Annual Report 2015 Bank Saint Petersburg at a Glance

ANNUAL REPORT 2015 BANK SAINT PETERSBURG AT A GLANCE

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BANK SAINT PETERSBURG Annual Report 2015 7 The Bank’s Profile

STRATEGY 2016-2018

In December 2015, the Supervisory Board approved the Bank’s new Strategy 2016-2018: sustainable growth at maximum capacity. The key priority is sustainable growth, both organic and by potential mergers and acquisitions, while maintaining a sufficient cushion of the Bank’s capital, operational efficiency and moderate risk appetite. ROAE 15% The key financial goal remains the long-term growth of shareholder value and ROAE recovery to 15% on the horizon till 2018. principal strategic goal for 2016-2018 The strategic priorities remain the further lowering of credit risks to increase the share of retail loans, as well as developing innovations in order to strengthen leadership in the digital environment today and over the next 3-5 years.

Annual growth of the loan portfolio is expected to reach 11-15% with an outperforming pace in retail, while the share of loans to individuals will increase to 20% of the loan portfolio by 2018.

In addition, it is planned that 7% of the loan portfolio in 2018 will be accounted for by loans in new regions. In the first stage, the Bank will be opening representative offices in Novosibirsk, Ekaterinburg and Krasnodar.

STAGES OF STRATEGIC DEVELOPMENT

2006-2009 2010-2013 2014-2015 2016-2018

Technologies development Building an efficient Aggressive growth Sustainable growth Retail is a focus bank with a scalable and going public at maximum capacity Investment in quality business model

§§ Annual rates of growth 100% §§ New IT-platform launched §§ Successful aquisition of Bank §§ The key priority is sustainable Evropeisky (Kaliningrad) growth, both organic and by §§ Top-20 in terms of assets in §§ Rebranding started and potential M&As Russia brand management system §§ The most efficient bank in implemented retail in 2014 (Renaissance §§ Innovations in E-banking §§ Loan portfolio growth from Credit Index) RUB 20 bn to RUB 174 bn §§ New HQ launched §§ Retail customer base growth §§ New Internet Bank for up to 2 600 000 in 2018 §§ Number of branches and §§ New Internet Bank for retail corporate customers ATMs was doubled customers §§ Expansion beyond the home §§ Focus on branch network region §§ Entry to the capital markets §§ Risk-management standards transformation and HR improved §§ Successful IPO §§ Top-3 on St. Petersburg’s mortgage lending market

BANK SAINT PETERSBURG Annual Report 2015 8 Overview of the Russian economy and banking sector

After 25 years in the local market, the Bank has fully integrated into the St. Petersburg business community. In St. Petersburg, Europe’s 4th largest city, the Bank has a 10% market share. Overview of the Russian Economy and Banking Sector

OVERVIEW OF THE RUSSIAN ECONOMY AND BANKING SECTOR

Bank Saint Petersburg follows a regional banking model in that its business remains primarily focused on St. Petersburg, which has a market comparable in capacity and size to Paris or a medium-sized European country such as Denmark or Finland.

The Bank maintains a stable position across all major banking service markets. As of the end of 2015, the Bank held the following market shares in St. Petersburg: 12.7% of the SME lending market, 8.8% of the corporate deposits market, 7.9% of the retail lending market, and 8.6% of the retail deposits market.

THE RUSSIAN ECONOMY IN 2015

In 2015, the Russian economy experienced a series of serious external and internal shocks, which led to negative figures at the year-end. GDP declined by 3.7% against growth of 0.7% a year earlier. The main external cause of the fall in GDP was the 1.9 time decrease of the average oil price. The main internal causes of the fall in GDP were a serious weakening of the Russian ruble, as well as an increase in the key rate of the Bank of Russia in late 2014. The average key rate set by the regulator in 2015 amounted to 12.7% compared with 8.25% a year earlier. The average RUB / USD exchange rate in 2015 amounted to RUB 61.2 per USD against 38.6 in 2014.

In the GDP structure only three industries have demonstrated growth in 2015 despite a challenging environment: agriculture, mining, and the healthcare industry.

The industrial sector showed a decline of 3.4%. Most industries ended the year with negative figures. The most significant growth was demonstrated by the chemical industry where competitiveness increased against the background of a weakening ruble, making it possible to increase production by 6.3%.

The real income of the population in 2015 demonstrated a drop of 4% versus a decline of 0.7% a year earlier. Real wages fell by 9.5% against growth of 1.2% in 2014. The unemployment rate showed insignificant growth of 0.5% for the year. Thus, the labor market has adjusted to the changed economic conditions through wage level corrections.

Inflation in early 2015 showed significant growth and reached a peak of 16.9% in March 2015, then slowing and amounting to 12.9% at the end of December.

The sanctions against Russia introduced a year earlier by the USA and the EU continued to be effective throughout the year.

The balance of trade in 2015 was USD 145.6 bn, which is 23% lower than in the previous year. The main reason being the fall in the average oil price from USD 98 per URALS barrel in 2014 to USD 51 in 2015. At the end of 2015, the price of the barrel was already less than USD 35. Capital outflow in the current conditions has totalled USD 57 bn against the USD 153 bn in the previous year.

The survey was provided by the Bank Saint Petersburg’s Research Department.

BANK SAINT PETERSBURG Annual Report 2015 10 Overview of the Russian Economy and Banking Sector

Financial markets were weak. The RTS index showed a slight decrease from 790 to 757 points, or 4.3%. Yields of the major issues of federal loan bonds (OFZ) were down 4-5.5% following the decline in key rates of the Central Bank of Russia from 17% at the beginning of 2015 to 11% at year-end. The ruble has shown a weakening against the US dollar by 25.7% and against the euro by 17.8%, ending the year at 72.9 RUB per USD and 79.3 RUB per EUR.

ECONOMIC GROWTH STRUCTURE, 2015 VS 2014

BANK SAINT PETERSBURG Annual Report 2015 11 Overview of the Russian Economy and Banking Sector

THE BANKING SECTOR IN 2015

The banking sector’s assets reached RUB 83 trillion in 2015 against RUB 78 trillion in the previous year. Asset growth was only 6.9% which is a historically low figure. Growth amounted to a moderate 7.6%, loans to non-financial legal entities increased by 12.7%, and loans to individuals decreased by 5.7%. The profits of Russian credit institutions in 2015 totalled RUB 192 bn, which is 67% lower than in 2014.

BANKING SECTOR ASSETS DYNAMICS

T R RUB A

After the record growth in the key rate at the end of 2014, the Central Bank of Russia in 2015 carried out a series of key rate cuts, which outpaced the slowing of the rate of inflation. At the year-end, the real interest rate was negative and amounted to -1.9%. Thus, credit conditions during 2015 showed some improvement, while remaining rather difficult. An easing of the conditions was evidenced by the moderate revival of lending in the second half of the year. According to the Central Bank of Russia, the average rate on loans to non-financial legal entities in RUB with 1 year maturity decreased by 6.1 PP, while on longer-term loans the figure was 2.1 PP. Interest rates on loans to individuals decreased less steeply by 4.8 PP and 2.0 PP respectively.

Interest rates in USD on loans to non-financial corporations decreased by 0.9 PP for maturity of less than 1 year and by 1.9 PP for maturity of over 1 year. Interest rates in USD on loans to retail borrowers grew by 1.4 PP for maturity of less than 1 year and by 0.2 PP for maturity of over 1 year. The growth in lending price was attributable to increased risks of FX loans to the public.

In 2015, the dynamics of consumer lending volumes were negative, which was due to a significant reduction in the level of real income of the population, as well as high interest rates on consumer loans. High risks of lending were represented by the growth in overdue loans of consumer borrowers. During the reporting year, the share of overdue consumer loans increased by 2.6 PP from 7.9% to 10.5%. The volume of overdue corporate loans amounted to 6.2% in December and increased by 2 PP during 2015. In retail lending, the share of overdue loans amounted to 8.1% in December, having increased by 2.3 PP.

The growth in retail deposits amounted to 25.2% in 2015, while corporate deposits increased by 15.6%, and adjusted for currency revaluation 16.8% and 2.7% respectively. Thus, the slowdown in economic activity affected deposit dynamics, causing them to worsen in comparison with the rates in 2014.

BANK SAINT PETERSBURG Annual Report 2015 12 Overview of the Russian Economy and Banking Sector

OVERVIEW OF THE ECONOMY OF ST. PETERSBURG AND THE LENINGRAD REGION

2015 was again a difficult one for the economy of St. Petersburg: by the end of the year the industrial production index had dropped by 7.3% (in 2014, the decline was 8.2%). The Leningrad Region demonstrated somewhat better dynamics, with industrial output showing a slight decrease of just 0.1% (the previous year showed an increase of 0.1%).

The processing industry index for St. Petersburg lost 7.4% (-9.0% in the previous year). The decline was only 1.9% for the Leningrad Region (-0.8% in the previous year).

The decline was observed in the majority of processing industries. A significant impact on the overall result of the city’s industrial production was due to a 16% decline in production of vehicles and respective equipment. Production of special-purpose vehicles decreased 1.9 times, trucks decreased by 29% and passenger cars by 15%.

A significant decrease of 15% was demonstrated in production of machinery and equipment. Chemical production also decreased by 15%, mainly due to a decline in the output of basic chemicals by 21%.

There was a 13% decrease in production of electrical and optical equipment. In addition, there was a 4% reduction in production in the food industry, which is one of the most promising sectors relating to the potential for import substitution.

Moderate growth was observed in pulp and paper production, publishing and printing (+5.3%), metallurgy and production of finished metal products (+4.8%), in production of rubber and plastic products (+4.6%), wood processing and production of wood products (+2.1%), and production of leather, leather products and footwear (+1.0%).

In the Leningrad Region, the 20% reduction in metallurgy and production of finished metal products had a key impact on dynamics of the processing industry. A significant reduction was also observed in the industry of production of other non-metallic mineral products (-13%). At the same time, growth has been renewed in food production, resulting in 2% growth at the year-end. A 34% increase was observed in production of pharmaceutical products and a 26% growth in production of casein adhesives. In the segment of car parts and accessories, as well as engines, there was a 14% increase. Production of paper and cardboard increased by 12%.

Producer prices of industrial products rose by 14.1% in St. Petersburg and 10.8% in the Leningrad Region. The average figure for this in Russia is 12.4%.

The volume of construction works in St. Petersburg in 2015 showed a decline of 7% and in the Leningrad Region 9%. The volume of housing construction in St. Petersburg decreased by 7% while in the Leningrad Region it increased by 30% compared to 2014.

BANK SAINT PETERSBURG Annual Report 2015 13 Overview of the Russian Economy and Banking Sector

THE ST. PETERSBURG BANKING SECTOR

St. Petersburg banking sector assets totalled RUB 1.9 trillion at year-end in 2015. The city’s share in the Russian banking system amounted to 2.3%.

The asset growth rate in the St. Petersburg banking sector amounted to 17% compared with 11% in 2014.

THE SHARE OF ST. PETERSBURG BANKING ASSETS IN THE TOTAL ASSETS OF RUSSIAN BANKS

T S P RUB T S P

In 2015, lending to legal entities in St. Petersburg increased by 6.3%, while the volume of loans to individuals showed a decrease of 3.7%. Significant growth was observed in the volume of corporate and retail deposits which increased by 24.2% and 25.5% respectively.

BANK SAINT PETERSBURG Annual Report 2015 14 Management Report

The Bank is always profitable, even in a challenging macroeconomic environment. The long-term financial target is a sustained ROAE level of more than 15% and consistent growth in the Bank’s shareholder value. In 2015, the share price grew by 79% and the Bank paid dividends in the amount of 20% of net profit. Management Report

MANAGEMENT REPORT

STATEMENT OF COMPREHENSIVE INCOME ANALYSIS

The principal factors that influenced the Bank’s 2015 financial results included:

§§ Record revenues RUB 28.0 bn (+21.6% compared to FY 2014); §§ Net trading income amounted to RUB 6.2 bn; §§ Net income amounted to RUB 3.6 bn; §§ Total comprehensive income reached RUB 5.6 bn and exceeded FY 2014’s result by 23.6%; §§ Retail loan portfolio grew by 10.1% in 2015 to RUB 48.7 bn; §§ Retail deposits grew by 20.5% to RUB 188.1 bn.

INCOME DYNAMICS*, RUB MLN

N I I N I N T I

INCOME AND EXPENSES DATA*, RUB MLN

R P

* One-off incomes are excluded from Revenues and Net Trading Income. Provisions for FY 2012 are reduced by the gain from disposal of investment property.

BANK SAINT PETERSBURG Annual Report 2015 16 Management Report

INTEREST INCOME

The Bank’s interest income increased by 31.0% in 2015 to RUB 50.8 bn, compared to RUB 38.8 bn in 2014. This increase was mainly the result of the Bank’s expanded business and loan portfolio in 2015, particularly in retail lending.

Customer lending contributed to 76.7% of total interest income. Interest income from loans and advances to customers gained 27.9% throughout 2015, amounting to RUB 39.0 bn, compared to RUB 30.4 bn in 2014.

Interest income from other operations, principally from securities, increased by 42.4%, amounting to RUB 11.8 bn in 2015, compared to RUB 8.3 bn in 2014. Overall, this interest income component still comprises an insignificant 23.3%.

INTEREST EXPENSE

Interest expense increased by 64.5%, amounting to RUB 33.3 bn in 2015, compared to RUB 20.2 bn in 2014).

Interest expense on retail term deposits increased by 71.8% and amounted to RUB 10.2 bn (30.6% of total interest expenses).

Interest expense on corporate term deposits increased by 76.3% and amounted to RUB 8.6 bn (25.9% of total interest expenses).

Interest expense on due to banks increased by 79.2%, reaching RUB 11.2 bn (33.6% of total interest expenses), which was mainly caused by current liquidity control and the expansion of short-term assets operations.

Interest expense on funds raised on the capital market (bonds issued and other borrowed funds) decreased by 3.4% to RUB 2.4 bn (7.2% of total interest expenses).

NET INTEREST INCOME RUB 17.5 bn Net interest income decreased by 5.6% to RUB 17.5 bn, compared to RUB 18.5 bn in 2014. net interest income

BANK SAINT PETERSBURG Annual Report 2015 17 Management Report

FEE AND COMMISSION INCOME

The Bank’s fee and commission income increased by 8.0% in 2015, reaching RUB 4.8 bn, compared to RUB 4.4 bn in 2014.

Cash and settlement operation fees (47.9% of total fee and commission income) increased to RUB 2.3 bn, by 17.6% compared to 2014. Plastic cards and cheque settlements (27.7% of total fee and commission income) gained 11.7%, amounting to RUB 1.3 bn. Income from fees for issuing guarantees and letters of credit (18.1% of the total fee and commission income) went down by 5.3% and stood at RUB 0.9 bn.

FEE AND COMMISSION EXPENSE

Fee and commission expense increased by 4.3% in 2015 to RUB 730 mln, compared with RUB 700 mln in 2014. The biggest commission growth was connected to commissions on settlement transactions (+21.5%) – to RUB 136 mln in 2015 (against RUB 112 mln in 2014). The aggregate amount for commissions on plastic cards and cheque settlements, commissions on settlement transactions and commissions on securities amounted to RUB 640 mln, or 87.6% of the total fee and commission expenses.

NET FEE AND COMMISSION INCOME RUB 4.0 bn In 2015, the net fee and commission income increased by 8.6% to RUB 4.0 bn. record net fee and commission income NET TRADING INCOME

In 2015, net trading income amounted to RUB 6.2 bn (a loss of RUB 123 mln in FY 2014). Gains from operations with foreign currencies and derivatives amounted to RUB 4.9 bn, while gains from operations with securities amounted to RUB 1.3 bn. Results from financial markets operations were driven by competent securities portfolio management in conditions of declining yields and using opportunities for arbitrage in a volatile market.

The Bank posted an additional gain through capital account from the revaluation of investment securities available-for-sale that contributed RUB 2.0 bn to total comprehensive income in 2015.

From 2007 onwards, Bank Saint Petersburg has been among the leaders in the most important segments of the Russian financial market and an active trader on foreign stock exchanges. The Bank is systematically included in the activity ratings of the market of the MOEX currency derivatives market and the MOEX futures and options market. The Bank’s currency futures trading volume currently represents a sizeable share of the total trading volume of the Chicago Mercantile Exchange. The Bank is also a major participant of the REPO market and a partner of leading domestic and international financial institutions.

BANK SAINT PETERSBURG Annual Report 2015 18 Management Report

OPERATING EXPENSES

The Bank’s operating expenses grew to RUB 10.8 bn, by 12.2% compared to 2014.

OPERATING EXPENSES*, RUB MLN

Staﬀ costs

* Property tax is excluded from other operating expenses and included in expenses related to premises and equipment.

STAFF COSTS

Staff costs are a major component of the Bank’s operating expenses, comprising 41.3% of all costs, compared to 46.4% in 2014. Staff costs remained at the previous year’s level and amounted to RUB 4.5 bn.

EXPENSES RELATED TO PREMISES AND EQUIPMENT

The Bank’s expenses related to premises and equipment amounted to RUB 1.6 bn in 2015, +5.6% compared to 2014.

OTHER ADMINISTRATIVE AND OPERATING EXPENSES

The Bank’s other operating expenses include rental payments, administrative costs, professional services, security, transportation, shipping and other expenses. In 2015, these expenses increased by 30.0% to RUB 4.8 bn.

BANK SAINT PETERSBURG Annual Report 2015 19 Management Report

KEY FINANCIAL INDICATORS

Net interest margin (NIM) for FY 2015 decreased by 90 bp and amounted to 3.5%. The cost/income 38.7% ratio for FY 2015 stood at 38.7%, compared to 41.9% in 2014. cost/income ratio

COST-TO-INCOME AND NET INTEREST MARGIN

I I NI

* Adjusted results - adjusted for one-offs. RUB 3.6 bn Net income for FY 2015 amounted to RUB 3.6 bn (-24.5% compared to FY 2014). The Bank’s return net income on equity (ROAE) for FY 2015 amounted to 6.7%.

The total comprehensive income for FY 2015 reached RUB 5.6 bn (+23.6% compared to FY 2014’s result). Aggregate ROAE 10.5% was supported by an investment securities revaluation of RUB 2 bn through capital account.

NET INCOME DYNAMICS

17.2% 15.2%

4 128 4 058 9.7%

9.4% 8.2% 6.7% 3.2%

5 885 1 304 6 695 4 796 3 619

2011 2012 2013 2014 2015

Net Income, RUB mln Net Income adjusted, RUB mln

ROAE, % ROAE adjusted, %

* Adjusted results - adjusted for one-offs.

BANK SAINT PETERSBURG Annual Report 2015 20 Management Report

LOAN PORTFOLIO QUALITY

Since lending constitutes the majority of the Bank’s assets, the Bank focuses on maintaining the high quality of its loan portfolio. RUB 370.3 bn In 2015, the volume of loans to customers (gross loans) increased by 7.7% and stood at RUB 370.3 bn. loan portfolio The provision charge for FY 2015 amounted to RUB 12.3 bn (RUB 7.3 bn for FY 2014). The allowance for loan impairment grew to 9.4% of the total loan portfolio (8.3% as at January 1, 2015).

LOAN PORTFOLIO QUALITY

RUB A G

G I G

* Overdue loans include the whole principle of the loan at least one day overdue.

As at January 1, 2016, the share of problem loans in the Bank’s portfolio (the total share of overdue loans and impaired not past due loans) amounted to 12.4% (10.0% as at January 1, 2015). The share of overdue loans in the Bank’s portfolio amounted to 5.9% of the total volume of loans. The share of corporate overdue loans amounted to 6.0% of the total corporate loans; the share of retail overdue loans amounted to 5.3% of the total retail loans. As at January 1, 2016, impaired not past due loans constituted 6.6% of the total volume of loans.

The provisions for the coverage of overdue loans were 161%. In 2015, the volume of loans written off amounted to RUB 5.7 bn (RUB 5.7 bn in 2014).

PROVISION CHARGE AND COST-OF-RISK

P RUB R

BANK SAINT PETERSBURG Annual Report 2015 21 Management Report

As at January 1, 2016, corporate loans comprised 85.6% of the total loan portfolio; their volume increased by 8.5% in 2015 to RUB 316.8 bn.

In 2015, the retail loan portfolio (mortgage, car and consumer loans) increased by 10.1% and amounted to RUB 48.7 bn. As at January 1, 2016, loans to individuals were RUB 53.5 bn (+3.3% compared to January 1, 2015). The share of loans to individuals in the loan portfolio amounted to 14.4% as at January 1, 2016 (15.1% in the previous year).

RETAIL LOAN PORTFOLIO GROWTH, RUB BN

aret

One of the highlights of 2015 for the Bank was mortgage lending. At the end 2015, Bank Saint th Petersburg was ranked 3rd in Russia within the State Mortgage Subsidy Program and 8th in terms of 8 in Russia new mortgages issued. The Bank’s share in new mortgage lending in St. Petersburg reached 18% by new mortgages granted in 2015. These are the best results the Bank has had since the introduction of its mortgage lending program.

STRONG PERFORMANCE IN THE RUSSIAN MORTGAGE LENDING MARKET

N RUB

R R

BANK SAINT PETERSBURG Annual Report 2015 22 Management Report

BALANCE SHEET STRUCTURE

RUB 343.4 bn The Bank’s assets increased by 7.8% in 2015 and amounted to RUB 562.5 bn, compared to customer deposits RUB 521.6 bn as at January 1, 2015.

Gross loans increased by 7.7% in 2015 and stood at RUB 370.3 bn, compared to RUB 343.7 bn as at January 1, 2015. The share of loans and advances to customers comprised 59.6% of assets.

The Bank’s securities portfolio amounted to RUB 111.4 bn as at January 1, 2016. The share of the securities portfolio comprised 19.8% of assets.

Cash and cash equivalents went down to RUB 36.6 bn or 36.1%, compared to RUB 57.2 bn as at January 1, 2015. The share of cash and cash equivalents comprised 6.5% of assets.

The volume of customer deposits (customer accounts and other debt securities issued) increased by 5.7% to RUB 343.4 bn, compared to RUB 324.9 bn as at January 1, 2015. The share of customer deposits comprised 61.0% of the liabilities and equity total.

In 2015, the volume of due to banks increased to RUB 135.8 bn as at January 1, 2016, compared to RUB 102.6 bn as at January 1, 2015. The share of due to banks comprised 24.1% of the liabilities and equity total.

The share of funds attracted from capital markets was 3.9% of total liabilities, compared to 5.7% as at January 1, 2015.

ASSETS AND LIABILITIES STRUCTURE, JANUARY 1, 2016, RUB BN

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utoer aount orporate

oan an aane to utoer

utoer aount nual

BANK SAINT PETERSBURG Annual Report 2015 23 Management Report

CUSTOMER DEPOSITS

The volume of customer deposits (customer accounts and other debt securities issued) increased by 5.7%, reaching RUB 343.4 bn, compared to RUB 324.9 bn a year earlier. As at January 1, 2016, 54.8% of customer accounts belonged to individuals and 45.2% belonged to corporate customers.

Retail customer deposits increased by 20.5%, reaching RUB 188.1 bn, whereas corporate customer deposits decreased by 8.0% to RUB 155.3 bn.

During 2015, corporate term deposits declined by 3.7% to RUB 79.5 bn. As at January 1, 2016, the share of term deposits in total corporate deposits stood at 57.7% (excluding state and public organisations, and promissory notes).

Retail term deposits increased by 26.0% and stood at RUB 146.3 bn. As at January 1, 2016, the share of term deposits in total retail deposits amounted to 77.8%.

CUSTOMER DEPOSITS, RUB BN

SHAREHOLDERS EQUITY AND CAPITAL

As at January 1, 2016, the Bank’s shareholders’ equity stood at RUB 56.8 bn (+10.7% compared to January 1, 2015). The Bank’s total capital amounted to RUB 81.1 bn (+29.3% compared to January 1, 2015). The capital growth was mainly driven by subordinated funds attracted from DIA in the amount of RUB 14.6 bn. In compliance with Basel Committee requirements, as at January 1, 2016, the Bank’s total capital adequacy stood at 15.6% and Tier 1 capital adequacy stood at 9.9%.

CAPITAL ADEQUACY RATIO

T T

BANK SAINT PETERSBURG Annual Report 2015 24 Management Report

INVESTOR RELATIONS

The Bank makes every effort to upgrade transparency, in addition to increasing the quality and quantity of information available to investors and shareholders. The Bank focuses on providing equal access to public information for all stakeholders.

Recognising that quality analytical coverage is a key aspect which forms an investor’s perception of an issuer, the Bank held its first Analyst Day in April 2015. Among the Bank’s guests were the analysts of various investment banks. Despite of the fact that it was a new experience for the Bank, the Analyst Day was a great success beyond any doubt, allowing the Bank’s guests to obtain detailed information first hand about the Bank’s development strategy and business divisions.

Making every effort to maintain a two-way dialogue with the investment community, Bank representatives pay significant attention to interacting with analysts and investors. Throughout 2015, the Bank’s management participated in international investment conferences and non-deal road shows, while various one-on-one meetings were also held on a regular basis at the Bank’s headquarters. In 2015, 4 webcasts dedicated to financial results were held for investors and analysts.

TRADING IN THE BANK’S ORDINARY SHARES

The Bank’s ordinary registered shares (state registration number 10300436В, ISIN: RU0009100945) are listed on the stock market of the Moscow Exchange. Ordinary registered shares of the Bank are traded with listing level 2 (stock ticker BSPB). The Bank’s shares are included into the following Moscow Exchange indices: the Moscow Exchange Indices (MICEXSC/RTS2); the Broad Market Index (MICEX BMI/RUBMI); the Sector Financials Index (MICEX FNL/RTSfn).

The information on the price can be found on the Moscow Exchange website at www.moex.com (stock ticker BSPB).

2015 THE BANK’S ORDINARY SHARES PERFORMANCE VERSUS MICEX AND MICEX FINANCE INDICES

IE IE BSPB

BANK SAINT PETERSBURG Annual Report 2015 25 Management Report

OPPORTUNITIES FOR INVESTORS 79% In 2015, although the Bank’s share price grew by 79% to RUB 44, the Bank still remains the most the Bank’s share price growth undervalued bank in the market (P/BV remains 0.3) with significant upside for the growth of shares.

THE CHEAPEST BANK IN THE MARKET

PB P

BSPB

RAE

* Peers - other publicly-traded Russian banks.

The Bank has been increasing book value per share for its shareholders: at the year’s end in 2015, to support share price and to overcome the current undervaluation, the Bank bought back 2.7% of the share capital. As at January 1, 2016, including the buyback results, book value per share has reached RUB 129.

THE BANK IS INCREASING BOOK VALUE PER SHARE FOR ITS SHAREHOLDERS SP SP RUB RUB R . bn SP R .7 bn The maor part as auired RUB The maor part as b eisting shareholders IP RUB S mln acuired b ER R 5. bn S 7 mln onvertible pref. stoc R . bn irst privateloned Russian ban

B RUB

BANK SAINT PETERSBURG Annual Report 2015 26 DIVIDEND POLICY

In accordance with the Russian legislation, dividends are based on net profit according to RAS. The dividend amount is approved by the General Shareholders’ Meeting, as recommended by the Supervisory Board.

In 2015, the Bank also paid dividends of 20% of RAS net income, which corresponds to 19% of IFRS net profit.

2015 DIVIDEND PAYOUT RATIO VS. 2014 IFRS NET INCOME

BSPB Peer paid out dividends from past ears net income

P P

RAE

* Peers - other publicly-traded Russian banks. Capital adequacy ratio and ROAE are for 2014.

In February 2016, the Supervisory Board approved the Dividend Policy. This document establishes the Dividend Policy Bank’s intention to maintain a dividend payout ratio of 20%+ of the Bank’s RAS net profit (RUB 2.3 bn 20%+ of RAS net income for FY 2015).

BANK SAINT PETERSBURG Annual Report 2015 27 Overview of the Bank's Business Divisions

The Bank opened 10 new offices in 2015, in which a new approach to business is being realized through an integrated system of organizational and technological innovations. Open space provides proper attention to each client, while spatial zoning is fully aligned with the needs of various customer groups. Overview of the Bank’s Business Divisions

CORPORATE BANKING

The Bank continues to improve its performance, offering a wide range of cutting-edge banking services to small-, medium- and large-sized enterprises, taking into account each client group’s particular requirements and interests. Today, the Bank’s corporate clients number more than 56 000 companies. The total number of transactions performed by the Bank for its corporate customers in 2015 exceeded 7 900 000.

Bank Saint Petersburg’s corporate banking business remains primarily focused on the regional market of St. Petersburg. In addition, the Bank strengthened its positions in Kaliningrad in 2015 through the creation of its Evropeisky Branch which currently has over 5 000 corporate customers (Bank Saint Petersburg completed the integration of Bank Evropeisky (Kaliningrad) during the reporting year, reorganizing it together with the Bank’s Kaliningrad Branch into a new Evropeisky Branch). 85.6% of loan portfolio Loans to legal entities represent 85.6% of the total loan portfolio. The sectoral breakdown of the Bank’s corporate portfolio reflects St. Petersburg’s economic structure, which has a high proportion corporate loans of construction, real estate, trade and production, allowing the Bank to benefit from all the advantages of the region’s economic structure, as well as to contribute to its development. At the same time, significant attention is being focused on expanding business in Moscow. As of January 1, 2016, 27.6% of the Bank’s corporate loan portfolio is made up of loans originating in the Moscow branch.

SECTORAL STRUCTURE OF THE BANK’S CORPORATE LOAN PORTFOLIO, JANUARY 1, 2016 ter Sport and health ontruton

ranport

oernent ﬁnanced routon Oil and gas an oo nutr

ea aner and ship-building rae

Real estate ean and ﬁnancial ere

During 2015, the corporate loan portfolio grew by 8.5% to RUB 316.8 bn. The Bank pays particular attention to developing a high-quality, well-balanced loan portfolio.

Corporate customer deposits remain a principal source of funding for the Bank, and represent 45.2% of customer deposits 45.2% of total customer deposits. During the reporting year, corporate customer deposits decreased corporate deposits by 8.0% to RUB 155.3 bn.

BANK SAINT PETERSBURG Annual Report 2015 29 Overview of the Bank’s Business Divisions

SETTLEMENT BUSINESS

Bank Saint Petersburg is striving to become the main clearing bank for St. Petersburg residents and enterprises engaged in payments and settlements with customers and suppliers. In particular, a number of special offers were made available to legal entities in 2015 to facilitate the opening of settlement accounts.

The Bank continues to advance its Enterprise Clearing Center product, which allows the holding company in the group to centrally manage corporate finance in companies with a geographical and organizational structure of any degree of complexity. 2015 saw two new network customer groups connected to the system.

As part of the recently introduced follow-through service for government contracts, the Bank opens and maintains subcontractor accounts and, as an added feature, supervises settlements with suppliers and contractors under the government contracts.

For employees of corporate customers and sole proprietors, the Bank issues corporate cards that allow settlement of the company’s business-related current expenses. Such cards can be used to withdraw funds for business-related settlements, including travel and hospitality expenses.

As part of strengthening its card payments infrastructure, the Bank offers its corporate customers merchant acquiring services, that enable legal entities and sole proprietors to accept plastic card payments for their goods and services, including contactless technologies, reducing the time required for servicing each customer.

Bank Saint Petersburg continues to expand the list of card types accepted by its POS-terminals. In 2015, the Bank started to accept cards of yet another international payment system: UnionPay International (China). Agreements were also made in 2015 to begin accepting cards of the Russian MIR National Payment System and of the international JCB system (Japan) in 2016.

The Bank’s impeccable reputation and strong financial performance allowed it to maintain good business relations with major US and EU banks which have been its long-standing correspondents. The Bank processes uninterrupted customer payments in USD and EUR, and is increasing the volume of payments in Chinese Yuan. Following the acquisition of Bank Evropeisky, the correspondent network was optimized in 2015 through the addition of new correspondent accounts in Poland and Lithuania that are actively used by customers based in Kaliningrad.

The proficiency of the Bank’s staff in ensuring high quality processing of client payments was highlighted by the receipt in 2015 of the Straight-Through Processing Excellence Award for 2014 from Commerzbank AG (STP Excellent Quality Award 2014).

The Bank provides a wide range of banking services connected with cash transactions in the regional markets of both St. Petersburg and the Leningrad Region, including receipt collection, cash re-counting, delivering cash wages to clients, and loading ATMs and payment kiosks. By the end of 2015, 1 903 stores were receiving the Bank’s collection services. The volume of cash transported in 2015 via the Bank’s collection service remained at the level of 2014 and amounted to RUB 540 bn.

BANK SAINT PETERSBURG Annual Report 2015 30 Overview of the Bank’s Business Divisions

CORPORATE LENDING AND INVESTMENT BANKING SERVICES

To reach its strategic goals, Bank Saint Petersburg is striving to create a product range that matches the interests of corporate clients as much as possible. In spite of the challenging economic environment, the Bank continues to offer loans to companies representing various industries and to strengthen its presence in this market segment.

In 2015, within its cooperation with the companies of the United Shipbuilding Corporation group, Bank Saint Petersburg set a credit limit of RUB 2.5 bn maturing in December 2017 for Baltic Shipyard LLC for the purposes of funding the factory overhead costs and costs associated with work commissioned by OJSC Rosenergoatom Consortium. Under the credit lines opened in November and December, the Bank has granted more than RUB 600 mln to the company.

Artis-Agro Export LLC, which specializes in international export of agricultural products, was assigned a credit limit of RUB 2.2 bn for up to 12 months and received loans totalling RUB 2.1 bn in order to buy agricultural commodities from domestic suppliers and also cover related transportation costs.

One of the landmarks of 2015 was the loan agreement with Global BUS LLC (authorized dealer of MAZ OJSC) for the purposes of delivery of 80 new large-capacity single-section low-deck buses to Passazhiravtotrans State Unitary Enterprise, which will enable Passazhiravtotrans to efficiently upgrade its entire fleet in time for the 2018 FIFA World Cup.

In 2015, the Bank’s investment banking offered major customers investment lending, project finance, syndicated loans, investment and corporate consulting services, M&A transactions support, and other types of structural finance.

RISK HEDGING

Enjoying access to a wide range of financial instruments, Bank Saint Petersburg creates efficient products that allow its corporate customers to hedge their currency and interest rate risks, which becomes particularly important amid the high volatility in financial markets. The Bank’s variety of hedging strategies for the foreign exchange market allows customers to choose the solution that meets their appetite in terms of price-return.

The Quotation Board service gives customers the opportunity to receive transaction details (rates and yields) from the interbank market and remotely enter into forward FX transactions (fixing the rate for future currency conversion), thus ensuring protection against weakening or strengthening currency rates to achieve efficient planning of future cash flows and independence from political factors. The number of Quotation Board customers increased 3 times in 2015 compared with the previous reporting year.

In order to increase customers’ awareness of the opportunities and advantages of various financial products, the Bank organized several large-scale events jointly with the Moscow Exchange and such partner companies as Bloomberg, Thomson Reuters, EY, SPIBA, KPMG, and others. These events were attended by more than 500 representatives of Russian and foreign companies during 2015.

BANK SAINT PETERSBURG Annual Report 2015 31 Overview of the Bank’s Business Divisions

REMOTE CUSTOMER SERVICE FOR CORPORATES

The Internet Bank i2b, launched in October 2014, became the principal remote banking channel for most of the Bank’s corporate customers during 2015. The number of its users grew sixfold from 7 000 to 42 000, with more than 90% customers providing highly positive feedback and commenting on the system’s functionality and convenience, and 99% of corporates transactions being made through digital channels.

This was achieved through large-scale system development and fine-tuning of functional features. i2b Internet Bank can now be used to remotely perform all standard banking operations, such as making ruble and foreign currently transfers, managing corporate cards, converting currency, placing deposits, performing full foreign exchange control cycles, and consulting the Bank’s experts.

In addition, the system now boasts several unique features. The Holding-Bank service is designed for large companies with subsidiaries and facilitates work with all subsidiary accounts through a single interface to control and distribute financial flows. The Quotation Board service can be used for clients’ currency conversions. A complete range of necessary functions has been offered to the Bank’s payroll project customers, from payroll card account reservation to payroll record download and automatic generation of security payments. Finally, a service unique in the market is the option of signing documents using an individual’s electronic signature, facilitating the work of executives who manage the accounts of several companies.

DEPOSIT PRODUCTS

The principal area of focus in developing the Bank’s deposit products in 2015 was the promotion of remote deposit placement through electronic sales channels. i2B Internet Bank now has a function that allows deposits to be placed with an early withdrawal option. This type of deposit became the second most popular deposit product in the Bank’s remote banking system, with the share of such deposits reaching 23% by the end of the year.

Moreover, from August 1 until October 31, 2015, the Golden Age Deposit, a special offer timed to coincide with the Bank’s 25th Anniversary, was available to corporate Internet Bank users. The key feature of this deposit was the higher interest rate as compared with other fixed deposits. This deposit was only available through the Internet Bank.

By the end of 2015 the Bank had reached its target and 61% of all corporate deposits with the Bank had been placed online. This significantly reduced the workload of the customer service staff who were able to focus instead on individually tailored deposits.

BANK SAINT PETERSBURG Annual Report 2015 32 Overview of the Bank’s Business Divisions

PROGRAMS TARGETED AT SMALL AND MEDIUM ENTERPRISES

Loans to small and medium enterprises are strategically important for the Bank and allow SMEs to finance their working capital, purchase equipment, vehicles, real estate and other property required for their business development, as well as to start new lines of business.

The volume of the Bank’s loans granted to SMEs in 2015 amounted to RUB 78.1 bn.

The Bank remains an active participant in government programs for SME support. In particular, the Bank has entered into agreements with the St. Petersburg Small and Medium Enterprises Credit Support Fund and OJSC Credit Support Agency of the Leningrad Region. Such funds act as sureties for the borrower’s obligations in cases where available liquid collateral is insufficient. The surety processing procedure is fast and simple, with the relevant decision made within 3 business days after the Bank’s application is submitted. During 2015, the volume of loans disbursed with one of these two funds acting as surety multiplied by 4.3 from RUB 121 mln to RUB 526 mln.

Additionally, in 2015 the Bank entered into an Agreement with OJSC Russian Bank for Support of Small and Medium Enterprises (MSP Bank OJSC) concerning the opening of two lines of credit of RUB 300 mln each for:

§§ funding to promote innovation, modernization and improve energy efficiency of small and medium enterprises;

§§ funding of SMEs producing goods and services for large-scale enterprises.

In cooperation with MSP Bank OJSC, the Bank also opened credit lines for a number of companies, such as EnergoGazMontazh LLC (for the purposes of construction of self-contained water-heating gas boiler houses), VVK-Stroykorporatsiya LLC (for the purposes of funding the construction of a railway section under a contract with Russian Railways OJSC), and some others.

As a result of the Bank’s cooperation with Korporatsiya MSP OJSC, the Bank’s customers also have the opportunity (subject to certain requirements) to receive a loan in the case of unavailable or insufficient own collateral. Korporatsiya MSP issues guarantees of up to RUB 1 bn for up to 15 years which can cover up to 70% of the required loan collateral amount.

BANK SAINT PETERSBURG Annual Report 2015 33 Overview of the Bank’s Business Divisions

TRADE FINANCE OPERATIONS

Bank Saint Petersburg offers its customers a wide range of high-quality services related to documentary 49 countries operations and international trade finance. The Bank continues to maintain and strengthen its geography of trade and structured positions in this market segment, supporting and expanding the list of its foreign contractor banks. finance arranged by the Bank The first transactions were executed in 2015 under the Cooperation Agreement with AO EXIAR concerning loans to export-oriented enterprises. The Agreement enables the Bank to lend funds to small and medium enterprises with EXIAR’s insurance coverage as collateral.

The Bank joined the program being implemented by the Government of the Republic of Belarus that is designed to partially compensate interest on loans offered to Russian companies for the purpose of purchasing goods in the Republic of Belarus. The Bank’s first transaction within this program has been completed. The agent bank under the relevant Agreement with the Ministry of Finance of the Republic of Belarus is OJSC BPS-Sberbank (Republic of Belarus).

Bank Saint Petersburg signed a General Loan Facility Agreement for Long-Term ECA-Covered Credits with Landesbank Hessen-Thüringen Girozentrale (Helaba) with the intention of promoting trade between Russia and Germany.

The Bank has also broadened the range of its services for correspondent banks. For instance, 4 guarantees were issued in 2015 against counter-guarantees issued according to instructions of Russian and foreign banks.

The Bank’s trade finance and documentary operations in the reporting year were characterized by a growing number of foreign trade transactions, with 235 arranged in 2015 as compared with 210 transactions arranged in 2014. The overall volume of documentary operations in 2015 saw an increase in 2014. Meanwhile the total volume of documentary operations in 2015 increased from USD 106 mln in 2014 to USD 118 mln in 2015. The most evident growth in the reporting year was observed in the number of export operations.

GEOGRAPHY OF TRADE AND STRUCTURED FINANCE ARRANGED BY THE BANK

Saint Petersburg

BANK SAINT PETERSBURG Annual Report 2015 34 Overview of the Bank’s Business Divisions

RETAIL BANKING

As one of the key players in St. Petersburg’s retail banking services, Bank Saint Petersburg aims to become the first bank of choice for the city’s residents. The Bank currently has 1 600 000 retail customers, forming a solid base for the future successful growth of its retail business. The total number of transactions performed by the Bank for its retail customers in 2015 reached 8 850 000.

During 2015, the retail loan portfolio increased by 10.1% to RUB 48.7 bn. While mortgage loans 14.4% of loan portfolio gained 20.4%, consumer and car loans showed a 2.6% and 31.9% decline respectively. The share of loans to individuals amounted to 14.4% of the total loan portfolio. loans to individuals

The Bank maintains a constant retail deposit growth rate. In 2015, the total amount of retail deposits 54.8% of customer deposits increased by 20.5%, reaching RUB 188.1 bn. The share of retail deposits amounts to 54.8% of total customer deposits. retail deposits

The Bank was ranked among the top 5 retail banks in terms of customer service quality, according to Retail Finance Awards 2015.

RETAIL DEPOSIT SERVICES

An extensive sales network, opportunity to place deposits through the remote banking system, a high quality of services, reliability, a wide range of deposit options and competitive interest rates provide the Bank with a continuously increasing number of loyal customers and a steadily broadening deposit base. 14th among Russian banks According to Interfax agency, as at January 1, 2016 the Bank ranks 14th among Russian banks by total retail deposits. in terms of retail deposits

In order to increase its customer base and attract additional deposits inflow, the Bank offered its customers a choice of several seasonal deposits with historically high interest rates in 2015.

The Bank’s customers also have the opportunity of placing deposits online. Online deposits accounted for 51% of retail deposits placed in 2015. As an example, one of the new offers launched in 2015 was the Online Pension Deposit.

DYNAMICS OF RETAIL CUSTOMER DEPOSITS, RUB BN

BANK SAINT PETERSBURG Annual Report 2015 35 Overview of the Bank’s Business Divisions

BANK CARDS

One of the priority areas for the Bank’s retail business is the issuance of bank cards and the provision of related services. As at January 2016, the total number of all types of issued plastic cards reached 1 036 000. The Bank has seen an annual increase in the number of its payroll customers: as at January 1, 2016, the Bank had 10 870 payroll programs with a total of 549 000 active payroll cards.

A large-scale project was completed by Bank Saint Petersburg in early 2015, after successfully winning a contract for the relevant open tender: St. Petersburg Metro fares can now be paid using bank cards. All ticket counters in the city’s Metro system were equipped with payment terminals accepting MasterCard and Visa. In addition, fares can be paid directly at the turnstile using either a MasterCard PayPass or Visa PayWave proximity cards. At present, each of St. Petersburg’s Metro stations is equipped with at least one card reading device. The Bank and the Metro intend to raise the number of such turnstiles to two per each station in 2016.

In the reporting year, the Bank took part in a project which had previously had no precedent in Russia: the introduction of an innovative online financial service MasterCard® mobile NFC card. This virtual debit card, which is tied to the customer’s account, is downloaded on the mobile phone, enabling contactless payments. The mobile MasterCard® NFC cards provide an opportunity to leave the wallet at home, making shopping possible by simply tapping the smartphone to make payments. Bank Saint Petersburg started issuing such cards through the NFC-Wallet application developed by CardsMobile. Customers using the NFC card to pay their metro fare also enjoy a cashback option with a percentage of the funds spent returned to the account.

BSPB’s YARKO (ALL BRIGHT) rewards program was distinguished as the best plastic card loyalty program in Russia by Loyalty Awards Russia 2015.

Starting from May 2015, the Bank has started issuing the MasterCard World Black Edition intended for its premium segment clients. The premium program includes: monthly accrual of interest on the account balance, YARKO bonus points earned for each purchase using the card, an insurance program, a higher cash withdrawal limit, access to airport VIP lounges, the issue of additional Platinum MasterCard cards, concierge service support and the services of a personal account manager.

In October 2015, the Bank started issuing Mastercard World Pension cards for customers whose pensions are paid through an account with the Bank, and for customers who also wish to enjoy all the benefits of the premium services program. Card holders have the benefit of interest accrued on the account balance, rewards earned through purchases, increased rewards for payments at pharmacies as well as insurance in case of emergencies.

Another plastic card product launched in the reporting year is the MasterCard Prepaid branded gift card. The card is a full-featured payment instrument, which can be purchased as a gift alternative to the traditional “envelope of cash”. The card is issued in denominations of RUB 1 000, RUB 3 000, RUB 5 000 and RUB 15 000. It is designed as a greeting card with space to write a personal message.

BANK SAINT PETERSBURG Annual Report 2015 36 Overview of the Bank’s Business Divisions

MORTGAGE LENDING

1st among private banks The Bank ranks 3rd among all local banks and 1st among private banks in St. Petersburg’s mortgage in St. Petersburg’s mortgage lending market. Throughout 2015, the Bank provided a total of RUB 13.2 bn in the form of 7 261 loans, lending market compared to RUB 15.6 bn and 8 355 loans in the previous year. 90% of the total mortgage loan portfolio consisted of mortgage loans for newly constructed buildings.

The key driver of growth in 2015 was the State Mortgage Subsidy Program in which the Bank has been participating since its very inception. The program established the following eligibility requirements: 1) a loan amount of up to RUB 8 mln for Moscow, the Moscow Region and St. Petersburg, and up to RUB 3 mln for other regions of the Russian Federation; 2) the initial down payment: at least 20% of the property cost; 3) a fixed rate of 12% for the entire life of the loan; 4) maturity up to 25 years. Loan applications are reviewed within 5 business days after the complete package of documents is submitted to the Bank.

At the year’s end in 2015, Bank Saint Petersburg was ranked 3rd in Russia within the State Mortgage Subsidy Program and 8th in terms of new mortgages issued, up from 9th place in the previous year. 18% share The Bank’s share in new mortgage lending in St. Petersburg reached 18% in 2015. in new mortgage lending The Bank opened 7 Mortgage Lending Centres where customers can get detailed advice on in St. Petersburg all mortgage lending programs available and obtain an estimated calculation of the amount and maturity, as well as apply for a mortgage loan. A dedicated loan officer supports each customer throughout the entire process. As an additional convenience for the customers and a way to ensure confidentiality, each Centre has a separate meeting room; the Bank’s outlets also have depository areas for transactions using safe deposit boxes.

The Bank is continuing its productive cooperation with construction companies and real estate agencies. By the end of 2015, more than 150 developers and over 600 construction projects received the Bank’s accreditation. Customers can receive mortgage related advice and apply for a mortgage loan at the Bank’s representative desks located in the offices of its partner companies.

MORTGAGE PORTFOLIO HIGH QUALITY

* Overdue loans include the whole principle of the loan at least one day overdue.

BANK SAINT PETERSBURG Annual Report 2015 37 Overview of the Bank’s Business Divisions

CAR LOANS

In the Bank’s 3 Car Lending Centres, 2 adjacent to the Bank’s outlet offices and 1 located in a car showroom, the customers can get detailed advice on all car lending programs and apply for a loan.

In 2015, the Bank started to participated in the state program for concessional car loans. According to the program’s requirements, loans are intended for purchasing new passenger cars and commercial vehicles manufactured in the Russian Federation in 2015 for under RUB 1 mln, with initial payment of at least 20% and maturity up to 3 years.

The Bank continues to cooperate with all major auto sales centres in St. Petersburg. The number of partners has grown in 2015, reaching up to 250.

According to the year-end results, the Bank continues to maintain a high-quality car loan portfolio.

CONSUMER LOANS

Bank Saint Petersburg takes a conservative approach to risk and offers consumer loans only to the existing customer base. The target segment for the unsecured lending program is represented by: the holders of the Bank’s payroll cards, customers whose financial position is well-known to the Bank, as well as clients who have a verifiable record of using the Bank’s services. Payroll card holders account for 80% of the Bank’s unsecured loan portfolio.

This approach has proved to be the most efficient one. Firstly, targeted work with customers and the forecasting of their needs guarantees a more sizeable response. The second advantage is that the Bank does not have to “go out in the street” and take the risks of the outside unsecured lending market, since the Bank already has over one million customers whose financial position can be assessed very efficiently.

Bank Saint Petersburg has introduced a fully remote loan origination, which is a brand new consumer lending process that allows the customer to save a significant their time. The Internet Bank users can independently submit loan applications, monitor their review progress, sign loan agreements and have funds disbursed to their accounts.

The share of consumer loans fully originating through the Internet Bank reached 70% in 2015.

The principal area of focus in 2015 was the enhancement of anti-fraud and operational risk management systems within the lending process. The fine-tuning of processes will ensure the stability of unsecured lending business during its subsequent scaling.

In order to secure its positions in the St. Petersburg consumer lending market, the Bank intends to put its existing customer base to maximum use through cross-selling and other methods, focusing on its continual growth, while furthering our efforts to improve customer services and optimizing the lending procedure.

BANK SAINT PETERSBURG Annual Report 2015 38 Overview of the Bank’s Business Divisions

REMOTE CUSTOMER SERVICES FOR INDIVIDUALS

The Bank’s customers enjoy the benefits of maintaining their accounts and executing most banking transactions remotely, either through the Internet Bank or through the extensive network of ATMs and payment kiosks. Electronic payments (through the Internet Bank, ATMs and kiosks) account for 96% of the total payments made by the Bank’s individual customers.

The Bank’s current Strategy highlights the advancement of electronic services as one of its top priorities and designates the Internet Bank as the Bank’s remote banking flagship. As at January 1, the best Internet Bank in Russia 2016 the Internet Bank had 600 000 users, which is 1/5 of the economically active population of St. Petersburg. 600 000 users

One in three of the Bank’s individual customers are using the online services of the Internet Bank, with this ratio being one of the best in Russia. The major innovations achieved in 2015 include: WikiPay solution, which allows the customer to pay paper bills without the need to manually input the payment recipient’s extensive payment details; insurance service for travellers and apartment owners; and an option to subscribe to the online payment of taxes and fines. The database of service providers who can receive payments through the Internet Bank contains 1 000 entities.

At the Retail Finance Awards 2015 ceremony, Bank Saint Petersburg was distinguished for having the best retail finance product, the latter being the above-mentioned WikiPay self-training payment details database. The Bank also implemented WikiPay for mobile banking, taking an important innovative step towards the alignment of the mobile and desktop versions of the Internet Bank.

The Bank’s digital team also justified its status of the spearhead of national innovations at the Customer eXperience Awards Russia 2015, receiving a total of three awards: for the unique paper- free Mobile Bank Credit Limit mobile banking service, for the nation’s best multichannel and omni-channel customer service practices, as well as the Grand Prix for best implementation of the customer experience concept in Russia.

According to Markswebb Rank & Report analytical agency, Bank Saint Petersburg’s Internet Bank of ranked 1st in Internet Banking Rank 2015, the annual survey of the efficiency of online services provided by the Russian banks to individual customers.

Throughout 2015, 70 new ATMs and payment kiosks and 394 additional POS-terminals were installed, raising the total number of ATMs and kiosks to 728, and the total number of POS-terminals to 6 865.

BANK SAINT PETERSBURG Annual Report 2015 39 Overview of the Bank’s Business Divisions

PRIVATE BANKING

Since 2007, the Bank has successfully been developing a modern Private Banking business, providing personal banking services to the wealthiest private clients.

The Bank’s VIP customers are served at the specially designated, centrally located office, which features the highest standards of comfort, safety and confidentiality, including a separate parking area and a convenient vault room.

As at January 1, 2016, the total number of VIP-segment clients stood at 2 187, of whom 1 673 were members of the VIP-Club Private Banking BSPb, a private club for wealthy private clients. In 2015, the volume of deposits from the VIP-segment increased by 23% to reach more than RUB 44.5 bn.

Private Banking allows customers to receive the full range of banking products and services, including deposits, lending and cash management services, as well as brokerage, dealing and consulting services that are tailored to address an individual client’s needs. The large number of investment, real estate and insurance partners allows the settlement of customers’ issues of varying levels of complexity. The Bank’s Concierge Service efficiently deals with customer requests related to travel, private aviation, real estate, art purchases etc.

Private Banking is continuously updating and refining its own line of products and services offered to its customers.

The following projects were launched in 2015:

§§ a wider range of services related to comprehensive support of real estate transactions;

§§ improved tariff plans for VIP customers;

§§ a streamlined deposit product line.

The Bank’s Private Banking business is committed to consistently enhancing its service quality, broadening its customer base, and improving the range of its products and services.

BANK SAINT PETERSBURG Annual Report 2015 40 Information Technology

Bank Saint Petersburg is one of the national leaders in applying high technology solutions and is introducing the “office of the future” concept when opening new offices, at the same time actively developing its business in a digital environment. 38% of private customers use the Internet Bank in which all services are easily available: from “three-click deposits” and “two-click cards” to “single-click loans”. Information Technology

INFORMATION TECHNOLOGY

In accordance with the Bank’s strategy, the key focus areas for its IT systems in 2015 were effective automation of the Bank’s new products, enhancement of data analysis tools to increase efficiency, and a customer-oriented approach.

IT SUPPORT OF BUSINESS OPERATIONS

One of the key projects of 2015 was the integration with Bank Evropeisky, whereby all customer and product data were transferred from the information systems of Bank Evropeisky, following which all employees of the latter were switched to the Bank’s systems.

The rapidly changing environment requires up-to-date data analysis and forecasting tools. Two newly implemented products, QlikView and Analytical CRM, allow not only benefits to be drawn from the accumulated information, but also forecasts to be made concerning the attractiveness of the Bank’s new offers. For instance, Analytical CRM serves as the platform for trainable models that rank customers by probability of response to the Bank’s offers and then select services best suited to them. QlikView enables access to all data files from the Corporate Data Storage and provides several practical solutions for various departments within the Bank.

Another successful step towards cost optimization was the pilot project introducing the Delis-Archive system, which enables automation of the end-to-end processing of hard copy documents from their creation to destruction. Now a single system is used to record, transfer, store and search hard copy documents received from the customers.

As part of the general strategy to increase risk management efficiency, in 2015 the Bank completed the implementation of Forecast: Market Risk, an advanced software solution for analyzing and managing market risk.

The Bank continues to subscribe to new information services provided by the government authorities, such as individual insolvency checks enabled by the Unified Federal Register of Bankruptcy Information and electronic document exchange with the Federal Service of State Registration.

The Bank continues to develop its Microsoft Dynamics CRM platform, which helps to automate banking products sales. Significant improvements have been made in both the previously implemented business processes as well as in the hardware and software platform that supports front and back office operations.

Numerous decisions were taken in 2015 regarding the development of the Bank’s service and product range in the CFT-Bank Automated Banking System. Among the completed projects were the introduction of a branded gift card and the Pension Card, connection to the National Payment Card System (NSPK), and improvement of services within the YARKO (ALL BRIGHT) loyalty program.

The “Office of the Future”, which opened in July 2015 at the premises of Ligovsky Outlet Office, features advanced technological and organizational solutions. One of them is the Interactive Display that presents customers with a convenient interactive overview of the Bank’s product line, rates, services and current offers.

BANK SAINT PETERSBURG Annual Report 2015 42 Information Technology

INFORMATION SECURITY

One of the most important tasks is the security of remote banking systems. The Bank carries out regular tests of the systems’ vulnerabilities and develops fraud protection subsystems (fraud analysis).

In 2015, the information security department was reorganized, the key areas of development were highlighted and additional resources for were allocated their development.

Conducted in 2015, the external audits carried out by qualified Russian companies confirmed the Bank’s high level of information security.

PAYMENT SYSTEMS

In 2015, Bank Saint Petersburg was one of the first Russian banks to transfer its traffic of domestic MasterCard and Visa transactions for processing through the National Payment Card System (NSPK). In the course of further development of the National Payment System, the Bank became a direct member of the MIR payment system in December 2015.

Promoting cooperation with the UnionPay International payment system (China), in 2015 the Bank successfully completed its acquiring network development project, following which UnionPay cards can be accepted by all ATMs and payment kiosks of the Bank, as well as all merchants using the Bank’s POS terminals.

In November 2015, Bank Saint Petersburg signed a cooperation agreement with JCB International Payment System (Japan).

In the reporting year, the Bank became a participant of the first project in Russia within which a mobile contactless MasterCard® card based on NFC technology was implemented, which is an innovation in the field of online financial services. The virtual debit card is issued to the customer’s account and downloaded into the smartphone and allowing them to make contactless operations. The project was jointly implemented with the MasterCard international payment system and CardsMobile Company. This is the first time in the Russian market that such cards are issued through a mobile banking application, allowing the use of existing customer details for remote authentication.

BANK SAINT PETERSBURG Annual Report 2015 43 Information Technology

REMOTE CUSTOMER SERVICES

In 2015, corporate customers were successfully transferred to the new i2b Internet Bank. This resulted in a sixfold increase in the number of corporate users of the i2b Internet Bank and a tenfold increase in daily payments over the year.

New functions enabled by the i2b Internet Bank include: processing payments and account statements of several companies simultaneously or separately (Holding Bank); sending a register for opening accounts/ordering bank cards for the company’s employees; using a uniform electronic signature for several companies.

One of the developments of remote service applications was integration with the treasury system of the Bank’s largest corporate customer, a system that enabled statements to be provided through a secure path without user involvement.

The Bank’s customer support team is now able to emulate the customer’s online screen, significantly improving efficiency and quality of services.

In 2015, customers of Evropeisky Branch were transferred to the Internet Bank of Bank Saint Petersburg. All customers had been redirected to the new system by the end of the year.

Last year saw further improvements of the Internet Bank for retail customers. Among the key innovations were integration with the services of the State Information System for Federal and Municipal Payments (GIS GMP) that allows the Bank’s customers to monitor and pay their taxes and penalties online, as well as the introduction of biometric authentication for iOS-based devices.

The newly introduced WikiPay service uses the database of successful payments of the Bank’s customers to automatically fill in new payment forms. This service was recognized as Russia’s best retail finance product in 2015 according to The Retail Finance magazine.

The end of the year saw the development of a new mobile application that is also suited for Windows Phones. This involved a revision of user scenarios, thus providing maximum simplification of routine customer operations.

The Bank’s website now features a substantially enhanced search engine designed to locate services (ATMs, offices) on the map. Many improvements were made in the integration of the CRM-system for keeping track of website user activity, for example certain product or callback requests.

The loan origination function available through the mobile Internet Bank was recognized by CX Awards Russia as the innovation of the year for revolutionizing the customer experience.

BANK SAINT PETERSBURG Annual Report 2015 44 Risk Management

Bank Saint Petersburg maintains a conservative approach to risk and capital management and is one of the most liquid institutions in the market. Risk Management

RISK MANAGEMENT

The strategic goal of risk management is to ensure the Bank’s financial stability. The risk management system designed by the Bank is a set of measures and solutions to detect and monitor all financially significant types of risks, and to assess and determine an acceptable level of risk. Once completed, the Bank then implements activities to limit each type of risk and/or put into practice other mechanisms to optimize risks.

The Bank’s Supervisory Board approves the Risk Management Policy as required by current legislation. The Bank’s Supervisory Board has a dedicated Risk Management Committee which assists the Supervisory Board in determining the priority areas for the Bank’s risk management efforts and creating conditions required for appropriate risk management.

Risk management is carried out in accordance with internal documents that regulate the management of decision-making on credit policy, loan classification and creating provisions, the use of various instruments to reduce credit risks (insurance, the guarantee of fulfilling obligations), fixing the risk premium to the interest rate for credit risk depending on the quality and term of a particular loan product, etc. These documents meet Russian legislative requirements, including the regulations of the Central Bank of Russia.

The Risk Management Policy coordinates initiatives to enhance the risk management system, consistent improvements in methodology, and standardization and automation of the risk management processes.

The risk management system addresses the following types of banking risks:

§§ Credit risk; §§ Liquidity risk; §§ Market risk, including: ––Stock market risk; ––Currency risk; ––Interest rate risk; §§ Operational risk; §§ Strategic risk.

The Bank has set up an appropriate management system for each significant type of risk that provides for adequate risk assessment and includes various risk limitation measures. The Bank compares assumed risks to the volume of the Bank’s capital, ensuring that it is adequate for the level necessary to meet the requirements of the Central Bank of Russia and the Bank’s creditors.

The Bank is consistently enhancing its risk management system and taking measures to identify foreign taxpayers among its customers. It is also developing procedures that are used by the Bank to prevent money laundering and the financing of terrorism.

BANK SAINT PETERSBURG Annual Report 2015 46 Risk Management

CREDIT RISK

The Bank’s credit risk management system is intended to provide the Bank with a number of tools to ensure accurate credit risk assessment and the factoring of the credit operations risk level into pricing, as well as to establish a credit operations policy which allows the Bank to implement its strategy with regard to loan portfolio structure, size and quality. The Bank is continuously improving its credit risk management system.

After economic deceleration and income contraction of households, businesses and budgets became apparent in 2014, the Bank took steps to limit the accepted credit risk, thus limiting potential losses throughout 2015. These measures remain in place and include:

1. Limitation of the authority of the Bank’s officers and collegial bodies with regard to loans provided to companies operating in sectors subject to sharp fluctuations of demand.

2. Limitation of authorities of the Bank’s officers and collegial bodies with regard to approval of certain types of lending.

3. A more careful approach to analyzing the creditworthiness of legal entities (assessment of currency risk exposure and sensitivity of the company’s financial stability with regard to falling sales and rising interest rates).

4. Limits imposed on credit exposure to real estate developers (for mortgage loans secured by rights of claim against these developers).

5. A more cautious approach to the underwriting of customers (debt load, operating sector and other parameters) and transaction terms (initial payment, loan amount and other parameters) in retail lending.

6. Closure of certain standard lending programs profitability of which, considering the associated risks, would not ensure target return on equity.

In 2015, the Bank reorganized its credit risk assessment procedure for non-standard lending transactions with legal entities and individuals. In order to avoid conflicts of interest in deal-structuring and in order to maintain a uniform standard for credit risk assessment, a new Credit Analysis Office was set up to assess the financial position and internal credit ratings of the borrowers.

For the purposes of standard lending programs for individuals, the Bank introduced customer- specific pricing that takes into account the risk of default of the particular customer, based on the results of questionnaire and behavioral scoring. Interest rates for reliable customers could thus be set at a lower level than for more risk-prone ones, making the Bank’s loans more competitive and reducing the risk of unfavorable customer selection.

THE CREDIT PROCESS AND DECISION LEVELS

Branch level Corporate Credit Committee Large Credit Committee Management Board

62% of decisions 25% of decisions 6% of decisions 6% of decisions 13% of total amount 16% of total amount 16% of total amount 54% of total amount

BANK SAINT PETERSBURG Annual Report 2015 47 Risk Management

LIQUIDITY RISK

The approach to managing liquidity is based on ensuring a level of liquidity provisions that will allow the Bank to sustain a certain period of sudden outflow of customer deposits due to macroeconomic events or occurrences directly related to the Bank, which are accompanied by a reduction in the Bank’s ability to attract resources from the financial market. The duration of the outflow of client funds during which the Bank must ensure smooth operations and potential declines in customer deposits are reviewed periodically by the Management Board and the Assets and Liabilities Management Committee.

The Bank has established a multi-level liquidity management system, which provides a comprehensive approach to monitoring, forecasting and decision-making in this sphere, and uses a scenario approach to determine current and projected liquidity. The scenario method for assessing liquidity includes four possible scenarios for the current status and liquidity forecast. In determining a particular scenario, the Bank calculates a number of indicators, and describes possible actions of the Bank in implementing this scenario and preventive measures against an undesirable scenario for the Bank.

Throughout 2015, cash reserves and liquidity provisions have been sufficient to ensure the Bank’s current activities and potential sudden outflow of liabilities. The liquidity position was recognized as ordinary.

MARKET RISK

The Bank’s management of market risk is guided by the regulations of the Central Bank of Russia and internal documents.

Russian market remained volatile throughout 2015 due to political and economic factors. In order to stimulate the national economy, the Central Bank gradually lowered the key interest rate, which resulted in declining profitability in the Russian debt capital market and shrinking credit spreads. As a result of a reduction in the price of oil and a lowered key interest rate, the Russian ruble weakened by 30% against the US dollar.

In 2015, the Bank raised its VaR limits (indicating highest possible market risk). New limits were based on new instrument volatility data, which means that the raising of limits did not affect the acceptable level of investments in such instruments, but reflected the change in risk assessment for existing investments.

BANK SAINT PETERSBURG Annual Report 2015 48 Risk Management

STOCK MARKET RISK

The Bank operates in the stock market with its own securities portfolio and therefore assumes stock market risk (the risk of reduced income and sustained losses due to adverse changes in the market quotations of securities acquired by the Bank).

To manage stock market risk, the Bank uses:

§§ Open and total position limits for investments in the securities of various issuers, on groups of securities, and on investments in commodity market assets; §§ Limits on maximum daily transaction valuations; §§ Option position limits; §§ “Stop-loss” limits for groups of securities and commodity market assets; §§ VaR limits; §§ Daily monitoring of stock market risk and compliance with the fixed limits.

In building its securities portfolio, the Bank continues to maintain a conservative approach. The volume of limits on equity securities remains small relative to the total limits on securities. REPO transactions represent a significant proportion of securities transactions. As of January 1, 2016, the share of bonds amounts to 98% of the Bank’s security portfolio (total volume of trading portfolio and investment securities). In forming the bond portfolio, the Bank gives preference to first-class credit quality securities. 93% of the debt securities belong to the Lombard list of the Central Bank of Russia. The duration of the revalued securities portfolio grew insignificantly from 1.1 to 1.3 years.

CURRENCY RISK

Current management of currency risk is carried out by the Bank on a daily basis in accordance with the Bank’s approved internal documents. The Bank monitors compliance with open currency position limits, as regulated by the Central Bank of Russia and calculates the value of currency risk, in accordance with procedures established by the Central Bank of Russia.

To manage currency risk, the Bank uses:

§§ Open foreign exchange position limits; §§ Forward foreign exchange position limits; §§ Option position limits; §§ VaR limits; §§ “Stop-loss” limit.

The principal volume of limits is set on hard currencies. The limits on other currencies are negligible.

INTEREST RATE RISK

Analysis of the Bank’s exposure to interest rate risk is based on the forecast of unfavourable changes in the current value of the Bank’s assets and liabilities. The key criterion for measuring this risk is the sensitivity of capital to the general interest rate level in the event of changes in market yields by 5% p.a. Another criterion is the sensitivity of annual net interest income to changes in the general level of interest rates.

BANK SAINT PETERSBURG Annual Report 2015 49 Risk Management

If, given the available forecast, interest rate movements appear unfavourable to the Bank’s interest rate risk exposure, the decision is taken to regulate the risk level by undertaking any of the following:

§§ Changes in base interest rates to manage the structure of assets and liabilities; §§ Operations in the financial market aimed at changing the Bank’s interest rate risk position, including: ––alteration of structure and duration of the securities portfolio; ––borrowing in financial markets; ––derivative transactions with financial instruments; §§ Other measures that enable a change in the share of instruments with floating rates in the structure of assets and liabilities.

The major trends observed throughout 2015 brought about the following interest rate risk management measures:

§§ Following a sharp increase in December 2014, RUB interest rates declined throughout 2015. As part of its RUB interest rate risk management efforts, in order to raise the net interest income, the Bank in 2015 sought to increase the duration of its assets while staying within the acceptable risk limits. §§ USD and EUR interest rates showed a downward trend throughout 2015 in line with the decrease of the country risk component contained in the rates. In managing interest rate risk in 2015, the Bank promoted loans with indexed interest rates, taking into account the anticipated decrease of foreign currency interest rates in Russia and probable growth of USD interest rates abroad. By the time USD interest rates started rising in Q4, the Bank had a significant share of floating-rate loans, which allows for favorable projections with regard to anticipated income from interest rate risk management. The Bank’s EUR interest rate risk exposure remained insignificant throughout 2015.

OPERATIONAL RISK

The Bank’s approach to operational risk management is to reduce it to an acceptable level by carrying out measures to prevent situations that could be a source of risk, as well as carrying insuring against operational risks that are beyond its control.

To control the level of operational risk, the Bank coordinates risk management and maintains a database that comprises operational failures and/or resulting financial losses. Based on collected and processed data, the Bank’s management and relevant mid-level management receive suggestions on measures to eliminate sources of heightened operational risk.

In order to minimize the operational risk, a set of measures was devised to reduce the likelihood of events and circumstances leading to operating loss, as well as to reduce (limit) potential operating loss. For the purposes of implementing the above measures, the Bank selected backup sites where backup workstations were set up and equipped for the critical business processes.

BANK SAINT PETERSBURG Annual Report 2015 50 Risk Management

STRATEGIC RISK

To minimize its strategic risk, the Bank, in compliance with its internal procedures, routinely monitors the progress of strategy implementation with feedback mechanisms to update and adjust the strategic goals and priorities, as well as conducts environment analysis, including macroeconomic analysis and competitive analysis.

As part of the strategic risk management program, the Bank has introduced and is successfully promoting a key performance indicator (KPI) management system that is designed to support the link between the strategic and operational levels of planning, as well as a strategic projects system to channel major qualitative changes.

WORKING WITH FOREIGN TAXPAYING CUSTOMERS

In full compliance with current legislation, Bank Saint Petersburg makes all reasonable efforts available under present circumstances to among its customers identify legal entities and individuals that are subject to foreign laws on foreign account taxation (for foreign taxpayer accounts), including Chapter 4 of the US Internal Revenue Code enacted on March 18, 2010 (Foreign Account Tax Compliance Act FATCA).

Bank Saint Petersburg is registered with the US Internal Revenue Service as a Participating Foreign Financial Institution under Global Intermediary Identification Number (GIIN) TQQXV5.99999.SL.643.

The Bank has internal regulations in place, which include criteria for classifying customers as foreign taxpayers and methods for obtaining the relevant information from them. The Bank conducts its customer identification procedures within the time limits stipulated by FATCA. The Bank systematically briefs its employees on various issues related to identifying foreign taxpayers among its customers.

ANTI-MONEY LAUNDERING PROCEDURES

The Bank’s policies and procedures for counteracting money laundering are based on applicable legislation of the Russian Federation. The Bank has developed the necessary internal regulations and procedures to prevent money laundering and financing of terrorism. These procedures are aimed at, among other things, minimizing the risk of the Bank being used as a money-laundering tool, protecting the Bank from financial and reputational risks, and increasing the confidence that banking services are available only for bona fide clients.

The Bank’s procedures for preventing money laundering and financing of terrorism include “Know Your Customer” (KYC) procedures, detecting suspicious transactions, and information storage. All information obtained in the process of counteracting money laundering is confidential, except for cases when it is supplied to the Federal Service for Financial Monitoring in accordance with applicable legislation. The Bank’s employees receive training on counteracting money laundering at least once a year.

The Bank’s Financial Monitoring Service Department monitors client transactions and the activities of all units with regard to compliance with the applicable Russian legislation on counteracting money laundering and financing terrorism.

BANK SAINT PETERSBURG Annual Report 2015 51 Relationships and Responsibility

In 2015, Bank Saint Petersburg executed 7 900 000 transactions for its corporate customers and 8 850 000 for individuals. The Bank is one of the largest employers in the region and always takes an active part in the city’s socially important projects. For instance, the Bank was the title sponsor of the 2015 event Alley of Floating Umbrellas. Relationships and Responsibility

CUSTOMERS

Bank Saint Petersburg is the largest private bank in Northwest Russia. Financial services rendered by the Bank support regional development and sustainable real economy growth, and help individuals to reach their financial targets.

Customer services still constitute the core of the Bank’s business. The Bank has 1 600 000 individual customers and over 56 000 corporate customers. Proximity to customers, high processing speed, and flexibility of decisions remain the traditional advantages of Bank Saint Petersburg in the region. Combined with the introduction of new quality standards for all operations, settlements and services, these factors determine the Bank’s contribution to the social and economic growth of the Russian Northwest.

PROXIMITY TO CUSTOMERS

The Bank continues to develop its branch network in St. Petersburg, creating the most up-to-date and convenient outlets, lending centers and round-the-clock service locations. As at January 1, 2016, the Bank’s customer service network comprises 57 outlets, 7 mortgage lending centers and 3 car lending centers. The numbers of ATMs and POS terminals were increased in the reporting year to 728 and 6 865 respectively.

In 2015, the Bank opened 10 new offices, in which a new approach to business has been realized through an integrated system of organizational and technological innovations. Open space provides proper attention to each client, while spatial zoning is fully aligned with the needs of various customer groups. At the office entrance there is an extended 24-hour self-service zone. The main part of the office is divided into an operational service zone (quick operations), a zone for more time- consuming operations, and the cash-desk zone. There is a comfortable waiting area between these zones. At the same time, individual customer services are provided separately, in a special area away from the main office zones. This Premium Zone is for VIP-client services and there is a special room for confidential meetings.

The Bank is also actively developing its business in the digital environment. 38% of private customers use the Internet Bank. Among the key innovations of 2015 were: WikiPay technology that enables payment of service bills without needing to manually enter a significant amount of details about the recipient’s organization, insurance services for travelers and apartments owners, as well as online subscription and payment of taxes and fines.

75% of corporate customers are users of the i2B Internet Bank, which was launched in 2014. A number of unique features were launched in 2015: a tool was installed for large company groups that enables working with all subsidiary accounts through a single interface; the Bank’s customers can use the Quotation Board service for currency conversion; a complete range of necessary functions were provided to the Bank’s payroll project customers.

BANK SAINT PETERSBURG Annual Report 2015 53 Relationships and Responsibility

HIGH SPEED AND FLEXIBILITY OF THE DECISION-MAKING PROCESS

Closeness to customers, high processing speed and flexibility of decisions remain the traditional advantages of Bank Saint Petersburg in the region.

The Bank introduced its continuously functioning Loan Factory project by fine-tuning the lending process throughout the entire life cycle of a loan, from application review and disbursement of funds to loan follow-up for both individuals and legal entities. In view of the fact that loan product automation is a crucial element of the Loan Factory, the Bank standardized the procedure for automation of newly introduced loan products.

Technological leadership of the Bank guarantees the high-speed of remote services. All Internet Bank services from “three-click deposits” and “two-click cards” to “single-click loans” are easily available to customers. The service is based on the timely creation of personalized offers and pre-completed forms in the channel most convenient for the customer.

The Bank guarantees an individual approach for customers by separating its customer services departments into segments. For instance, the corporate unit contains five dedicated divisions for developing business with clients in various industries. This approach to servicing clients enables the quality of sector expertise to be enhanced and banking services customized to each client’s needs.

HIGH QUALITY SERVICE

Bank Saint Petersburg is striving to become the leading bank in the Northwest Region in terms of service quality and, in view of this strategic goal, continues to improve its procedures for managing service quality. One example is the dedicated Service Quality Management Department created within the Bank. In addition to quality customer services provided by the Bank’s outlets, considerable focus is placed on the technologies that make the Bank’s products and services more user-friendly and accessible to its customers. The convenient service structure spans the entire range of remote banking channels.

A system for monitoring and processing customer queries was also created to allow the Bank to respond to any request as efficiently as possible. The system provides customers with easily accessible feedback channels and handles any type of customer query, including through actual visits to the Bank, phone calls, e-mails, regular mail, as well as comments on the most popular social networks.

New products and services are very popular among the Bank’s customers. Customer feedback allows the Bank to sensitively and flexibly respond to the requirements and wishes of its clients.

The quality of the Bank’s products and services was in 2015 distinguished by a number of federal and regional awards, including the national Russian Financial Elite award for Corporate Bank of the Year. The Bank also received three awards for its e-business achievements at the Customer eXperience Awards Russia 2015: for innovative paper-free mobile banking services; for multichannel and omni- channel retailing; and for best implementation of the customer experience concept in Russia. In addition, the Bank was ranked among the top 5 retail banks in terms of customer service quality at the Retail Finance Awards and won in the category The Best Finance and Credit Company in the Construction Market.

BANK SAINT PETERSBURG Annual Report 2015 54 Relationships and Responsibility

COLLEAGUES

Bank Saint Petersburg provides its employees with the most favorable environment to unlock their potential and ensure their professional growth. In 2015, the Supervisory Board approved the Human Resources (HR) Policy, which is a framework document for human resource management that reflects the management’s current vision of the Bank’s HR development strategy from candidate recruitment, training and career advancement, to staff motivation and corporate culture.

Bank Saint Petersburg is one of the largest employers in the region, with a head count of more than 3 600 employees as of January 1, 2016. Currently 39% of staff work in branch networks and 25% in the Head Office business departments.

STAFF COMPOSITION BY BUSINESS LINE, JANUARY 1, 2016

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STAFF COMPOSITION BY AGE, JANUARY 1, 2016

BANK SAINT PETERSBURG Annual Report 2015 55 Relationships and Responsibility

A BANK FOR THE BEST

The Bank’s success largely depends on its current and future employees. Bank Saint Petersburg aims to recruit only the best banking professionals. The 5.9% growth in the number of employees in 2015 was mainly due to the opening of 10 new offices.

One of the Bank’s efficient recruitment tools was its Future Banker training program for university graduates. 50 of the more than 130 students of St. Petersburg’s leading universities who took part in the program in 2015 received job offers from the Bank. The success of the Bank’s training project, which in 2011 was shortlisted for the HR Brand Award, is evident in the interest demonstrated both by graduates determined to pursue a career with the Bank and by the Bank’s departments that are willing to fill their vacancies with ambitious young alumni of the corporate training program.

The Bank uses dedicated Internet platforms (HH.ru, linkedIn.com, vk.com) to promote its employer image and to find and recruit candidates. The Bank also communicates with potential job applicants by participating in dedicated forums, job fairs and roundtables, such as Professional Advancement and Choose the Future.

THE YEAR OF PERSONNEL

According to its employees and job applicants, one of the competitive advantages of Bank Saint Petersburg as an employer is its strong corporate culture. The Bank’s corporate culture is based on the corporate values of: proactive attitude, customer-oriented approach, efficiency and partnership. These values were adopted together with the High Culture Banking slogan during the 2011 rebranding. Since 2011, the corporate culture has been developing in two directions. These are the culture of quality, based on service quality, and the culture of results, based on performance assessment principles.

Bank Saint Petersburg declared 2015 as the Year of Personnel, promoting a new culture of recognition, with the Bank recognizing best achievement, showing appreciation of results, cooperation and support, and publicly distinguishing outstanding performance. These principles were the cornerstone of all corporate events and activities dedicated to the Year of Personnel, including the Bank’s anniversary celebrations.

The culture of recognition was initially launched at the winter corporate event organized for the Bank’s management, following which more than 400 of the Bank’s employees took part in the Scaling New Heights events held in St. Petersburg, Moscow and Kaliningrad.

The Top of Mind interactive platform serves as a basis for the development program for middle management, allowing its participants to enhance their management skills.

The automated Bank of Gifts system of additional incentives on the corporate Intranet is used to distinguish outstanding achievements and best employees of the Bank’s branches. At the end of each quarter, the list of the top 10 employees in retail and corporate sales of the Bank’s products is published on the Intranet. A total of 600 employees of the Bank’s branch network took part in the Bank of Gifts program in 2015.

A survey held at the end of 2015 revealed 5% growth in employee engagement (to 73%) and an increase more than 1.5 times in the number of retail employees exceeding their sales targets as compared with 2014.

BANK SAINT PETERSBURG Annual Report 2015 56 Relationships and Responsibility

THE BANK INSPIRES GROWTH

The Human Resources Policy laid the groundwork for 12 employee rules for defining the principles of successful staff development in Bank Saint Petersburg, and facilitating performance and career advancement.

One of the 12 rules, Develop yourself and others, most closely reflects the Bank’s view with regard to staff training. As in previous years, the Year of Personnel demonstrated an increase in the numbers of training programs and their participants, with 47% of headquarters staff taking part in 500 events. The number of training events focused on various products/services and the development of management skills has gained more than 40% since the previous year.

In 2015, in addition to internal modular training programs, middle managers in headquarters and outlet offices completed the Management Competencies training program, designed specifically for the Bank in 2012 and conducted by leading business school professionals.

A total of 438 training events revolving around banking products, services and sales skills were held in 2015 for the employees of the Bank’s branch network, 80% of which were organized internally. 98% of the average number of staff of outlet offices went through knowledge testing. The training in banking products and services involves internal coaches who are professional and successful employees sharing their knowledge with others. The growing number of training programs targeted at outlet network employees is related both to changes in the associated role models and new outlets being opened, as well as to special-purpose training events.

Seven Steps to Success. Genesis is a new project aimed at maintaining the high level of proactive sales and quality of customer service demonstrated by the employees of the Bank’s branch network. Approximately 300 employees and managers of outlet offices participated in the project in 4Q 2015.

144 managers of the outlets took part in competency testing held in the form of an assessment center, currently one of the most accurate methods for competency assessment. The results showed an improvement in competencies of the Bank’s management.

The new and unique Nest training project introduced by the Bank allows the heads of retail offices to implement various projects under the guidance of the Bank’s top managers, learning from their vast management experience.

The most promising, active and talented employees of the Bank’s branch network take part in the Bench Strength program with the aim of developing corporate and management competencies. The program gives a head start for professional growth and career development. The best program participants enter the pool of candidates to receive further training and subsequently fill the Bank’s key vacancies.

Many current Bench Strength participants from the retail business have substantial mentorship experience. Each retail office employee is trained by an assigned mentor, a technique facilitating the onboarding process, improving service quality and enhancing banking product sales. Having shown itself to be highly effective, mentorship is now also practised at Headquarters, in particular, at the Call Centre of the Retail Business Department and in the Bank’s Back Office.

BANK SAINT PETERSBURG Annual Report 2015 57 Relationships and Responsibility

COMMUNITY

Bank Saint Petersburg attaches great importance to the successful development of the Russian Northwest, strictly adhering to social responsibility principles in its business operations. As the largest private bank in the region, Bank Saint Petersburg never distances itself from socially significant projects in the region, but rather taking an active part in them.

The Bank pays particular attention to the following three groups of social responsibility initiatives: supporting underprivileged children, protecting the environment, and encouraging financial awareness.

CHARITY AND SPONSORSHIP

In 2015, the Bank continued its long-term aid program for Kolpino Foster Care Centre No. 27. The project started in 2006 when the Bank joined Board of Trustees of this institution. In addition to improving the Centre’s facilities and infrastructure, the Bank also offers the children additional vocational training, healthcare and leisure activities. The Bank regularly provides incentives for talented teachers of the Centre.

Bank Saint Petersburg is actively involved in implementing socially important charity programs in the city. For nearly 10 years, the Bank has been supporting the Helping Homeless Dogs Charity Foundation.

Fittingly for its High Culture Banking slogan, Bank Saint Petersburg continues to support important cultural initiatives in the city. Already for the fourth time, the Bank in 2015 became the title partner of the traditional St. Petersburg Museum Night, one of the city’s most spectacular annual cultural events. More than 100 000 people visited participating museums, which is a record number of visitors for the event.

The Bank was the title sponsor of the 2015 Alley of Floating Umbrellas event, in which an installation of hundreds of multi-colored umbrellas were positioned on one of the central streets of St. Petersburg to form a bright unified composition. For one month, the Alley of Floating Umbrellas became a venue for city events, master classes, concerts and exhibitions.

The Opera for Everyone International Festival, another landmark project of the year, showcased various masterpieces of classical opera. It gave local residents and visitors of St. Petersburg the chance to enjoy open-air performances of some of the most popular world operas against the backdrop of the city’s famous architectural complexes completely free of charge.

Bank Saint Petersburg acted as the title sponsor of Message to Man, the city’s largest and most long- established film festival which featured more than 200 documentary, animated, experimental and short films.

Through unique immersive technology, the high-tech multimedia exhibitions Monet to Cézanne and Van Gogh Alive supported by the Bank turned regular art exhibitions into unforgettable sensory experiences.

The Bank was a proud partner of the opening of the Victory Arch, a special commemorative event held in Krasnoye Selo on the Victory Day of May 9, 2015.

A an alley of 25 chestnut trees was planted in the park adjacent to the Bank’s headquarters to mark the Bank’s 25th Anniversary.

BANK SAINT PETERSBURG Annual Report 2015 58 Relationships and Responsibility

EMPLOYEE VOLUNTEER INITIATIVES

In addition to its traditional charity events, the Bank has since 2012 supported its employees in their own volunteer projects. During 2015, more than 500 Bank employees volunteered for a number of important charity projects including:

§§ White Flower and Dreams Come True projects supporting a children’s hospice; §§ assisting a junior whitewater slalom club; §§ volunteer classes and workshops held in foster homes; §§ New Year gift collection and holiday event for the children of the Sortavala Orphanage; §§ charity auction selling items handcrafted by the Bank’s employees for the benefit of Kolpino Foster Care Centre No. 27.

ENVIRONMENTALLY RESPONSIBLE LENDING

Bank Saint Petersburg cooperates with a wide range of enterprises in St. Petersburg in order to support environmentally-oriented projects.

For instance, the Bank issued a guarantee to Lenmontazh LLC for completion of a government contract for capital repair of a cultural heritage site, the Rzhevsky (Okhtinsky) Hydroengineering Complex dam on the Bolshaya Okhta River, as ordered by the St. Petersburg Committee for Natural Resources Management, Environment Protection and Environmental Safety.

Another example of environmental projects is the guarantee securing the obligations of OJSC TSP under a contract for construction of a processing plant to neutralize toxic agents in landfill gas (biogas) and transforming the biogas into electric power. The plant is under construction on the site of the Novy Svet-Eco solid domestic waste landfill in Novy Svet settlement of the Gatchina District (Leningrad Region).

SOCIALLY-ORIENTED PROJECTS

Bank Saint Petersburg provides loans to St. Petersburg enterprises and issues guarantees to secure the performance of contracts under projects that are socially-oriented and aimed at solving socio- economic problems of the region.

For instance, in 2015 the Bank issued a guarantee to Metrostroy-2 OJSC to secure the performance of a contract for construction of the St. Petersburg subway line from Spasskaya station to Morskoy Fasad station for the amount of RUB 2.1 bn, as well as a contract for maintenance and repair of St. Petersburg Dam engineering infrastructure amounting to RUB 0.7 bn.

One of the landmarks of 2015 was the loan agreement with Global BUS LLC (authorized dealer of MAZ OJSC) for the purposes of delivery of 80 new large-capacity single-section low-deck buses to Passazhiravtotrans State Unitary Enterprise, which will enable Passazhiravtotrans to promptly upgrade its entire fleet in time for the 2018 FIFA World Cup.

BANK SAINT PETERSBURG Annual Report 2015 59 Relationships and Responsibility

The Bank issued a guarantee to Vozrozhdenie Peterburga LLC to secure the performance of contracts for a total amount of more than RUB 150 mln, including restoration and repair works of a number of historical sites including St. Isaac’s Cathedral and Gatchina Palace.

The Bank also signed a loan agreement with Groteks LLC (pharmaceutical factory Solopharm) for investment loan granting of RUB 1.7 bn for 5 years with the aim of increasing the enterprise’s capacity within existing technology of aseptic filling to ensure double growth in production volumes.

In 2015, the Bank also granted loans to Basseiny LLC for implementation of the strategic investment project of St. Petersburg for construction of three indoor swimming pools.

With its expertise in the retail sphere and a reputation as a reliable partner, Bank Saint Petersburg renders products and services that are in high demand and have a major social impact. This includes mortgage loans, the maternity (family) capital payments scheme, the social security payments scheme and the pension scheme.

The Bank is involved in targeted citywide programs such as “Affordable Housing for the Young” and “Development Long-Term Housing Finance in St. Petersburg”, striving to make borrowing convenient and affordable for private customers.

For the past 14 years the Bank has been issuing and servicing the “Newborn” and “Preschool” social benefits cards to which child benefit payments are credited, and which can subsequently be used to make payments for baby and childcare products in specialized stores. As of January 1, 2016, 223 000 “Newborn” and “Preschool” cards had been issued.

Since 2011, under an agreement with the Pension Fund of the Russian Federation, the Bank pays out pensions not only to St. Petersburg pensioners but also to individuals living in the Leningrad Region. As of January 1, 2016, more than 11 300 pensioners had received the Bank’s cards.

Bank Saint Petersburg is fully aware of the importance of building a healthy social environment in the city of St. Petersburg and in the Northwest of Russia, and will continue to be actively involved in the social life of the city by implementing its traditional charity projects and encouraging employees’ volunteer initiatives.

BANK SAINT PETERSBURG Annual Report 2015 60 Corporate Governance

Exceptional efficiency is demonstrated at all corporate governance levels, and in every department and branch. One example is the Bank’s Moscow Branch focus on large corporate customers and VIP clients, which with a high level of efficiency maintains a staff number of 80, exceptionally small for the scale of its business. Corporate Governance

CORPORATE GOVERNANCE

Upgrading corporate governance in line with best practice is one of the Bank’s key tasks. Strictly observing the rights of shareholders, internal control and auditing procedures, a high level of transparency and information disclosure, as well as maintenance of efficient management bodies ensure customer confidence and the maximum efficiency of shareholders investments.

The following internal Bank documents regulate corporate governance:

§§ The Charter, as approved by a resolution of the General Shareholders Meeting held on 19.06.2014 (including subsequent amendments); §§ The Policy on the Supervisory Board, as approved by the General Shareholders Meeting held on 18.06.2015; §§ The Policy on the Management Board, as approved by the General Shareholders Meeting on 19.06.2014; §§ The Policy on the Strategy Committee of the Supervisory Board, as approved by a resolution of the Supervisory Board on 23.07.2015; §§ The Policy on the Appointments and Remuneration Committee of the Supervisory Board, as approved by a resolution of the Supervisory Board on 31.07.2014; §§ The Policy on the Audit Committee of the Supervisory Board, as approved by a resolution of the Supervisory Board on 27.01.2015; §§ The Policy on the Risk Management Committee of the Supervisory Board, as approved by a resolution of the Supervisory Board on 31.07.2014; §§ The Policy on the Corporate Secretary, as approved by a resolution of the Supervisory Board on 19.06.2014; §§ The Policy on the Revision Committee, as approved by the General Shareholders Meeting held on 28.04.2011.

CORPORATE GOVERNANCE STRUCTURE, JANUARY 1, 2016

General Shareholders Meeting

Revision Auditors Committee

Strategy Committee Internal Audit Service Appointments and Remuneration Committee Supervisory Board Audit Committee Corporate Secretary Service Risk Management Committee

Management Board

BANK SAINT PETERSBURG Annual Report 2015 62 Corporate Governance

THE GENERAL SHAREHOLDERS MEETING

The General Shareholders Meeting is the Bank’s supreme governing body which makes decisions on key issues related to the Bank’s activities, as established by the Federal law “On Joint Stock Companies” and the Bank’s Charter.

The Bank must hold the Annual General Shareholders’ Meeting every year. The Annual General Shareholders’ Meeting is held on the dates determined by the Charter, but no earlier than two months and no later than six months following the end of the fiscal year.

According to Russian legislation, the Bank may also convene extraordinary General Shareholders’ Meetings.

Two General Shareholders’ Meetings were held by the Bank in 2015.

The annual General Shareholders’ Meeting held on June 18, 2015 passed the following resolutions:

§§ Approving the Annual Report and the Annual Financial Statements, including the income statement and profit distribution based on the results for 2014; §§ Paying 2014 dividends; §§ Paying remuneration to members of the Bank’s Supervisory Board; §§ Compensation to the members of the Bank’s Supervisory Board for costs incurred while acting in their professional capacities; §§ Approving the related party transactions; §§ Approving FBK LLC as the Bank’s Auditor for 2015 RAS reporting; §§ Determining the quantitative membership of the Bank’s Supervisory Board and electing members; §§ Electing the Bank’s Revision Committee; §§ Approving the Amendments No.3 to the Charter, the Regulations on the Supervisory Board as amended and restated, the Regulations on the Annual General Shareholders’ Meeting, the Regulations on Remunerations and Compensations paid to the members of the Supervisory Board.

Due to Bank Saint Petersburg’s participation in the state capitalization support program for credit institutions, as implemented by Deposit Insurance Agency State Corporation (DIA), an extraordinary General Shareholders Meeting held on September 8, 2015 passed the following resolutions:

§§ Allocation of at least 75% of net profit towards equity increase, until the increase in equity amounts to at least 50% of the amount of subordinated obligations owed by the Bank to DIA, or until the equity increase obligations are executed through additional contributions made by the Bank’s shareholders and/or third parties to pay up the Bank’s shares.

§§ Limitation of remunerations for members of the Supervisory Board for 3 years from the date that the Bank receives Federal Loan Bonds from DIA, or until the increase in equity amounts to at least 50% of the amount of subordinated obligations owed to DIA.

BANK SAINT PETERSBURG Annual Report 2015 63 Corporate Governance

THE SUPERVISORY BOARD

The Supervisory Board is responsible for the general management of the Bank’s activities, except for issues that fall under the competency of the General Shareholders’ Meeting. The Supervisory Board determines the strategic priorities for the Bank’s activity and controls the functioning of the executive management bodies. According to a resolution of the 2015 General Shareholders’ Meeting, the Supervisory Board is made up of 9 members.

Alexander V. Savelyev is the Chairman of the Supervisory Board and has been a member of the Supervisory Board since 2001. Mr. Savelyev acted as Chairman of the Bank’s Management Board from January 2001 to August 2014. His previous experience includes Deputy Chairman of the Management Boards of Petrovsky Commercial Bank and Baltoneximbank. Mr. Savelyev was born in 1954. He is a graduate of the Kazan Aviation Institute.

Mr. Savelyev owns 23.70% of the Bank’s ordinary shares. His holding in the Bank’s charter capital is 22.83%.

Elena V. Ivannikova is Deputy Chairperson of the Supervisory Board and has worked in the Bank since 2001. Previously, she worked as the Chief Accountant at the Petrovsky Commercial Bank and Baltoneximbank. Mrs. Ivannikova was born in 1965. She is a graduate of the Kiev Institute of Peoples’ Economy.

Mrs. Ivannikova owns 0.65% of the Bank’s ordinary shares. Her holding in the Bank’s charter capital is 0.63%.

Susan Gail Buyske joined the Bank’s Supervisory Board in April 2012. Mrs. Buyske has served as a non-executive director and chair of the risk and audit committee for a number of banks, as well as consulting on financial sector development issues for the World Bank, IFC, and others. She has also been Vice President at JPMorgan Chase. Mrs. Buyske was born in 1954. She is a graduate of Middlebury College, Princeton University and Columbia University, and holds a PhD in political science.

Mrs. Buyske owns no Bank shares.

Andrey P. Bychkov has been a member of the Supervisory Board since April 2010. At present, Mr. Bychkov is the Deputy Director of the Financial Institutions Department at the Bank of Development and Foreign Trade (Vneshekonombank) State Corporation. Mr. Bychkov was born in 1961. He is a graduate of Moscow State University and the Russian Academy of Economics.

Mr. Bychkov owns no Bank shares.

Alexey A. Germanovich has been a member of the Supervisory Board since June 2014. Mr. Germanovich currently acts as Advisor to the CEO of Upravleniye Investitsiyami CJSC and is a member of the Management Board of the St. Petersburg State University Development Endowment Fund and the Board of Directors of E.ON Russia JSС. Mr. Germanovich was born in 1977. He is a graduate of Moscow State University and Cranfield University (UK).

Mr. Germanovich owns no Bank shares.

BANK SAINT PETERSBURG Annual Report 2015 64 Corporate Governance

Vladislav S. Guz is the Chairman of the Management Board and has been a member of the Supervisory Board since June 2014. Mr. Guz has acted as First Deputy Chairman of the Management Board since 2009 and Deputy Chairman of the Management Board since 2004. His previous experience includes working in the St. Petersburg branch of Alfa-Bank as First Deputy Director of the branch and Executive Director (from December 1996 till September 2003). Mr. Guz was born in 1967. He is a graduate of the Leningrad State University. Mr. Guz holds a PhD in economics.

Mr. Guz owns no Bank shares.

Andrey T. Ibragimov has been a member of the Bank’s Supervisory Board since December 2005. From July 2002 to April 2004, Mr. Ibragimov worked in the capacity of the Bank’s Deputy Management Board Chairman and was the Director of the Legal Department. Currently, Mr. Ibragimov is the General Director of Musin, Ibragimov and Partners CJSC law firm. Mr. Ibragimov was born in 1954. He is a graduate of the KGB Higher School.

Mr. Ibragimov’s holding in the Bank’s charter capital is 0.0000022%.

Alexander I. Polukeyev was a member of the Bank’s Supervisory Board from December 2005 to April 2008. He has held this position again since June 2014. From May 2006 to February 2009, he held the position of Vice Governor of St. Petersburg. Mr. Polukeyev was born in 1948. He is a graduate of Riga Civil Aviation Engineering Institute and North-West Academy of Public Administration. Mr. Polukeyev holds a PhD in economics.

Mr. Polukeyev’s holding in the Bank’s charter capital is 0.0000022%.

Alexander V. Pustovalov joined the Bank’s Supervisory Board in April 2012. He has been Chairman of the Audit Committee since April 2013. In 1992-2005, Mr. Pustovalov worked for the Industry and Construction Bank (which later became VTB North-West), successively serving as Head of Department, Director, and Chairman of the Management Board. Starting in 2005, he has held the position of Vice President at OJSC “Bank of Moscow”. Between 2008 and 2012, Mr. Pustovalov was Deputy Chairman of the Management Board at the Northwest Bank of the Savings Bank of the Russian Federation (Sberbank). Current positions include CEO and member of the Board of Directors of Evolyutsiya Investment Group CJSC, and Chairman of the Board of Directors of Malaya Okhta Management Company LLC. Mr. Pustovalov was born in 1967. He is a graduate of St. Petersburg State University.

Mr. Pustovalov owns no Bank shares.

In accordance with corporate governance best practices, the Board includes fore independent directors: Alexey A. Germanovich, Andrey T. Ibragimov, Alexander I. Polukeyev, and Alexander V. Pustovalov. These directors positively contribute to the Board’s functioning with their experience and professionalism.

In 2015, members of the Supervisory Board made no transactions with the Bank’s shares.

BANK SAINT PETERSBURG Annual Report 2015 65 Corporate Governance

DETERMINATION CRITERIA AND LEVEL OF REMUNERATION FOR MEMBERS OF THE SUPERVISORY BOARD

Based on a decision of the General Shareholders Meeting, members of the Bank’s Supervisory Board may be entitled to remuneration and compensation for costs related to performing their functions as members of the Supervisory Board. This remuneration and compensation is set by the General Shareholders’ Meeting.

According to a resolution of the General Shareholders’ Meeting held on June 18, 2015, remuneration paid to members of the Supervisory Board for the year 2014 stood at RUB 35.9 mln. Respective Committee meeting participation was also factored in when calculating the remuneration amounts for the members of the Supervisory Board.

THE STRATEGY COMMITTEE

The Strategy Committee is not a management body of the Bank. Members of the Committee are appointed by the Supervisory Board. Current Committee members are: Alexander V. Savelyev (Chairman of the Committee), Vladislav S. Guz, Alexey A. Germanovich, and Andrey T. Ibragimov.

The main task of the Strategy Committee is to assist the Supervisory Board in determining the long- and mid-term strategy of the Bank and its business priorities, as well as to review the Bank’s major innovation and investment projects.

THE APPOINTMENTS AND REMUNERATION COMMITTEE

The Appointments and Remuneration Committee is not a management body of the Bank. Members of the Committee are appointed by the Supervisory Board. Current Committee members are: Elena V. Ivannikova (Chairman of the Committee), Andrey T. Ibragimov, and Alexander V. Pustovalov.

The main task of the Appointments and Remuneration Committee is to provide recommendations to the Supervisory Board with regard to candidates for key management positions, as well as to establish the principles and criteria for determining the amounts of remuneration for the Bank’s key management and staff.

THE AUDIT COMMITTEE

The Audit Committee is not a management body of the Bank. Members of the Committee are appointed by the Supervisory Board. Current Committee members are: Alexander V. Pustovalov (Chairman of the Committee), Andrey P. Bychkov, and Alexey A. Germanovich.

The main task of the Audit Committee is to assist the Supervisory Board in controlling the Bank’s operations. The Committee verifies the integrity and accuracy of financial reporting, and preparation and presentation of the financial statements, examines the functioning of the internal control and audit systems, and issues recommendations for the Supervisory Board.

THE RISK MANAGEMENT COMMITTEE

The Risk Management Committee is not a management body of the Bank. Members of the Committee are appointed by the Supervisory Board. Current Committee members are: Susan Gail Buyske (Chairperson of the Committee), Andrey P. Bychkov, and Elena V. Ivannikova.

The principal task of the Risk Management Committee is to assist the Bank’s Supervisory Board in defining the Bank’s priorities related to its exposures and creating the conditions required for proper risk management.

BANK SAINT PETERSBURG Annual Report 2015 66 Corporate Governance

THE MANAGEMENT BOARD

The Bank’s ongoing operations are managed by the Chairman of the Management Board as its sole executive body, and the Management Board as its collegial executive body. As of January 1, 2016, the Bank’s Management Board consists of 9 members.

Vladislav S. Guz is the Chairman of the Management Board and has been a member of the Supervisory Board since June 2014. Mr. Guz has acted as First Deputy Chairman of the Management Board since 2009, and Deputy Chairman of the Management Board since 2004. His previous experience includes working in the St. Petersburg branch of Alfa-Bank as First Deputy Director of the branch and Executive Director (from December 1996 till September 2003). Mr. Guz was born in 1967. He is a graduate of Leningrad State University. Mr. Guz holds a PhD in economics.

Mr. Guz owns no Bank shares.

Alexander S. Konyshkov has been First Deputy Chairman of the Management Board since July 2014 and has two decades of experience in the banking sector. Before joining Bank Saint Petersburg, Mr. Konyshkov worked for Raiffeisenbank, managing all of the bank’s operations in the Northwestern Federal District. Prior to that, he was in charge of corporate and international businesses of Dresdner Bank and headed the St. Petersburg Branch of the International Moscow Bank. Mr. Konyshkov was born in 1970. He is a graduate of St. Petersburg University of Economics and Finance.

Mr. Konyshkov owns no Bank shares.

Vladimir P. Skatin has been Deputy Chairman of the Management Board since 2008 and has been First Deputy Chairman of the Management Board since 2009. His career at JSC Industry and Construction Bank (which later became VTB North-West) was launched in 1995 as Deputy Chairman of the Management Board. In 2001, he was appointed First Deputy Chairman of the Management Board and during 2006-2007 he served as the Chairman of the Management Board. Mr. Skatin was born in 1956. He is a graduate of Leningrad Polytechnic Institute and St. Petersburg State University for Economics and Finance. Mr. Skatin holds a PhD in economics.

Mr. Skatin owns no Bank shares.

Konstantin Y. Balandin has been Deputy Chairman of the Management Board since January 2008. Mr. Balandin has worked for the Bank since 2000. From 1996 till 2000, he worked in the Treasury Department of the Industry and Construction Bank. Mr. Balandin was born in 1976. He is a graduate of the Economics Department of St. Petersburg State University. Mr. Balandin holds a PhD in economics and a Qualification Certificate issued by the Federal Commission for the Securities Market.

Mr. Balandin owns 0.02% of the Bank’s ordinary shares. His holding in the Bank’s charter capital is 0.02%.

Pavel V. Filimonenok has been Deputy Chairman of the Management Board since 2003. Mr. Filimonenok joined the Bank in 2001 and worked as Director of the Retail Business Department from August 2003 until June 2007. In May 2009 he was appointed Chairman of the Board of Directors of CJSC “Kompyuterniye sistemy dlya biznesa”. His previous positions include Deputy Director of the Plastic Cards Department in the Petrovsky Commercial Bank. Mr. Filimonenok was born in 1971. He is a graduate of the St. Petersburg Institute of Precision Mechanics and Optics.

BANK SAINT PETERSBURG Annual Report 2015 67 Corporate Governance

Mr. Filimonenok owns 0.005% of the Bank’s ordinary shares. His holding in the Bank’s charter capital is 0.005%. Mr. Filimonenok also holds a 100% interest in LAZORIA LIMITED, which in turn owns 100% of ZERILOD HOLDINGS LIMITED. ZERILOD HOLDINGS LIMITED owns 26.576% of the charter capital of “Verniye Druzya” Management Company LLC. Verniye Druzya Management Company LLC owns 28.74% of the Bank’s ordinary shares and holds a 27.68% interest in the Bank’s share capital.

Vladimir K. Likhodievsky has been Deputy Chairman of the Management Board since April 2015. He has been Advisor of the Chairman of the Management Board of the Bank since February 2015. Mr. Likhodievsky worked in the Minsk department of Belvnesheconombank from 1995 to 2008. He was Deputy Chairman of the Management Board of CJSC VTB Bank (Belarus) from 2008 to 2015. Mr. Likhodievsky was born in 1968. He graduated from Minsk Radiotechnical Institute and Belarus State Economic University.

Mr. Likhodievsky owns no Bank shares.

Kristina B. Mironova has been Deputy Chairman of the Management Board since September 2013, having joined Bank Saint Petersburg in 2002. Her previous positions include Deputy Director of the Moscow Branch, Director of Investor Relations, and Director of the Customer Monitoring Department. Mrs. Mironova was born in 1980 and graduated from St. Petersburg University for Economics and Finance.

Mrs. Mironova holds a 100% interest in ZUGRADIA ENTERPRISES LIMITED, which in turn owns 100% of NOROYIA ASSETS LIMITED. NOROYIA ASSETS LIMITED owns 26.578% of the charter capital of Verniye Druzya Management Company LLC. Verniye Druzya Management Company LLC owns 28.74% of the Bank’s ordinary shares and holds a 27.68% interest in the Bank’s share capital.

Vladimir G. Reutov has been Deputy Chairman of the Management Board since 2006, having joined Bank Saint Petersburg in 2001. Mr. Reutov has been a member of the Exchange Committee of the St. Petersburg Currency Exchange since May 2006. He is a member of the Board of Directors of JSCB Zarechye, as well as a member of NSMA’s Board and a member of the Supervisory Board of National Settlement Depository. In 2008-2011 he served as a member of the Board of Directors of CJSC Moscow Interbank Currency Exchange. From 2009 to 2011 he was a Board member at the CJSC MICEX Stock Exchange. Mr. Reutov was born in 1963. He is a graduate of the Leningrad Shipbuilding Institute, the International Banking Institute and St. Petersburg State University.

Mr. Reutov owns 0.003% of the Bank’s ordinary shares. His holding in the Bank’s charter capital is 0.003%. Mr. Reutov also holds a 100% interest in MAGNONIA VENTURES LIMITED, which in turn owns 100% of CARISTAS LIMITED. CARISTAS LIMITED owns 26.576% of the charter capital of Verniye Druzya Management Company LLC. Verniye Druzya Management Company LLC owns 28.74% of the Bank’s ordinary shares and holds a 27.68% interest in the Bank’s share capital.

Oksana Sivokobilska has been Deputy Chairperson of the Board since November 2011. From April 2011, she served as Vice President-Director of the Bank’s Strategic Development Division. From 1998 to 2007, she worked as the head of the Marketing Division of Hansabanka in Latvia (which was later renamed Swedbank). From 2007 till 2010, she headed up the retail division of Swedbank in Latvia. From 2010 till 2011, Mrs. Sivokobilska was in charge of business development for Swedbank in the Baltic Region. She was born in 1973 and graduated from the Economics Department of the Latvian State University with a Masters in economics.

Mrs. Sivokobilska owns 0.03% of the Bank’s ordinary shares. Her holding in the Bank’s charter capital is 0.03%.

In 2015, members of the Management Board made no transactions with the Bank’s shares.

BANK SAINT PETERSBURG Annual Report 2015 68 Corporate Governance

SHAREHOLDERS EQUITY STRUCTURE

As of January 1, 2016, the Bank’s charter capital was RUB 459 654 000 and consisted of 439 554 000 ordinary shares with a nominal value of 1 ruble per share and 20 100 000 preferred shares with a nominal value of 1 ruble per share. All issued shares have been paid in full.

SHAREHOLDERS EQUITY STRUCTURE (ORDINARY SHARES), JANUARY 1, 2016

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REGISTRAR

The Bank’s Registrar is Joint-Stock Company Independent Registrar Company (JSC Independent Registrar Company).

Location and mailing address of the company JSC Independent Registrar Company:

8 Ivan Franko Street, Moscow, Russia, 121108. Telephone: +7 /495/ 926 8160

The St. Petersburg Branch:

6 Belovodskiy Street, St. Petersburg, Russia, 194044 Telephone: +7 /812/ 401 6312, +7 /812/ 401 6310

The AeroAvkar Branch:

212A Moskovsky prospect, St. Petersburg, Russia, 196066 Telephone: +7 /812/ 371 9868 www.nrcreg.ru

License Data:

§§ Number: 045-13954-000001; §§ Issue Date: 06.09.2002; §§ Issuing Authority: The Central Bank of the Russian Federation; §§ Term: indefinite.

BANK SAINT PETERSBURG Annual Report 2015 69 IFRS Financial Statements for FY 2015

In 2015, Bank Saint Petersburg completed the integration of Bank Evropeisky (Kaliningrad), reorganizing it together with the Bank’s Kaliningrad Branch into a new Evropeisky Branch. The first ever acquisition in the Bank’s history was a tremendous success. The share of Evropeisky Branch in the Bank’s FY 2015 fee and commission income amounted to 9%. SUMMARY CONSOLIDATED FINANCIAL STATEMENTS DERIVED FROM THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015

BANK SAINT PETERSBURG Annual Report 2015 71 PJSC “Bank Saint Petersburg” Group Summary Consolidated Statement of Financial Position as at 31 December 2015

In thousands of Russian Roubles 2015 2014 ASSETS Cash and cash equivalents 36 558 917 57 240 622 Mandatory reserve deposits with the Central Bank of the Russian Federation 2 388 138 3 290 084 Trading securities 13 193 472 205 425 Securities pledged under sale and repurchase agreements and loaned 70 314 051 39 138 709 Amounts receivable under reverse repurchase agreements 15 220 590 29 511 109 Due from banks 35 122 584 29 264 470 Loans and advances to customers 335 302 100 315 338 995 Investment securities available-for-sale 27 849 192 9 259 393 Prepaid income tax 412 959 819 399 Deferred tax asset 449 - Investment property 3 162 532 1 591 433 Premises, equipment and intangible assets 14 476 946 14 535 188 Other assets 7 539 787 20 078 295 Long-term assets held for sale 992 859 1 327 028 TOTAL ASSETS 562 534 576 521 600 150 LIABILITIES Due to banks 135 833 080 102 596 690 Customer accounts 325 961 928 308 481 731 Bonds issued 19 200 016 23 864 107 Other debt securities issued 17 441 146 16 405 964 Other borrowed funds 2 642 299 5 671 179 Deferred tax liability 2 809 073 1 293 069 Other liabilities 1 863 550 11 993 069 TOTAL LIABILITIES 505 751 092 470 305 809 EQUITY Share capital 3 721 734 3 696 674 Share premium 21 393 878 21 393 878 Revaluation reserve for premises 3 820 496 3 901 555 Revaluation reserve for investment securities available-for-sale 1 596 286 (433 894) Retained earnings 26 251 090 22 736 128 TOTAL EQUITY 56 783 484 51 294 341 TOTAL LIABILITIES AND EQUITY 562 534 576 521 600 150

Approved for issue and signed on behalf of the Management Board on 21 March 2016.

V.S. Guz N.G. Tomilina Chairman of the Management Board Chief Accountant

The summary consolidated financial statements should be read in conjunction with the consolidated financial statements from which they were derived.

BANK SAINT PETERSBURG Annual Report 2015 72 PJSC “Bank Saint Petersburg” Group Summary Consolidated Statement of Comprehensive Income for the Year Ended 31 December 2015

In thousands of Russian Roubles 2015 2014 Interest income 50 793 475 38 760 300 Interest expense (33 315 993) (20 249 404)

Net interest income 17 477 482 18 510 896 Provision for loan impairment (12 293 143) (7 285 909)

Net interest income after provision for loan impairment 5 184 339 11 224 987 Net gains (losses) from trading securities 839 259 (4 343 701) Net gains from investment securities available-for-sale 474 793 265 091 Net gains from trading in foreign currencies 1 434 816 671 620 Net gains from foreign exchange translations 7 609 030 4 412 461 Net losses from derivatives (4 178 591) (1 128 118) Fee and commission income 4 772 338 4 420 587 Fee and commission expense (730 028) (699 945) (Provision for) recovery of impairment for credit related commitments (134 901) 8 850 Impairment of investment property - (53 442) Recovery of impairment of premises - 188 Gain from acquisition of subsidiary - 488 587 Other net operating income 317 438 440 575 Administrative and other operating expenses: - Staff costs (4 473 777) (4 477 139) - Costs related to premises and equipment (1 328 500) (1 247 321) - Other administrative and operating expenses (5 039 192) (3 934 654)

Profit before tax 4 747 024 6 048 626 Income tax expense (1 128 509) (1 252 952)

Profit for the year 3 618 515 4 795 674

Other comprehensive income (loss) Items that are or will be reclassified subsequently to profit or loss: Revaluation of investment securities available-for-sale transferred to profit or loss upon disposal (727 652) (372 323) Gain (loss) from revaluation of investment securities available-for-sale 3 265 377 (669 638) Deferred income tax recognised in equity related to components of other comprehensive income (507 545) 208 393 Items that will not be reclassified subsequently to profit or loss: Revaluation of premises - 757 799 Deferred income tax recognised in equity related to components of other comprehensive income - (151 560) Other comprehensive income (loss) for the year, net of income tax 2 030 180 (227 329)

Total comprehensive income for the year 5 648 695 4 568 345

Basic and diluted earnings per share (in Russian Roubles per share) 8.33 10.93

The summary consolidated financial statements should be read in conjunction with the consolidated financial statements from which they were derived.

BANK SAINT PETERSBURG Annual Report 2015 73 PJSC “Bank Saint Petersburg” Group Summary Consolidated Statement of Changes in Equity for the Year Ended 31 December 2015

Revaluation reserve for investment Revaluation securities In thousands of Russian Share Share reserve for available- Retained Roubles capital premium premises for-sale earnings Total equity Balance as at 1 January 2014 3 721 734 21 393 878 3 339 031 399 674 18 821 638 47 675 955

Other comprehensive income (loss) recognised in equity - - 606 239 (833 568) - (227 329) Profit for the year - - - - 4 795 674 4 795 674 Disposal of premises - - (43 715) - 43 715 - Total comprehensive income for the year ended 31 December 2014 - - 562 524 (833 568) 4 839 389 4 568 345

Purchase of treasury shares (25 060) - - - (874 337) (899 397) Dividends declared - ordinary shares - - - - (48 351) (48 351) - preference shares - - - - (2 211) (2 211) Balance as at 31 December 2014 3 696 674 21 393 878 3 901 555 (433 894) 22 736 128 51 294 341

Other comprehensive income recognised in equity - - - 2 030 180 - 2 030 180 Profit for the year - - - - 3 618 515 3 618 515 Disposal of premises - - (81 059) - 81 059 - Total comprehensive income for the year ended 31 December 2015 - - (81 059) 2 030 180 3 699 574 5 648 695

Sale of treasury shares 25 060 - - - 705 441 730 501 Dividends declared - ordinary shares - - - - (887 842) (887 842) - preference shares - - - - (2 211) (2 211) Balance as at 31 December 2015 3 721 734 21 393 878 3 820 496 1 596 286 26 251 090 56 783 484

The summary consolidated financial statements should be read in conjunction with the consolidated financial statements from which they were derived.

BANK SAINT PETERSBURG Annual Report 2015 74 PJSC “Bank Saint Petersburg” Group Summary Consolidated Statement of Cash Flows for the Year Ended 31 December 2015

In thousands of Russian Roubles 2015 2014 Cash flows from operating activities Interest received on loans and correspondent accounts 41 327 987 31 081 665 Interest received on securities 7 143 237 5 102 040 Interest received on amounts receivable under reverse repurchase agreements 2 234 430 1 823 950 Interest paid on due to banks (10 929 952) (6 363 159) Interest paid on customer accounts (18 327 227) (10 402 407) Interest paid on other debt securities issued (441 769) (345 749) Net payments from securities trading (69 842) (2 100 931) Net receipts from trading in foreign currencies 1 434 816 671 637 Net payments from transactions with derivatives (1 592 892) (7 916 739) Fee and commissions received 4 814 621 4 422 026 Fee and commissions paid (730 028) (699 945) Other operating income received 304 180 423 974 Staff costs paid (4 371 292) (4 220 617) Premises and equipment costs paid (551 450) (704 437) Administrative and other operating expenses paid (5 031 644) (3 847 341) Income tax received (paid) 285 941 (1 616 943)

Cash flows from operating activities before changes in operating assets and liabilities 15 499 116 5 307 024 Changes in operating assets and liabilities Net decrease (increase) in mandatory reserve deposits with the Central Bank of the Russian Federation 901 946 (381 975) Net (increase) decrease in trading securities (12 787 149) 11 937 767 Net (increase) decrease in securities pledged under sale and repurchase agreements and loaned (4 483 261) 24 427 934 Net decrease (increase) in amounts receivable under reverse repurchase agreements 14 260 421 (14 626 067) Net increase in due from banks (4 227 627) (7 693 777) Net increase in loans and advances to customers (12 140 987) (16 392 041) Net decrease (increase) in other assets 971 218 (1 090 628) Net increase in due to banks 29 171 408 30 304 300 Net increase in customer accounts 8 515 514 18 572 305 Net (decrease) increase in other debt securities issued (2 056 067) 5 029 622 Net (decrease) increase in other liabilities (1 400 337) 1 246 568

Net cash received from operating activities 32 224 195 56 641 032 Cash flows from investing activities Acquisition of premises and equipment and intangible assets (795 972) (644 587) Proceeds from disposal of premises and equipment and intangible assets 105 742 178 433 Net acquisition of investment securities available-for-sale (42 221 710) (38 478 739) Proceeds from disposal of investment securities available-for-sale 459 402 24 760 Net proceeds from acquisition of subsidiary - 1 011 643 Proceeds from disposal of long-term assets held-for-sale 413 039 89 302 Proceeds from disposal of investment property 5 100 3 484 Dividend income received 10 522 12 050 Net cash used in investing activities (42 023 877) (37 803 654)

The summary consolidated financial statements should be read in conjunction with the consolidated financial statements from which they were derived.

BANK SAINT PETERSBURG Annual Report 2015 75 PJSC “Bank Saint Petersburg” Group Summary Consolidated Statement of Cash Flows for the Year Ended 31 December 2015

In thousands of Russian Roubles 2015 2014 Cash flows from financing activities Purchase of ordinary shares - (1 119 174) Sale of treasury shares 730 501 219 777 Redemption of bonds issued (9 376 171) (3 501 045) Proceeds from other borrowed funds 344 471 968 108 Repayment of other borrowed funds (3 831 324) (4 511 295) Interest paid on bonds issued (2 334 140) (1 969 540) Interest paid on other borrowed funds (258 739) (573 277) Dividends paid (888 414) (50 159)

Net cash used in financing activities (15 613 816) (10 536 605)

Effects of exchange rate changes on cash and cash equivalents 4 731 793 8 879 397

Net (decrease) increase in cash and cash equivalents (20 681 705) 17 180 170 Cash and cash equivalents at the beginning of the year 57 240 622 40 060 452

Cash and cash equivalents at the end of the year 36 558 917 57 240 622

The summary consolidated financial statements should be read in conjunction with the consolidated financial statements from which they were derived.

BANK SAINT PETERSBURG Annual Report 2015 76 PJSC “Bank Saint Petersburg” Group Notes to the Consolidated Financial Statements – 31 December 2015

1 INTRODUCTION

These summary consolidated financial statements, which comprise the summary consolidated statement of financial position as at 31 December 2015, the summary consolidated statements of comprehensive income, changes in equity and cash flows for the year then ended, and related notes are derived from the consolidated financial statements of PJSC “Bank Saint Petersburg” (the “Bank”) and its subsidiaries, together referred to as the “Group” or PJSC “Bank Saint Petersburg” Group”.

The Bank was formed in 1990 as an open joint stock company under the Laws of the Russian Federation as the result of the corporatisation process of the former Leningrad Regional Office of Zhilsotsbank. In 2014 the Bank was reorganised from the Open Joint-Stock Company “Bank Saint Petersburg” to the Public Joint-Stock Company “Bank Saint Petersburg” following the resolution passed at the extraordinary Shareholders’ Meeting.

As at 31 December 2015, Mr. A.V. Savelyev and management of the Bank controls 53.2% of the ordinary shares of the Bank (2014: 52.3%), including: 23.7% of the ordinary shares of the Bank controlled by Mr. A.V. Savelyev (2014: 23.7%) and 29.5% of the ordinary shares controlled by management of the Bank, including 28.7% of the ordinary shares of the Bank are owned by LLC “Management Company “Vernye Druzya” (2014: 0%). In the company LLC “Management Company “Vernye Druzya”, companies “NOROYIA ASSETS LIMITED”, “ZERILOD HOLDINGS LIMITED” and “CARISTAS LIMITED” own 26.6% of the share capital each. Mr. A.V. Savelyev has a perpetual option to purchase a 100% interest in the companies “NOROYIA ASSETS LIMITED”, “ZERILOD HOLDINGS LIMITED” and “CARISTAS LIMITED” (31 December 2014: the company “NOROYIA ASSETS LIMITED” owned 9.4% of the ordinary shares of the Bank, the company “ZERILOD HOLDINGS LIMITED” owned 9.4% of the ordinary shares of the Bank, the company “CARISTAS LIMITED” owned 8.9% of the ordinary shares of the Bank.)

The remaining ordinary shares of the Bank are owned as follows: 9.0% of the shares are owned by the East Capital Group (31 December 2014: 9.3%), 5.5% of the ordinary shares are owned by the European Bank for Reconstruction and Development (EBRD) (31 December 2014: 5.5%).

The remaining 32.3% of the ordinary shares are widely held (31 December 2014: 27.3%).

As at 31 December 2014, treasury shares purchased by the Bank in response to shareholders’ request in accordance with Articles 75, 76 of Federal Law No. 208-FZ dated 26 December 1995 On Joint Stock Companies due to reorganisation of OJSC “Bank “Saint Petersburg” in the form of merger of Evropeyskiy CJSC ICB into OJSC “Bank “Saint Petersburg” composed 5.6%.

Principal activity. The Bank’s principal business activity is commercial banking operations within the Russian Federation. The Bank has operated under a general banking license issued by the Central Bank of the Russian Federation (the “CBRF”) since 1997. The Bank takes part in the state deposit insurance system introduced by the Federal Law No.177-FZ dated 23 December 2003 On Retail Deposit Insurance in the Russian Federation. The state deposit insurance system guarantees payment in the amount of 100% of total deposits placed with a bank, but limited to RR 1 400 000, in the event the bank’s license is revoked or the CBRF imposes a moratorium on payments.

As at 31 December 2015, the Bank had four branches within the Russian Federation (three branches located in the North-West region of Russia and one branch in Moscow) and fifty three outlets (2014: five branches within the Russian Federation (four branches located in the North-West region of Russia and one branch in Moscow) and fourty three outlets).

Registered address and place of business. The Bank’s registered address and place of business is Malookhtinsky Prospect, 64A, 195112, Saint Petersburg, Russian Federation.

The summary consolidated financial statements should be read in conjunction with the consolidated financial statements from which they were derived.

BANK SAINT PETERSBURG Annual Report 2015 77 PJSC “Bank Saint Petersburg” Group Notes to the Consolidated Financial Statements – 31 December 2015

2 OPERATING ENVIRONMENT OF THE GROUP

Russian Federation. The economy of the Russian Federation displays certain characteristics of developing markets including relatively high inflation and interest rates.

In 2015 there was a negative impact on Russia from the external environment. At the end of 2014 there was depreciation of Russian Rouble which led to a sharp increase of the policy rate of the CBRF from 9.5% to 17.0%. These factors accelerated consumer inflation which picked at 16.9% in March 2015. During the year inflation slowed to 12.9% and, as the result, the policy rate of the CBRF was decreased to 11.0%. In such conditions, the GDP real growth was negative at -3.7%. Decline in the production industry was 3.4% p.a.

Thus in 2015 the Russian economy adapted to changes in the external environment without a significant drop in the GDP. Nevertheless, there are increasing risks for future growth. Capital investments decreased by 8.6% which impacts negatively future growth. Unemployment level did not rise significantly, as at the year end it was 5.8% versus 5.3% at the end of 2014. Labor market adapted to the new environment mainly by adjusting salary levels which were decreased by 9.5%.

The legal, tax and regulatory frameworks continue development, but are subject to varying interpretations and frequent changes which together with other legal and fiscal impediments contribute to the challenges faced by entities operating in the Russian Federation. In addition, the recent contraction in the capital and credit markets have further increased the level of economic uncertainty. In general, the current economic environment the Group operates in is characterised by significant growth of risks of different nature and general uncertainty, bounding the strategic horizon for market participants and aggregated risk appetite.

The current economic and political situation, including the situation in the Ukraine and introduction of sanctions against the Russian Federation by particular countries and introduction of responsive sanctions against particular countries by the Russian Federation creates risks for operations conducted by the Group.

The summary consolidated financial statements reflect management’s assessment of the possible impact of the Russian business environment on the operations and the financial position of the Group. The future business environment may differ from management’s assessment.

Management of the Group believes that it takes all the necessary efforts to support the economic stability of the Group in the current environment.

The future economic development of the Russian Federation is largely dependent upon the effectiveness of the economic, financial and monetary measures undertaken by the Government, together with the tax, legal, regulatory, and political developments.

3 BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES

The complete consolidated financial statements of the Group as at and for the year ended 31 December 2015 are prepared in accordance with International Financial Reporting Standards. These summary consolidated financial statements are derived from the complete consolidated financial statements, except that substantially all note disclosures are omitted.

The summary consolidated financial statements should be read in conjunction with the consolidated financial statements from which they were derived.

BANK SAINT PETERSBURG Annual Report 2015 78 “BANK “SAINT-PETERSBURG” PUBLIC JOINT-STOCK COMPANY “Bank “Saint-Petersburg” PJSC www.bspb.ru

HEAD OFFICE: 64A Malookhtinsky Prospect, St. Petersburg, 195112, Russian Federation

HELP DESK St. Petersburg +7 /812/ 329 5050 Moscow +7 /495/ 228 3838 Kaliningrad +7 /4012/ 997 000 [email protected]

BANK SAINT PETERSBURG Annual Report 2015 79 OUTLETS IN ST.PETERSBURG Tsentralny 64 Malookhtinsky Prospect - Mortgage lending centre - Mortgage support centre - Car lending centre

Commercial Department 7 Ostrovskogo Square - Mortgage lending centre

Commercial Department-2 178 Nevsky Prospect

Dachnoe 19 Dachny Prospect

Energiya 1 Konstitutsii Square

Gavansky 54 Maly Prospect, Vasilievsky Island

Grazhdansky 36 Grazhdansky Prospect

Investrbank 47 Rimskogo-Korsakova Prospect

Kalininsky 114-1 Grazhdansky Prospect

Kolomyazhsky 15-2 Kolomyazhsky Prospect - Mortgage lending centre

Kolpinsky 9 Proletarskaya Street, Kolpino

Komendantsky 17-1 Komendantsky Prospect

Kosmopolis 13 Vyborgskoye Shosse - Car lending centre

Kronshtadtsky 5 Andreevskaya Street, Kronshtadt

Kupchinsky 26 Malaya Balkanskaya Street

Lakhta 124-1 Savushkina Street

Lesnoy 65-1 Lesnoy Prospect

Ligovsky 140 Ligovsky Prospect

Mezhdunarodny 3 Bely Kuna Street

Moskovsky 63-1 Varshavskaya Street

Na Bolshevikov 17 Prospect Bolshevikov

Na Engelsa 136-1 Engelsa Prospect

Na Kirochnoy 39 Kirochnaya Street

Na Leninskom 125 Leninsky Prospect

Na Moskovskom 171 Moskovsky Prospect

Na Nastavnikov 19 Prospect Nastavnikov

Na Nekrasova 14 Nekrasova Street

Na Nevskom 68 Nevsky Prospect

Na Prosvescheniya 53-1 Prospect Prosvescheniya

Na Prospecte Slavy 30-1 Prospect Slavy

Na Tipanova 212 Moskovsky Prospect

Na Turistskoy 22 Turistskaya Street

Narvsky 47 Prospect Stachek - Mortgage lending centre

Nevsky 18 Pribrezhnaya Street

Okhtinsky 1 Revolutsii Shosse

Oktyabrsky 20 3rd Line, Vasilievsky Island

Petrodvortsovy 11 Nikolskaya Street, Peterhof

Petrogradsky 20 Kamennoostrovsky Prospect

Petrovsky 4 Finlyandsky Prospect

Ploschad Iskusstv 6 Naberezhnaya Kanala Griboedova

Primorsky 8-2 Bolshaya Zelenina Street - Mortgage lending centre

Proletarsky 7 Ivanovskaya Street

Pushkinsky 16 Oktyabrsky Boulevard, Pushkin

Sestroretsky 7 Volodarskogo Street, Sestroretsk

Vyborgsky 85 Engelsa Prospect

Zvezdny 97-1 Lensoveta Street

BANK SAINT PETERSBURG Annual Report 2015 80 BRANCHES AND OFFICES IN THE LENINGRAD REGION Kirishi Branch 28 Lenina Prospect, Kirishi

Priozersk Branch 18 Lenina Street, Priozersk

Gatchinsky, operational office 32, 25 Oktyabrya Prospect, Gatchina

MOSCOW BRANCH Moscow Branch 40 Building 2, Bolshaya Ordynka Street, Moscow

Avtozavodsky 22 Avtozavodskaya Street, Moscow - Mortgage lending centre

BRANCHES AND OFFICES IN KALININGRAD Evropeisky Branch 39 Kutuzova Street, Kaliningrad

Baltic Business Center 40 Moskovsky Prospect, Kaliningrad

Berlin 122-1 Gaidara Street, Kaliningrad

Kutuzova 34B 34B Kutuzova Street, Kaliningrad

London 30 Teatralnaya Street, Kaliningrad

Tsentralny 17 Zarayskaya Street, Kaliningrad

BANK SAINT PETERSBURG Annual Report 2015 81