest income generated in the reporting quarterly period included in the reporting period. ³ Including bonds issued and syndicated interbank loans. period to average interest-earning assets as of the end ⁸ Operating expenses include salary and other payments ⁴ According to recommendations issued by the Bank of each quarter in the reporting period. Interest-earning to personnel, and administrative expenses relating for International Settlements (Basel I). assets include fixed-term deposits in banks, loans provided to banking activities. Operating income includes net interest to customers and debt securities (all before deducting loan income, non-interest income and operating profit from loss provisions). non-banking activities. 15 Gazprombank ANNUAL REPORT 2016

Assets dynamics, RUB billion Loan portfolio dynamics, RUB billion ■ Cash and cash equivalents ■ Net loans to customers ■ Commercial lending ■ Securities ■ Specialized lending ■ Other assets ■ Loans to individuals

3,201 3,248 3,023

2,526 2,276 2,116

830 922 708 731 634 580 589 569 648 424 491 473 330 314 329

31.12.14 31.12.15 31.12.16 31.12.14 31.12.15 31.12.16

Financial results received from the Bank of Russia. The net operating expenses decreased by 1.1%, In 2016, the Group earned net profit interest margin saw a 0.5 p. p. rise, to 3.0%, a more significant decline of operating in the amount of RUB 29.0 billion. The total in 2016, compared to 2015. income led in 2016 to a growth of the ratio income, including re-assessment The Group’s stable income generated between operating expenses and operating of non-trading investments and foreign by core banking operations, including income by 4.7 p. p. to 46.5%. currency revaluation of the Group’s overseas net interest before deduction of reserves allocations, amounted to RUB 8.1 billion. provided for potential depreciation of inte­ Business volume indicators To compare, in 2015, the Group’s net rest-earning assets and net fee and commis- As of end-2016, the Group’s assets equaled and aggregate loss equaled RUB 47.7 billion sion income, was RUB 136.7 billion in 2016, RUB 4,879.2 billion, down by 4.7% from and RUB 24.9 billion, respectively. or 22.1% more than in 2015. The percentage RUB 5,122.2 billion as of end-2015. The prin- First and foremost, the Group’s profit of stable income in the Group’s operating cipal factor of the decline was dwindling in 2016 stemmed from a rise in net interest income was 87.5%, exceeding the 2015 of the ruble equivalent of foreign currency income, which increased by 27.1% in 2016, indicator by 23.8 p. p., because of both assets as a consequence of a climbing to RUB 122.0 billion, and also from revival growing net interest earnings and a decline ruble exchange rate, and also a shrinkage, of a portion of reserves provided for poten- of the ratio of trading and investment by RUB 160.0 billion to RUB 473.5 billion, tial impairment of interest-earning assets income in the Group’s operating income. of monetary funds and their equiva- (created earlier, during the 2014–2015 The aggregate bottom-line in transactions lents used by the Group to repay loans crisis period), in connection with restruc- with securities⁹ dwindled by 25.6% in 2016 from the Bank of Russia, Eurobond loans turing of some large underwater loans. year-on-year, to RUB 37.4 billion. The main and syndicated loans. As a result, reserve-building costs amounted reason for the falling income from securi- The loan portfolio prior to loan-loss provi- to RUB 2.0 billion in 2016, whereas 2015 ties was the ongoing deceleration of value sions deduction was RUB 3,503.9 billion saw “peak” transfers in the amount growth rates of the Group’s investments. as of end-2016, which was virtually of RUB 139.5 billion. The Group’s credit Non-banking segments posted close to the level of end-2015. The factor exposure as a risk indicator was 0.1% in 2016, a RUB 15.0 billion loss from opera- of a stronger ruble, which pulled down compared to 3.7% a year before. tions in 2016, compared to a profit the ruble equivalent of currency loans, was Net interest income in 2016 was growing of RUB 5.3 billion in 2015. eventually canceled out by growing busi- due to both a gain in the Group’s As a result of an impact of the above-men- ness volumes. interest earnings, which were up 2.5%, tioned factors, the Group’s operating The loan portfolio accounted for 66.6% to RUB 380.1 billion, in 2016, and also income (excluding costs of building of the Group’s aggregate assets, to a dipping interest paid, which slumped reserves provided for potential deprecia- climbing by 4.1 p. p. in 2016. At the same by 6.1% to RUB 258.1 billion. By and large, tion of interest-earning assets) amounted time, the scope of corporate loans interest earnings were affected to RUB 156.3 billion, down by 11.2% by a growing interest income in the port- from 2015. ⁹ The total financial bottom-line in transactions with folio of debt securities. Interest expenses Operating expenses in the reporting period securities includes realized and unrealized results of transactions with securities, a change in the value were down mainly because of repayment, were RUB 72.8 billion, versus RUB 73.6 billion of the Group’s allocations, revenue from investments in affiliated ventures, the result generated from derivative in 2016, of a portion of funds previously in the previous year. Despite the fact that instruments, revenue from retirement of subsidiaries. 16 Gazprombank ANNUAL REPORT 2016

Securities portfolio, RUB billion Loan portfolio quality indicators, RUB billion ■ Debt securities reported at fair value ■ Debt securities reported at amortized cost ■ Non-performing loans ■ Traded shares ■ Loan loss provisions ■ Non-traded shares

360.6 311.8 329.4 256.2

197.3 174.9 154.6 145.7 137.1 127.1 104.1 91.6 77.3 71.7 36.2 26.5 22.8 31.0

31.12.14 31.12.15 31.12.16 31.12.14 31.12.15 31.12.16

Resource base distribution, RUB billion

■ Amounts owed to banks ■ Amounts owed to the Bank of Russia ■ Amounts owed to customers 3,281.7 3,330.8 ■ Borrowings from capital markets 2,867.5 ■ Subordinated debt ■ Other liabilities

565.3 475.3 322.6 317.3 234.9 207.4 296.4 207.7 209.8 283.0 182.8 131.9 120.9 95.5 175.3

31.12.14 31.12.15 31.12.16

(RUB 3,174.8 billion) remained virtually portfolio is characterized by domination Deposits and private accounts added unchanged compared to end-2015, of fixed-income instruments representing 3% in 2016, showing an accelerated and the volume of retail loans was up 4.7%, allocations to Russian government growth rate by year’s end and reaching to RUB 329.1 billion, accounting for 9.4% debt and bonds and promissory notes RUB 678.3 billion on 31 December 2016. in the structure of the loan portfolio (versus of Russian issuers; the percentage of Customer funds accounted for 76.0% 9.0% as of end-2015). the latter is also rather stable — as of in the Group’s liabilities as of 31 December The Group’s securities portfolio was down end-2016 it was 79.2% versus 78.8% as of 2016 versus 71.5% a year before. by 16.8% in 2016, and as of 31 December end-2015. Borrowings in capital markets, including 2016, it equaled RUB 589.1 billion. Funds of corporate and private bond issues in the international Shrinkage of the portfolio was associ- customers still remain the underlying and Russian markets, and syndicated ated with partial disposal of some of the foundation of the Group’s resource interbank raising of resources, were Group’s long-term investments, and also base; as of end-2016, they amounted partially repaid in 2016, following with redemption of a number of securities to RUB 3,330.8 billion, showing a 1.5% rise which their volume shrunk by 33.2% from the portfolio of securities held to from RUB 3,281.7 billion as of end-2015. in 2016 and by the end of the year maturity and from the Group’s trading In particular, funds of corporate customers it was RUB 317.3 billion. Borrowings portfolio. Ultimately, the percentage equaled RUB 2,652.5 billion as of end-2016, in capital markets correspondingly of securities within the Group’s assets up 1.1% year-on-year. The biggest incre- declined by 3.2 p. p. in the Bank’s decreased by 1.7 p. p. (compared mental growth in funds of corporate resource base in 2016, and now they to end-2015) to 12.1%. Traditionally, customers occurred at the end of 2016, account for 7.2% of the Group’s aggre- the structure of the Group’s securities rising by 5.6% in the fourth quarter. gate liabilities as of the reporting date. 17 Gazprombank ANNUAL REPORT 2016

Operating income structure, RUB billion Operating profitability

■ Net interest income ■ Net profit, RUB billion ■ Commission income ■ Cost of risk, % ■ Net income from trading in foreign currencies and securities ■ Other income/expenses

3.7

122.0 29.0 96.6 96.1

1.8 58.3

28.6 14.4 17.6 15.9 14.6 5.7 –5.0 0.1

31.12.14 31.12.15 31.12.16 31.12.14 31.12.15 31.12.16 –8.9

–13.7 Capital adequacy indicators, RUB billion

■ RWA ■ Tier 1 capital ■ Tier 2 capital 4,311.9 4,855.5 4,583.4

494.0 457.9 398.8 –47.7

195.2 162.5 137.3

31.12.14 31.12.15 31.12.16

In particular, in 2016, the Group repaid Asset quality indicators plunged by 10.0%. The key factors that a USD 500 million syndicated loan, The ratio between non-performing lending caused the decline were a stronger redeemed Eurobonds with a par value receivables¹⁰ and the amount of the loan ruble exchange rate, which affected of CNY 500 million, USD 120 million, portfolio was 3.0% as of end-2016 versus foreign currency sources in the capital, CHF 200 million and RUB 40 billion, 2.0% as of end-2015. disposal of a number of the Group’s and ruble-denominated bonds for a total The ratio between provision for losses from investments, net assets of which were amount of RUB 40 billion; at the same time, impaired loans and the loan portfolio was reflected in the capital, so far as holdings the Group issued ruble-denominated 7.3% as of end-2016, declining by 1.6 p. p. of non-controlling shareholders were bonds for a total amount of RUB 45 billion. year-on-year, including because of a large- concerned, and dividend payments Revaluation of foreign currency liabilities scale dismantling of reserves at year’s end. on preferred shares in 2016. The Group’s also helped reduce the ruble equivalent Provision for losses from impaired loans assets, weighted to account for risk, were of the borrowings. exceed non-performing loans 2.5 times. down by 5.6% in 2016. It led to an adjust- As of 31 December 2016, the amount ment of the Group’s capital adequacy of funds raised from the Bank of Russia Capital adequacy as of end-2016, with the Group’s aggregate and secured by loans to customers The Group’s aggregate capital calcu- capital adequacy being 13.5% versus 14.2% equaled RUB 95.5 billion, down by 21.0% lated in accordance with requirements a year before, and tier 1 capital adequacy from what it was on 31 December 2015. of the Basel Accord (Basel I) on the basis staying at 10.0% versus 10.2% a year before. The Bank of Russia’s funds accounted of figures from consolidated state- for 2.2% in the Group’s liabilities at the end ments prepared pursuant to IFRS was ¹⁰ Lending receivables for which the debt principal or interests of the reporting year. RUB 620.4 billion as of end-2016, having are 90 or more days overdue or which defaulted. 18 Gazprombank ANNUAL REPORT 2016

POSITIONING

Domestically, Bank GPB (JSC) remains in the lead, reaffirming its stable position as one of the top three banks in terms of key volume indicators.

Share of Bank GPB (JSC) in the key indicators of the Russian banking system (RAS), %

Assets Capital¹ Loans to corporate Loans to individuals Amounts owed Amounts owed customers to corporate to individuals customers²

As of 1 January 2016 6.0 7.0 8.5 2.7 11.1 2.7 As of 1 January 2017 6.0 6.8 9.2 2.9 11.9 2.7

Growth rates in 2016: Bank GPB (JSC) vs. Russian banking system, %

Assets Capital¹ Loans to corporate Loans to individuals Amounts owed Amounts owed customers to corporate to individuals customers²

Banking system –3.5 4.2 –6.5 1.1 –10.1 4.2 Bank GPB (JSC) –4.1 0.2 1.0 9.7 –4.0 2.8

¹ Regulatory capital (‘Tatal Capital (Equity)’ metric in the Capital Adequacy Report (Form 808)). ² Including funds of government bodies. 19 Gazprombank ANNUAL REPORT 2016

Ratings

The Bank`s current ratings are underpinned by its strong market position in the market and systemic importance.

As of 31 December 2016, Standard & Poor’s to negative following a similar rating action the following credit °° ВВ+ (long-term foreign currency credit on sovereign rating of the Russian Federa- ratings were assigned rating) — negative outlook; tion on 22 April 2016. to Gazprombank: °° ruAA+ (national scale rating)¹. On 18 March 2016 Moody’s Interfax with- Fitch Ratings drew the national scale rating of Gazprom- °° ВВ+ (long-term foreign-currency issuer bank following a similar withdrawal of all default rating) — stable outlook; issuers’ national scale ratings. °° "AA+(rus)"² (national scale rating) — On 14 October 2016 Fitch Ratings revised stable outlook. the outlook on Russia’s sovereign rating Moody’s Investors Service BBB– from negative to stable. Following °° Ba2 (long-term foreign-currency deposit this rating action, on 21 October 2016 Fitch rating) — negative outlook³. Ratings changed the outlook on Gazprom- Dagong Global Credit Rating bank’s rating BB+ from negative to stable. °° "А–" (long-term foreign currency credit On 24 November 2016 ACRA rating agency rating) — stable outlook. assigned АA(RU) rating with stable outlook Expert RA to Gazprombank. °° "А++" (national scale creditworthiness The Bank’s current ratings are under- rating) — stable outlook. pinned by its traditionally strong position ACRA on the lending market, specifically due ° «АA(RU)» (credit rating) — stable outlook. to loans to large corporations, the systemic Gazprombank’s long-term foreign importance of the Bank, high probability currency credit ratings were consistent of receiving government support when with the sovereign rating of the Russian necessary, high asset quality (significantly Federation assigned by Standard &Poor’s higher than banking sector average), and were one step lower than Russia’s adequate risk management tools, rating assigned by Moody’s Investors and comfortable liquidity level adequate Service and Fitch Ratings. for debt servicing. On 4 March 2016 Moody’s Investors Service placed the sovereign rating of the Russian Federation Ba1 on review for downgrade. Following this rating action, on 9 March 2016 Gazprombank’s rating Ba2 was also placed on review for downgrade. On 26 April 2016 Moody’s Investors ¹ 02.06.2017 — rating was withdrawn. ² 06.02.2017 — rating was withdrawn. Service changed the outlook on Gazprom- ³ 21.02.2017 — outlook was changed to stable. bank’s rating from possible downgrade 20 Gazprombank ANNUAL REPORT 2016 BUSINESS DEVELOPMENT STRATEGY AND OBJECTIVES

New strategic goals of Bank GPB (JSC) aim at consistent business expansion as well as business performance and profitability improvement while ensuring continuity and further development of key competencies and competitive advantages of GPB Group.

BANK GPB (JSC) °° Bank GPB (JSC) keeps a leading position °° to take part in the implementation SUCCESSFULLY CARRIES in the industry; of government initiatives aiming OUT PRINCIPAL STRATEGIC °° ensures growth of business in the areas to ensure stable economic MISSIONS SET OUT that have been identified as top priority development; BY THE BOARD OF DIRECTORS, ones: loans to corporate customers, °° to improve the quality of asset AND, AMONG OTHER THINGS: including project finance, retail business, management and of the work and operations in financial markets; with potentially distressed debts; °° strives to increase the percentage °° to ensure stability in the structure of its regular income — interest revenue of the Bank’s balance sheet and capital and fees — in the Bank’s aggregate adequacy; income; °° to enhance efficiency of operations °° increases its capital, in order to ensure across all units of GPB Group. further stable evolution of GPB Group. The Bank will continue its work to increase Responding to changes in macroeconomic the return on assets and capital, and market conditions, including and, in the corporate segment, the Bank a stronger competition among will have the following objectives at hand: major banks and declining revenues °° a well-balanced growth of the loan of banking business, the Bank timely portfolio across basic industries adjusts and reviews its plans, making of economy, with due account sure that there is continuity in strategic of the risk-return ratio; goals and furthering key competencies °° optimization of the currency structure and competitive advantages. of its loan portfolio in order to mitigate Bank GPB (JSC) makes an effort to handle possible risks; principal strategic missions, which include °° development of compound settlement promoting strategic partnerships with products for corporate customers major Russian companies, keeping up in order to unlock the potential of cross the status of a key systemically important sales and build a stable and diversified bank, diversification of business resource base. and retaining key positions in the market Bank GPB (JSC) plans to keep a prominent of banking services. presence in the market of specialized To accomplish that, the Bank intends funding for large projects, important to do the following: for Russia’s economic development, °° to provide a full range of financial which are carried out by major companies services to major Russian companies; in top-priority industries of economy, 21 Gazprombank ANNUAL REPORT 2016

The Bank has worked out a mechanism of flexible response to external challenges, which timely updates targets and helps the leadership make prudent managerial decisions (taking into account the balance between expected benefits and potential risks) in order to adapt the current business model to changes in the macroeconomic and market situation.

including projects focused on import willing to increase its share in the Bank’s customers in the Russian debt capital substitution and adoption of new assets and in the aggregate income market, and will strive to keep its leader- technologies. of GPB Group. To pursue this strategic ship among deal makers amidst a stronger At the regional level, the Bank goal, the Bank will be trying to expand competition. contemplates further collaboration its foothold in the retail market and plans: The Bank is going to make targeted with local authorities and private sector °° to improve existing and to create new efforts to optimize costs, to increase companies in the implementation of PPP products for customers who are private labor productivity through more efficient projects aimed at creation of transport individuals; business processes and technologies, infrastructure, community amenities, °° to diversify channels and points of sale, and to continue perfecting its corporate healthcare facilities and utilities in various to enlarge their functional capabilities; governance. Russian regions. The Bank will continue °° to adopt advanced technologies to work with corporate customers among aimed at improvement of services medium-sized businesses, taking the credit and of satisfaction of the Bank’s quality and reliability of borrowers customers. as the main gauge in making loan-related The Bank plans to enhance investment decisions. banking and regular banking services, The Bank plans to pay significant attention and for that, it will be acting more vigor- to development of its retail business, ously in the interests of key corporate 22 Gazprombank ANNUAL REPORT 2016 23 Gazprombank ANNUAL REPORT 2016 2 sustainable HISTORY OF THE PRESENT DEVELOPMENT URALMASH PLANT 24 Gazprombank ANNUAL REPORT 2016 CUSTOMER BASE

In 2016, the Bank pursued collaboration with Gazprom Group, which is not only a key customer but also a platform to adopt and develop innovative settlement services.

A STRIKING EXAMPLE he service helps manage liquidity Bank GPB (JSC) was vigorously carrying OF JOINT PROJECTS Tof a group of companies in an effi- out tasks to ensure additional control OF BANK GPB (JSC) cient manner and outsource to the Bank over targeted use of funds allocated AND GAZPROM GROUP treasury functions related to automatic for implementation of investment IN INTRODUCTION consolidation of a group’s monetary projects of the Bank’s key customers. OF HI-TECH SETTLEMENT funds (pool) on a master account selected In 2016, within the framework of those SERVICES IS THE by the customer, and further automatic efforts, a first contract for banking support SUCCESSFUL DEVELOPMENT payments of the pool members made of construction contracts was signed OF THE MATERIAL CASH from the master account (overdraft between Bank GPB (JSC) and Gazprom POOLING SERVICE IN 2016. is also available). Today, the Material Cash Transgaz Yugorsk LLC. It will permit Pooling service, which showed strong implementation of a control mecha- efficiency and absolute compliance with nism for the utilization of funds within the custo­mer’s requirements, is commer- the framework of a gas pipeline repair cially ope­rated by Gazprom. Work goes program. A contract was signed with on to expand the number of Gazprom OMZ-DAELIM LLC for the provision Group companies connected to the pool. of that service under a project of construc- Cooperation with NOVATEK, its subsidiaries tion of a terminal in the Port of Vysotsk, and affiliated companies also continues Leningrad Region, with a capacity to develop. In 2016, the total limit of credit of 660,000 tons of LNG a year. risk was increased for NOVATEK Group. In June 2016, Bank GPB (JSC) launched The Bank has arranged financing a project of banking support within the framework of the Yamal LNG to the construction of a large property project and another project to develop for Rosneft. A trilateral agreement was a gas field in the Yamal-Nenets Auto­ executed, and on its basis the Bank moni- nomous Area (JSC ARCTICGAZ). Having tors targeted use of funds by the parties engaged NOVATEK Group’s subsid- involved in the construction. iaries to be serviced by the Bank, In 2016, the Bank arranged issues of corpo- it facilitated transition to provision rate bonds by companies of the oil of compound settlement products offered industry for a total amount of more than by Bank GPB (JSC), including connection RUB 120 billion. to the Corporate Settlement Center soft- Cooperation of Bank GPB (JSC) with ware application, and the parties were major enterprises of the oil and petroche­ able to start working out implementa- mical industry of CIS countries also saw tion of the Material Cash Pooling service, a dynamic evolution. Gazprombank, Italian and to develop collaboration in depo­ export credit agency SACE, Russian export siting NOVATEK Group’s funds. credit agency EXIAR and Azerbaijan’s 25 Gazprombank ANNUAL REPORT 2016

In 2016, the Bank arranged corporate bond issues for companies of the oil industry for a total amount exceeding RUB 120 billion. company SOCAR signed a memo- Traditionally, lending to cover current oper- of a register of payments and receipt randum of understanding on financing ations and funding of investment projects of a spending report. and construction of a gas chemical facility have been the main lines of cooperation The industry’s enterprises display in Azerbaijan. The signing ceremony took with enterprises of the energy industry. an interest in compound settlement place in the presence of Russian President In 2016, the Bank showed an outstanding services provided by the Bank. In 2016, Vladimir Putin and Italian Prime Minister growth in commercial lending, with the Material Cash Pooling service was Matteo Renzi. According to preliminary the portfolio of commercial loans to implemented at a branch of Bank GPB (JSC) estimates, the total investment budget enterprises of the power industry surging in Krasnoyarsk for Siberian Generating of the project amounts to USD 3.5 billion. by nearly 1.5 times (from RUB 121 billion Company Group. Potential supplies of Russian equipment to RUB 180 billion). Bank GPB (JSC) continued work and materials, and the cost of construc- At the same time, demand is increas- related to a wide range of prod- tion and installation services provided ingly growing for the banking support ucts and services provided to major by Russian contractors under the project of construction contracts, which was metallurgical enterprises (PJSC TMK, will account for up to 20% of the invest- provided for Kaliningrad Generation PJSC Severstal, OJSC MMK, UC Rusal, ment budget. A project of SOCAR Gas Plas- LLC, PJSC Lenenergo, and PJSC Quadra — EvrazHolding LLC, Industrial Metallurgical tics Company opens up new opportunities Power Generation in 2016. In addition, Holding LLC) and coal industry (JSC SUEK, for Gazprombank Group companies both Bank GPB (JSC) increased sales of payroll JSC HC SDS-Coal). The Bank arranged in terms of funding and export shipments projects to enterprises of the energy bond issues for PJSC MMC Norilsk Nickel of Russian equipment. sector. (RUB 15 billion), Metalloinvest Manage- Within the framework of the 2016 PJSC FGC UES and Velesstroy LLC (and their ment Company LLC (RUB 5 billion), St. Petersburg International Economic contractors) were connected to a new Evrazholding LLC (USD 500 million), Forum, an agreement with SOCAR Polymer service of monitoring by the Bank of debit PJSC TMK (RUB 5 billion). was signed, with an intention to design transactions using e-registers. This service In 2016, a number of joint projects were and deliver a nitrogen unit (the manu- implies transfer of the monitoring func- carried out in the telecom, transport facturer, PJSC Cryogenmash, is a unit tion over targeted spending of money and infrastructure sectors. The Bank of Gazprombank Group) within the frame- by companies under a customer’s control executed a syndicated loan agreement work of a project to build high-density to the Bank, and fully automated electronic with PJSC STLC to finance purchase polypropylene and polyethylene plants. document management — submission of 32 SSJ-100 jets. Two loan agreements 26 Gazprombank ANNUAL REPORT 2016

for a total amount of RUB 20 billion were and special chemicals, with the purpose were developed, relevant regulatory signed with PJSC Rostelecom. of optimizing their production cycles and legal framework was put in place, Gazprombank arranged a debut bond and building a single control loop. Bank remote banking services were upgraded. issue of JSC Federal Passenger Company GPB (JSC) will act as the base bank in that During the reporting period, represent- (RUB 5 billion), and also exchange-traded project and will contribute to its imple- atives of Bank GPB (JSC) organized more bond issues of PJSC MTS (RUB 10 billion), mentation, providing required banking than 40 workshops covering implemen- PJSC JSFC Sistema (RUB 10 billion) services. tation of the requirements of Federal and PJSC STLC (RUB 5 billion). The Bank promotes successful coop- Law No. 275-ФЗ On Government Defense As a backbone bank of Russia’s nuclear eration with subordinate enterprises Order, dated 29 December 2012. power industry, Bank GPB (JSC) keeps of the Russian Ministry of Defense, such All that, combined with hands-on expe- its leading positions in servicing money as JSC Voentorg and the Krasnaya Zvezda rience in the area of banking support, flows of State Atomic Energy Corporation media holding, for which Bank GPB (JSC) allowed Bank GPB (JSC) to consolidate ROSATOM. In 2016, the Bank successfully is the main settlement bank. its leadership in that field and to open up arranged new exchange-traded bond In 2016, Bank GPB (JSC) continued new growth prospects. issues of JSC Atomenergoprom. Active active work to provide banking support In 2016, the Bank continued to further work was going on to develop host-to- to contracts, including those related its relations with major financial compa- host services for enterprises affiliated to fulfillment of the Government nies, including Capital Group, Sber- with State Atomic Energy Corporation Defense Order, and also those executed bank Group of Managing Companies, ROSATOM. in compliance with Resolution No. О1 Group, Leader Group. Cooperation Gazprombank (jointly with VTB Capital) 963, dated 20 September 2014, of the with major private pension funds — was a co-lead manager of a RUB 10 billion Government of the Russian Federation Sberbank and Blagosostoyanie — exchange-traded bond issue and contracts of the Bank’s corporate was initiated. for PJSC Power Machines. customers. Projects to accept insurance premiums In 2016, cooperation started between The total amount of contracts provided using information and payment terminals Bank GPB (JSC) and the Federal Service with banking support exceeded gained momentum. They are pursued of National Guard Troops of the Russian RUB 800 billion in 2016. In that period, in association with insurance firms. Other Federation. Within the framework of that 32,000 separate accounts for the Bank’s types of services are provided to private cooperation, the Bank is tasked with customers provided with banking pension funds and include transfer developing customized solutions for key support were reserved and opened. of retirement payments using consoli- banking products and services both Bank GPB (JSC) provides banking support dated register technology. for employees and structural divisions to major projects, including construc- The Bank has opened settlement of the National Guard. tion of Zvezda, a ship-building factory accounts and has reached a collabora- Within the framework of a collabora- in the Primorye, and of a railway bridge tion agreement with ATON Group, one tion agreement between the Ministry over the Amur River (Heilongjiang). of the leaders in the financial market. of Industry and Trade of the Russian Important efforts were made to enhance Financial companies are increasingly Federation and the Bank, the parties the quality of customer services. more interested in a service of monitoring, agreed to start work under a project In particular, advisory services were by specialized depositories, of payments to optimize the structure of ministry­ arranged by employees of the Bank’s made by managing companies. -dependent enterprises producing contact center, methodological Within the framework of implementation conventional armaments, ordnance and hands-on guides on banking support of a project for movable property pledge 27 Gazprombank ANNUAL REPORT 2016

In 2016, Bank GPB (JSC) began cooperation with the Federal Service of National Guard Troops of the Russian Federation.

notices to be registered by the Federal In 2016, GPB-Factoring LLC, a subsid- of collaboration with industry leaders Notarial Chamber (FNP), Bank GPB (JSC) iary of the Bank, launched a factoring at a high level and to continue financing developed and successfully launched program for vendors working with of new efficient government-backed for the FNP an integrated and custom- nationwide retail chains. Owing projects within the framework ized banking solution in late 2016, which to the program implementation, of target-oriented priorities of the indus- facilitates efficient management of cash the volume of assigned money claims try’s development. inflows and outflows through full auto- against retail chains has grown three The customer base of Bank GPB (JSC) mation of the process. times since the program was launched. enlarged by 13.6% in 2016 and exceeded Gazprombank is a leader in an innova- In 2016, the Bank also arranged issues 53,000 corporate customers tive business area — servicing the cash of exchange-traded bonds of a number as of end-2016. take turnover of corporate customers of public nationwide retail chains, using automated cash deposit machines for a total nominal value of RUB 25 billion. (CDM). In 2016, Gazprombank completed Gazprombank was the financial 15 projects with large corporate consultant of TechnoNICOL Corp., customers, based in several regions one of Russia’s largest manufacturers across the country, and started rolling of construction materials, in the purchase out large projects in the retail chains of public (AIM-traded) company Super- Victoria (Dixy Group) and Magnit (Tander glass, a major independent manufacturer Group), in Gazprom Neft’s chain of filling of insulation materials and glass wool stations (PJSC Gazprom Neft) and in Aero- in the UK. It is the first deal arranged express LLC. by Gazprombank for a UK public The number of CDMs maintained company. by the Bank has increased to 288 devices. In 2016, agribusiness remained The customers’ cash take turnover via among top-priority financing areas the Bank’s devices reached RUB 16 billion for the Bank. The Bank is now completely in 2016. Geography of the service ready for a transition to a new mech- availability has enlarged, and by now anism of soft lending adopted within the Bank’s devices have been installed the framework of Resolution No. 1528 at customers’ properties in Moscow, of the Government of the Russian St. Petersburg, Kazan, Ulan-Ude, Federation, dated 29 December 2016. and in the Perm Territory. Gazprombank plans to keep the scope 28 Gazprombank ANNUAL REPORT 2016 COMMERCIAL LENDING

By the end of 2016, commercial lending was up 11 %, to RUB 2,526 billion.

IN THE REPORTING azprombank is involved in active companies of the power industry PERIOD, THE STRUCTURE Gcollaboration with enterprises (PJSC Power Machines, OJSC Taganrog OF PROVIDED LOANS of ferrous and non-ferrous metal- Boiler­-Making Works Krasny Kotelschik, IN TERMS OF INDUSTRIES lurgy. Among our customers we have OJSC Kaluga Turbine Works, JSC Tyazh- DID NOT CHANGE Russia’s major metallurgical holdings: mash, PJSC Machine-Building Factory IN ANY MAJOR WAY. TMK Group, UGMK Group, OMK Group, of Podolsk, Krasnoyarsk Boiler Plant LLC, ECONOMY’S BASIC EVRAZ Group, NLMK Group, Russian JSC Ural Turbine Works, Electrosevkavmon- INDUSTRIES — METAL Copper Company Group, UC RUSAL, tazh LLC and others). INDUSTRY, ELECTRIC PJSC MMC Norilsk Nickel. Contributing to implementation of stra- POWER INDUSTRY, OIL During 2016, the Bank increased signif- tegic missions of the nuclear power AND GAS PRODUCTION, icantly (by more than 49% versus 2015) industry, Bank GPB (JSC) was in active TRANSPORTATION, lending covering current operations collaboration with major enterprises PROCESSING, CHEMICAL of power sector enterprises, including of the nuclear power generation AND PETROCHEMICAL power grid companies of Rosseti Group, complex. In accordance with a reso- INDUSTRY, MINING, power-generating company lution of ROSATOM State Corporation, AGRIBUSINESS, MACHINE- PJSC Enel Russia, heat-generating compa- the Bank is one of the base banks servicing BUILDING AND RETAIL — nies Gazprom Energoholding Group the industry’s enterprises. ACCOUNT FOR THE MAJORITY (PJSC MIPC, PJSC TGK-1) and other major As a strategic partner of ROSATOM State OF LOANS. enterprises of the industry. Current lending Corporation, the Bank continued coopera- provided to RusHydro Group enterprises tion with JSC Atomenergoprom. The Bank that carry out operations in generation, was tasked with making arrangements transmission and delivery of electric power for centralized financing of enterprises in the Far East was up, and lending to elec- of the nuclear power supply complex tric power enterprises of Siberia, including and with supplying guarantees to ensure EuroSibEnergo Group enterprises those enterprises’ compliance with their (PJSC IrkutskEnergo), remained at a consist- contractual obligations, including pursuant ently high level. to the Uniform Industry-Wide Procure- To finance short-term cash gaps, the Bank ment Standard, which regulates activities provided lending in the form of overdraft of ROSATOM State Corporation enterprises. to largest companies of the electric power Bank GPB (JSC) was still involved in collab- industry, including power supply compa- oration with JSC AEM-Technology and nies of Inter RAO Group, PJSC Unipro PJSC ZiO-Podolsk, subsidiaries of JSC Atom- and Rosseti Group. energomash, a company that consolidates Promoting relations with the machine- the machine-building assets of ROSATOM building industry, Gazprombank State Corporation and produces key continues to collaborate with enter- equipment for the nuclear and heat power prises of the energy machine-building industries, ship-building, gas and petro- sector, engineering and service chemical sectors. 29 Gazprombank ANNUAL REPORT 2016

In 2016, the Bank was in cooperation with °° development of infrastructure at license In 2016, a strategic cooperation agree- enterprises of fuel company JSC TVEL, blocks; ment was reached between PJSC STLC and enterprises of JSC Techsnabex- °° construction, reconstruction, and the Bank, with the Bank appointed port Group (trademark: TENEX), one technical retrofit of gas production an authorized arranger of a syndicated of the world’s biggest suppliers of prod- and transportation facilities; and loan for an amount of up to RUB 30 billion. ucts of the nuclear fuel cycle (NFC), °° construction of new and upgrade The funds are to be used to finance which covers a significant proportion of existing processing facilities. a program of promoting the lease of foreign-designed nuclear reactors Gazprombank provided loans to large of Russian-made aircraft Sukhoi Superjet demand for uranium enrichment services; contractors engaged in the implementa- 100, which is carried out by PJSC STLC the company is included in the control tion of investment programs of Gazprom, under an order of the Government loop of the Development and Interna- Transneft Group and NOVATEK. Simulta- of the Russian Federation with a backing tional Business Module of ROSATOM State neously, the Bank expanded its partic- from Russia’s Ministry of Transport Corporation. ipation in financing projects of inde- and Ministry of Industry and Trade. Fostering partner relations with ROSATOM pendent natural gas producers, such Gazprombank supports external economic State Corporation, Bank GPB (JSC) was as PJSC Sibneftegaz and NOVATEK. activities of corporate customers, issues financing current operations and issued In 2016, Gazprombank, being an authorized bank guarantees and letters of credit guarantees to some of the industry’s enter- bank to finance enterprises within the frame- and provides services related to manage-

The Bank strives to attract and retain the most promising and reliable segment of borrowers with a high credit quality.

prises in 2016, such as ElectroKhimPribor work of the government order, was pursuing ment of payments (documents against Integrated Plant (Federal State Unitary collaboration with enterprises of the defense payment (D/P)) and trade finance (pre-­ Enterprise), Instrument-Making Plant industry complex and Roscosmos. export finance; short-, mid- and long- (Federal State Unitary Enterprise), Mayak In 2016, interaction was continued with term loans for external trade operations Production Association (Federal State leading companies of the telecom market. (including those covered by export credit Unitary Enterprise), Russian Federal Nuclear Gazprombank has PJSC Megafon, PJSC Rost- agencies) and import factoring). Center — VNIIEF (Federal State Unitary elecom, PJSC MTS, PJSC JSFC Sistema, In structured trade finance operations, Enterprise), JSC NIKIET. JSC TransTelecom, JSC ER-Telecom Holding the Bank uses the advantages of the Group’s Cooperation of Bank GPB (JSC) with and other telecoms among its customers. Europe-based subsidiaries — Gazprom- major enterprises of oil and petrochem- Despite negative trends in the consumer bank (Switzerland) Ltd. and Bank GPB Inter- ical industries, including Rosneft Group, sector of economy, a new impetus was national S.A. (Luxembourg). PJSC LUKOIL, PJSC Bashneft, Slavneft given to partner relations of Bank GPB (JSC) The Bank provides financial support Group, Gazprom Neft Group, SIBUR with retailers. Work was begun with to Russian exporters, supplying them Holding Group, TAIF Group, Cordiant Auchan Group, one of the biggest inter- with long-term “tied” export loans within Group, Gazprom Neftekhim Salavat LLC, national players, and a factoring program the framework of a program of govern- Shchekinoazot Group and PJSC Kuiby- of financing of vendors of major nation- ment financial (guarantee-based) support shevAzot, was traditionally active in 2016. wide retail chains (Magnit, Lenta, Metro of industrial exports, using trade finance Lending was provided for financing Cash & Carry, Auchan, O’KEY) was enlarged. instruments with involvement of JSC EXIAR, of operations and implementation In 2016, the Bank continued to take an active acceptance and post-financing of export of programs related to production facil- part in funding of agribusiness enterprises, letters of credit, etc. ities upgrade. The Material Cash Pooling increasing lending volumes to finance their The Bank promotes partnership relations service was implemented with Gazprom current operations, and also to be used in trade finance with financial institutions Neft Group, and a respective overdraft as investments in business development based in CIS countries and overseas, loan contract was executed. of companies producing and processing carrying out operations that necessitate In 2016, Bank GPB (JSC) was involved agricultural products and groceries. Special issuance of irrevocable reimbursement in active collaboration with Gazprom attention was paid to expansion of coop- undertakings, bank guarantees against Group, and took part in financing eration with vertically integrated holdings counter-guarantees, arranging acceptance the Group’s subsidiaries and affili- of the food industry and agriculture (Rusagro, and post-financing of letters of credit. ated ventures within the framework Miratorg, Cherkizovo, Komos Group, Aston, A great part of the deals are carried out of Gazprom’s investment program, which Efko, NMGK, KDV, Dominant) and with in the interests of the Bank’s corporate provides for, among other things: leading regional enterprises. customers. 30 Gazprombank ANNUAL REPORT 2016 RETAIL BUSINESS

In 2016, Gazprombank Group started to enlarge its retail loan portfolio, keeping its quality at an invariably high level.

EVALUATING PERFORMANCE Main results of 2016 new business as the market as a whole, OF THE RETAIL SEGMENT 2016 can be described as a year where which means that declining foreign OF GAZPROMBANK recovery trends in Russian economy were currency volumes were proactively offset GROUP’S BUSINESS IN 2016, building up after the 2014–2015 crisis by attracted ruble deposits. WE CAN STATE THAT RETAIL period. A stronger national currency was Last year, the retail loan market left LIABILITIES WERE SHOWING largely defining the picture of the retail the declining phase, which it had entered GROWTH AT THE MARKET banking market in the reporting year. during the 2014–2015 crisis period, LEVEL, WITH THE CURRENCY As a consequence, the deposit market and resumed growth. STRUCTURE CHANGING saw deceleration of growth rates; In 2016, the Group’s retail loan portfolio IN FAVOR OF THE RUBLE the decline in the lending market has was rising at rates slightly below market COMPONENT; THE RETAIL stopped and the market started to revive. average. This could be explained taking LOAN PORTFOLIO RESUMED From 2014 to 2015, ruble depreciation into account its product structure. GROWTH, AND ITS QUALITY was occurring, as a result of which The market recovery which had started REMAINS HIGH, WITH the deposit market was adding in volume affected the segment of unsecured THE DELINQUENCY LEVEL at outperforming rates, mostly because lending first and foremost, i.e. credit cards STAYING MUCH LOWER THAN of revaluation of the market foreign- and consumer loans, while the Group THE MARKET AVERAGE. currency component. In 2016, the ruble pursues a conservative lending policy, was moving in the reverse direction, making an emphasis on development with market volumes declining because of mortgage and consumer lending of falling interest rates on foreign currency in the low-risk customer segment. deposits and shrinkage of the ruble This type of lending policy allows equivalent of foreign currency deposits. the Group to maintain the quality The market was able to make up of its loan portfolio at the highest for the slump by an incremental growth level, with its delinquency ratio staying of ruble deposits. significantly below the market average. The ratio of “foreign currency On the back of 2016, the Group was predominance” (percentage of foreign- ranked at the top of retail rankings, taking currency deposits) of Gazprombank 4th place in terms of attracted deposits Group’s retail liabilities is higher than and 4th place in terms of the volume the market average. This explains of the retail loan portfolio. a considerable volume growth in 2014 Systematic implementation of a retail and 2015, and also why the Bank saw strategy that has maximum coverage a faster deceleration of deposit growth of the target customer base and retail rates than the market at large. It must be lending based on a low-risk business noted, however, that in the reporting year model as its basic elements allowed the Group was attracting virtually as much the Group to offset declining volumes 31 Gazprombank ANNUAL REPORT 2016

Market shares , % Retail loan portfolio dynamics Growth rates for retail loans, %

■ Deposits ■ % of total Bank's loan portfolio ■ Market, RAS ■ Loans ■ Volume, RUB billion ■ GPB Group

3.0 10.4 330 329 15 2.9 2.9 2.9 2.8 314 14 2.7 9.4 9.0

5

1 2015

2014 2015 2016 2014 2015 2016 2014 2016

–5

–7

Non-performing loans ratio Retail deposit portfolio Growth rates for retail deposits, % dynamics, % of retail loan dynamics portfolio ■ Market, RAS ■ % of total Bank's deposit ■ GPB Group ■ Market, RAS portfolio ■ GPB Group ■ Volume, RUB billion

8.0 20.1 659 20.4 678 34 7.3 17.2 5.9 492 25 24

2.9 2.6 2.1 9

4 3

2014 2015 2016 2014 2015 2016 2014 2015 2016 32 Gazprombank ANNUAL REPORT 2016

Structure of loans by product lines Structure of loans by product lines in 2015, % in 2016, %

■ Mortgage loans ■ Mortgage loans ■ Consumer loans ■ Consumer loans ■ Car loans ■ Car loans ■ Credit cards ■ Credit cards

3 2 1 2

24 26

71 71

of foreign currency deposits by attracting credit risk perception, which means that, for 20.4% of the total volume of the Group’s ruble deposits, and to make a transition, predominantly, we opt for secured lending customer liabilities. alongside the market at large, (mortgage loans) and lending to customers Within the volume of attracted deposits to an enlarged loan portfolio. The Group’s with a transparent financial standing, of private individuals, demand deposit loan delinquency ratio invariably remains namely borrowers with a positive credit accounts total RUB 136 billion, and time low compared to the market average. history, those who have their salaries trans- deposits are equal to RUB 542 billion. ferred to accounts with the Group’s banks, The Group’s reputation and appeal Customer base and customers of the premium segment. of the deposit product range help keep One of key customer segments for the Bank The structure of the retail loan portfolio the time structure of the deposit port- are employees of Gazprom Group compa- underwent some changes in 2016, folio virtually unchanged, which offers nies and employees of large corporate by virtue of market trends, with automo- benefits in terms of liquidity and attests customers. This customer segment helps tive lending scaled back and the consumer to the customers’ trust in the Bank build a low-risk portfolio of retail loans, loan market seeing a revival across as a highly reliable lender. which includes mortgage loans, consumer the segment. loans and credit cards, and provides sources On the back of 2016, we observed a decline Bank card business of retail funding, such as payroll projects, in the percentage of the Group’s overdue I. Key quantitative indicators: time deposits and demand deposit accounts. retail loans to 2.6% (in 2015 it was 2.9%) °° The issuance portfolio was up 8% (from of the aggregate portfolio of loans to private 3.6 to 3.9 million units). Loans individuals. That indicator plunged within °° The number of ATMs jumped by 6% (from In the reporting year, the portfolio the framework of the general market trend. 5,300 to 5,600 units) during the year. of retail loans added 5%, while the market However, the Group’s retail lending model II. New products and services realized at large gained only 1%. As of the end allows it to keep the delinquency ratio in 2016: of the reporting year, the amount of loans at a much lower level that the market average. Issuance of bank cards of the Mir national to private individuals equaled RUB 329 billion, payment system: or 9.4% of the Bank’s aggregate loan portfolio. Deposits °° November 2015: The Bank was When building the Group’s retail loan In 2016, deposits of private individuals were the first to join and start issuing cards portfolio, we adopt an approach with a low up 3% to RUB 678 billion and accounted of the national payment system MIR. 33 Gazprombank ANNUAL REPORT 2016

Structure of retail deposits by term Structure of retail deposits by term in 2015, % in 2016, %

■ Fixed-term deposits ■ Fixed-term deposits ■ Demand accounts ■ Demand accounts

17 20

83 80

The Bank was awarded individual A cooperation agreement was signed • expansion of a list of payments member code 10001. between the Bank and JSC Federal (public information system for regional °° December 2015: The Bank issued its first Passenger Company. Within the frame- and local payments, etc.). co-badge card powered by MasterCard — work of the agreement, discounts The Bank’s self-service machines the Mir-Maestro card. are to be offered under the Russian °° The Bank has implemented a new service — °° February 2016: The Bank issued its first Railways Bonus program to students opening a deposit using an ATM. co-brand card of the Mir payment who hold the Bank’s campus cards — V. Improvement of solutions that help system — the Mir—Gazprombank— up to 25% off the railway ticket price. ensure security of transactions using Russian Army card. III. New projects for corporate customers the Bank’s cards: °° August 2016: The Bank issued °° Development of projects with non-­ °° For a fourth straight year, Bank GPB (JSC) its second co-badge card powered financial services included in bank cards was announced as the winner in two by the JCB payment system — the Mir— (e.g. accounting for reduced-rate medical prestigious international nominations JCB card. nutrition) for employees of major enter- in the issue and service of Visa bank cards¹: As of end-2016, the total issue of Mir bank prises. As of 1 January 2017, more than • for the highest efficiency in managing cards exceeded 250,000 units. 18,000 cards were issued. issuer’s risks in international transactions; Development of on-campus projects: VI. Development of remote channels • for the best quality of servicing international °° August 2016: The Bank started to issue The Telecard system transactions among Russian issuer banks. joint bank cards with the Amur Hockey °° A new application of the Telecard system VI. Acquiring Club — the Gazprombank—Amur card. has been designed and rolled out for iOS °° Acquiring services are provided The card can be used as a payment vehicle and Android operating systems. in association with Inventive Retail Group and as a fan’s certificate, and also allows °° The following functions have been (a store chain that sells Apple, SONY, participation in the loyalty programs included: Samsung and other branded products). of the Amur Hockey Club and the Bank. • using a finger print for cardholder iden- °° Recycling ATMs and automated safe °° As of 1 January 2017, about 2,000 cards tification (Touch ID); deposit boxes were deployed across large were issued. • concealment of the balance; retail and service chains. °° September 2016: Implementation • payment of traffic police fines of the Russian Railways Bonus program. (including a 50% discount); ¹ According to rankings of the Visa payment system. 34 Gazprombank ANNUAL REPORT 2016 PRIVATE BANKING: 2016 FULL-YEAR RESULTS AND DEVELOPMENT PROSPECTS

In 2016, Gazprombank Private Banking displayed stable growth and reinforced its strong positions in the market of private banking services.

IN 2016, ASSETS UNDER n emphasis made on products GAZPROMBANK PRIVATE Athat meet our customers’ interests BANKING’S MANAGEMENT as fully as possible has allowed the Bank CLIMBED BY 30%, to timely modify the line of bank AND THE NUMBER OF HNWI deposits. Changes made to the interest CUSTOMERS WAS UP 20%. rate, liquidity, capitalization of interests, THESE ACHIEVEMENTS special conditions in the event of an early WERE FACILITATED termination of a deposit helped maintain BY REINFORCEMENT competitiveness, and ensure a significant OF HUMAN RESOURCES inflow of funds from wealthy customers. AND IMPROVEMENT In addition to the five key currencies, 3 jurisdictions OF THE PRODUCT LINE. yuan-denominated deposits were Russia, Switzerland and Luxembourg introduced. Investment-related vectors saw a very active development. Wealthy customers 12 regions of presence in Russia were offered investment solutions that allow making money on various classes of assets without risking to lose invested capital. In particular, under programs Luxembourg of Investment Life Insurance offered St. Petersburg by partners, i.e. insurance firms, aggregate Zurich insurance premiums surged 2.5 times. Lending opportunities available to private Moscow banking customers were enlarged consid- Tula erably, including those secured by assets Nizhny Novgorod placed with the Bank. In 2016, the loan portfolio doubled. A number of transac- Rostov-on-Don Saratov tions were carried out, in which loans and Krasnodar Ufa Yekaterinburg Surgut guarantees, which were secured by assets, were granted to legal entities, and mort- Orenburg gage loans were provided to buy luxury apartments, which account for a consid- erable part of the premium real estate Novosibirsk market. Usability of bank cards for customers ■ Gazprombank Private Banking: geography of presence also has been enhanced in a major way. 35 Gazprombank ANNUAL REPORT 2016

> 30% > 5350 2 customers fold rise was the growth of assets the number of HNWI seen in Gazprombank Private under the management customers climbed by 20% Banking’s loan portfolio of Gazprombank Private in 2016 Banking

Within the framework of private banking 2nd in the nomination TOP 5 Best Banks Russian artists. Traditionally, works from pricing plans, we can now issue for free of the Frank RG Private Banking Award. the Bank’s collection took part in large- up to 10 major cards in different curren- scale exhibition and museum projects cies, and opportunities are available across Russia and abroad in 2016. The most to accumulate miles under the Aero- important among them were the flot Bonus system and get cashbacks Triennale of Contemporary Art in Ljubljana, of up to 20% for spending in preferred In 2017, Gazprombank Private Banking an exhibition project of selected art categories (restaurants, cafés, bars, will keep its development vector works from the Bank’s collection within supermarkets). and will be focused on expansion the framework of the First Festival of Art In 2016, an important emphasis was of its regional and international busi- and Lifestyle “Art.Up Art.In” at the Moscow made on HR development, and, notably, ness. One of key priorities is to increase Museum of Contemporary Art, the “Russian on expansion of instruments the frequency of utilization of banking Space” project at the Multimedia and methods of personnel training products and to pursue active attraction Art Museum (Moscow). and evaluation. Employee educational of new customers. Gazprombank is the first corporation programs covering private banking prod- from Russia and Eastern Europe, ucts and services were organized both Art Banking which was admitted as a member in the traditional on-site format and with In the Art Banking segment, provision to the International Association the use of remote learning technologies, of a wide range of services to customers of Corporate Collections of Contemporary including the webinar format, which remained a priority in 2016, and those Art (IACCCA), a prestigious professional helps hold orientation and training services ranged from selection of experts group. At the Bank’s invitation, the sessions, and sessions where employees and service providers to handle leadership of the association visited our can share experiences in a timely manner practical matters related to investments country for the first time and took part and with minimum costs. Moreover, to participation in educational programs in a round-table discussion, which was that format was now used as an effi- to visiting unique events of the world to introduce the IACCCA’s activities to cient instrument of video monitoring of arts. A program of art events remained the Russian art community, to expound in regular evaluations of professional in place and was even enlarged; within underlying strategies of building and expertise of client managers. A system its framework, customers were able to take maintaining major corporate collections to evaluate professional training of client part in the main events of artistic life of modern art. A round-table discussion managers was also adopted. In particular, and to see landmark exhibition projects with participation of the curator of the this system helps organize regular in Russia and abroad. Bank’s corporate collection was part of and simultaneous knowledge testing Tasks related to management the public program of the “Art.Up Art.In” of all Private Banking account managers of Gazprombank’s corporate art collection, festival. across all products and services. which celebrated its fourth year in In 2016, the Bank’s collection was included Activities of Gazprombank Private 2016, were also accomplished. Today, in the short list of the Corporate Art Awards, Banking were rated highly by financial the corporate collection has more than an award of the LUISS Business School market experts. The Bank was ranked 800 works of over 70 contemporary (Rome) backed by Italy’s Ministry of Culture. 36 Gazprombank ANNUAL REPORT 2016 PROJECT AND STRUCTURED FINANCE

In 2016, Gazprombank was among global leaders in project finance.

A WIDE EXPERIENCE azprombank carries out investment banks, EXIAR’s agent and account bank IN IMPLEMENTATION Gprojects in a wide range of sectors for project accounts. Gazprombank helped OF COMPLEX INVESTMENT of economy. The main competitive attract funding in the amount equivalent PROJECTS IN THE KEY advantages are concentrated in the oil to USD 19 billion into the project. INDUSTRIES OF ECONOMY, and gas, chemical and petrochemical, Project Finance & Infrastructure Journal A WELL-BALANCED LENDING mining, metallurgical, machine-building (IJGlobal) named Yamal LNG the world’s POLICY, PROFESSIONAL, and power industries, in real estate, trans- biggest project in infrastructure finance TRUST-BASED AND TIME- port, infrastructure, agribusiness, etc. in 2016. TESTED RELATIONS The Bank’s team has a vast expertise A project to finance purchase of rolling WITH CUSTOMERS in handling projects, proposes integrated stock for Aeroexpress LLC was accom- AND COUNTERPARTIES financial solutions and customized plished; it provides for delivery SECURED FOR GAZPROMBANK approach. of 62 double-deck Swiss-made passenger A PLACE AMONG Among 2016 projects, the following ones railway cars to be operated on the routes THE LEADING BANKS deserve special attention: connecting the city of Moscow with IN THE GLOBAL AND RUSSIAN The financial deal for the Yamal LNG the airports of the Moscow airport hub MARKETS OF PROJECT project was completed. The project (Vnukovo, Domodedovo, Sheremetyevo). AND STRUCTURED FINANCE, purports to develop the South-Tambey The project cost EUR 184 million to carry out. INVESTMENT LENDING gas condensate field in the Yamal Penin- The main peculiarity was that the project AND FINANCIAL CONSULTING sula and construction of an LNG plant turned out to be Russia’s first project with ON THE BACK OF THE 2016 with an output of 16.5 million tons of LNG insurance cover by an international export PERFORMANCE. a year. Within the framework of the project, credit agency (SERV, Switzerland) in rubles the Sabetta international airport, a sea “on the project.” The new rolling stock port and a power plant with a capacity is scheduled to be commissioned in 2017. of 376 MW were also built. The Bank also won a tender to finance Financing of the Yamal LNG project and executed a loan agreement with is the biggest project finance deal JSC Federal Passenger Company (Russian in Russia’s history and also one Railways Group) to supply double- of the world’s largest; it involves share- deck passenger railway cars; the limit holders, financial institutions and export of financing was set at RUB 6 billion. credit agencies from Russia, China, France, The Bank was actively expanding busi- Italy and Japan. The multi-currency struc- ness in the telecom industry. In 2016, ture of the deal ensures investments a unique deal was completed, under in rubles, euros and yuans. which a 5-year loan agreement was Gazprombank acted as financial consultant executed with PJSC Mobile TeleSystems, for a project company, as arranger, which contemplates ruble financing lender, loan facility agent of the Russian in an amount equivalent to EUR 100 million 37 Gazprombank ANNUAL REPORT 2016

for the construction of an LTE network; with Exim Bank of China was used, under performance, Gazprombank was among for that project, the Bank raised funding a Chinese equipment supply contract. global leaders in the area of investment in euros from Danske Bank, with a coverage Adopting progressive solutions and taking project finance. The Bank shared 3rd provided by export credit agency EKN. care of the environment, Gazprombank place, according to Project Finance Bank GPB (JSC) continues to carry out promotes green energy. For instance, International, among the Global Top 10 a strategy of construction of plants a RUB 6.8 billion project of construction for Advisories Closed; 2nd to 5th ranks to produce LNG at light- and medium-­ of solar power plants with a total capacity as financial consultant in infrastructure tonnage units. In May 2016, CJSC CryoGas of 75 MW was financed in the Republic finance, according to IJGlobal; was ranked (the construction was funded by the Bank) of Bashkortostan, Republic of Altay 10th as a commercial lender in the energy commissioned into operation a new natu- and Orenburg Region. sector, according to the Trade Finance ral-gas liquefaction facility in Pskov, with The Bank acted as financial consultant magazine. In addition, the Bank took 2nd an output of 20,000 tons a year. of Gazprom Pererabotka Blagoveschensk place as CIS mandated arranger of syndi- The Bank also provides funding for the con­- LLC, within the framework of a project cated lending, according to Dealogic. ­struction­ of an LNG plant with an output of construction of the Amur Gas Processing Gazprombank’s ability to be effective of 660,000 tons a year in the Port of Vysotsk. Plant with an output of 42 bcm a year in any economic environment, proven In 2016, finance in the amount of RUB 21 bil­lion in the Amur Region. The plant will become by multiple examples of successfully was provided­ for the purpose. The structure the world’s biggest helium producer. completed projects and powered of the deal provides for loans to be raised Financial consulting was provided by a strong experience, highly quali- from a syndicate of foreign banks, which for a project of construction of a gas fied personnel, established reputation are to be covered by export credit agencies processing plant and a polymer plant and large scale of operations, predeter- Hermes and Bpifrance Assurance Export S.A.S. in Garadagh, Republic of Azerbaijan. mined further efficient development The funds will be used to finance/refinance The capacity of the gas processing plant will of project and structured finance as an area costs of the purchase of principal process be 10 bcm a year, the output of the polymer of the Bank’s business. equipment made by Air Liquide and TGE. plant will reach 570,000 tons of polyeth- In order to substitute imports, financing was ylene and 120,000 tons of polypropylene Consulting for M&A deals provided for the construction of Russia’s a year. The Bank contemplates engagement and investments in minority stakes first unit to produce dimethyl ether, with of a Chinese strategic investor and Chinese of non-public companies an output of 20,000 tons a year. The amount contractors within the framework of revival Gazprombank is one of the leaders of the M&A of the loan granted to DME-Aerosol LLC of economic relations among the countries market in Russia, which attests to the Bank’s for the project was EUR 14.8 million. of the Silk Road. consistently strong performance. Additionally, in the chemical sector, a project Many other projects were completed, At the ceremony for the 2016 Russia M&A of OJSC Shchekinoazot was funded, which which ensured for Gazprombank’s special- Awards led by Preqveca agency, Gazprom- contemplates construction of a unit ized finance loan portfolio according to IFRS bank was named Russia’s best investment to produce sulfuric acid, with a capacity to equal RUB 648 billion by year’s end. bank for a second straight year. According of 200,000 tons a year. To optimize costs In rankings of major international to the Thomson Reuters agency, from 2007 for the borrower, a forfeiting arrangement publishers released on the back of 2016 to 2016, more than 80 M&A deals for a total 38 Gazprombank ANNUAL REPORT 2016

amount exceeding USD 40 billion were was an investor and financial consultant of City Hospital No. 40 in St. Petersburg; executed with Gazprombank’s involvement. of the project and provided financing an agreement on the project joint imple- Gazprombank provides consultations within the framework of a syndicate mentation was signed by the Bank, Italian to customers on matters related to private consisting of five financial institutions. company Pizzarotti and the Russian Direct offerings, purchase and sale of business, The project involves a team of people from Investment Fund in June 2016, during mergers, joint ventures and equity swaps. several departments of Gazprombank, the St. Petersburg International Economic The Bank continues to develop Merchant including the Direct Investments Depart- Forum, in the presence of Russian President Banking, or investments (independently ment, the Project and Structured Finance Vladimir Putin and Italian Prime Minister or as a co-investor) in minority stakes Department, the Public Private Partnership Matteo Renzi. That project won a pres- of non-public fast-growing companies. Center, the Bank’s Branch in St. Petersburg. tigious national award, Rosinfra, for 2016, Gazprombank representatives take part Moreover, in December 2016, a conces- in the Best PPP Project for Communities in corporate management of portfolio sion agreement was signed for the first category. The Bank received an award companies of MIR Capital, a joint fund with PPP transport project in the Far East — in the Best Investor nomination. Italy’s Intesa Group. construction of an automobile road Gazprombank also finances two conces- to bypass the city of Khabarovsk. The agree- sions in the construction of PET centers Public-private partnership ment will stay in effect for 15 years, in Balashikha and Podolsk. Two loan In April 2016, the Republic of Komi, Road and the project will cost more than agreements executed by Gazprombank Concession LLC and Gazprombank executed RUB 40 billion. Gazprombank acts as finan- with the concession operator are worth a direct agreement within the framework cial consultant and plans to provide RUB 2.7 billion. Those projects will help of financial closing in a project of construc- financing to the concession operator create a modern system of diagnostics tion of sections of the Syktyvkar — Naryan- ­ for a total amount of up to RUB 10 billion. and effective treatment of oncological Mar automobile road, with costs running PPP projects contribute to development diseases in the Moscow Region. Gazprom- as high as RUB 6.2 billion. A respective of railway communications. For instance, bank, in association with relevant investors, concession agreement for reconstruction, the Bank, as financial consultant, is in talks about implementation of similar construction and operation of sections takes part in the construction project projects in other Russian regions. of the Malaya Pera — Irael and Irael — of the Bovanenkovo — Sabetta railway 2016 was also the first year of working Kadzher roads, of the total length of 80.5 km, line, with a total length of more than under a new federal law on PPP. In particular, was executed in July 2015; a facility 170 km, in the Yamal-Nenets Autonomous it permits carrying out projects where agreement was signed in December 2015. Area. Investments exceed RUB 113 billion. a private partner, after completing a facility, The sections are scheduled to begin opera- The Yamal-Nenets Autonomous Area is also involved in its maintenance, which tions no later than in 2018. is a traditional region where the Bank is especially in demand in education In December 2016, traffic was opened operates, and a project of daycare centers and healthcare. The legislation sees along the entire length of the Western and schools construction is also imple- further improvement, and Gazprombank High-Speed Diameter. Technically, mented there in the form of PPP. is engaged in the work of relevant groups the central part of the road, built within In 2016, Gazprombank was actively involved under the Russian Ministry of Economic the framework of a 2012 PPP agreement, in medical PPP projects. In particular, Development, the Ministry of Construc- is the biggest in scale, with about 30 sophis- the Bank is in talks to complete the financial tion, Housing and Utilities, the Chamber ticated engineering facilities; the costs stage of a project of construction of a new of Commerce and Industry, and the Federa- exceed RUB 120 billion. Gazprombank treatment and rehabilitation building tion Council. 39 Gazprombank ANNUAL REPORT 2016 MOST SIGNIFICANT PROJECT FINANCE AND FINANCIAL ADVICE TRANSACTIONS IN 2016

Varnitsa. Construction of a salt Financing shipment plant to make Extra class Construction Construction of an LNG plant Construction of a section of 62 double-deck railway edible salt from saline solution of an automobile road based on the South-Tambey of the Syktyvkar — produced from the salt beds gas condensate field Naryan Mar automobile road cars covered by an export developed in the course to bypass the city credit agency of the Kaliningrad natural gas of Khabarovsk storage expansion USD 19 billion RUB 6.2 billion RUB 11.1 billion ≈ RUB 2 billion RUB 43 billion

Arranger, lender, facility agent, EXIAR agent, financial adviser Funding arranger, lender Adviser, funding arranger, lender Lender Member of a consortium

DME-Aerozol

Financing construction of solar power plants Financing construction in the Republic of 6 pre-school educational Financing shipment Refinancing costs to purchase Construction of a unit of Bashkortostan, Republic institutions of double-deck long-distance equipment for expansion to produce dimethyl ether of Altay, Orenburg Region, in the Yamal-Nenets passenger cars of LTE networks in Russia with a total capacity of 75 MW Autonomous Area

RUB 6.8 billion RUB 5.9 billion RUB 5.6 billion ≈ EUR 100 million EUR 14.8 million

Lender Lender Lender Funding arranger, lender Lender

Consulting services to raise Funding of construction funding from export credit Construction Construction of a unit Reconstruction of a gas processing plant agencies and Russian of a rehabilitation building to produce sulfuric acid of the Art Gallery residential and a polymer plant banks for the Long Fu 1 TPP of City Hospital No. 40 building in Moscow in Garadagh, Azerbaijan construction project in St. Petersburg Republic (Vietnam)

RUB 1.9 billion RUB 1.68 billion USD 3.5 billion USD 1.1 billion RUB 8.9 billion

Lender Lender Financial adviser Financial adviser Financial adviser

Construction Construction of a timber of the Bovanenkovo — Construction and chemical plant Sabetta railway line of the Amur Gas in the Yenisei District in the Yamal-Nenets Processing Plant Autonomous Area of the Krasnoyarsk Territory

RUB 114 billion USD 2.4 billion

Financial adviser Financial adviser Financial adviser 40 Gazprombank ANNUAL REPORT 2016 COMMODITY AND CAPITAL MARKET OPERATIONS

Gazprombank provides a wide range of services, keeping leadership in key business areas in capital markets.

Deal-making in the debt capital market °° Best Russian Investment Bank China and other countries of the Asian-­ In 2016, Gazprombank arranged on Eurobond Market Pacific region, and also with regulators 64 primary bond issues of 38 issuers, A deal for the placement of Moscow and infrastructure players of the debt and for a total amount of RUB 633 billion, Region bonds, in which Gazprombank was equity capital markets. In December 2016, in the local debt capital market, and was the general agent, was not only the biggest the Bank arranged a meeting with investors the leader in the Cbonds ranking of lead in 2016 in the sub-federal segment, but was in Shanghai and meetings with largest banks managers in all the key categories: also awarded the Comeback of the Year prize. in Beijing for the Russian Ministry of Finance. °° first place in the general rating of lead A deal to issue bonds of JSC Federal Passenger To promote joint projects for issuers managers (all issues); Company, arranged by Gazprombank, was and investors from Russia and China, °° first place in the rating of lead managers awarded the Debut of the Year prize. Gazprombank took part in a conference that of market issues; Gazprombank was also the lead manager was organized by the Moscow and Shanghai °° first place in the rating of corporate in a landmark­ issue for the Russian market — Stock Exchanges in Shanghai. GPB Financial sector lead managers. issue of exchange-traded bonds of Vnesh­ Services Hong Kong Ltd., Gazprombank’s The Bank retained leadership in the general econombank, ПБО-001Р-03 Series; those subsidiary, provides brokerage services rating, despite a stronger competition were 5-year US dollar-denominated bonds for transactions with securities in Hong Kong, among investment banks: over the year, with settlements in Russian rubles. The deal renders support to projects, and arranges the scope of offerings managed by Gazprom- was the first market transaction with that road shows in the Asian-Pacific region bank surged by 46% (from RUB 433 billion structure of settlements in the local market. for Russia’s leading companies that the Bank to RUB 633 billion), and the number of offer- In the Eurobond segment, the Bank was has as its customers. ings by 23% (from 52 to 64 issues). the lead manager and book-runner of all Gazprombank also remains one deals for Gazprom in 2016. For Evraz Work in stock markets of the leading Russian banks Group, the Bank arranged management Since 2013, Gazprombank has been in the Eurobond segment, as it arranged of liabilities related to Eurobond redemp- mandated as corporate broker for Gazprom. seven international deals for a total amount tion, and offering of a new USD 750 million During 2016, Gazprombank was involved of USD 3.2 billion (in the equivalent) Eurobond issue; for PJSC Polyus it arranged in the preparation of Gazprom’s road shows in three different currencies. a debut USD 500 million Eurobond issue. in Europe and Asia, and Investor Days Moreover, deals were completed to issue in London and New York. Selected Gazprombank deals in 2016 eurocommercial papers and convertible Gazprombank pursues work aimed The Bank’s performance was highly eval- Eurobonds for Industrial Metallurgical at enhancement of the appeal of Russian uated by market players, and the Bank Holding Managing Company LLC. companies to Asian investors. During received landmark prizes of the Cbonds the year, Gazprombank organized more Awards, a prestigious annual award, in 2016: Asian vector than ten road shows for government °° Best Investment Bank (Company) – The Bank is consistent in establishing its foot- officials of the Russian Federation Arranger for Fuel and Energy Complex hold in Asian markets and in enlarging and for companies of the oil, gas, °° Best Investment Bank (Company) — interaction with Asian investors, in particular metallurgical and consumer sectors in Hong Arranger for Non-oil sector those based in Hong Kong, continental Kong and in the Asian region at large. 41 Gazprombank ANNUAL REPORT 2016

3.375 % 3.125 % 2.750 % 4.699 % 6.750 % 2.7 years 7 years 5 years 5.5 years 5.5 years

CHF 500,000,000 EUR 1,000,000,000 CHF 500,000,000 USD 500,000,000 USD 500,000,000

Lead manager Lead manager Lead manager Lead manager Lead manager

Arrangers rating (all issues)

Source: Arranger Share, % Amount, Cbonds as of 31.12.2016. RUB million

Gazprombank 21.0 382,759 VTB Capital 18.0 329,092 Sberbank CIB 13.6 248,776 Otkritie Financial Corporation Bank 11.0 200,919 Sovcombank 6.9 125,949 Others 29.5 537,708 Total 0100 1,825,203

Arrangers rating (market issues)

Source: Arranger Share, % Amount, Cbonds RUB million as of 31.12.2016.

Gazprombank 19.9 220,967 VTB Capital 19.0 211,063 Sberbank CIB 13.9 153,943 Sovcombank 10.5 117,183 ROSBANK 8.0 88,417 Others 28.7 320,172 Total 0100 1,111,745

Trade operations °° TOP 5 major dealers in Russian Eurobonds °° TOP 4 operators of equity securities in the In 2016, the Bank managed to achieve (according to the Bloomberg agency, Moscow Exchange (among Russian banks) significant results in trading and sales 2016) In 2016, the Bank was bestowed high of debt and equity instruments. °° TOP 4 major dealers in corporate bonds awards in key nominations of the Cbonds In terms of trading, the Bank is confidently in the Russian local market Awards: numbered among major market players, °° TOP 5 banks in terms of Federal Loan °° Best Bond Market Trading (first place) including: Bonds (OFZ) sales °° Best Bond Market Sales (second place). 42 Gazprombank ANNUAL REPORT 2016

Moscow Region Yamal-Nenets Autonomous Area

4.90 % 9.39 % 9.65 % 9.37 % 9.95 % 5 years 5 years 7 years 7 years 3 years

USD 600,000,000 RUB 30,000,000,000 RUB 25,000,000,000 RUB 20,000,000,000 RUB 5,000,000,000

Arranger Arranger General agent Arranger Arranger

Arrangers rating (corporate sector)

Source: Arranger Share, % Amount, Cbonds as of 31.12.2016. RUB million

Gazprombank 22.2 369,342 VTB Capital 16.2 270,610 Sberbank CIB 13.8 230,356 Otkritie Financial Corporation Bank 12.1 200,919 ROSBANK 5.7 95,417 Others 30.0 499,583 Total 0100 1,666,227

Arrangers rating (Eurobonds, issues of Russian corporate and finance issuers)

Source: Arranger Share, % Amount, Bloomberg RUB million as of 31.12.2016.

JP Morgan 11.5 2,063.2 VTB Capital 7.5 1,347.5 Citi 5.6 1,000.0 Gazprombank 5.0 892.8¹ UBS 4.9 883.3 Others 65.5 11,821.3 Total 0100 18,008.1 ¹ Including US dollar- denominated local bonds of VEB for USD 600 mln.

Moreover, in 2016, the Bank effectively In 2016, active work was continued Brokerage services arranged and organized a number to foster trade relations with investors In 2016, the Bank’s brokerage business of landmark events (road shows, investor for the purpose of opening trading lines. was still on the rise. Owing to advanced days and round-table discussions) A dialog was established with virtually relations with institutional and corporate for investors in debt and equity instru- all important investors in the Asian customers, assets used in brokerage ments in Asia, Europe and the U.S. region. services soared by 50%, to RUB 600 billion. 43 Gazprombank ANNUAL REPORT 2016

The trade volume of customer transactions infrastructure projects was provided. JSC “URALELEKTROMED” refineries reached a record high of RUB 1.4 tril- A report entitled Russian Agribusiness. of OJSC Krastsvetmet, JSC Prioksky Non-­ lion, and the total number of customer Realization of Export Potential described Ferrous Metals Plant, JSC Yekaterinburg accounts was up by 25%, and was 23,000 growth prospects of agricultural Non-Ferrous Metal Processing Plant. as of end-2016. In the reporting period, exports, and the development potential In 2016, the scope of finance provided the Bank was also focused on develop- of Russia’s Far East. to various enterprises of the industry ment of products and services for private Detailed reviews were prepared on issues exceeded RUB 33 billion. Loans were customers. In 2016, customers were of the budget, monetary and credit policy; extended to gold-mining and processing offered a new method of FX transac- a number of analytical studies were businesses to finance their operating tions with brokerage accounts using released which covered most important and investment needs; one area of focus GPB-i-Trade, the Bank’s information topics in the Russian banking sector, such was enlargement of the operations spec- and trading system. To attract private as the effect produced on the ruble rate trum and improvement of their efficiency. money to the financial market, a system by the reduction of foreign currency use In the area of narrow-scoped industry of sales of individual investment accounts in the banking sector, and the impact products, we could cite loans in precious in all offices of the Bank has been set up. made by regulation of banks’ demand metals to gold mining companies, enter- in the bond market. prises of the chemical and petrochemical Analytical support In addition to industry-related reports, industry, and short-term and mid-term The Market Research Department Gazprombank handles analysis of all prepaid supplies of precious metals within is focused in its analysis on Russian the key Russian issuers and financial the framework of trade agreements. economy, energy and banking sectors, instruments. In terms of purchases of precious metals financial markets and prospects of busi- The Bank’s expertise in market analysis from mining and processing enterprises, ness development in other emerging enjoys well-deserved authority and Gazprombank consistently keeps third markets, including member nations recognition in the investment community. rank in the Russian market of precious of the Eurasian Economic Union and Asian Over the past seven years, the Сbonds metals. Last year, purchases exceeded countries. agency has invariably included Gazprom- 34 tons in gold equivalent. Exports to key Analysts study and analyze the Russian bank in the top three leaders of Russian global centers of spot trade in precious financial market by industries, issuers, analytical expertise in the debt market. metals — London, Zurich, Hong Kong, and topics our customers are most inter- Dubai and Delhi — equaled 8 tons in gold ested in. In 2016, the Bank continued Transactions in precious metals equivalent. to release analytical products covering The Bank is engaged in financing GPB-MetallInvest LLC, a subsidiary most topical issues. In particular, special and purchase transactions involving of the Bank, provides services related reviews were prepared, such as Regions precious metals with the top leaders to processing, purchase and sales of prod- of Russia. An Investment Guide, which of the industry, which handle mining ucts containing precious metals to enter- offered analysis of the financial and processing of refined precious metals. prises of Russia’s petrochemical industry; and economic standing of 41 constit- The key customers of Bank GPB (JSC) it also supplies imported catalytic systems. uent territories of the Russian Feder- include Polymetal International Plc., Its core customer base includes Surgut- ation; Infrastructure of Russia. Points PJSC Polyus, Millhouse Capital UK Ltd., neftegaz OJSC (KINEF LLC), PJSOC Bashneft, of Investment Growth Amidst Budget NORILSK NICKEL, Yuzhuralzoloto (UGC), Rosneft, Gazprom Neft PJSC, SIBUR Holding. Limitations, where a review of needs UMMC, Russian Copper Company, High- The subsidiary’s revenue in the reporting and sources of finance for the country’s land Gold Mining Ltd., Russian Platinum, year amounted to RUB 4.29 billion. 44 Gazprombank ANNUAL REPORT 2016 ASSET MANAGEMENT

In 2016, Gazprombank Group saw stable development and growth of assets under management in the retail segment.

GAZPROMBANK GROUP PB Group concentrated assets return, compared to other bond funds IS A LEADER OF THE ASSET Gof more than 70 corporate customers operating in the market. MANAGEMENT MARKET, under its management, including funds °° Open-end mutual investment fund PROVIDING SERVICES of major non-government pension funds Gazprombank — Bonds Plus is ranked RELATED TO MANAGEMENT and endowment funds. The product line second in terms of its size among OF FUNDS OF PRIVATE includes over 20 retail and private invest- all open-end and interval mutual AND CORPORATE CUSTOMERS. ment funds, and an international fund investment funds in Russia². IN 2016, ASSETS registered in the Grand Duchy of Luxem- °° Gazprombank — Asset Management IN THE GROUP’S TRUST bourg. was included in the TOP 5 managing MANAGEMENT EXCEEDED °° Gazprombank — Asset Management companies in terms of value of its net RUB 151 BILLION. reiterated once again its stature assets allocated to open-end as an absolute leader of the endowment and interval investment funds². capital market. The company The company was ranked second³ has concentrated the biggest in terms of the net volume of funds number of endowment funds under allocated to open-end mutual funds its management: 46 endowment funds in 2016², and it increased its assets on the back of 2016. by RUB 5.9 billion, showing the best year- °° In 2016, Gazprombank — Asset on-year incremental growth rate of 99%. Management was ranked at the top In 2016, rating agency Expert RA reaffirmed among its peers and competitors Gazprombank — Asset Management’s in terms of funds in individual trust rating of maximum reliability and service management¹. quality at А++. The ratings that were °° Gazprombank — Asset Management previously awarded to the company traditionally demonstrated its superiority by the National Rating Agency in terms of management efficiency and the National League of Manage- in 2016. For instance, Gazprombank — ment Companies also correspond MICEX Index, an open-end mutual fund, to the maximum reliability level (AAA showed the best return in its category on the scale of those agencies). (with the total net assets of at least RUB 100 million)². Gazprombank — ¹ Third place based on the MICEX Index-Power Energy, another latest available update, on the back of Q3 2016 — open-end mutual fund, displayed National Rating Agency. ² According to Investfunds. the best return among index investment ru agency as of end-2016. ³ Second place according funds². Gazprombank — Bonds Plus, to Investfunds.ru agency, after Raiffeisen — Bonds yet another open-end mutual fund, fund which attracted RUB 7 billion in 2016. was the best in terms of risk-adjusted 45 Gazprombank ANNUAL REPORT 2016 PRIVATE EQUITY

Gazprombank continues to remain an active investor in the strategic sectors of the Russian economy.

Media Business and Telecommunications Optic Fiber Systems Portenergo JSC Optic Fiber Systems is Russia’s only Since the end-2015 a consortium of inves- Gazprom Media factory producing optic fiber, the main tors comprising Gazprombank and a group Gazprom Media Holding is one of Russia’s component of telecom cables (the facto- of major Russian and international inves- major media holding companies. ry’s capacity is 2.5 million km a year). tors, own an LPG and light oil terminal In 2016, Russia’s advertising market The project has been carried out by joint at the Ust-Luga commercial sea port. recovered to pre-crisis levels; on the back efforts of Bank GPB (JSC) and ROSNANO In 2016, the capacity of the LPG and light of 2016, the market is expected to grow since 2011 in Saransk, Mordovia. oil terminal increased from 4.0 mln by 10-12%. Structuring of the Group’s In 2016, commercial launch of the produc- to 5.2 mln tpa enabling achievement assets by way of their consolidation into tion facilities took place. The factory’s of operational targets. key business segments was completed, produce was certified by PJSC Rostelecom, and entertainment TV channel TNT-4 was and the company started deliveries of first BIONET successfully launched. production lots abroad. Since 2013, the Bank has been carrying out a project of manufacturing industrial Speech Technology Center Infrastructure projects pellets in the Arkhangelsk Region. Those The Center is a leading developer of inno- pellets are used as clean fuel in the heat vative multimode biometrics, speech Northern Capital Highway and electric power energy industries. recognition and synthesis systems, multi- Northern Capital Highway is a project The capacity of the facility amounts track recording, processing and analysis of construction and operation to 150,000 tons pellets a year. of audio and video information and prod- of the Western High-Speed Diameter, In February 2017, the first commercial ucts based on artificial intelligence. a toll automobile road, which has stra- batch of pellets was shipped to Transcor Oil Among major projects in 2016 were tegic importance for the transport system Services S.A. (Belgium), one of the largest creation of a document management of St. Petersburg. The project is imple- European traders in energy resources. system for the Russian judicial system mented by Bank GPB (JSC) and VTB In the course of 2017, long-term contracts and introduction of a voice control module on the basis of a private-public partnership. of sale of fuel pellets to European buyers to be inserted in the onboard information In early December 2016, the central are expected to be signed. system for KAMAZ Group, Russia’s biggest section of the road was commissioned into truck manufacturer. The most promising operation, and Northern Capital Highway vector in the future is deemed to be STC’s started operating the entire road, seeing participation in creating a nationwide plat- a significant growth of traffic intensity. form and a database of biometric prints of users based on voice and facial recogni- tion technologies. 46 Gazprombank ANNUAL REPORT 2016

Petrochemical industry of a new factory of solid-dosage forms, processing plant, within the framework alongside existing production facilities, of a long-term program up to 2031, which PENOPLEX in accordance with European GMP standards. contemplates capacity expansion and PENOPLEX SPb LLC, of which GPB Group The new facility will help increase the compa- production growth to 1.8 to 2.0 tons a year. became a shareholder in 2012, is a leading ny’s production capacity by 600 tons (over manufacturer of heat insulation materials 1.6 billion tablets and capsules a year). CJSC CryoGAS based on extruded polystyrene foam In 2016, the company commissioned (XPS) and the industry’s technology leader. Oil and gas projects a natural gas liquefaction unit in Pskov. For several years in a row, the company has The unit will provide fuel to the first been ranked first in Europe and second Gazprom Gas Motor Fuel LNG-powered ferry in the Baltic Sea, which in the world in terms of XPS production. In 2016, the company was engaged consumes approx. 19,000 tons of LNG in building infrastructure for the devel- a year. The company continued to carry Manufacturing and service sector opment of the gas motor fuel market out a project of construction of a low-­ in the Russian Federation. tonnage LNG plant in the Kaliningrad Eriell In 2016, construction of 35 new auto- Region; the project was included in the list Eriell is a major player in the oil service mobile CNG stations was completed, of comprehensive investment projects market of Russia and the CIS. In 2016, as was a complex reconstruction in priority areas of civilian industries. the company continued to carry out of 4 CNG stations. The plant is to be commissioned into opera- a strategy for the entry into international In addition, the company continued consol- tion in early 2018. markets. Among its most significant idating existing gas motor infrastructure. In 2016, the Bank continued work towards achievements was mobilization of equip- By the end of 2016, the company had construction of an LNG production ment for well-drilling in Iraq for Lukoil bought more than 160 CNG stations from and reloading terminal in the area of the Port Middle East and being qualified by Saudi Gazprom Group companies and third parties. of Vysotsk, Leningrad Region. The plant Aramco — for the first time among The company’s strategy contemplates capacity will be 660,000 tons of LNG a year. all Russian drilling companies. further expansion of the network As of end-2016, the total amount of CNG stations and wider availability of GPB Group’s investments in the projects Alvansa of gas motor fuel for consumers. carried out by CryoGAS Group amounted Alvansa is a Russian pharmaceutical to RUB 15.1 billion. company based in the village of Obolen- JSC Vasilievsky Mine skoye, Moscow Region, which produces Bank GPB (JSC) Group owns a 62.5% stake more than 150 various medical drugs. in JSC Vasilievsky Mine, a company pros- In 2016, the company saw a 44% income pecting for and producing gold in the Kras- growth (which outperforms growth rates noyarsk Territory. In 2016, gold production in the Russian pharmaceutical market mani- was 1.3 tons. In 2016, the company began fold) and the beginning of the construction a project of reconstruction of a hard rock 47 Gazprombank ANNUAL REPORT 2016 MACHINE-BUILDING ASSETS: PRINCIPAL AREAS OF OPERATIONS AND KEY PROJECTS

Machine-building enterprises of GPB Group are main providers of unique technology equipment and integrated solutions for key industries: fuel and energy complex, oil, gas and petrochemical industries, metallurgy and mining.

IN 2016, THE MACHINE- °° A contract was signed with is underway; the units will be used BUILDING ASSETS CJSC Tamanneftegaz, and a project for natural gas liquefaction. Production OF GPB GROUP CONTINUED is being carried out to manufacture of mixed refrigerant compressors THEIR SUCCESSFUL spherical tanks with a capacity will be set up in Russia for the first time. DEVELOPMENT. of 5,000 cubic meters. Those spherical tanks will be used for propane As part of development efforts, The key events that defined past year, 2016, storage at a transshipment terminal GPB Group’s machine-building assets were the following: for liquefied hydrocarbon gases continued to enlarge their foothold in export in the Port of Taman. Spherical tanks markets. In particular, three cryogen air In the nuclear power industry: of that volume have never been separation units were commissioned into °° Manufacturing of a WWER-1200 reactor produced in Russia before. operation at the Kazzinc and Kazphosphate shell was completed for the second °° Production and shipment of 25 sets enterprises in the Republic of Kazakhstan. power generation unit of the Baltic of packaged petrochemical equipment Six mining shovels were shipped to India Nuclear Power Plant. were completed in the interests under an order from Coal India, a major °° Accumulator tanks of the emergency of Gazprom Group for the infrastructure global coal producer. core cooling system were shipped of the Chayandiskoe oil and gas for the fourth power generation unit condensate field, which is the basic In the area of adoption of new products, of the Tianwan Nuclear Power Station field to build Gazprom’s Yakutsk center we should note the start of production (China) and for the first and second power of gas production and resource base of Russia’s mining shovel — EKG-35 (bucket generation units of the Kola Nuclear for the Power of Siberia gas pipeline. capacity: 35 cubic meters) and Russia’s first Power Plant; this equipment ensures safe °° An agreement was signed with hydraulic mining shovel UGE-300. operation of nuclear power stations. Zapsibneftekhim LLC (SIBUR Holding) Mid-term strategic priorities for GPB machine- on construction of a facility building assets remain as follows: In the petrochemical industry: for the production of industrial °° fostering competencies in the imple- °° A contract previously executed with gases at a Zapsibneftekhim facility mentation of integrated projects Sakhalin Energy was still in force. currently under construction: nitrogen on a turn-key basis (EPC — engineering, It is a contract for the production and compressed dry air will ensure procurement and construction); and supply of equipment to be used operations at all the key facilities °° enlargement of foothold in export at a gas booster station for the purpose of Zapsibneftekhim, from main markets, and keeping leadership of preparing gas coming from technology units to site utilities. in the Russian and CIS markets; the Lunskaya-A sea platform for further °° In order to implement the investment °° mastering new products, including transportation to the south of the island project of an LNG plant construction within the framework of import of Sakhalin. Russian-made separators will in the Port of Vysotsk, design and delivery substitution programs; be used for the first time at a production of two mixed refrigerant compressor °° enhancing production efficiency facility of Sakhalin Energy. units with a unit capacity of 25 MW and cost-saving. 48 Gazprombank ANNUAL REPORT 2016

RESOURCE BASE DEVELOPMENT

In 2016, the structure of the Bank’s resource base did not see significant changes. As a result of a stronger ruble rate, evaluation of the foreign-currency portion of the resource base was down in 2016, which reduced the Bank’s total liabilities by 4.5%. The Bank’s liabilities adjusted for FX rate fluctuations were up 4.4% in 2016.

FUNDS OF CORPORATE Structure of the resource base spanned over many years, and owing AND PRIVATE CUSTOMERS Customer funds constitute the under- to integrated services provided to their CONSTITUTE THE KEY lying basis for funding of Gazprombank’s employees, the Bank keeps up a stable COMPONENT OF THE BANK’S active operations. As of end-2016, they volume of customer money, resilient RESOURCE BASE. THANKS accounted for 76.0% of the Bank’s liabilities, to economic shocks. TO COOPERATION WITH and were up 4.5 p. p. in 2016. In 2016, funds of corporate customers MAJOR RUSSIAN ENTERPRISES Fund-raising in capital markets, including grew by 1.1%, to RUB 2,652.5 billion, THAT HAS SPANNED OVER placed bonds and subordinated debt and accounted for 60.5% of the Bank’s MANY YEARS, AND OWING (in total, 11.4% of the resource base), resource base. TO INTEGRATED SERVICES build the Bank’s long-term resource base. Funds of private individuals equaled PROVIDED TO THEIR The Bank made scheduled repayments RUB 678.3 billion, or 15.5% of the total EMPLOYEES, THE BANK of a number of foreign-currency loans, resource base, and they were up 3% over KEEPS UP A STABLE VOLUME and replaced them with new market the year. OF CUSTOMER MONEY, instruments, as well as funds of corporate RESILIENT TO ECONOMIC and retail customers, as a result of which Debt capital markets SHOCKS. the percentage of the resource base built As of end-2016, the portfolio of funds by fund-raising in capital markets was raised in capital markets equaled down 2.8 p. p. versus end-2015. RUB 500.1 billion (11.4% of the Bank’s liabil- In 2016, Gazprombank decreased ities), out of which RUB 317.3 billion were the amount of funds raised from the Bank comprised by bonds, and RUB 182.8 billion of Russia, having repaid RUB 25.4 billion. by subordinated loans. The move was caused by a high cost of that The loan portfolio provides for a regular resource compared to customer funds. repayment schedule and is diversified As a result, the percentage of that source in instruments and currencies, including of funding declined to 2.2% in the struc- Russian ruble, U.S. dollar, euros, Chinese ture of liabilities as of end-2016. yuan and Swiss franc. In 2016, the Bank continued to Customer funds expand the tool kit of fundraising Funds of corporate and private customers in the domestic bond market. In February are the key component of the Bank’s 2016, the Bank issued 5-year 2-ИП resource base. Thanks to cooperation Series mortgage-backed bonds with major Russian enterprises that has in the amount of RUB 15 billion. For those 49 Gazprombank ANNUAL REPORT 2016

Resource base structure as of 31 December 2016, %

■ Amounts owed to corporate customers ■ Amounts owed to individuals ■ Senior debt, borrowed from capital markets ■ Amounts owed to banks ■ Subordinated debt (including the subordinated deposit of the National Wealth Fund amounting to RUB 44.2 billion) ■ Amounts owed to the Bank of Russia ■ Other liabilities

2.2 4.0 4.2 6.4

7.2

60.5 15.5

In 2016, the structure of the Bank’s resource base did not see significant changes. Customer funds, which accounted for 76% of the Bank’s liabilities as of year’s end, remain the underlying basis for funding.

bonds, a floating coupon rate was set Refinancing instruments in the amount of the yield on OFZ with In addition to highly liquid instruments a one-year grace period, multiplied (monies and equivalent funds, cash due by 1% p. a. Moreover, in 2016, the Bank from banks, trading securities), which successfully placed 4 issues of exchange- accounted for 14.4% of the Bank’s assets traded bonds with a total par value as of end-2016, the Bank has access of RUB 30 billion. to additional sources of expanding In 2016, the Bank redeemed Eurobond its liquidity in the event external stress issues for CNY 500 million, USD 120 million scenarios should become a reality. Based and two issues for RUB 20 billion each, on the structure of assets that meet and a syndicated loan of USD 433 million. the Bank of Russia’s criteria set for loan collaterals, the Bank can additionally raise Instruments of long-term RUB 824 billion (about 17% of the total funding in the Bank of Russia assets). The Bank was moderate in using To incentivize lending provided to long- that resource last year: as of end-2016, term investment projects, the Bank liabilities in pledge instruments owed of Russia has worked out a framework to the Bank of Russia amounted of granting loans for up to 3 years to RUB 65 billion (7.9% of the available to financial institutions. Within the frame- volume). work of that program, the Bank raised RUB 30 billion and used that money to finance investment projects. 50 Gazprombank ANNUAL REPORT 2016 DEPOSITORY OPERATIONS, SPECIALIZED DEPOSITORY SERVICES

IN 2016, BANK GPB (JSC) which significantly facilitates investors’ of assets held in custody was approx. MAINTAINED HIGH CLASS access to the exercise of their corporate RUB 150 billion as of the year-end 2016. IN PROVIDING DEPOSITORY rights. New standards of corporate actions, The Bank’s specialized depository super- SERVICES AND SPECIALIZED including the use of electronic document vises asset management of its customers, DEPOSITORY SERVICES. management systems, enhance the quality which include include management THE BANK’S DEPOSITORY of services provided by the Bank and effi- companies of mutual investment funds IS ASSIGNED THE AAA ciency of customer interaction. (MIF), mortgage bond issuers, mortgage RELIABILITY RATING In 2016, the Bank’s Depository Center pool managers, and state-owned corpora- ACCORDING TO THE NATIONAL carried on its collaboration with tions established by the Russian Federation. DEPOSITORY the National Securities Market Associ- As far as customer relations are concerned, RELIABILITY RATING ation, JSC AHML and the Central Bank the depository intends to strengthen SCALE, AND IS RANKED of the Russian Federation as an authorized its positions significantly through greater FIRST AMONG THE TOP depository of the Bank of Russia respon- coverage of the customer base and more 30 BIGGEST DEPOSITORIES sible for accounting and safekeeping active customer relations with the existing IN TERMS OF THE MARKET collaterals (mortgage pool) pledged depositors. VALUE OF DEPOSITED by borrowing banks in favor of the Bank The principal vector of the deposito- SECURITIES¹ . WITH ITS of Russia under the pilot Lombard Lending ry’s customer service policy remains EXTENSIVE REGIONAL project implemented by the Bank of Russia. unchanged, i.e. to differentiate the depos- NETWORK THAT INCLUDES By the end of the year, the Bank’s depos- itory performance model by individual MORE THAN 100 SERVICE itory kept more than 340,000 mortgage segments (professional financial traders, OUTLETS, THE DEPOSITORY certificates with a total value of mort- strategic investors, insurance companies, MAINTAINS MORE THAN gage-backed liabilities over RUB 557 billion. pension funds, and pooled investment 400,000 SECURITIES Within the framework of nominee market players), as well as development ACCOUNTS FOR OVER holding, income on securities was paid of the product range, and optimization 600 ISSUERS, LEAVING to the Bank’s depositors with respect of internal technologies and processes. ITS COMPETITORS to more than 2,000 corporate actions The depository seeks to raise the efficiency BEHIND BY THE AMOUNT announced by issuers of securities. of its performance by taking the following OF DEPOSITED ASSETS The amount of money transfers exceeded steps: study of customer needs, offering AND THE NUMBER OF RUB 130 billion in rubles, USD 9 billion a wide range of new financial instruments, DEPOSITORS. in U.S. dollars, and EUR 200 million in euros. investigation and classification of Russian he total number of transactions In 2016, all scheduled upgrades customers and their need for custodial Twithin the depository chain exceeded of the depository’s IT infrastructure were services. 992.5 thousand. completed. Efforts were primarily focused The model of the depository busi- Local offices of the Bank’s depository chain on the introduction of a new automated ness adopted by the Bank will enable inform shareholders of Gazprom and other system for the specialized depository, regu- it to benefit from its competitive advan- issuers about submissions for general latory compliance, enhancing the level tages as much as possible. These advan- meetings of shareholders. The depos- of straight through orders processing tages include an extensive customer base, itory provides infrastructure support in transactions involving mortgage certifi- a strong brand, and a wide service network. to international projects of Gazprom cates and tackling issues related to opera- Group (an ADR program) and to domestic tional risk management. and international projects of Gazprom- The Bank’s specialized depository was bank Group. ranked among Top 10 of the national rating Within the framework of a legislative of specialized depositories on the back reform covering corporate actions, of its performance in 1H2016, and was ¹ The ratings were released by the Foundation the Depository Center provided in eighth line on the Top 10 list of special- for Development of Financial Institutions — Infrastructural Institute (INFI), in cooperation with the Professional to its customers an opportunity of exer- ized depositories in terms of assets Association of Registrars, Transfer-Agents, and Depositories (PARTAD) on the official website: www.safedepo.ru, based cising corporate rights via a depository, in custody as of 30 June 2016¹. The value on the performance in the first 6 months of 2016. 51 Gazprombank ANNUAL REPORT 2016 RISK MANAGEMENT

For the purpose of in-depth and all-around review of matters, the Audit Committee and the Compensation Committee operate under the Board of Directors.

THE BANK FOCUSES Risk management system of an effective remuneration system ON IMPROVEMENT The Board of Directors annually approves subject to accepted risks. OF THE RISK AND CAPITAL the Risk Appetite Statement, which B) Within the risk and capital management MANAGEMENT SYSTEMS includes both quantitative and quali- strategy adopted by the Board of Direc- IN ACCORDANCE WITH tative indicators designed to provide tors, the Management Board provides THE REQUIREMENTS high-level guidelines on the struc- overall risk management for the Group’s OF THE BANK OF RUSSIA, ture and values of risks that the Bank operations and regularly monitors actual DEVELOPMENT and the Group are willing to take risk levels to see how they conform OF A MONITORING SYSTEM in pursuit of their strategic goals. This risk to the approved risk appetite level. TO REVIEW COUNTERPARTIES appetite is further scaled and operation- C) Dedicated committees WITH A HIGH-RISK alized to the level of limits for separate and commissions reporting PROFILE, IMPROVEMENT risks and positions. to the Chairman of the Management OF STRESS TEST The following key principles guide Board and the Management Board PROCEDURES AND CAPPING the Bank’s approach to risk management: of Bank GPB (JSC) (Investment Committee, THE CONCENTRATION А) The Board of Directors adopts Credit Committee, Assets and Liabili- RISK. IN ADDITION, the general risk and capital management ties Management Committee (ALMC), THE BANK IS FOCUSED policy and determines the level of risk Commission for Financial Market ON DEVELOPMENT acceptability (risk appetite), strategic goals, and Operational Risks (Risk Commis- OF A QUANTITATIVE fundamental risk management policies sion), Processes and Technologies EVALUATION METHODOLOGY. and the stress-testing scenarios. Development Committee, Strategy AVAILABILITY OF A FULL- For the purpose of in-depth and all-around Committee and Corporate Governance FLEDGED MANAGEMENT review of matters, the Audit Committee and Compensations Committee, Assets SYSTEM IS A DECISIVE FACTOR and the Compensation Committee Restructuring Committee) are appointed OF EFFICIENT OPERATIONAL operate under the Board of Directors. to address issues relating to individual RISK MANAGEMENT. The Audit Committee’s mandate includes risk types. Members of the committees preliminary review of matters related and commissions are subject to approval to internal and external audit, and matters by the Chairman of the Management of risk and capital management coming Board. within the terms of reference of the Board D) Units of the Risk Management Division of Directors. (RMD) are independent from business units The mandate of the Compensation and are supervised by the Head of the Risk Committee of the Board of Directors Management Division reporting directly includes preliminary review of matters to the Chairman of the Management Board. coming within the terms of reference E) Risk management is applied in an inte- of the Board of Directors and related grated manner at all operational levels, to establishment and functioning considering the relationships and cross 52 Gazprombank ANNUAL REPORT 2016

impact of various risks. The Bank’s °° enhancement of the operational risk management and control. Credit risk RMD performs the function of managing management culture and integration management is performed at all stages Group risks. of the results of operational risk of the credit process, from the review F) At the Group level, the Bank defines management into the performance of a customer’s loan application to the full the roles and objectives of the manage- evaluation of the Bank’s divisions; settlement of all liabilities. ment bodies of the Group companies, °° improvement of the system for early The credit risk management process including those of local risk management identification of counterparties with includes the following elements: divisions (if any), as they pertain to iden- a higher risk level; improvement °° risk identification, quantitative tification, assessment and monitoring of mechanisms helping work out early and qualitative assessment of risk; of risks related to transactions performed response measures and strategies °° risk limitation and mitigation measures by Group companies. of work with respective counterparties; (including setting limits, taking security); The Group has an integrated risk manage- °° further development of a methodology °° risk monitoring and control (including ment system which enables it to: of quantitative evaluation of credit control of set limits), both with °° use unified risk management exposure; respect to individual borrowers approaches within the Group; °° implementation of organizational and at the general portfolio level; °° control risk management activities procedures within the framework °° building loss reserves; in Group companies; of a project to adopt requirements °° planning credit risk levels. °° align the overall Group / Group company of the international financial reporting Qualitative assessment of credit risk risk profile with the Group’s strategic standard IFRS 9 Financial Instruments takes the form of conclusive expert objectives and make informed decisions coming into effect on 1 January 2018. opinions on acceptability of requested at the Group level. parameters of a deal, required measures The Group’s risk management system Key risks in 2016 of minimizing credit risks taken in that is based on advanced standards, models 1. Credit risk regard, and on compatibility of the and practices accepted in financial organ- The Group is exposed to the risk of finan- requested form of the cash flow funding izations. cial losses occurring due to a borrower model to the designated purpose of the In 2016, the Bank was focused or counterparty defaulting on their obliga- deal. on the following aspects of risk manage- tion to the Group (credit risk). Internal ratings serve as a key element ment: Credit risk is managed in accordance of quantitative evaluation of credit °° improvement of risk and capital with the regulations of the Central Bank exposure. Our rating system includes an management system in line with of Russia, Basel Committee principles array of methods, procedures, control the requirements set forth by Directive and guidelines concerning banking super- systems, data collection and information of the Bank of Russia No. 3624-U vision, and internal documents developed systems used for assigning, change and On Requirements to the Risk and Capital to incorporate such principles. verification of a given rating. Management System of a Credit The main objectives of credit risk manage- Quantitative credit risk assessment is exer- Institution or a Banking Group ment include: cised in accordance with the Group’s (hereinafter referred to as “Directive °° sustainable development of the Group; models designed to estimate the proba- No. 3624-U”) at the level of the Bank °° compliance of the loan portfolio bility of borrower default for various types and the Group; quality and the credit risk profile with of counterparties, including: °° optimization of the limit-setting process the Group’s strategic goals; °° corporate customers (leading, major, for operations in financial markets; °° optimal combination of profitability medium sized and other customers, °° diffusion of the Bank’s system of limits and credit risk level with due account for project finance transactions); across subsidiary banks and adoption of capital limits and capital adequacy °° financial institutions; of an integrated system of limits requirements. °° individuals (applicative models of default at the Group level; Credit risk management is based probability assessment by retail lending °° enhancement of efficiency of the wealth on uniform methodological approaches sector); management system and liquidity risk and procedures within the framework °° constituent entities of the Russian subject to the regulator’s requirements; of an integrated system of risk analysis, Federation and local authorities. 53 Gazprombank ANNUAL REPORT 2016

Counterparties are assigned internal °° monitoring of security (pledges, surety, 2. Concentration risk ratings based on the approved models other types of security); Concentration risk arises in connection for estimating the probability of borrower °° monitoring of internal capital adequacy with the Group’s exposure to big risks. default. Internal credit ratings are used provided as risk allowance; The Group performs on a regular basis: to set credit risk limits, calculate expected °° monitoring of other negative factors; °° analysis of the Group’s exposure to each losses, create loan loss provisions, °° control over contingent form of concentration risk (identifies and conduct risk-weighted analysis and supplementary clauses in a deal; concentration risk); of the loan portfolio and financial planning. °° control over the use of limits. °° monitoring of the level of acceptability Target credit risk levels are set in accord- In 2017, there are plans to adopt of concentration risk and estimates ance with risk appetite. Decisions an upgraded Early Warning System (EWS). acceptability of concentration risk on manageable risk levels are made Where negative trends are identified with respect to its every form for which by authorized bodies, including in the activities of counterparties that no limits are set. the Investment Committee, the Credit are legal entities, on the back of moni- The Group stress-tests concentration risk Committee and the Chairman toring, respective counterparties regularly in order to evaluate potential of the Management Board. Transac- are included in a section of the Watch losses in the event of adverse changes tions submitted to review by the Credit List Register information resource (which in the economic situation. Committee or Investment Committee includes Watched Counterparties, Poten- The result of stress-testing is presented are subject to examination by inde- tially Troubled Counterparties, and Trou- in the form of evaluation of the impact pendent experts of the RMD. bled Counterparties). of negative scenarios on quantitative The Group sets ultimate risk limits Information from the Watch List Register metrics of concentration risk, capital for every borrower or a group is used, among other things, for the selec- adequacy, and actions aimed at minimiza- of borrowers. Compliance with (and use tion of intensity (mode) of monitoring tion of expected losses. of) credit risk limits is monitored and strategy of further work with the assets, At present, the Group either has set on an ongoing basis and represents and also in the implementation of mecha- or is adopting the following limits the limit compliance monitoring. Devel- nisms that impose restrictions on transac- of concentration risk: opment and improvement of the credit tions with counterparties. °° limits of concentration risk limits system is a priority line of work The Group performs stress tests of credit for counterparties / groups of related for the Group. exposure on a regular basis, in order counterparties; Monitoring is performed on a regular to evaluate potential changes in the quality °° limit of industry concentration; basis, from the moment when a limit was of the loan portfolio in the event of unfa- °° limit of risk concentration per one assigned to a customer to the moment vorable changes in the economic situation. person affiliated with the Bank (group when the counterparty fulfills all Analysis of a borrower’s credit expo- of persons affiliated with the Bank); of its commitments to the Group. sure and of the price exposure of real °° limit of risk concentration per one surety The purpose of the monitoring is to identify estate values plays an important part (guarantor); any changes in the level of credit expo- in the management of credit exposure °° country limits; sure in a timely manner, to evaluate that in retail lending. The risk management °° regional limits of concentration; exposure, to adopt preventive measures system performs regular selective checks °° limit of concentration risk for operations and to control the fallout of the risk occur- of loan applications, and verifies the quality in financial markets, including by types rence. of the appraisal of the property to be collat- of financial instruments, basic assets, The process of monitoring of credit expo- eralized in mortgage lending, after it was and by individual characteristics sure includes, among others, the following done by an independent appraiser. of instruments; types of monitoring: In the wake of the adoption of the law °° limits of concentration risk for funding °° monitoring of payment discipline; on bankruptcy of private individuals, sources and expected cash inflows. °° monitoring of the financial standing an annually updated database was set up, Limits of concentration risk are set of counterparties; which contains information about and revised by the authorized body °° monitoring of financial covenants (terms the Bank’s customers — private individuals on a regular basis with due account of limit); who have gone bankrupt. of the appetite for risk and capital budget. 54 Gazprombank ANNUAL REPORT 2016

Simultaneously with the setting / revision across the Group’s banking segment. °° period of solvency without external of limits of concentration risk for each type It is an essential part of the assets support; of the above limits, the following param- and liability management (ALM) system °° short-term liquidity (STL); eters are determined at the discretion at the Group level, including the head °° net stable funding ratio (NSFR); of the authorized body: office and regional branches. °° liquidity gaps for realistic (business °° signal values warning of an approach The liquidity management system consists as usual) and liquidity stress scenarios to set limits of concentration; of two main components: in terms of maturity and key currencies; °° the procedure for the monitoring °° instant (short-term) liquidity °° minimum level of liquidity buffer. of the limits, including actions management implemented Gap analysis estimates the forecast in the event of identified over-limit by the Treasury on a regular basis; excess or shortfall of cash inflows over in a completed deal; °° medium-term and long-term outflows grouped by maturity and °° methodological peculiarities liquidity management performed currencies and thus allows identifica- of estimation of a respective limit, and, by the ALM Committee and the Internal tion and management of open liquidity if possible, the information system Treasury Department as part of the exposures. Gap analysis is supported is identified which will take account ALM function, ultimately for the purpose by scenario analysis, which includes of and monitor respective limits; of setting an effective risk-return ratio. a realistic scenario (business as usual) °° the procedure of documenting The liquidity management policy is subject and a liquidity stress scenario. Scenario the outcome of limits monitoring. to approval by the Board of Directors upon analysis is performed as part of regular submission by the Management Board. risk evaluation: 3.Country risk At the executive level, liquidity risk °° Realistic scenario: shows the average Country risk is a risk of financial losses due is managed by the ALM Committee. expected liquidity level. to foreign counterparties defaulting on their The ALM Committee determines the policy °° Stress scenario: shows stress tolerance obligations to the Group for economic, for asset and liability management and the ability to maintain sufficient political or social reasons, or as a result that aims to build up a liquidity gap liquidity without implying restrictions of a limited access to the counterpar- control framework considering maturity on assets related banking transactions. ty’s committed amounts denominated profiles for assets and liabilities. It also As part of the liquidity risk management in foreign currency because of national helps to provide effective diversification system, the Bank has a Contingency legislation (irrespective of the counterpar- of funding sources and availability of suffi- Funding Plan (CFP) that sets out the strat- ty’s creditworthiness). cient funding in stressed conditions. egies for addressing liquidity short- The Group manages this risk according The Risk Management Division monitors falls in emergency situations. The CFP to its Country Risk Policy. This policy liquidity risks and reports on the status is updated on an annual basis and outlines defines key principles and approaches regularly to the ALM Committee, policies to manage a range of stress for the assessment of country risks the Management Board and the head scenarios, and establishes lines of respon- and setting country limits. Country risk of the Risk Management Division. Risk sibility, including proactive emergency assessment considers the economy scale reporting includes qualitative and quanti- monitoring, activation and escalation (GDP level) and the sovereign rating tative risk estimations, stress testing results, procedures. of the country. and evaluation of additional liquidity sources (liquidity buffer). 5. Market risk 4. Liquidity risk Managing market risk includes limita- The Group manages its liquidity to ensure Liquidity risk management methods tion and monitoring of market risks that that sufficient liquidity is available to meet The liquidity risk management system affect the Group’s banking business. its commitments to customers, creditors is integrated into the transaction plan- Responsibility for the decision-making and note holders, and to fulfill its business ning processes in order to determine process regarding acceptable market plans for active banking operations. the required funding sources in normal risk levels is vested in dedicated The Bank’s liquidity management and stressful situations. The Group applies bodies: ALM Committee, Risk Manage- system is an integrated solution of risk limits on the following liquidity risk indica- ment Commission and the Chairman identification, evaluation and control tors to mitigate it: of the Management Board. The market 55 Gazprombank ANNUAL REPORT 2016

The Bank relays the appetite for risk and the budget of economic capital to the operational level via a system of limits.

risk management function is assigned The Bank’s policy with respect to the inter- transactions with highly reliable counter- to the Risk Management Division. est-rate risk exposure is reviewed parties. The Bank’s existing market risk on a regular basis and approved The ALM Committee and the Risk Commis- management system is based on: by the ALM Committee. The RMD prepares sion set limits on the level of currency risk °° a system of limits ensuring that regular reports on the interest rate exposure for each portfolio (trading, invest- the volume of risks corresponds risk exposure for the ALM Committee ment, the Group, the Bank and subsidi- to the adopted risk appetite and other management bodies of the Bank. aries). For trading portfolios, maximum and the amount of economic capital In accordance with the Bank’s appetite losses are also limited (stop-loss). Separate distributed among business lines for risk, the ALM Committee has set limits apply to operations involving deriv- concerned; the following indicators of interest-rate risk: atives. The Bank’s currency risk exposure °° qualitative and quantitative market °° sensitivity of the net present value limits comply with the minimum require- risk assessment with the use of value- of assets and liabilities; ments of the Central Bank of Russia. at-risk (VaR) methodology, stress °° gaps in the requirements and the Bank’s The Bank assesses the value at risk testing, scenario analysis and sensitivity commitments in terms of time pools; and sensitivity of profit to foreign exchange analysis. °° sensitivity of the net interest income rate fluctuations as part of a stress scenario. The Risk Management Division supports of the bank book; Stress testing provides conservative the market risk management system °° sensitivity of the financial outcome scenarios for fluctuations of currencies on a regular basis, and, in particular: (so far as revaluation of financial and precious metals against the ruble. °° monitors pre-set risk limits; instruments is concerned) °° builds reports to be submitted to the changes in the interest-rate curve. Equity risk to authorized bodies and senior Interest-rate risk management is inte- The Bank has investments primarily executives; grated in the Banks’ planning procedure; in sovereign securities and bonds of high- °° revises values of risk limits in accordance consequently, decisions about changes quality major Russian issuers. The Bank with the Bank’s plans and appetite in the structure of assets and liabilities, also assumes risks from non-market for risk; made in the form of the Bank’s business financial instruments (strategic and direct °° takes part in working out measures plans, are adopted with due consideration investments). These risks, however, for the optimization of the use of risk of the target profile of the interest-rate risk. are specific, due to the fact that no reval- limits subject to business efficiency, uation is required for this type of assets including with due account of stress-test Currency risk and the investments are long-term, which results. The principal sources of currency risk makes it possible to gain profit from include investment in foreign companies projects once the economic environment Interest rate risk and banks, as well as the position arising becomes favorable. Derivatives are used Interest rate risk in the trading book comes from creation of provisions on currency for risk hedging. from the bonds and derivatives present assets that is subject to due hedging. The VaR methodology is only applied in the Bank’s trading portfolio. Interest The Bank is free of significant currency posi- to quoted instruments. Non-quoted instru- rate risk in the banking book arises when tions opened ments are not included in the traditional there is a mismatch between the maturity for the purpose of speculative gains. VaR model, and a separate model is used profiles of rate sensitive assets and rate Currency risks arising from transactions to calculate the capital value for these sensitive liabilities. with customers are hedged by counter instruments. Therefore, the Bank does 56 Gazprombank ANNUAL REPORT 2016

not exercise real-time monitoring of risks °° operational risk identification C) The Bank approves risk appetite both relating to these assets. The main tool and escalation procedures; at the Bank level at large, and in the form for managing this risk is allocating capital °° acquisition and registration of data of principles governing constraints set to cover the risk of depreciation over on risk events caused by operational risk, on operational risk-taking. the horizon of financial planning (one year) and their consequences; D) The Bank develops internal documents and strategic planning (five years). °° self-evaluation of operational risks regulating: The Bank also assesses the sensitivity by the Bank’s divisions, including °° staff job descriptions; to securities price changes as part keeping a register of the Bank’s °° business processes for banking of a systemic stress scenario. Stress testing operational risks; operations; includes analysis of conservative scenarios, °° qualitative and quantitative assessment °° business continuity and disaster where the stress level assumes a decrease of risk (including the process recovery plans; in quotes for equities and an increase of evaluation of controls effectiveness); °° policy on information disclosure. in YTM for debt securities. °° business continuity and disaster E) The Bank builds processes of moni- According to the Bank’s risk appetite, recovery system (is being optimized); toring and information escalation with the Risk Committee sets market risk limits °° operational risk monitoring system respect to operational risks across all levels (VaR limits, limits for sensitivity to interest (including key risk indicators); of the Bank’s corporate governance struc- rate fluctuations), limits for maximum °° operational risk reporting. ture, in order to ensure proactive opera- losses (stop-loss), limits for exposure Altogether, these components provide tional risk management. level (nominal limits, structural limits). the advantage of quick detection of risks F) The Bank implements principles The Committees the Risk Commission in policies, processes and procedures for segregation of duties and conflict-of- make decisions on the risk concentration for adequate operational risk manage- interest policies. limits for each issuer/financial instrument. ment. Prompt detection, assessment G) The Bank implements new products and addressing of these deficiencies to risk and business processes only after the rele- 6. Operational risk owners of the corresponding management vant procedures and processes have Operational risk is defined as the risk level can substantially reduce the potential been properly documented. Internal of a loss resulting from inadequate or inef- frequency and/or severity of losses due regulatory documents are only approved fective internal processes, personnel to operational risk and/or event. when signed off by subject matter experts, and (or) third parties, management systems The Bank attaches special importance including the Risk Management Division or external events. In particular, losses from to a systemic approach to regular moni- and the Compliance Service. staff errors, internal or external fraud, model toring and to submission of statements H) The Bank organizes procurement errors or natural disasters are considered on the operational risk and substantial risks of goods and services on a competitive losses due to operational risks. of operational losses. basis. Quantitative measurement of those risks In order to mitigate operational risks, In order to reduce the negative effects is more complicated than in case of other the Bank uses principles, methods from specific types of operational risks, types of financial risks, therefore a compre- and approaches based on best practices the Bank has provided comprehensive hensive system of operational risk manage- in operational risk governance and control. insurance coverage including contracts for: ment is a decisive factor in effective А) The Bank ensures acceptable level °° Comprehensive Crime & Professional management of operational risk. of corporate culture in operational risk Indemnity Insurance (standard Today, the Bank’s operational risk manage- management by raising awareness crime insurance, including internal ment system comprises the following key of the values and goals of risk manage- fraud, electronic crime insurance elements: ment among all employees of the Bank, and computer crime insurance, °° operational risk management and also by setting and monitoring compli- professional liability insurance); methodology; ance with the rules and standards of risk °° employee voluntary medical insurance; °° principles on which operational management. °° insurance of property, including risk management is based and their B) The system of operational risk manage- insurance of self-service machines. integration in decision-making ment is integrated in the Bank’s risk procedures observed at the Bank; management system. 57 Gazprombank ANNUAL REPORT 2016 BANK GPB ( JSC) REGIONAL NETWORK

Centralization of back-office and support functions, standardization of principal business processes, and improvement of the organizational, staff, and functional structure were the key instruments of enhancing efficiency of the regional network in 2016.

or the purpose of improving efficiency were promoted to the status of operating Fof presence in accordance with reso- offices in 2016. In 2017, there are plans lutions of the Bank’s Board of Directors to continue measures for the development and Management Board, branches in Volg- of the Bank’s sales office network and opti- ograd, Tyumen, Yakutsk, Yuzhno-Sakha- mization of the Bank’s presence in indi- linsk, Astrakhan, Omsk and Khabarovsk vidual regions of the Russian Federation.

Information about standalone structural units. The Bank comprises the following standalone structural units: Regional network in the Russian Federation As of 01.01.2016 As of 01.01.2017

Branches 31 24 Branch offices 262 233 Operational offices 73 101 Out-of-office cash counters 5 4 Total units in the Russian Federation 0371 0362 58 Gazprombank ANNUAL REPORT 2016 59 Gazprombank ANNUAL REPORT 2016

REGIONAL NETWORK MAP Geographic location of the branches across principal regions where the Bank has a foothold as of 1 January 2017: Central Federal District 3 Shchelkovo (Moscow Region), Tula, Voronezh Northwestern Federal District 2 St. Petersburg, Kaliningrad Southern Federal District 2 Krasnodar, Rostov-on-Don North Caucasian Federal District 1 Stavropol Volga Federal District 7 Nizhny Novgorod, Saratov, Orenburg, Ufa, Perm, Samara, Kazan Ural Federal District 3 Yekaterinburg, Surgut, Novy Urengoi Siberian Federal District 5 Tomsk, Novosibirsk, Krasnoyarsk, Irkutsk, Kemerovo Far Eastern Federal District 1 Vladivostok Total 0024

Kaliningrad

St. Petersburg

Moscow Shchelkovo Tula Novy Urengoy Nizhny Novgorod

Voronezh Kazan Perm Surgut Saratov Samara Yekaterinburg Rostov-on-Don Ufa Krasnodar

Stavropol Orenburg Tomsk Krasnoyarsk Novosibirsk Kemerovo

Irkutsk Vladivostok

Regions of presence Branches 60 Gazprombank ANNUAL REPORT 2016 HR POLICY, EMPLOYEE DEVELOPMENT AND MOTIVATION

Team efforts building Gazprombank’s image as a stable and efficient institution that takes care of its development and caters to the welfare of its employees have been awarded more than once with prestigious international prizes by the HR community.

IN 2016, AMIDST EXISTING n one hand, those moves helped technologies, such as psychological diag- LIMITATIONS IMPOSED Oeliminate redundant jobs and cut nostics and professional tests. To screen BY THE DEPOSIT INSURANCE inefficient personnel; and, on the other, applicants for a new call center in Chebok- AGENCY ON THE PAYROLL they allowed building required resources sary, remote testing was used, which BUDGET, THE BANK CARRIED for keeping, incentivizing and raising effi- helped select specialists with required OUT A SERIES OF MEASURES ciency of the key staff. competencies within a short time. TO DOWNSIZE AND TO CUT In the past few years, optimization of busi- In 2016, a personnel technology called ITS STAFF; IN ADDITION, ness processes and automation of opera- Assessment Center was widely used WORK WAS CONTINUED tions that require intensive manual labor as an efficient staff selection instrument TO IMPROVE TRANSPARENCY have become a key factor of success for a large-scale applicant screening amidst OF ALLOCATION in competitive struggle. In that regard, time constraints. Assessment was carried OF FUNCTIONS, AUTHORITIES the Bank continued to centralize support out to select applicants for the positions AND RESPONSIBILITIES and assistance functions (operational of operational employees, customer AMONG DIVISIONS service, underwriting, internal control, managers and executive assistants. More- AND OFFICERS. etc.) in regions with optimal labor costs; over, Assessment Centers were used and to unify and standardize the organ- in the screening of managers for Under- izational and functional structure writing Centers in three regions. of the branches. Adoption of new functional In 2016, regular work was performed formats helps reallocate resources in favor to evaluate how successfully new of the Bank’s business divisions. A great employees complete the orientation deal of attention is also paid to standardiza- period and to provide them with assis- tion of GPB Group’s regulatory framework tance should any issues arise. in terms of payroll and personnel incentives, Staff turnover in the Head Office was social guarantees and benefits, and compli- up in 2016 (11.7%) versus 2015 (9.2%), largely ance with regulators’ requirements. because of downsizing and personnel cuts. As of 31 December 2016, the Bank’s work- Across the Bank as a whole, staff turnover force consisted of 13,800 people. About was 16.2% in 2016 (12.4% in 2015), which, 90% of the staff are college graduates, nevertheless, is below the market average. the average period of service at the Bank That level of turnover was conditioned is 5.8 years, with about 1,000 people by the Bank’s stability and reliability, avail- having stayed with Bank GPB (JSC) ability of social benefits and guarantees, for more than 15 years. The average age the Bank’s established corporate culture, of employees is 38 years; approximately within the framework of which taking care 20% of the personnel are under 30. of human resources is invariably a priority. In 2016, special attention in staff recruit- The Bank’s leadership pays a lot of atten- ment was paid to newly adopted tion to development and advancement 61 Gazprombank ANNUAL REPORT 2016

In connection with centralization of support functions, advanced technologies of large-scale remote testing and distance learning were used in 2016.

of professional level of the personnel. In 2016, more than 6,600 of the Bank’s °° 29 named scholarships were awarded The Bank has in place an integrated system employees completed on-site training, to students of 11 leading finance of corporate training for employees, of which: and economics universities of Moscow which is aimed at proactive develop- °° 4,000 were representatives of the Head and St. Petersburg; ment of key expertise and competencies, Office; °° work goes on with interns, and more required for creating a competitive edge °° 2,600 were employees of the branch than 100 students interned in various and completion of assigned business network. divisions of the Bank’s Head Office. objectives. Throughout the year, in-house consult- In 2016, within the framework of annual The system includes: ants who are the Bank’s employees were performance evaluation, a system °° corporate workshops and trainings; engaged in conducting training programs of “cascading” the Bank’s Plan key °° individual training of employees; for products and project management. targets from the leadership to low-level °° module programs aimed at systematic In 2016, in-house coaches were trained employees was adopted across the Bank. development of managerial skills who teach improvement of the tech- Moreover, competencies of heads of front and personal growth; nology of underwriting loan applications office divisions are evaluated according to °° o remote learning; of private individuals; 12 groups of under- the “360 degrees” method on a regular basis. °° an e-library of business literature; writers of the branch network completed Professional tests are widely used, which °° studying for qualification certificate training. help quickly and effectively evaluate exams, which is mandatory Within the framework of the Bank’s interac- knowledge of employees in the area for employees to be able to perform tion with Russian universities: of the Bank’s regulations, business their functional duties. °° the procedure of screening processes, products, policies and proce- The themes, methods and forms applicants for the enrollment dures. With that aim in mind, a package of learning activities are determined to the International Banking Business of more than 100 e-tests is used; those in accordance with the Bank’s goals program of the Bank GPB (JSC) Chair tests were designed in association with for the current and future periods, with in the International Energy Policy the Bank’s specialists. strategies and policies in individual areas and Diplomacy Institute of MGIMO The Bank has adopted a system of remote of operations, approved schedules under of the Russian Ministry of Foreign learning, which is successfully functioning projects and outcomes of regular perfor- Affairs, and the program of internship and developing as a priority in corporate mance evaluations. at the Bank’s divisions were modified; training. The system helps effectively use 62 Gazprombank ANNUAL REPORT 2016

In 2016, the Bank established a close tie between the annual planning system and the individual performance evaluation system, and implemented a system of “cascading” key targets of the overall plan all the way down to low-level employees.

internal resources and suggest immediate solutions adapted to the ever-changing external environment. The corporate library of e-training courses and e-tests keeps teaching aids and tuto- rials on virtually all areas of the Bank’s activ- ities and operations. The Bank continuously expands its e-training library by developing in-house products and by purchasing ready-made solutions. In 2016, active work RANDSTAD AWARD WINNER was pursued in development of a data- IN THE MOST OF THE LEADERSHIP base of e-content used for training of all ATTRACTIVE EMPLOYER INDEX RATING categories of the Bank’s employees. IN THE FINANCIAL A combination of onsite and distance SERVICES SECTOR learning is common practice in the Bank’s NOMINATION corporate programs, and webinars have It is the world’s largest survey in which This rating is composed on an annual become a much-in-demand and popular respondents (representatives basis by Rabota.ru (RDV-Media of employed and unemployed Group) based on the opinions form of interaction between employees populace) select the most attractive of 120,000 employees of Russian of the Bank’s branch network and the Head employer in each market segment out companies, 3,000 HR specialists Office. In 2016, distance learning covered of the country’s biggest companies and 10 most renowned experts about 13,000 people, and more than in terms of personnel. of the job market. 4,500 people took part in webinars. The Bank’s HR policy has been celebrated by the professional community more than once; on the back of 2016, the Bank also received awards. 63 Gazprombank ANNUAL REPORT 2016 DEVELOPMENT OF INFORMATION TECHNOLOGIES

During the reporting period, the Bank carried out a number of projects within the framework of centralization and standardization of IT solutions, adoption of new systems supporting core operations. Measures were taken to drive down costs and to enhance efficiency of IT processes.

ALL IN ALL, THE BANK In addition to the basic objectives of the network infrastructure of the Bank CARRIES OUT MORE THAN of the project, reengineering of key busi- at large and of its individual branches, 40 IT PROJECTS AIMED ness processes was completed within and also for the development of the data AT QUALITY IMPROVEMENT the framework of efforts to ensure work processing center infrastructure. AND MAKING NEW of Gazprom in St. Petersburg, document In December 2016, initial evaluation OPPORTUNITIES AVAILABLE processing was standardized, workplaces of the Bank’s IT processes was completed IN CUSTOMER SERVICE were brought in line with unified standards. in accordance with the Capability Maturity PROVISION AND IN SAVING In 2016, the Bank completed required Model Integration (CMMI). Potential of effi- TRANSACTIONAL COSTS. technological modifications to carry out ciency improvement of basic processes a project for the Government Defense was identified, which will help tackle n 2016, a project of the Bank’s settlement Order; in the process, 978 corporate competitive challenges in digital tech- Ifunctions centralization was completed. customers were connected to the remote nologies and hi-tech services provided All the branches were connected banking system, and approx. 3,000 docu- to customers. On the back of the eval- to a centralized settlement system. ments are processed on average every day. uation results, the main guidelines The Bank’s branches in Yekaterinburg, The GPB-IEIS automated system has been of the IT module’s organizational develop- St. Petersburg, Novosibirsk, Tyumen rolled out. It ensures electronic exchange ment through to 2020 have been identified. and Omsk have been transferred to a centra­ with federal authorities (in particular, The purpose is to reach third maturity level lized corporate platform, and technology interactions with the Federal Bailiff Service, in accordance with the CMMI, which will support has been ensured in the general the Federal Tax Service and the Central ensure the Bank’s leadership in information transformation of the branch network. Electoral Commission have been estab- technologies. The principal business goals of the Bank’s lished). During 2016, some of the Bank’s cri­tical transition to a centralized corporate plat- In the Head Office and at the Bank’s automated systems were switched form are as follows: branches in Novosibirsk and Nizhny over to the Agile/SCRUM methodology °° customer base growth through better Novgorod, a specialized system in the course of their development. service quality; of support of operations with distressed The total number of ordering departments °° cutting the “time to market”; debt of retail customers was launched exceeded 30 within the framework of “agile °° larger scope of operations and their into pilot operation. development,” and the number of updates quicker implementation; Commercial operation was started of systems rolled out within the framework °° enlargement of the range of available with respect of the functions that allow of the new methodology during the year products and services; opening and replenishing deposits via exceeds 2000. °° cutting operational costs; АТМs; a number of new capabilities were In 2016, examination and testing of domes- °° mitigating operational and regulatory integrated in the Home Bank system. tically available solutions and solutions risks; To ensure continuity of the Bank’s opera- based on freeware were going on within °° decommissioning of decentralized tions and of customer services, technology the framework of import substitution; pilot and outdated systems in the Bank’s solutions were designed and developed projects were planned for the technologies branches. for the unification and centralization selected for testing. 64 Gazprombank ANNUAL REPORT 2016 SOCIAL RESPONSIBILITY AND INTERNATIONAL CULTURAL COOPERATION

Social responsibility has always been and remains among the high-priority corporate values in Gazprombank.

SCIENCE AND EDUCATION, aying close attention to training and sports fans. The event took place CULTURE AND KNOWLEDGE Pof highly qualified specialists in six cities of Russia (Saratov, Sochi, Kalinin- DISSEMINATION, in economics, Gazprombank has not only grad, St. Petersburg, Omsk, Yekaterinburg), SPORTS, ASSISTANCE TO established a tight rapport with the coun- and on the back of its results the best DISADVANTAGED SOCIAL try’s major higher education institutions, of the best went to a training camp in Sochi. GROUPS, PROTECTION OF THE but it also actively promotes secondary Over many years, Gazprombank has been ENVIRONMENT ARE PRIORITY professional education. One striking a general partner of annual European AREAS OF THE BANK’S example is the professional excellence and world cups in Latin American dances REGULAR AND SYSTEMIC competition Gazprombank Working and of the charity Vienna Ball in Moscow; WORK IN THIS FIELD. Scholars, which has been organized annu- it also provides assistance to the Russian ally since 2010 in more than 25 cities across Dance Union. Russia. Educational institutions taking part Work in the area of culture and knowledge in that nationwide competition train work- dissemination is of essential importance force for strategically important industries for Gazprombank; the Bank has museums, of Russian economy, such as metallurgy, theaters and cinema organizations — nuclear power energy, petrochemical Moscow Kremlin Museums, A.S. Pushkin industry, heavy- and medium-duty Museum of Fine Arts, State Hermitage machine-building, automotive industry, and others — as its key partners. defense industry. On the back of the compe- No less attention does the Bank pay tition results, 40 winners in every institution to nurturing creative endeavors of children. are awarded an annual named scholar- Every year, Orlyonok (Eaglet), a national ship from the Bank, and the participating center for children, situated on the shores colleges receive sponsor donations. of the Black Sea, hosts, in association To foster healthy lifestyles, the Bank with Gazprombank, the Children’s Song provides support to many federations, of the Year festival presided by Ange- clubs and other organizations promoting lina Vovk, a people’s artist. The event elite or mass sports, including physical is a ga­thering bringing together more than culture among children. Over many 300 performers from across the nation, years, Gazprombank has been a partner where talented youngsters have an excel- of the Zenit Football Club, which holds, lent opportunity to prove their mettle in association with its sponsor, the Grand on big stage, to take part in master classes Football Festival for children. It is a unique hosted by stars of the Russian show busi- social and athletic project that became ness, and relax on the seaside in a cozy cove. nationwide in 2016. The festival brought One of the most important areas of charity together more than 50,000 people: young activities of Bank GPB (JSC) is rendering football players, aficionados, football assistance to underprivileged social groups, 65 Gazprombank ANNUAL REPORT 2016

International cultural collaboration also remains one of top-priority vectors of the Bank’s humanitarian mission. within the framework of which the Bank Gazprombank jointly with Bank Intesa Battalion, a film directed by Dmitry collaborates closely with veterans’ organi- organized a traditional nonprofit event Meskhiev and backed financially zations, orphans’ homes, boarding schools. for residents of the Italian city and guests by Gazprombank, was awarded the Grand Support provided to orphans in general of the forum in the fall of 2016 in Verona. Prix at an international cinema festival occupies a special place in those efforts. Ahead of the festivities to celebrate of BRICS (Brazil, Russia, India, China, For many years, the Bank has been a donor the 80th anniversary of the Igor Moiseyev South Africa) in 2016. The picture won of Children’s Villages — SOS, an inter-­ State Academic Ensemble of Popular in four nominations, including World’s regional charity NGO, it is actively involved Dance, the legendary company performed Best Motion Picture, Best Motion Picture in the construction of family child-care its program Dances of the Peoples of BRICS Countries, Best Actress in a Lead homes for orphans across Russia and backs of the World for the first time. The concert Role, and Best Sound Editing. The event up the traditional New Year charity was an immediate sensation and was was a real international victory of Russian campaign “I believe in Father Frost” orga­ one of the most memorable events cinema. After it saw a wide distribution, nized for the benefit of orphans; the Bank’s in Gazprombank’s international cultural Battalion won more than 30 Russian employees also take part in it on an indi- cooperation. and international prizes. vidual basis. In 2016, Gazprombank embarked on colla­ Alongside motion pictures, a great Within the framework of its environmental boration with Shorter, an international deal of attention was paid to initiatives endeavors, Gazprombank continues festival of short-length films that has in the theater. Gazprombank backed to donate to the endowment fund been organized since 2013 to seek out the audience choice award The Star of the Land of the Leopard national park. and support young talents. The Board of the Theater Lover. That Russian prize In 2015, the Bank took a young leopardess of Trustees includes leaders of the Russian has the status of independent award, named Bary under its care and since then movie industry: Fyodor Bondarchuk, Igor and rather than by a professional judging has been observing closely the deve­ Tolstunov, Sergei Selyanov, Valery Todo­rovsky, panel, it is bestowed by theater-going audi- lopment of the natural reserve at large Leonid Vereschagin, Sergei Melkumov. ences in Russia and abroad. Among its nomi- and the life of its ward in particular. Over the four years of its existence, the event nations there are Best Russian Theater has paved the shortest and at the same Abroad, Best Social Project, Best Production International cultural cooperation time the widest way to the world of motions for Children and Youth, Best Performance Within the framework of the annual pictures for newcomers among movie dire­ by a Theater Actor (Actress) in Motion international forum “Conoscere Eurasia,” ctors and actors. Pictures, Favorite Theater, and many others. 66 Gazprombank ANNUAL REPORT 2016 67 Gazprombank ANNUAL REPORT 2016 3 CORPORATE HISTORY OF THE PRESENT GOVERNANCE PLATOV INTERNATIONAL AIRPORT 68 Gazprombank ANNUAL REPORT 2016 SHAREHOLDERS OF BANK GPB ( JSC)

Full name As of 01.01.2016 As of 01.01.2017

Share Share Share Share Share Share in common in Type A in Type B in common in Type A in Type B stock ¹, % preferred preferred stock ¹, % preferred preferred stock ², % stock ³, % stock ², % stock ³, % Public Joint-Stock Company Gazprom 35.5414 0 0 35.5414 0 0 Non-State Pension Fund GAZFOND 6.0798 0 0 6.0798 0 0 Open Joint-Stock Company GAZ-Tech 11.1125 0 0 11.1125 0 0 Open Joint-Stock Company GAZ-Service 16.2223 0 0 16.2223 0 0 Open Joint-Stock Company GAZKON 16.2316 0 0 16.2316 0 0 Closed Joint-Stock Company Leader 0.3534 0 0 0.3534 0 0 (pension fund asset management company), Trust Management Closed Joint-Stock Company Leader 0.0004 0 0 0.0004 0 0 (pension fund asset management company) State Corporation Bank for Development 10.1907 0 0 10.1907 0 0 and Foreign Economic Affairs (Vnesheconombank) Russian Federation represented 0 100 0 0 100 0 by the Ministry of Finance of the Russian Federation State Corporation Deposit Insurance Agency 0 0 100 0 0 100 Limited liability company New Financial 4.2180 4.2356 Technologies Individuals 0.0499 0 0 0.0323 0 0 Total 0100 0100 0100 0100 0100 0100

¹ Of the total number of common shares. ² Of the total number of Type A preferred shares. ³ Of the total number of Type B preferred shares. 69 Gazprombank ANNUAL REPORT 2016 BOARD OF DIRECTORS OF BANK GPB ( JSC)

The Board of Directors composition as of 1 January 2017.

Chairman of the Board of Directors

Alexey B. Miller Chairman of the Management Committee, Gazprom

Deputy Chairmen of the Board of Directors

Andrey I. Akimov Chairman of the Management Board, "Gazprombank" (Joint-stock Company) Mikhail L. Sereda Deputy Chairman of the Management Committee, Head of the Administration of the Management Committee, Gazprom Yury N. Shamalov President of Non-State Pension Fund GAZFOND

Members of the Board of Directors

Elena A. Vasilieva Deputy Chairwoman of the Management Committee, Chief Accountant, Gazprom Anatoly A. Gavrilenko General Director, CJSC Leader Vladimir A. Dmitriev Vice President, Chamber of Commerce and Industry of the Russian Federation Kirill A. Dmitriev Chief Executive Officer, Russian Direct Investment Fund Management Company Ilya V. Eliseev Deputy Chairman of the Management Board, "Gazprombank" (Joint-stock Company) Yulia S. Karpova Deputy Chairperson and Member of the Management Board of Vnesheconombank Andrey V. Kruglov Deputy Chairman of the Management Committee, Gazprom Kirill G. Seleznev Member of the Management Committee, Department Head, Gazprom

Profiles of Members of the Board of Directors, "Gazprombank" Alexey B. Miller Andrey I. Akimov (Joint-stock Company) Year of birth: 1962. Year of birth: 1953. Educational background: Graduated from Educational background: Graduated from the Voznesensky Leningrad Institute the Moscow Institute of Finance in 1975. of Finance and Economics in 1984. Candi- Job titles in the past three years: From January date of Sciences (Economics). 2003 to date — Chairman of the Manage- Job titles in the past three years: From June ment Board, Bank GPB (JSC). 2001 to date — Chairman of the Manage- ment Committee, Gazprom. 70 Gazprombank ANNUAL REPORT 2016

Transactions, from April 2012 to March Mikhail L. Sereda Vladimir A. Dmitriev 2014 — Deputy Chairperson, from March Year of birth: 1970. Year of birth: 1953. 2014 to date — Deputy Chairperson Educational background: Graduated Educational background: Graduated from and Member of the Management Board from St. Petersburg State University Moscow Institute of Finance in 1975. of Vnesheconombank. of Economics and Finance in 1997. Doctor of Sciences (Economics). Job titles in the past three years: From Job titles in the past three years: From June Andrey V. Kruglov September 2004 to date: Deputy Chairman 2007 to February 2016 — Chairman, Year of birth: 1969. of the Management Committee, Head State Corporation Bank for Development Educational background: Graduated of the Administration of the Management and Foreign Economic Affairs from St. Petersburg Technology Insti- Committee, Gazprom. (Vnesheconombank); from April 2016 tute of Refrigeration Industry in 1994; to date — Vice President, Chamber studied at the Interdisciplinary Insti- Yury N. Shamalov of Commerce and Industry of the Russian tute of Advanced Training and Staff Year of birth: 1970. Federation. Retraining at the St. Petersburg University Educational background: Graduated from of Economics and Finance in 1995. Doctor the Higher Naval Engineering School Kirill A. Dmitriev of Sciences (Economics). in 1992; graduated from the Russian Year of birth: 1975. Job titles in the past three years: From April Foreign Trade Academy (Ministry Educational background: Graduated from 2004 to July 2015 — Deputy Chairman of External Economic Relations Stanford University in 1996; graduated of the Management Board, Head of Depart- of the Russian Federation) in 1996. Ph. D. from Harvard University in 2000. ment; from July 2015 to date — Deputy (Economics). Job titles in the past three years: From June Chairman of the Management Committee, Job titles in the past three years: From August 2009 to July 2011 — Head of Ukraine’s Gazprom. 2003 to date — President of Non-State Representative Office of Icon Private Pension Fund GAZFOND. Equity Limited; from May 2011 to date — Kirill G. Seleznev Chief Executive Officer, Russian Direct Year of birth: 1974. Elena A. Vasilieva Investment Fund Management Company. Educational background: Graduated from Year of birth: 1959. the Ustinov Baltic State Technical University Educational background: Graduated from Ilya V. Eliseev in 1997; graduated from St. Petersburg State the Voznesensky Leningrad Institute Year of birth: 1965. University in 2002. Ph. D. (Economics). of Finance and Economics in 1986; Educational background: Graduated from Job titles in the past three years: From graduated from the St. Petersburg Zhdanov Leningrad State University September 2002 to date — Member International Institute of Management in 1987. Ph. D. (Law). of the Management Committee, in 2008. Job titles in the past three years: From Department Head, Gazprom; from Job titles in the past three years: From August 2005 to date — Deputy Chairman March 2003 to date — CEO of Gazprom September 2001 to date — Deputy of the Management Board, Bank GPB (JSC). Mezhregiongaz (LLC) (concurrently). Chairwoman of the Management Committee, Chief Accountant, Gazprom. Yulia S. Karpova Year of birth: 1970. Anatoly A. Gavrilenko Educational background: Graduated Year of birth: 1972. from the Plekhanov Moscow Institute Educational background: Graduated from of National Economy in 1991; graduated Lomonosov Moscow State University from the Financial Academy (under in 1995 and 2001. the Government of the Russian Federa- Job titles in the past three years: From May tion) in 1999. 2004 to date — General Director, CJSC Job titles in the past three years: From Leader (pension fund asset management November 2007 to April 2012 — company). Director, Directorate of FX and Financial 71 Gazprombank ANNUAL REPORT 2016 MANAGEMENT BOARD OF BANK GPB ( JSC)

The Management Board composition as of 1 January 2017.

Andrey I. Akimov Chairman of the Management Board Oleg M. Vaksman Deputy Chairman of the Management Board Ilya V. Eliseev Deputy Chairman of the Management Board Dmitry V. Zauers Deputy Chairman of the Management Board Viktor A. Komanov Deputy Chairman of the Management Board Alexey A. Matveev Deputy Chairman of the Management Board Alexander Y. Muranov Deputy Chairman of the Management Board Famil K. Sadygov Deputy Chairman of the Management Board Alexander I. Sobol Deputy Chairman of the Management Board Elena A. Borisenko First Vice President Vladimir N. Vinokurov First Vice President Andrey A. Pimenov First Vice President Igor V. Rusanov First Vice President Valery A. Seregin First Vice President Alexander M. Stepanov First Vice President Yan V. Tsenter First Vice President

he held the position of Managing Director Officer (Analysis) at First National Bank Andrey I. Akimov at IМAG Investment Management & Advi- in Johannesburg, South Africa. From Year of birth: 1953. sory Group AG (Austria). Chairman of Bank October 2005 to January 2008 he worked Education: A graduate of Moscow Financial GPB (JSC) Management Board since at KPMG London Advisory Department Institute (1975) majoring in Economics. January 2003. as a risk consulting manager responsible Career: From October 1974 to November for the financial sector. From January 1990 Andrey was an employee Oleg M. Vaksman 2008 to June 2009 Oleg served as Perfor- of Vneshtorgbank in the positions of Credit Year of birth: 1977. mance Management Director and from Inspector, Head of Foreign Exchange Education: Bachelor’s degree in Law from July 2009 to February 2010 as Consulting Department, Deputy General Manager the University of the Witwatersrand in Director (Partner) with Business Consulting of the bank’s office in Zurich, and Chairman Johannesburg, South Africa (2002). at PricewaterhouseCoopers Russia B.V., of the Management Board in Donau Bank. Career: From May 2003 to March 2005 Moscow. Employed by Gazprombank From February 1991 to January 2003 Oleg held the position of Chief Operating in February 2010 as First Vice President, 72 Gazprombank ANNUAL REPORT 2016

elected as a Member of the Management 2007 to February 2010 he served as Head Development Department. Joined Bank Board in April 2010 and appointed Deputy of the Network Coordination Department GPB (JSC) in October 2003. From October Chairman of the Management Board and from February 2010 to May 2011 2003 to February 2004 he acted as Advisor in February 2013. as Deputy Head of the division. In May to the Management Board and Corpo- 2011 he was appointed Vice President rate Finance Director; from February Ilya V. Eliseev and then First Vice President of the Bank 2004 to November 2007 he was Head Year of birth: 1965. in September 2012. He has been a Member of the Corporate Finance Department; from Education: A degree in Law from Zhdanov of the Management Board since February November 2007 to July 2010 served as First Leningrad State University (1987). Awarded 2013 and Deputy Chairman of the Manage- Vice President. He was elected as a Member a degree of Candidate of Sciences in Law ment Board since November 2014. of the Management Board in April 2007 in 2001. and appointed Deputy Chairman of the Career: From January 1991 to March Viktor A. Komanov Management Board in July 2010. 2003 Ilya worked at St. Petersburg State Year of birth: 1973. University in the Department of Law (Civil Education: A graduate of Plekhanov Russian Alexey A. Matveev Law). From May 2003 to July 2005 he held Academy of Economics majoring in Year of birth: 1963. the position of Vice President and President Economics (1995) and the London School Education: A degree in Economics from of the Law Center Association in St. Peters- of Economics and Political Science (1997). Moscow Financial Institute (1986). burg. He has worked for Bank GPB (JSC) Career: Viktor started his career Career: Alexey started his career in January in the position of Deputy Chairman in September 1990 with commercial 1986 with VTB’s Soyuzraschetexport, where of the Management Board since August banks Stroycredit and Moscovia. Then he worked as an inspector and an econo- 2005. until March 1996 he worked as a lead mist until December 1987. From January economist at commercial banks YALOS- 1988 to June 1989 he worked as an econ- Dmitry V. Zauers BANK, National Credit and Gagarinsky. omist in Vnesheconombank of the USSR. Year of birth: 1979. From 1996 to 1997 he served as Head Then Alexey joined International Moscow Education: Graduated from Tomsk State of the New Product Development Divi- Bank where he was Head of the Financial University with a degree in Management sion of the Corporate Services Division Credits Department until January 1992. (2001). at Menatep Bank. From December 1997 During the following year he worked Career: Dmitry started his career in August to November 1998 Viktor was an analyst as Foreign Affairs Consultant with Servis- 2001 with Gazprombank. Through June with the Corporate Finance Department Globus (a joint venture). From February 2003, he held the positions of specialist of Fleming USB (CJSC). Up to February 1993 to July 1995 he held the positions and lead specialist of the Lending Depart- 2001, he held the position of Deputy Head of Director for External Loans, Member ment with the Bank’s branch in Tomsk; of the Investment Banking Department of the Management Board, and Executive from June 2003 to May 2011 he worked of Fleming USB (CJSC). Up to March 2002 Vice President of Inter-Sectoral Commer- in the Bank’s Regional Business Devel- he was Deputy Head of the Corporate cial Bank for Wholesale Development. opment Division and held the position Client Banking and Capital Markets In July 1995 he joined JSC Bank Credit of Chief Specialist of the Network Manage- Department at J. P. Morgan Bank Inter- Suisse (Moscow) where he worked as Head ment Department until March 2006; from national LLC. From April 2002 to October of the Securities Management Department March 2006 to September 2007 he was 2003 Viktor worked in the Moscow office and Vice President until June 1998. During Deputy Head of the Network Coordination of Lukoil Overseas Service LTD in the posi- 1999, Alexey was Advisor to the Chairman Division and Head of the Network Manage- tions of Head of the M&A Department of the Management Board in Eastern ment Department; from September and later Head of the International Business European Investment Bank. From June 73 Gazprombank ANNUAL REPORT 2016

1999 to March 2001 he held the position in Engineering Economics (1993). Awarded September 1993. In September 1993 of Head of the Investment Banking Depart- a degree of Candidate of Sciences he joined Russian National Commercial ment in Fleming USB (CJSC). From May in Economics in 2006. Bank (RNCB) and worked there until 2001 to February 2003 he was Managing Career: From 1992 to 1994 Famil occu- November 1998 in the positions of Eco­­ Director in Investment Company Troika pied managerial positions in a number no­mist, Head of the Financial Resources Dialog (CJSC). He joined Gazprombank of trading companies. From June 1994 Department, Deputy Head and Head in February 2003, working as Advisor to May 1995 he held the position of Deputy of the Consolidated Analysis Department, to the Chairman of the Management CEO & Chief Manager at National Diamond Vice President of the Bank, Vice President Board from February to July 2003, Fund (CJSC). From June 1995 to March & Head of the Compliance Control Service, and was appointed Deputy Chairman 1996 he served in the Ministry of Finance and Deputy Chairman of the Manage- of the Management Board in July 2003. of the Russian Federation as a consultant ment Board & Head of the Compliance of the Administrative Control Department. Control Service. Alexander joined Alexander Y. Muranov From March 1996 to April 1997 Famil held Bank GPB (JSC) in November 1998 and held Year of birth: 1958. the position of Head of the Forecast & the positions of Advisor to the Chairman Education: A graduate of Leninsky Analysis Department. From April to June of the Management Board from November Komsomol Lviv Polytechnic Institute 1997 he acted as Deputy Head of Science 1998 to February 1999 and Deputy Head majoring in Electronic Engineering (1980). and Technology under the Russian Federal of Strategic Development and Resource Career: Alexander’s career started Road Service. He was Deputy Head of the Planning & Advisor to the Chairman in November 1980 with Elektroizmeritel Directorate in Dorinvest until January of the Management Board from February Plant named after the 50th Anniversary 1998 and Deputy Head of the Russian 1999 to November 1999. He has been of the USSR in Zhytomyr, where he worked Federal Road Service until July 1999. From Deputy Chairman of the Management as an Engineer, Laboratory Chief and July 1999 to December 2004 he served Board since November 1999. Deputy Head of R&D until August 1994. in the capacity of Deputy Minister for Taxes From 1995 to 1998 he held the positions and Duties of the Russian Federation. From Elena A. Borisenko of Economist, Head of the Correspondent January 2005 to February 2009 he held Year of birth: 1978. Relations Department, Deputy Chairman the position of Deputy Head of the Federal Education: A graduate of St. Petersburg of the Management Board and First Deputy Treasury. From February 2009 until the State University (2000), majoring in Law. Chairman of the Management Board present Famil has been Deputy Chairman of Career: Elena started her career in May in Unibest (a commercial bank). From the Management Board in Bank GPB (JSC). 1999 as a legal adviser at CJSC Plaza Firm. October 1998 to February 2005 his career From August to November 2000, she was continued with Rosprombank in the posi- Alexander I. Sobol the Head of the Law Group at CJSC Plaza tions of Vice President, First Vice President, Year of birth: 1969. Plus. From December 2000 to November and President of the Bank. He joined Bank Education: A graduate of Ordzhonikidze 2008, she worked at OJSC Jewelry Trade GPB (JSC) in February 2005 and has been Moscow Aviation Institute majoring of North-West, first as a Legal Adviser, acting as Deputy Chairman of the Manage- in Engineering Economics (1991). Awarded then as the Head of the Law Department. ment Board until the present. a degree of Candidate of Sciences From November 2008 to September in Economics in 2003. 2009, she was an Adviser to the Head Famil K. Sadygov Career: Alexander started his career of the Federal Service for State Registration, Year of birth: 1968. in February 1989 in Ordzhonikidze Moscow Cadastral Records and Cartography. Education: A graduate of Ordzhonikidze Aviation Institute, where he worked From September 2009 to June 2012, State Academy of Management majoring as a technician and an engineer until she was first an Adviser to the Justice 74 Gazprombank ANNUAL REPORT 2016

Minister of the Russian Federation June 2003 to March 2014. Employed & Head of Administrative Support. He was and afterwards the Director of the Depart- by Bank GPB (JSC) since March 2014 appointed First Vice President in July 2007 ment of Legal Aid and Interaction with in the positions of First Vice President and elected as a Member of the Manage- the Judicial System of the Ministry and Member of the Management Board. ment Board in October 2013. of Justice of the Russian Federation. In July 2010, she was awarded the civil Andrey A. Pimenov Igor V. Rusanov service rank of Full State Counsellor Year of birth: 1964. Year of birth: 1970. of the Russian Federation, 3rd Class. From Education: A graduate of Moscow Peda- Education: A graduate of Moscow Institute June 2012 to July 2015, she was Deputy gogical Institute with a teacher’s degree of Physics and Technology with a degree Minister of Justice of the Russian Federa- in Vocational Training and General Tech- in Engineering Mathematics (1993). tion. In December 2012, she was awarded nical Disciplines (1992). Career: Igor’s career started with the Insti- the civil service rank of Full State Counsellor Career: Andrey started his career in tute of Design Automation under the USSR of the Russian Federation, 2nd Class. From 1984 as Foreman of Vocational Training Academy of Sciences, where he worked September 2015 till now, she has been First in a technical college. In April 1991 he as an engineer from April 1990 to November Vice President, Member of the Manage- became Director General of Cicera (a small 1993. From June 1994 to July 1997 he was ment Board of Bank GPB (JSC). enterprise), and then served as Deputy employed by Neftekhimbank, where Director General in Ares LLP from January he held the positions of Specialist and Chief Vladimir N. Vinokurov 1993 to January 1995. From February 1995 Specialist of the Securities Department until Year of birth: 1959. to September 1996 Andrey held the posi- May 1996 and Deputy Head of the Dealing Education: Graduated from Dzerzhinsky tion of Senior Manager of the Branching Department from June 1996 to July 1997. Tambov Higher Military Aviation Engi- Department in Commercial Investment In July 1997 he was appointed Acting neering School in 1981 with a degree Bank Alfa Bank. From October 1996 Head of Treasury. In August 1997 he joined in Radio Engineering; a graduate to October 1998 he worked in the Moscow Bank GPB (JSC) where he worked as Head of the Higher School of the KGB quali- Regional Office of Menatep Bank LLC of the Promissory Notes and Bonds fied as an officer with a degree in higher as Head of Business Development. From Department and Deputy Head of Secu- professional education in 1991; a graduate October 1998 to February 1999 he was rities until February 1999; Deputy Head of the Russian Academy of Public Admin- Head of Corporate Services in the Moscow of Treasury, Deputy Head of Treasury istration with a degree in Social Sciences Branch of Menatep St. Petersburg. From & Head of Liquidity Control & Analysis, in 1994. March 1999 to November 2000 he held and Deputy Head of Treasury & Head Career: Vladimir did military service the position of Head of Administration of Cash Flow Management from February with the USSR Ministry of Defense in Rosprombank LLC. From November 2000 1999 to December 2003; Head of Structured from July 1981 to September 1983 to November 2002 he acted in the capacity & Syndicated Financing from December and with KGB/FSB counterintelligence of Business Center Manager in the Moscow 2003 to September 2004; Vice President & offices (staff records and fieldwork) Representative Office of Trekhprudny Head of the Debt Capital Markets Depart- from September 1983 to December Management Limited. From November ment from September 2004 to January 1998. From December 1998 to March 2002 to April 2005 Andrey was head of Polet 2006; Vice President & Head of the Capital 2014 he served in the FSB Center Federal Operating Company. He joined Markets Department from January 2006 for Special Assignments, holding Gazprombank in May 2005 working as Head to September 2007; Vice President & Head the position of Chief Deputy and Chief of Administrative Support until December of Structured & Syndicated Financing Personnel Officer to June 2003, Chief 2006. From December 2006 to July 2007 and Corporate Solutions from September Deputy and Chief Officer of Unit A from he held the position of First Vice President 2007 to January 2011. He was appointed 75 Gazprombank ANNUAL REPORT 2016

First Vice President in January 2007 of Economics in Economics (1999). of the Trust Management Department, and elected as a Member of the Manage- Awarded a degree of Candidate of Sciences Deputy Head of Treasury and Head ment Board in February 2013. in Economics in 2000. of Customer Service of the Ural Bank Career: Aleksandr started his career for Reconstruction and Development. Valery A. Seregin in April 1994 with Sozidanie LLP He joined Bank GPB (JSC) in March 2000 Year of birth: 1966. as a computer operator. From February as a department head. Later he occupied Education: A graduate of Makarov Pacific 1997 to December 1999 he worked the positions of Deputy Branch Manager Higher Naval School majoring in Radio as a consultant at Monitor Eurasia in Yekaterinburg from April 2002 to July Engineering (1988). Africa Ltd. and then as a consultant 2010, and Branch Manager from July 2010 Career: From 1991 to 1992 Valery worked in the Moscow Representative Office to February 2012. In February 2012 Yan for Moskovsky Fondovy Dom as Head of A.T. Kearney GmbH from January was appointed Vice President and Branch of the Operations Department. From 2000 to April 2001. From April 2001 Manager in Yekaterinburg. From August June 1992 to May 1994 he was Head to October 2004 he held the position 2012 to December 2013 he acted of the Securities Department of Aviabank. of Analyst, Deputy Director of Trans- in the capacity of First Vice President In May 1994 he joined Neftekhimbank portation Projects, and Investment and Branch Manager in Yekaterinburg. where he held the positions of Head Director in Finartis LLC. In October Elected as a Member of the Management of the Securities Department and Deputy 2004 Aleksandr joined Gazprombank Board in August 2012 and appointed First Chairman of the Management Board until as Director of the Project Finance Depart- Vice President in January 2014. May 1997. From May 1997 to April 2002 ment until October 2006 and Advisor he was Deputy Chairman of the Manage- to Chairman of the Management Board Changes in the Management Board ment Board in Gazprombank. Until from October 2006 to February 2011. in 2016 November 2004 he occupied the posi- In February 2011 he was appointed First N.G. Korenev and S.E. Malyuseva left tion of Deputy CEO of the Agency Vice President & Head of the Strategic the Management Board. for Housing Mortgage Lending (OJSC). Industrial Assets Department. Elected E.A. Borisenko became a member From December 2004 to April 2010 as Member of the Management Board of the Management Board. Valery worked in GPB-Mortgage (OJSC) in November 2014. A.M. Stepanov, a Management Board in the capacity of Advisor to the Manage- member, was appointed to the position ment Board and Chairman of the Manage- Yan V. Tsenter of First Vice President. ment Board. He joined Bank GPB (JSC) Year of birth: 1974. in April 2010 as First Vice President. Education: A graduate of Ural State Elected as a Member of the Management University of the Order of the Red Banner Board in June 2010. of Labor with a degree in Mathematics (1996); a graduate of Ural State University Alexander M. Stepanov of Economics majoring in Economics Year of birth: 1976. (2006). Education: A bachelor’s degree from Career: Yan’s career started in July Moscow State Institute (University) of Inter- 1995 with Uralpromstroibank, where national Relations (MGIMO) in Manage- he worked until February 1998 as an econ- ment with a qualification in a foreign omist and a dealer. From February language (1997); a master’s degree 1998 to March 2000 he held the posi- from G. V. Plekhanov Russian Academy tions of Manager and Asset Manager 76 Gazprombank ANNUAL REPORT 2016 CORPORATE GOVERNANCE SYSTEM OF BANK GPB ( JSC)

As of 1 January 2017.

The corporate governance system of Bank GPB (JSC) comprises management bodies, internal control services, a system of relations between management bodies and the Bank’s Shareholders, and the management’s interaction with stakeholders.

THE BANK IS MANAGED ursuant to Article 9 of the Bank’s Arti- Performance of the Bank’s management IN COMPLIANCE Pcles of Association, the Bank’s manage- bodies: Summary WITH THE PROCEDURE ment bodies are: In the reporting year, two General SPELLED OUT °° the General Shareholders Meeting; Shareholders Meetings were held. At IN THE LEGISLATION °° the Board of Directors; the annual General Shareholders OF THE RUSSIAN FEDERATION °° the sole (Chairperson Meeting in June the Bank’s 2015 annual AND THE BANK’S ARTICLES of the Management Board) report and annual accounting (financial) OF ASSOCIATION. and the collective (Management Board) statements were approved, as were the executive bodies. Bank’s external auditor and the Bank’s The decision-making powers and compe- Board of Directors. The annual General tences of the General Shareholders Shareholders Meeting also resolved to Meeting, the Board of Directors, approve the new revision of the Articles the Management Board and the Chairman of Association, ruled to approve related- of the Management Board are established party transactions that might be executed in line with the laws of the Russian Federa- in the future, in the course of the Bank’s tion and the Bank’s Articles of Association. regular business; and addressed The Bank’s supreme management body other matters included in the agenda is the General Shareholders Meeting. of the annual General Shareholders The Bank’s Board of Directors is in charge Meeting. In December, an extraordinary of the general management of the Bank’s General Shareholders Meeting took place, operations, except for matters reserved which resolved to pay (declare) the Bank’s for the General Shareholders Meeting, dividend on the back of performance according to the Federal Law on Joint- in the first nine months of 2016, and also stock Companies (No. 208-FZ, dated to set the date on which persons 26.12.1995 ) and the Bank’s Articles of Asso- entitled to dividends paid by the Bank ciation. are identified; the meeting also resolved Two committees are in operation under to increase the Bank’s authorized capital. the Board of Directors, i.e. the Audit In 2016, the Board of Directors held Committee and the Compensation 35 meetings and addressed 51 issues; Committee. the Audit Committee of the Board of Direc- The Bank’s day-to-day operations tors convened 14 times and addressed are managed by the sole (Chairman 40 issues; the Management Board of the Management Board) and collective held 61 sessions where it looked into (Management Board) executive bodies. 254 matters. 77 Gazprombank ANNUAL REPORT 2016 ORGANIZATIONAL MANAGEMENT FLOWCHART OF BANK GPB ( JSC)

As of 1 January 2017.

SHAREHOLDERS MEETING

AUDITOR OF THE BANK BOARD OF DIRECTORS REVISION COMMISSION

Audit Committee Compensation Committee of the Board of Directors of the Board of Directors

MANAGEMENT BOARD Chairman of the Management Board

Management Board, First Vice Presidents, Executive Vice Presidents, The Bank’s Committees Vice Presidents, Advisors to the Chairman of the Management Board and Consultants to the Management Board

Deputy Chairman of the Management Board Deputy Chairman of the Management Board Administration, HR management and organizational development, Strategic development and financial planning, equity capital, purchases, IFRS, corporate communications accounting and reporting, subsidiary banks

Deputy Chairman of the Management Board Deputy Chairman of the Management Board Corporate lending, distressed assets of individuals, Private Banking, Sales of treasury products, the Bank’s interactions with counterparties international business in financial markets, tax records and reports, transaction accounting service

Deputy Chairman of the Management Board Deputy Chairman of the Management Board Customer base development, financial monitoring, information security Private equity, corporate finance

Deputy Chairman of the Management Board Deputy Chairman of the Management Board Financial market and capital market transactions, asset management, Compliance control project and structured finance

Member of the Management Board, First Vice President Member of the Management Board, First Vice President Assets and liabilities management, liquidity management, borrowings Security, cash collection

Member of the Management Board, First Vice President Member of the Management Board, First Vice President Strategic industrial assets Retail business, depository transactions

Member of the Management Board, First Vice President Member of the Management Board, First Vice President General services Regional network, including the Moscow Region network

First Vice President Member of the Management Board, First Vice President IT, Bank’s operational performance Legal protection of the Bank’s interests

Head of Bank’s Restructured Assets Management First Vice President Distressed corporate assets Risk management service

Internal Audit Service 78 Gazprombank ANNUAL REPORT 2016 INTERNAL CONTROL SYSTEM

To achieve strategic goals amidst an ever-changing competitive and regulatory environment, the Bank has built an effective system of internal controls.

THE BANK DOES ITS BEST he internal control system encom- °° business units and employees TO MAKE AN EFFECTIVE Tpasses all management levels of the Bank in charge of internal control INTERNAL CONTROL SYSTEM of the Bank, and all types of its business, by their authority as stated in the Bank’s ITS COMPETITIVE EDGE. including branches and units. internal regulations. Efficiency criteria of the Bank’s system of internal controls include uninterrupted The Internal Audit and Internal functioning of all its components and mini- Control Services are an integral part mization of all significant risks. The Bank of the internal control system. has put in place procedures of regular monitoring of the internal control system. Compliance control Internal controls at the Bank are designed One of the integral parts of the internal in a package, with the application of both control system is compliance control. regulatory requirements and gener- The core of the compliance risk manage- ally accepted international practices, ment system is the Compliance Control including the Three Lines of Defense Service (CCS). Model. That approach provides the Bank’s The CCS exercises compliance control management bodies with the required in the following areas: level of assurance that the internal control °° compliance with the applicable rules, system functions properly. regulations and standards by the Bank Setting up the system of effective internal and its personnel; controls and getting it to function °° monitoring of compliance risk levels; is a mission that falls within the authority °° prevention and detection of competing of the Bank’s Board of Directors. interests that may arise in the course The Bank’s internal control system includes: of the Bank’s activity; °° management bodies responsible °° compliance with the US Foreign for building the corporate control Account Tax Compliance Act (FATCA) culture in the Bank to emphasize by all entities of the Gazprombank and demonstrate the significance Group; of internal control and audit °° compliance with Russian legislation to personnel at all levels; concerning the securities market, °° the Revision Commission of the Bank; protection of rights and legitimate °° Chief Accountant (or Deputy Chief interests of investors in the securities Accountants) of the Bank; market, advertising laws and internal °° Branch Manager (Deputy Branch regulations of the Bank in this area; Managers) or Chief Accountant °° compliance with the laws (or Deputy Chief Accountants) on the prevention of illegal use of insider of a branch; information and market manipulation 79 Gazprombank ANNUAL REPORT 2016

Independent assessment of the Bank’s internal control system through internal auditing is important for ensuring its efficient operation.

by the Bank, its personnel and customers PARTAD self-regulated organization. The including the appointment of the head as well as compliance with Russian CCS also maintains active cooperation of the IAS. legislation and the Bank’s internal with the International Compliance Associ- The key principles of the IAS are independ- regulations concerning operations ation (UK). ence, unbiased judgement and profes- of Gazprombank’s Specialized sional competence. Depository; Internal audit The IAS inspects each of the Bank’s struc- °° development of unified approaches Independent assessment of the Bank’s tural units or each type of business trans- to internal control for all entities internal control system through internal action and operation at least once every of the Gazprombank Group. auditing is important for ensuring its effi- three years. In its work, the CCS interacts with the Audit cient operation. Expert assessment of the residual Committee of the Bank’s Board of Directors; The Bank set up a dedicated Internal risk is exercised in respect of all areas the committee evaluates the effectiveness Audit Service (IAS) that reports directly of the Bank’s activity, which is subject of compliance control procedures adopted to the Board of Directors (Audit Committee to the objectives and strategy of the Bank, by the Bank, proposes ways of their of the Board of Directors). changes in the level of inherent risk, improvement, and facilitates the deci- The Audit Committee of the Board changes in business processes, previous sion-making process in matters related of Directors ensures preliminary review inspection results, the opinion of the Bank’s to compliance risk management. of matters related to IAS activities, management regarding the current risk The CCS submits regular reports including analisys of IAS work plans levels, and other factors. to the Bank’s Board of Directors and performance reports. The IAS monitors the efficiency of meas- and the Management Board on its work The Board of Directors approves all ures taken by the Bank’s units and manage- and identified compliance risks. action plans for the auditing team ment bodies to mitigate the identified risks. CCS officers are members of the AML/ and monitors their fulfillment, reviews The scope of the IAS’s competence includes CFT and Compliance Risk Committee IAS performance reports, including independent monitoring of the internal of the Russian Banking Association internal control inspection and audit control system performance to assess whether and non-commercial partnership results, monitors the progress of the the existing system is effective and meets “National Financial Market Council” IAS-prescribed correction work to the Bank’s objectives, as well as to detect defi- (NFMC), as well as members of the Pooled eliminate all identified drawbacks, and ciencies and propose initiatives to improve Investment Control Committee of the addresses resource management issues, the Bank’s internal control system. 80 Gazprombank ANNUAL REPORT 2016 81 Gazprombank ANNUAL REPORT 2016 4 Summary HISTORY OF THE PRESENT consolidated YAMAL LNG, A NATURAL GAS financial LIQUEFACTION PLANT statements

derived from the audited

consolidated financial

statements for the year ended

31 December 2016 82 Gazprombank ANNUAL REPORT 2016 Independent Auditors’ Report on the Summary Consolidated Financial Statements

To the Shareholders and Board of Directors of "Gazprombank" (Joint-stock Company).

JSC “KPMG” Audited entity: Independent auditor: 10 Presnenskaya Naberezhnaya Moscow, Russia 123112 "Gazprombank" (Joint-stock Company). JSC “KPMG”, a company incorporated Telephone: +7 (495) 937 4477 Fax: +7 (495) 937 4400/99 Registration number in the Unified State under the Laws of the Russian Federation, Internet: www.kpmg.ru Register of Legal Entities 1027700167110. a member firm of the KPMG network Moscow, Russian Federation. of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. Registration number in the Unified State Register of Legal Entities 1027700125628. Member of the Self-regulated organisa- tion of auditors “Russian Union of auditors” (Association). The Principal Registration Number of the Entry in the Register of Auditors and Audit Organisations: No. 11603053203. 83 Gazprombank ANNUAL REPORT 2016

Opinion Summary Consolidated Management’s Responsibility The summary consolidated financial Financial Statements for the Summary Financial Statements statements, which comprise the summary The summary consolidated financial Management is responsible for the prepa- consolidated statement of financial statements do not contain all the disclo- ration of the summary consolidated position as at 31 December 2016, sures required by International Finan- financial statements in accordance with the summary consolidated statements cial Reporting Standards. Reading the basis described in Note 2. of profit or loss and other comprehensive the summary consolidated financial state- income, changes in equity and cash flows ments and our report thereon, therefore, Auditors’ Responsibility for the year then ended, and related notes, is not a substitute for reading the audited Our responsibility is to express an opinion are derived from the audited consoli- consolidated financial statements on whether the summary consolidated dated financial statements of "Gazprom- and our report thereon. financial statements are consistent, bank" (Joint-stock Company) (the Bank) in all material respects, with the audited and its subsidiaries (the Group) for the year The Audited Consolidated Financial consolidated financial statements based ended 31 December 2016. Statements and Our Report Thereon on our procedures, which were conducted In our opinion, the accompanying We expressed an unmodified audit opinion in accordance with International Standard summary consolidated financial state- on the audited consolidated financial state- on Auditing (ISA) 810 (Revised), “Engage- ments are consistent, in all material ments in our report dated 30 March 2017. ments to Report on Summary Financial respects, with the audited consolidated That report also includes the communica- Statements”. financial statements, in accordance with tion of key audit matters. Key audit matters the basis described in Note 2. are those matters that in our professional judgement, were of most significance in our audit of the consolidated financial statements for the current period.

Kolosov A. E. The engagement partner on the audit resulting in this independent auditors’ report

JSC “KPMG”

30 March 2017 Moscow, Russian Federation 84 Gazprombank ANNUAL REPORT 2016

GAZPROMBANK GROUP Summary Consolidated Statement of Profit or Loss and Other Сomprehensive Income for the Year Ended 31 December 2016

(in millions of Russian rubles unless otherwise stated)

2016 2015

Interest income 380,096 370,945 Interest expense (258,049) (274,886) Net interest income 122,047 96,059

Impairment of interest earning assets (2,044) (139,545) Net interest income (loss) after impairment of interest earning assets 120,003 (43,486)

Fees and commissions income 25,025 25,342 Fees and commissions expense (10,402) (9,430) Non-interest gain from financial assets and liabilities at fair value through profit or loss, net 14,029 16,527 Gain from investments available-for-sale 2,073 3,223 Income from accounting for investments in associates under the equity method 11,236 31,631 Gain from disposal of subsidiaries 10,010 – (Loss) gain from trading in foreign currencies, operations with foreign currency derivatives and (8,785) 6,901 foreign exchange translation, net Other operating income, net 6,048 398 Non-interest income 49,234 74,592

Non-banking operating revenues 213,948 201,120 Non-banking operating expenses (228,942) (195,793) Non-banking operating (losses) profits (14,994) 5,327

Banking salaries and employment benefits (38,452) (39,011) Banking administrative expenses (34,298) (34,539) Impairment of other assets and provisions for other risks (22,325) (13,488) Impairment of goodwill (5,758) (2,791) Non-interest expense (100,833) (89,829)

Profit (loss) before profit tax 53,410 (53,396)

Profit tax (expense) benefit (24,403) 5,673 Profit (loss) for the year 29,007 (47,723) 85 Gazprombank ANNUAL REPORT 2016

2016 2015

Other comprehensive income (loss), net of tax Items that are or may be reclassified to profit or loss in subsequent periods: Investments available-for-sale: net change in fair value 607 (1,721) net change in fair value transferred to profit or loss (128) 88 impairment transferred to profit or loss – 866 Net change in cash flow hedge reserve (103) (15) Foreign operations: exchange differences on translation (11,791) 23,100 exchange differences on translation transferred to profit or loss on disposal of subsidiaries (9,667) – Movements in other comprehensive income of associates 175 492 Total other comprehensive (loss) income, net of tax (20,907) 22,810

Total comprehensive income (loss) for the year 8,100 (24,913)

Profit (loss) for the year attributable to: Bank’s shareholders 31,151 (57,117) Non-controlling interests (2,144) 9,394 29,007 (47,723)

Total comprehensive income (loss) for the year attributable to: Bank’s shareholders 12,566 (40,354) Non-controlling interests (4,466) 15,441 8,100 (24,913)

The summary consolidated financial statements were derived from the consolidated financial statements of Gazprombank Group, which were approved for issue by the Management Board of "Gazprombank" (Joint-stock Company) and signed on its behalf on 30 March 2017.

The summary consolidated Signed on behalf of the Management Board: financial statements should be read in conjuction with the consolidated financial statements Andrey I. Akimov of the Gazprombank Group from which they were derived. Chairman of the Management Board

Famil K. Sadygov Deputy Chairman of the Management Board

30 March 2017 86 Gazprombank ANNUAL REPORT 2016

GAZPROMBANK GROUP Summary Consolidated Statement of Financial Position as at 31 December 2016

(in millions of Russian Rubles unless otherwise stated)

31 December 2016 31 December 2015

Assets Cash and cash equivalents 473,460 633,509 Obligatory reserve with the Central Bank of the Russian Federation 31,701 24,170 Due from credit institutions 65,298 51,167 Financial assets at fair value through profit or loss 207,831 255,980 of which pledged under repo agreements 3,257 3,141 Loans to customers 3,247,624 3,200,572 Investments available-for-sale 22,215 23,397 Investments in associates 75,312 113,527 Receivables and prepayments 96,608 111,206 Investments held-to-maturity 329,443 360,595 of which pledged under repo agreements – 417 Inventories 60,726 60,783 Profit tax assets 26,295 45,229 Property, plant and equipment 127,569 117,104 Intangibles 56,874 66,711 Goodwill 30,669 36,427 Other assets 27,620 21,781 Total assets 4,879,245 5,122,158 87 Gazprombank ANNUAL REPORT 2016

31 December 2016 31 December 2015

Liabilities Financial liabilities at fair value through profit or loss 27,377 25,278 Amounts owed to credit institutions 378,463 448,996 Amounts owed to customers 3,330,819 3,281,673 Bonds issued 317,335 443,621 Profit tax liabilities 8,104 10,163 Subordinated debts 182,784 207,697 Other liabilities 139,843 174,319 Total liabilities 4,384,725 4,591,747

Equity Share capital 202,072 202,072 Additional paid-in capital 110,738 110,684 Treasury shares (9,695) (9,641) Perpetual debt issued 60,656 72,882 Foreign currency translation reserve 7,284 26,420 Fair value reserve for securities available-for-sale and cash flow hedge reserve 505 129 Retained earnings 128,360 107,288 Equity attributable to the Bank’s shareholders 499,920 509,834

Non-controlling interests (5,400) 20,577 Total equity 494,520 530,411

Total liabilities and equity 4,879,245 5,122,158

The summary consolidated Signed on behalf of the Management Board: financial statements should be read in conjuction with the consolidated financial statements Andrey I. Akimov of the Gazprombank Group from which they were derived. Chairman of the Management Board

Famil K. Sadygov Deputy Chairman of the Management Board

30 March 2017 88 Gazprombank ANNUAL REPORT 2016

GAZPROMBANK GROUP Summary Consolidated Statement of Changes in Equity for the Year Ended 31 December 2016

(in millions of Russian Rubles unless otherwise stated)

Share capital Additional Treasury shares Perpetual Foreign currency Fair value reserve Retained Equity Non-controlling Total equity paid-in capital debt issued translation for securities availa- earnings attributable interests reserve ble-for-sale and cash to Bank’s flow shareholders hedge reserve

31 December 2014 76,324 110,063 (9,020) 56,258 9,367 0911 181,105 425,008 13,975 438,983

(Loss) profit for the year – – – – – – (57,117) (57,117) 9,394 (47,723) Items that are or may be reclassified to profit or loss in subsequent periods: Investments available-for-sale: net change in fair value – – – – – (1,721) – (1,721) – (1,721) net change in fair value transferred to profit or loss – – – – – 88 – 88 – 88 impairment transferred to profit or loss – – – – – 866 – 866 – 866 Net change in cash flow hedge reserve – – – – – (15) – (15) – (15) Foreign operations: exchange differences on translation – – – – 17,053 – – 17,053 6,047 23,100 Movements in other comprehensive income of associates – – – – – – 492 492 – 492 Total items that are or may be reclassified to profit or loss in subsequent periods – – – – 17,053 (782) 492 16,763 6,047 22,810 Total comprehensive income (loss) for the year – – – – 17,053 (782) (56,625) (40,354) 15,441 (24,913)

Preference shares issued 125,748 – – – – – – 125,748 – 125,748 Accruals for perpetual debt issued – – – – – – (4,606) (4,606) – (4,606) Foreign exchange translation of perpetual debt issued – – – 16,624 – – (16,624) – – – Tax effect on perpetual debt issued – – – – – – 4,246 4,246 – 4,246 Acquisition and disposal of non-controlling interests in subsidiaries – – – – – – (654) (654) 232 (422) Acquisition of subsidiaries – – – – – – – – 1,147 1,147 Dividends declared – – – – – – (13) (13) (10,212) (10,225) Acquisition and sale of treasury shares – 621 (621) – – – – – – – Other movements – – – – – – 459 459 (6) 453 31 December 2015 202,072 110,684 (9,641) 72,882 26,420 0129 107,288 509,834 20,577 530,411 89 Gazprombank ANNUAL REPORT 2016

Share capital Additional Treasury shares Perpetual Foreign currency Fair value reserve Retained Equity Non-controlling Total equity paid-in capital debt issued translation for securities availa- earnings attributable interests reserve ble-for-sale and cash to Bank’s flow shareholders hedge reserve

31 December 2014 76,324 110,063 (9,020) 56,258 9,367 0911 181,105 425,008 13,975 438,983

(Loss) profit for the year – – – – – – (57,117) (57,117) 9,394 (47,723) Items that are or may be reclassified to profit or loss in subsequent periods: Investments available-for-sale: net change in fair value – – – – – (1,721) – (1,721) – (1,721) net change in fair value transferred to profit or loss – – – – – 88 – 88 – 88 impairment transferred to profit or loss – – – – – 866 – 866 – 866 Net change in cash flow hedge reserve – – – – – (15) – (15) – (15) Foreign operations: exchange differences on translation – – – – 17,053 – – 17,053 6,047 23,100 Movements in other comprehensive income of associates – – – – – – 492 492 – 492 Total items that are or may be reclassified to profit or loss in subsequent periods – – – – 17,053 (782) 492 16,763 6,047 22,810 Total comprehensive income (loss) for the year – – – – 17,053 (782) (56,625) (40,354) 15,441 (24,913)

Preference shares issued 125,748 – – – – – – 125,748 – 125,748 Accruals for perpetual debt issued – – – – – – (4,606) (4,606) – (4,606) Foreign exchange translation of perpetual debt issued – – – 16,624 – – (16,624) – – – Tax effect on perpetual debt issued – – – – – – 4,246 4,246 – 4,246 Acquisition and disposal of non-controlling interests in subsidiaries – – – – – – (654) (654) 232 (422) Acquisition of subsidiaries – – – – – – – – 1,147 1,147 Dividends declared – – – – – – (13) (13) (10,212) (10,225) Acquisition and sale of treasury shares – 621 (621) – – – – – – – Other movements – – – – – – 459 459 (6) 453 31 December 2015 202,072 110,684 (9,641) 72,882 26,420 0129 107,288 509,834 20,577 530,411

The summary consolidated financial statements should be read in conjuction with the consolidated financial statements of the Gazprombank Group from which they were derived. 90 Gazprombank ANNUAL REPORT 2016

GAZPROMBANK GROUP Summary Consolidated Statement of Changes in Equity for the Year Ended 31 December 2016

(in millions of Russian Rubles unless otherwise stated)

Share capital Additional Treasury shares Perpetual Foreign currency Fair value reserve Retained Equity Non-controlling Total equity paid-in capital debt issued translation for securities availa- earnings attributable interests reserve ble-for-sale and cash to Bank’s flow shareholders hedge reserve

31 December 2015 202,072 110,684 (9,641) 72,882 26,420 0129 107,288 509,834 20,577 530,411

Profit (loss) for the year – – – – – – 31,151 31,151 (2,144) 29,007 Items that are or may be reclassified to profit or loss in subsequent periods: Investments available-for-sale: net change in fair value – – – – – 607 – 607 – 607 net change in fair value transferred to profit or loss – – – – – (128) – (128) – (128) Net change in cash flow hedge reserve – – – – – (103) – (103) – (103) Foreign operations: exchange differences on translation – – – – (9,469) – – (9,469) (2,322) (11,791) exchange differences on translation transferred to profit or loss on disposal – – – – (9,667) – – (9,667) – (9,667) of subsidiaries Movements in other comprehensive income of associates – – – – – – 175 175 – 175 Total items that are or may be reclassified to profit or loss in subsequent periods – – – – (19,136) 376 175 (18,585) (2,322) (20,907) Total comprehensive (loss) income for the year – – – – (19,136) 0376 31,326 12,566 (4,466) 8,100

Accruals for perpetual debt issued – – – – – – (5,326) (5,326) – (5,326) Foreign exchange translation of perpetual debt issued – – – (12,226) – – 12,226 – – – Tax effect on perpetual debt issued – – – – – – (1,380) (1,380) – (1,380) Acquisition and disposal of non-controlling interests in subsidiaries – – – – – – 256 256 (870) (614) Disposal of subsidiaries – – – – – – – – (18,616) (18,616) Dividends declared – – – – – – (16,846) (16,846) (1,038) (17,884) Acquisition and sale of treasury shares – 54 (54) – – – – – – – Other movements – – – – – – 816 816 (987) (171) 31 December 2016 202,072 110,738 (9,695) 60,656 7,284 0505 128,360 499,920 (5,400) 494,520 91 Gazprombank ANNUAL REPORT 2016

Share capital Additional Treasury shares Perpetual Foreign currency Fair value reserve Retained Equity Non-controlling Total equity paid-in capital debt issued translation for securities availa- earnings attributable interests reserve ble-for-sale and cash to Bank’s flow shareholders hedge reserve

31 December 2015 202,072 110,684 (9,641) 72,882 26,420 0129 107,288 509,834 20,577 530,411

Profit (loss) for the year – – – – – – 31,151 31,151 (2,144) 29,007 Items that are or may be reclassified to profit or loss in subsequent periods: Investments available-for-sale: net change in fair value – – – – – 607 – 607 – 607 net change in fair value transferred to profit or loss – – – – – (128) – (128) – (128) Net change in cash flow hedge reserve – – – – – (103) – (103) – (103) Foreign operations: exchange differences on translation – – – – (9,469) – – (9,469) (2,322) (11,791) exchange differences on translation transferred to profit or loss on disposal – – – – (9,667) – – (9,667) – (9,667) of subsidiaries Movements in other comprehensive income of associates – – – – – – 175 175 – 175 Total items that are or may be reclassified to profit or loss in subsequent periods – – – – (19,136) 376 175 (18,585) (2,322) (20,907) Total comprehensive (loss) income for the year – – – – (19,136) 0376 31,326 12,566 (4,466) 8,100

Accruals for perpetual debt issued – – – – – – (5,326) (5,326) – (5,326) Foreign exchange translation of perpetual debt issued – – – (12,226) – – 12,226 – – – Tax effect on perpetual debt issued – – – – – – (1,380) (1,380) – (1,380) Acquisition and disposal of non-controlling interests in subsidiaries – – – – – – 256 256 (870) (614) Disposal of subsidiaries – – – – – – – – (18,616) (18,616) Dividends declared – – – – – – (16,846) (16,846) (1,038) (17,884) Acquisition and sale of treasury shares – 54 (54) – – – – – – – Other movements – – – – – – 816 816 (987) (171) 31 December 2016 202,072 110,738 (9,695) 60,656 7,284 0505 128,360 499,920 (5,400) 494,520

The summary consolidated Signed on behalf of the Management Board: financial statements should be read in conjuction with the consolidated financial statements Andrey I. Akimov of the Gazprombank Group from which they were derived. Chairman of the Management Board

Famil K. Sadygov Deputy Chairman of the Management Board

30 March 2017 92 Gazprombank ANNUAL REPORT 2016

GAZPROMBANK GROUP Summary Consolidated Statement of Cash Flows for the Year Ended 31 December 2016

(in millions of Russian Rubles unless otherwise stated)

2016 2015

Cash flows from operating activities Interest received 362,142 338,245 Fees and commissions received 24,947 24,955 Interest paid (281,270) (239,770) Fees and commissions paid (10,256) (9,318) Non-interest receipts (payments) from financial assets and liabilities at fair value through profit or loss 6,246 (1,231) (Payments) receipts from derivative contracts with foreign currency (28,857) 24,212 and from foreign exchange operations Media business operating receipts 76,066 73,320 Media business operating payments (46,137) (38,496) Machinery business operating receipts 55,455 54,814 Machinery business operating payments (53,963) (51,338) Other segment operating receipts 76,292 72,985 Other segment operating payments (69,760) (68,519) Other operating receipts (payments) 8,544 (477) Banking salaries and employment benefit payments (36,794) (34,531) Banking administrative expenses and other operating payments (24,879) (28,333) Cash flows from operating activities before changes in operating assets and liabilities 57,776 116,518

(Increase) decrease in operating assets Obligatory reserve with the Central Bank of the Russian Federation (7,531) 8,421 Due from credit institutions (18,935) (35,471) Financial assets at fair value through profit or loss 46,779 (12,171) Loans to customers (308,489) 54,845 Other operating assets (21,435) (4,638) Increase (decrease) in operating liabilities Amounts owed to credit institutions 25,892 (206,512) Amounts owed to customers 350,843 48,812 Other operating liabilities 3,283 (27,526) Net cash flows from (used in) operating activities before profit tax 128,183 (57,722)

Profit tax paid (8,665) (5,175) Net cash flows from (used in) operating activities 119,518 (62,897) 93 Gazprombank ANNUAL REPORT 2016

2016 2015

Cash flows from investing activities Property, equipment and intangibles purchased (65,301) (70,577) Property, equipment and intangibles sold 7,660 10,435 Acquisition of subsidiaries, net of cash acquired – (2,422) Disposal of subsidiaries, net of cash disposed 6,934 – Investments available-for-sale purchased (13,211) (5,707) Investments available-for-sale sold 6,997 1,276 Investments in associates purchased (39,357) (34,498) Investments in associates sold 1,440 815 Dividends received from associates 5,919 22,539 Investments held-to-maturity redeemed and purchased 10,774 (26,109) Dividends received 883 852 Net cash flows used in investing activities (77,262) (103,396)

Cash flows from financing activities Treasury shares sold and acquired (54) (621) Bonds issued and sold from earlier repurchased 35,270 5,000 Bonds redeemed or repurchased (100,689) (171,411) Coupon on perpetual debt paid (5,019) (4,504) Syndicated loans redeemed (27,258) (4,332) Subordinated debts received – 38,434 Subordinated debts repaid (1,511) (50) Acquisition of non-controlling interests in subsidiaries (603) (422) Financing of non-banking activities received 1,406 5,913 Financing of non-banking activities redeemed (9,872) (9,200) Dividends paid (17,884) (1,162) Net cash flows used in financing activities (126,214) (142,355)

Effect of change in exchange rates on cash and cash equivalents (76,091) 111,812 Change in cash and cash equivalents (160,049) (196,836)

Cash and cash equivalents, beginning of the year 633,509 830,345

Cash and cash equivalents, end of the year 473,460 633,509

The summary consolidated Signed on behalf of the Management Board: financial statements should be read in conjuction with the consolidated financial statements Andrey I. Akimov of the Gazprombank Group from which they were derived. Chairman of the Management Board

Famil K. Sadygov Deputy Chairman of the Management Board

30 March 2017 94 Gazprombank ANNUAL REPORT 2016 GAZPROMBANK GROUP Notes to the Summary Consolidated Financial Statements for the Year Ended 31 December 2016

Note 1. others, PJSC Gazprom and its related Principal activities and organisation parties (the Gazprom Group). The prin- The Gazprombank Group (the Group) cipal corporate banking services include: primarily consists of: commercial lending, project and acquisi- °° "Gazprombank" (Joint-stock Company), tion finance, trade finance, financial and which is the parent company, operating leasing, deposit taking, settle- °° subsidiary banks, including ments and cash management, capital GPB-Mortgage JSC, Credit Ural Bank markets transactions, asset management, JSC, Gazprombank (Switzerland) brokerage, corporate finance and mergers Ltd., and Bank GPB International S.A., and acquisitions advisory, and depositary and a number of smaller financial and custodian services. The Bank is also companies, that support the banking involved in private equity transactions, business, foreign exchange and securities trading, °° several significant non-banking and operations with precious metals. companies. The Bank provides a range of services "Gazprombank" (Joint-stock Company) to private individuals, including employees (the Bank) was established in 1990. of its corporate clients, high net worth The Bank has a general banking license individuals and the general public. Retail and a license for operations with precious services include: lending, deposit taking, metals from the Central Bank of the Russian debit and credit card services, brokerage, Federation (the CBR), and licenses for secu- asset management and a range of other rities operations and custody services services. from the Federal Financial Markets Service The Bank has controlling stakes in several of Russia, which in 2013 became a part non-banking investments, which of the CBR. Its subsidiary banks and compa- are consolidated in these financial state- nies also have general banking licenses for ments and are presented as separate operations in Switzerland and Luxembourg segments, including: and investment, brokerage and asset °° JSC Gazprom-Media Holding management licenses for operations and its subsidiaries (the Media in Cyprus, Luxembourg and Hong Kong. segment) is a Russian media group The Bank is the third largest bank of companies, the principal activities in the Russian Federation in terms of assets of which are TV and radio broadcasting, and equity, and it provides a broad advertising, publishing, film production range of commercial and investment and distribution primarily undertaken banking services to many of Russia's in the Russian Federation. leading corporations, including, among 95 Gazprombank ANNUAL REPORT 2016

°° OMZ and its subsidiaries Note 2. a significant risk of causing a material (the OMZ Group) and a number Basis of presentation adjustment to the carrying amounts of other industrial assets (together — of assets and liabilities within the next the Machinery segment). OMZ Group a) General financial year, include: produces nuclear power plant These summary consolidated financial °° estimation of allowance for impairment equipment, specialty steels, machinery statements, which comprise the summary losses for financial assets measured equipment, manufacturing and mining consolidated statement of financial posi- at amortised cost. These include mainly equipment. The OMZ Group tion as at 31 December 2016, the summary loans to customers, amounts due from manufacturing facilities are based consolidated statements of profit or loss credit institutions, receivables and other in the Russian Federation and the Czech and other comprehensive income, assets. The estimation of allowance Republic. changes in equity and cash flows for 2016, for impairment losses involves The legal address of the Bank is: Bld.1, 16, and related notes are derived from the exercise of judgement and is based Nametkina St., Moscow, 117420, Russian the audited consolidated financial state- on internal credit risk rating systems Federation. ments of the Group, except that substan- and statistical data. The consolidated financial statements tially all note disclosures are omitted. °° valuation of complex and illiquid for the year ended 31 December The consolidated financial statements financial instruments. This involves 2016 are published at Bank's website are prepared in accordance with Interna- the exercise of judgement www.gazprombank.ru. tional Financial Reporting Standards (IFRS). and use of valuation models. As at 31 December 2016, PJSC Gazprom Management is responsible for the prepa- In the absence of an active market owns 35.54% of the outstanding ordinary ration of the consolidated financial state- management has to make assumptions shares of the Group. A substantial portion ments in accordance with IFRS. in respect of appropriate inputs used of the Group’s funding is from the Gazprom The preparation of consolidated finan- in valuation models, some of which may Group. As such the Group is economically cial statements in accordance with IFRS not be based on observable market data. dependent on the Gazprom Group. requires management to make judge- °° estimation of fair values of identifiable These summary consolidated financial ments and key estimates and assump- assets and liabilities acquired statements were authorised for issue tions that affect the reported amounts in business combinations. This involves by the Management Board of the Bank of assets and liabilities and disclosures the exercise of judgement and use on 30 March 2017. of contingent assets and liabilities of valuation models, which among at the date of the financial information others include assumptions about future and the reported amounts of revenues business performance and cash flows and expenses during the reporting periods. and appropriate discount rates. Actual results could differ from those esti- °° estimation of impairment losses mates. Key areas of judgements and key for non-financial assets (including assumptions concerning the future goodwill). This involves the exercise and other key sources of estimation uncer- of judgement and use of valuation tainty at the reporting date, that have models, which among others include 96 Gazprombank ANNUAL REPORT 2016

assumptions about future business b) Russian economic environment agencies Russia's credit rating was down- performance, estimation of cash flows The Group’s operations are primarily graded to below investment grade. from assets assessed for impairment located in the Russian Federation. These summary consolidated finan- and estimation of appropriate discount The Russian Federation displays certain cial statements reflect management’s rates. characteristics of an emerging markets. assessment of the impact of the Russian °° assessment of whether the Group The legal, tax and regulatory frameworks business environment on the operations has control or significant influence continue to develop and are subject and the financial position of the Group. for investments where control to frequent changes and varying inter- The future business environment may differ or significant influence is determined pretations. Management of the Group from management’s assessment. by contractual arrangements or other believes that it is taking all necessary The Group is not exposed to significant factors other than voting rights held efforts to support the economic stability seasonal or cyclical variations in operating by the Group. of the Group in the current environment. income during the financial year. °° recognition of deferred tax assets. In 2014, the United States OFAC This involves the exercise of judgement and the European Council implemented about future taxable profits available coordinated sectoral sanctions against to utilise tax losses carryforward. some of the Russian banks and corpo- rations, including the Bank, and some of the Russian officials and businessmen. The sanctions prohibit the U.S. and EU citi- zens or entities operating on the territory of the U.S. and EU transacting in, providing financing for, or otherwise dealing in the debt instruments of the Group with a maturity of longer than 30 days issued after the date of the sanctions announce- ment. During 2016, the Russian economy was negatively affected by low oil prices, ongoing political tension in the region and continuing international sanctions, all of which contributed to the country's economic recession resulted in a decline in gross domestic product. The finan- cial markets continue to be volatile and are characterised by frequent significant price movements and increased trading spreads. According to some rating 97 Gazprombank ANNUAL REPORT 2016

c) Basis of measurement d) Functional and presentation currency e) Changes in accounting policies These summary consolidated financial The functional currency of the Bank Except for the adoption of new stand- statements are prepared on the historical and the majority of its subsidiaries ards and interpretations as at 1 January cost basis except for financial instruments is the Russian ruble (the RUB) as, being 2016, the accounting policies are applied at fair value through profit or loss and avail- the national currency of the Russian consistently to all periods presented able-for-sale financial assets are stated Federation, it reflects the economic condi- in the summary consolidated finan- at fair value. tions of the majority of underlying events cial statements. Accounting policies and circumstances relevant to them. are applied consistently by the Group Some of the Group's principal subsidiaries entities. have functional currency different from the Russian ruble:

Name Functional currency Gazprombank (Switzerland) Ltd. Swiss franc Bank GPB International S.A. Euro ŠKODA JS a.s. Czech crown Centrex Europe Energy & Gas AG Euro

The summary consolidated Signed on behalf of the Management Board: financial statements should be read in conjuction with the consolidated financial statements Andrey I. Akimov of the Gazprombank Group from which they were derived. Chairman of the Management Board

Famil K. Sadygov Deputy Chairman of the Management Board

30 March 2017 98 Gazprombank ANNUAL REPORT 2016 99 Gazprombank ANNUAL REPORT 2016 5 REFERENCE HISTORY OF THE PRESENT INFORMATION STANDALONE HYBRID POWER PLANT IN THE ALTAY TERRITORY evel Group H evel P hoto: 100 Gazprombank ANNUAL REPORT 2016 BRANCHES OF BANK GPB ( JSC)

As of 1 July 2017.

Branch name Number and date Head of the branch Address, (short name) of registration (title, name) phone number

Bank GPB (JSC) Branch 354/42 Branch Manager 5a Uborevicha St., Vladivostok, in Vladivostok 19.03.2009 Dmitry V. Gutnikov Primorsky Territory, 690091 (423) 265-08-35 Bank GPB (JSC) Branch 354/49 Vice President, Branch Manager 11 Kirova St., Voronezh, in Voronezh 26.06.2013 Gennady N. Koptyaev Voronezh Region, 394018 (473) 200-81-55 Bank GPB (JSC) Branch 354/26 First Vice President 134v Lunacharskogo St., in Yekaterinburg 24.01.2000 Yan V. Tsenter Yekaterinburg, 620075 (343) 355-58-00 Bank GPB (JSC) Branch 354/47 Vice President, Branch Manager 32 Levo-Bulachnaya St., Kazan, in Kazan 09.02.2010 Marat F. Mukhametshin Republic of Tatarstan, 420111 (843) 221-73-01 Bank GPB (JSC) Branch 354/38 Branch Manager 5 Leninsky Prospect, Kaliningrad, in Kaliningrad 02.08.2007 Olga V. Bolshakova Kaliningrad Region, 236039 (4012) 30-52-00 Bank GPB (JSC) Branch 354/36 Branch Manager Office 7, 32 Sovetskiy Prospect, Kemerovo, in Kemerovo 27.02.2007 Pavel Yu. Scherbakov Kemerovo Region, 650000 (3842) 34-50-90 Bank GPB (JSC) Branch 354/2 Branch Manager 11 Dmitrievskaya Damba St., Krasnodar, in Krasnodar 03.11.1992 Aleksey Yu. Pavin Krasnodar Territory, 350033 (861) 210-48-00 Bank GPB (JSC) Branch 354/34 Branch Manager 87b Akademika Kirenskogo St., Krasnoyarsk, in Krasnoyarsk 25.01.2006 Pavel G. Avdeev Krasnoyarsk Territory, 660041 (391) 274-58-00 Bank GPB (JSC) Branch 354/4 Vice President, Branch Manager 65b, Maxima Gorkogo St., in Nizhny Novgorod 04.02.1993 Evgeny A. Kogan Nizhny Novgorod, 603000 (831) 422-18-11 Bank GPB (JSC) Branch 354/29 Vice President, Branch Manager 2 Kavaleriyskaya St., in Novosibirsk 05.02.2001 Namzhil N. Urbanaev Novosibirsk, 630105 (383) 200-10-00 Bank GPB (JSC) Branch 354/6 Branch Manager 4 26 Syezda KPSS St., Novy Urengoy, in Novy Urengoy 04.02.1993 Andrey S. Bykov Tyumen Region, 629300 (3494) 93-53-81 Bank GPB (JSC) Branch 354/32 Vice President, Branch Manager 77a Maksima Gorkogo St., Sverdlovsky District, in Perm 09.10.2002 Aleksandr N. Zarubey Perm, Perm Territory, 614007 (342) 219-00-50 101 Gazprombank ANNUAL REPORT 2016

Branch name Number and date Head of the branch Address, (short name) of registration (title, name) phone number

Bank GPB (JSC) Branch 354/37 Branch Manager 106a, bld. 1, Novo-Sadovaya St., Oktyabrsky in Samara 09.03.2007 Vladimir V. Agafonov District, Samara, Samara Region, 443068 (846) 339-69-45 Bank GPB (JSC) Branch 354/13 Executive Vice President, Branch Manager 3A Proletarskoy Diktaturi St., in St. Petersburg 13.12.1993 Olga V. Dragomiretskaya St. Petersburg, 191124 (812) 301-99-99 Bank GPB (JSC) Branch 354/24 Branch Manager 429b Lenina St., Stavropol, in Stavropol 26.12.1997 Aleksandr G. Kuritsyn Stavropol Territory, 355029 (8652) 56-67-83 Bank GPB (JSC) Branch 354/48 Branch Manager 12 Svobody Blvd., Surgut, in Surgut 14.07.2010 Oleg F. Myzgin Khanty-Mansijsk Autonomous Area — Yugra, Tyumen Region, 628417 (3462) 24-49-80 Bank GPB (JSC) Branch 354/12 Branch Manager 7 1905 Goda Lane, Tomsk, in Tomsk 19.10.1993 Dmitry N. Litvinenko Tomsk Region, 634009 (3822) 61-00-63 Bank GPB (JSC) Branch 354/3 Branch Manager 106 Lenina Prospect, Tula, 300026 in Tula 04.02.1993 Natalya A. Antonova (4872) 50-05-55 Bank GPB (JSC) Branch 354/25 Branch Manager 138 Mendeleeva St., Ufa, in Ufa 03.02.1999 Roza N. Urazgildeeva Republic of Bashkortostan, 450022 (347) 256-67-80 Bank GPB (JSC) Branch 354/28 Branch Manager 1–1a Proletarsky Prospect, Shchelkovo, Central Branch, 23.06.2000 Evgeny A. Guzeev Moscow Region, 141100 Moscow Region (496) 255-65-55 102 Gazprombank ANNUAL REPORT 2016 REPRESENTATIVE OFFICES OF BANK GPB ( JSC) IN OTHER COUNTRIES

As of 1 April 2017.

GAZPROMBANK PAYS CLOSE The key objectives of the Bank’s foreign °° assisting in the promotion ATTENTION TO BUSINESS representative offices include: of Gazprombank brand and products DEVELOPMENT ABROAD. °° representing the GPB (JSC) and in financial markets; CURRENTLY, REPRESENTATIVE expanding the scope of its business °° supporting business development OFFICES OF BANK GPB (JSC) operations in the local banking markets; and implementing specific projects ARE OPERATING IN BEIJING, °° maintaining relationships with the local of the Bank's strategic customers ULAANBAATAR, NEW DELHI governmental authorities and credit and partners. AND ASTANA. institutions;

Offices Date Head of the office Location of opening

Representative 30.08.2006 Acting Head Central International trade Center, Suite No. 1205 in Tower Office of "Gazprombank" of the Representative Office, C, No 6A Jianguomenwai Avenue, Chaoyang District, Beijing, (Joint-stock Company) Averkiy M. Savostianov China, 100022 in Beijing (China) (+8610) 65-63-05-16 Representative 14.02.2008 Valery A. Kislov 6 Prospect Mira, Ulaanbaatar, Mongolia, 14250 Office of "Gazprombank" (+976) 99-10-99-02 (Joint-stock Company) in Ulaanbaatar (Mongolia) Representative 25.05.2010 Sergey F. Mitreykin 10/48 Malcha Marg, Diplomatic Enclave, Chanakyapuri, Office of "Gazprombank" New Delhi — 110021, Delhi, INDIA (Joint-stock Company) (+9111) 24-10-86-48 in New Delhi (India) Representative 30.09.2014 Askar S. Aspandiyarov 6th floor, Business Center «Q», block A, building 15 A, Kabanbay Office of "Gazprombank" Batyra avenue, «Esil» district, Astana, 010000, The Republic (Joint-stock Company) of Kazakhstan in the Republic of Kazakhstan (+7701) 514 04 40 103 Gazprombank ANNUAL REPORT 2016 SUBSIDIARY AND AFFILIATED BANKS WITH AN OWNERSHIP OF MORE THAN 5%

As of 1 March 2017.

GAZPROMBANK HAS GPB Group banks S.A. (the Grand Duchy of Luxembourg), INTERESTS IN A NUMBER In 2016, the regional network of Bank and two affiliated banks, i. e., Belgaz- OF CREDIT INSTITUTIONS GPB (JSC) included five subsidiary banks, prombank OJSC (the Republic of Belarus) IN RUSSIA, CIS AND WESTERN namely AREXIMBANK — GAZPROM- and Russian-Venezuelan joint-stock EUROPE. BANK GROUP CJSC (the Republic of commercial bank EVROFINANCE MOSNAR- Armenia), Bank GPB-Mortgage (Joint-stock BANK (Joint- stock Company). Company), Credit Ural Bank (Joint-stock Company, CUB JSC), Gazprombank (Switzerland) Ltd., GPB International

Name of the bank CEO Contacts

Belgazprombank OJSC Chairman of the Management Board 60/2 Pritytskogo St., Minsk, Viktor D. Babariko the Republic of Belarus, 220121 Phone: +375 17 229-16-16 Fax: +375 17 369-45-25 E-mail: [email protected] CUB JSC Chairperson of the Management Board 17 Gagarina St., Magnitogorsk, Svetlana V. Yeremina Chelyabinsk Region, Russia, 455044 Phone: +7 (3519) 248-910 Fax: +7 (3519) 248-930 E-mail: [email protected] GPB-Mortgage JSC Chairman of the Liquidation Commission 14 Kolomensky Proezd, Moscow, Russia, 115446 Maxim L. Korotkin Phone: +7 (495) 223-40-40, Fax: +7 (495) 223-40-41 E-mail: [email protected] Gazprombank (Switzerland) Ltd. Chairman of the Management Board Zollikerstrasse 183, CH — 8032 Zurich Switzerland Roman R. Abdulin +41-44-386-86-86 E-mail: [email protected] Bank GPB International S.A. CEO 15 rue Bender, L-1229, Luxembourg Dmitry N. Derkach +352-26-29-751 CEO E-mail: [email protected] Thomas Kiefer EVROFINANCE MOSNARBANK JSC CEO and Chairman 29 Novy Arbat St., Moscow, Russia, 121099 of the Management Board Phone: +7 (495) 967-81-82, Fax: +7 (495) 967-81-33 Valeria B. Adamova E-mail: [email protected] 104 Gazprombank ANNUAL REPORT 2016

Credit Ural Bank (Joint-stock Company) Gazprombank (Switzerland) Ltd. assists Bank GPB-Mortgage (Joint-stock is a technically advanced universal credit in the expansion of Gazprombank’s Company) was a specialized mort- institution. It can boast of many years presence in global financial markets, gage bank. Within the framework of business experience and provides a full and provides financial and banking of a program to optimize Gazprombank range of banking services in Magnitogorsk. support to the commercial and investment Group’s mortgage business, which was The reliability and impeccable reputation business of Bank GPB’s customers. In 2016, approved by the bank’s Board of Directors, of Credit Ural Bank are confirmed by high the bank started to develop new banking all working assets of Bank GPB-Mortgage ratings from the world’s top rating agen- products for Commodity Trade Finance. (JSC) were moved to the balance sheet cies. Thus, Expert RA affirmed the bank’s of Bank GPB (JSC) in the course of last year, rating at A+ (Very high level of creditwor- Bank GPB International S.A. commenced and in December 2016, actions aimed thiness) with stable outlook. its operations in the Grand Duchy at its voluntary winding-up were initiated. In 2016, Credit Ural Bank was awarded of Luxembourg in January 2014. The bank’s Southern Urals Consumer Confidence Mark focus is to provide services to corporate AREXIMBANK — GAZPROMBANK GROUP (Magnitogorsk). customers and individuals and develop CJSC was a universal financial institu- financial and investment banking services tion that ensures the presence of Bank Belgazprombank OJSC is a universal bank of the Gazprombank Group in the EU coun- GPB (JSC) in the Republic of Armenia. In with a focus on providing banking services tries and in global financial markets. October 2016, 100% of the bank’s shares to the subsidiaries of Gazprom, energy In accordance with an approved devel- were sold to a third-party investor that sector enterprises and small- and medi- opment strategy, the bank’s authorized owns a large banking business in Armenia. um-sized businesses in the Republic capital was increased by EUR 50 million of Belarus. to EUR 130 million in March 2016. Over the two years of existence of Belarus The bank successfully performs functions Development Bank’s program to provide of a platform offering structured products funding to small and medium-sized to customers of the GPB Group private businesses, in which 12 national banks banking business. Additionally, the bank are taking part, Belgazprombank, carried out its first deals in Commodity for a second time in 2016, became Trade Finance for corporate customers. an absolute leader in terms of the number of completed projects and funding volumes. At the Sixth Entrepreneurship Forum, the bank was bestowed the highest award of the Development Bank — Best Bank-Partner in Support Provided to Small and Medium-Sized Businesses. 105 Gazprombank ANNUAL REPORT 2016 LICENSES

License type (licensed activities): General License type (licensed activities): Profes- License type (licensed activities): License Banking License. sional securities market player license for banking operations (with precious metals). License (permit) or activity-specific permit- for dealer activities. License (permit) or activity-specific permit- ting document number: 354. License (permit) or activity-specific permit- ting document number: 354. License (authorization, permit) date ting document number: 177-04280-010000. License (authorization, permit) date of issue: 29.12.2014. License (authorization, permit) date of issue: 29.12.2014. Issuing authority: The Bank of Russia. of issue: 27.12.2000. Issuing authority: The Bank of Russia. Validity: Without limitation. Issuing authority: Federal Securities Validity: Without limitation. Commission of Russia (The Bank of Russia). License type (licensed activities): Profes- Validity: Without limitation. License type (licensed activities): General sional securities market player license license/export (other raw silver in bars for securities management activities. License type (licensed activities): Profes- with a purity value of no less than 999 parts License (permit) or activity-specific permit- sional securities market player license of silver per 1000 parts of alloy). ting document number: 177-04329-001000. for brokerage activities. License (permit) or activity-spe- License (authorization, permit) date License (permit) or activity-specific permit- cific permitting document number: of issue: 27.12.2000. ting document number: 177-04229-100000. 092RU16002001458. Issuing authority: Federal Securities License (authorization, permit) date License (authorization, permit) date Commission of Russia (The Bank of Russia). of issue: 27.12.2000. of issue: 15.12.2016. Validity: Without limitation. Issuing authority: Federal Securities Issuing authority: Ministry of Industry Commission of Russia (The Bank of Russia). and Trade of the Russian Federation. License type (licensed activities): Activity Validity: Without limitation. Validity: From 15.12.2016 to 06.12.2017. of specialized depositories, investment funds, mutual investment funds and private License type (licensed activities): Profes- License type (licensed activities): License pension funds. sional securities market player license authorizing the use of information consti- License (permit) or activity-specific permit- for depository activities. tuting state secrets. ting document number: 22-000-0-00021. License (permit) or activity-specific permit- License (permit) or activity-specific permit- License (authorization, permit) date ting document number: 177-04464-000100. ting document number: 5105. of issue: 13.12.2000. License (authorization, permit) date License (authorization, permit) date Issuing authority: Federal Securities of issue: 10.01.2001. of issue: 19.02.2015. Commission of Russia (The Bank of Russia). Issuing authority: Federal Securities Issuing authority: Center for Licensing, Validity: Without limitation. Commission of Russia (The Bank of Russia). Certifying and Protecting State Secrets Validity: Without limitation. of the Federal Security Service of Russia. Validity: 05.12.2017. 106 Gazprombank ANNUAL REPORT 2016

License type (licensed activities): Certificate License type (licensed activities): Certifi- License type (licensed activities): Certificate of state registration of a credit institution cate of entering information about a legal of membership in the Professional Associa- (with a note of Moscow Main Territorial Direc- entity, incorporated prior to July 1, 2002 into tion of Registrars, Transfer Agents and Depos- torate of the Bank of Russia regarding change the Unified State Register of Legal Entities. itories (PARTAD). of form of incorporation from CJSC to OJSC License (permit) or activity-specific permit- License (permit) or activity-spe- as of September 27, 2007) (with a note ting document number: 77 № 004890355. cific permitting document number: of the Bank of Russia regarding change License (authorization, permit) date series А No. 0000193. of form of incorporation from OJSC to JSC of issue: 28.08.2002. License (authorization, permit) date as of December 30, 2014). Issuing authority: Administration of issue: 29.09.1994. License (permit) or activity-specific permit- of the Ministry of the Russian Federation Issuing authority: Professional Association ting document number: 354. for Taxes and Levies for the city of Moscow. of Registrars, Transfer Agents and Deposito- License (authorization, permit) date Validity: Without limitation. ries (PARTAD). of issue: 13.11.2001. Validity: Without limitation. Issuing authority: The Bank of Russia. License type (licensed activities): Certifi- Validity: Without limitation. cate of inclusion of the bank in the Register License type (licensed activities): Notice of the Deposit Insurance System Member of registration with the tax authority License type (licensed activities): Certifi- Banks. as a major taxpayer. cate of registration of a Russian organization License (permit) or activity-specific permit- License (permit) or activity-spe- with the tax authority at its registered address. ting document number: 629. cific permitting document number: License (permit) or activity-specific permit- License (authorization, permit) date letter No. 245927939. ting document number: Without number. of issue: 10.02.2005. License (authorization, permit) date License (authorization, permit) date Issuing authority: State Corporation Deposit of issue: Date of the letter: 10.11.2015, Regis- of issue: 06.01.2017. Insurance Agency. tered on: 17.11.2006. Issuing authority: Inspectorate of the Federal Validity: Without limitation. Issuing authority: Interdistrict Inspectorate Tax Service No. 28 in the city of Moscow. of the Federal Tax Service for Major Taxpayers Validity: Without limitation. License type (licensed activities): Certificate No. 9. of registration of a member of the National Validity: Without limitation. Securities Market Association. License (permit) or activity-specific permit- ting document number: 045. License (authorization, permit) date of issue: 28.02.2001. Issuing authority: The National Securities Market Association. Validity: Without limitation. 107 Gazprombank ANNUAL REPORT 2016

License type (licensed activities): Notice License type (licensed activities): Technical License type (licensed activities): Single-use regarding the right to act as a guarantor protection of confidential information. license/export (raw or powdered platinum in interaction with tax authorities. License (permit) or activity-specific in bars with a purity value of no less than License (permit) or activity-specific permit- permitting document number: No. 0860. 999.5 parts of platinum per 1000 parts of alloy). ting document number: Without number. License (authorization, permit) date License (permit) or activity-specific License (authorization, permit) date of issue: 03.08.2009. permitting document number: of issue: 01.05.2016. Issuing authority: Federal Service No. 093RU16002000340. Issuing authority: Federal Customs Service for Technical and Export Control. License (authorization, permit) date of Russia. Validity: Without limitation. of issue: 20.10.2016. Validity: Till 30.04.2019. Issuing authority: Ministry of Industry License type (licensed activities): General and Trade of the Russian Federation. License type (licensed activities): License license for export (of other raw gold not used Validity: From 20.10.2016 to 13.10.2017. authorizing the development, manufacture for minting coins in bars with a purity License type (licensed activities): Single-use and distribution of cryptographic equipment, value of no less than 995 parts of gold license/export (raw or powdered palladium information and telecommunications systems per 1000 parts of alloy). in bars with a purity value of no less than protected with the use of cryptographic equip- License (permit) or activity-specific 995.5 parts of palladium per 1000 parts ment, performance of work and provision of permitting document number: of alloy). services in the field of data encryption, mainte- No. 092RU17002001525. License (permit) or activity-specific nance of cryptographic equipment, information License (authorization, permit) date permitting document number: and telecommunications systems protected of issue: 22.02.2017. No. 093RU16002000339. with the use of cryptographic equipment. Issuing authority: Ministry of Industry License (authorization, permit) date License (permit) or activity-specific permit- and Trade of the Russian Federation. of issue: 20.10.2016. ting document number: No. 14136 Н. Validity: From 22.02.2017 to 14.02.2018. Issuing authority: Ministry of Industry License (authorization, permit) date and Trade of the Russian Federation. of issue: 05.03.2015. Validity: From 20.10.2016 to 13.10.2017. Issuing authority: Center for Licensing, Certifying and Protecting State Secrets of the Federal Security Service of Russia. Validity: Without limitation. 108 Gazprombank ANNUAL REPORT 2016 CONTACT INFORMATION AND BANK DETAILS

Full name "Gazprombank" (Joint-stock Company) Abbreviated name Bank GPB (JSC) Start of business operations 31 July 1990 Mailing (legal) address 16 Nametkina St., bldg 1, Moscow, 117420 Place of business 63 Novocheremushkinskaya St., Moscow, 117418 Single Help Desk +7 (495) 913-74-74 Fax +7 (495) 913-73-19 Telex 412027 GAZ RU Website www.gazprombank.ru E-mail [email protected] SWIFT code GAZPRUMM Reuters Dealing code GZPM Correspondent account 30101810200000000823 with the Main Branch of the Central Bank of the Russian Federation for the Central Federal District, Moscow INN 7744001497 KPP 997950001 BIC 044525823 OKPO 09807684 OKVED 64.19 OGRN 1027700167110 dated 28 August 2002

www.gazprombank.ru