Annual Report
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Gazprombank Group ANNUAL REPORT (IFRS) 2006 GAZPROMBANK GROUP | Annual report | 2006 CONTENTS ADDRESS BY THE CHAIRMAN OF THE MANAGEMENT BOARD . 4 A PORTRAIT OF GAZPROMBANK GROUP. 6 1. FINANCIAL PERFORMANCE AND PROSPECTS . 16 Macroeconomic situation and banking environment . 17 Financial performance . 19 Enhancement of shareholder base . 22 2. BUSINESS DEVELOPMENT . 26 Corporate business. 27 Strategic partnership with OAO “Gazprom” . 27 Cooperation development with strategic customers . 28 Corporate lending. 29 Cash and settlement services . 30 Investment banking . 31 Project finance . 31 Corporate finance. 32 Financial and stock markets. 38 Proprietary trading. 38 Client trading in financial markets . 39 Capital markets . 40 Asset management. 41 Custodian services . 42 Retail business . 46 Lending programs . 46 Deposits and money transfer services. 47 On-line and remote banking . 48 Retail business outlook . 50 3. SUSTAINABLE DEVELOPMENT MANAGEMENT. 54 Corporate governance development . 55 Risk management and internal audit . 56 |2| GAZPROMBANK GROUP | Annual report | 2006 Human resource policy and personnel management. 57 Regional expansion and it development. 58 Social responsibility . 59 4. GAZPROMBANK GROUP FINANCIAL INFORMATION . 64 Independent auditors’ report. 65 Consolidated financial statements . 66 REFERENCE INFORMATION . 140 Branches and representative offices . 141 Subsidiary banks . 144 S Licenses, permits, certificates. 145 T N Contact details . 146 E T N O C |3| GAZPROMBANK GROUP | Annual report | 2006 ADDRESS BY THE CHAIRMAN OF THE MANAGEMENT BOARD Dear Shareholders, Clients, and Partners, We are delighted to report a steady progress and strong financial performance in the past year. We have achieved a significant growth in all key financials and expanded the Bank’s geography and the range of its products and services. In 2006, the Group’s assets grew 75% to exceed USD 31.6 billion, while customer accounts increased 1.6 times. The Bank’s corporate customer base reached 40 thousand. Our corporate loan portfolio grew 44% and our retail loan portfolio 2.7 times. The Group reported a net profit of USD 1.56 billion, or 2.8 times year on year. Gazprombank has reaffirmed its position as one of the top three Russian banks and improved its international standing. A high level of trust is reflected in investment grade credit ratings assigned to the Bank by the leading rating agencies Moody’s Investors Service and Standard & Poor’s. The Bank’s sustainable growth is supported by a solid customer base that is centered around major government-owned and private companies. ОАО “Gazprom” has tradi- tionally been our top-priority client, and the Bank considers the support of Gazprom’s operations and participation in its large-scale investment projects to be a very impor- tant and prestigious mission. We see it as our contribution to strengthening the ener- gy basis of the Russian economy and a vital mission for ensuring global energy secu- rity. In January 2007, Gazprombank and Gazprom signed a cooperation agreement for the period through 2015 providing for further development of our close partner- ship. The Bank’s solid and well-balanced funding base guarantees continued expansion of products and services offered to our corporate and retail clients. Gazprombank active- ly develops investment banking. Today the Bank is the leading underwriter and an organizer of domestic market bond issues. Its Depositary Center is the largest in Rus- sia in terms of customer assets. We have also strengthened our positions in the con- sumer and mortgage lending markets and the market of remote banking services. Furthermore, we are actively developing our asset management business. In 2006, Gazprombank completed an additional share issue, which became another important landmark for the Bank. The new issue boosted the Bank’s share capital by 28%, while the Group’s equity more than doubled to USD 6.65 billion. In addition to Gazprom the Bank acquired another major shareholder – the leading Russian Non-State Pension Fund “GAZFOND”. A new inflow of cash generated by an additional stock placement will be invested in the regional network development pro- gram, the retail and investment banking businesses and the introduction of new prod- ucts for corporate customers from various sectors of the economy. |4| ADDRESS BY THE CHAIRMAN OF THE MANAGEMENT BOARD Gazprombank of theManagementBoar Chairman benefit ofthecountry. tothemutualsatisfactionofallparticipantsand ourrelationship and develop Please, beassur I totheirpractices. social responsibility ofcorporate inthearea financial institutionsinadaptinginternationalstandards toassistRussian ready all aspectsofthisinfluenceinourdailyoperationsandare toconsider strive andotherimportantaspectsofsociallife.We protection, ronmental andhealth,envi- impactonemployment,publicwelfare andhasadirect development fullyunderstandthatbusinessitselfisanimportantfactorofsocial we Moreover, e s t enterprisepursuingitsownbusinesspurposes.Yet, isacommercial Gazprombank G he Bank recognizes its commitment to fulfilling social responsibilities focusingon itscommitmentto fulfillingsocialresponsibilities he Bankrecognizes ponsorship and charity and providing support to orphanages and boarding schools, supporttoorphanagesandboarding ponsorship andcharityproviding ducational, research and cultural institutions, the church andsportsorganizations. andculturalinstitutions,thechurch ducational, research am grateful to our shareholders, clients andbusinesspartnersforcooperation. am gratefultoourshareholders, AZPROMBANK GROUP | Annual report |2006 AZPROMBANK GROUP|Annualreport ed, that in the future theBankwilldo itsbesttofurtherstrengthen ed, thatinthefuture d Andrey I.Akimov Andrey |5| GAZPROMBANK GROUP | Annual report | 2006 A PORTRAIT OF GAZPROMBANK GROUP Joint-Stock Bank of the Gas Industry “Gazprombank” (Closed Joint-Stock Company) is one of the largest full-service financial institutions in Russia providing a broad range of banking, financial, and investment products to corporate and individual cus- tomers, credit institutions and institutional and private investors. I Gazprombank was founded in 1990 as a strategic partner of OAO “Gazprom” and the gas industry. I In late 2006, Gazprombank completed an additional placement of shares to increase its share capital by about 1/3, while its total equity more than doubled to reach USD 6.65 billion. I Gazprombank’s two principal shareholders are OAO “Gazprom”, the largest producer and exporter of natural gas in the world (41.7%) and NPF “Gazfond”, a leading Russian non-state pension fund (50% + 1 share, including the shares of ZAO “Leader”, a “Gazfond”'s asset management company). I The Bank provides services to companies representing key sectors of the Russ- ian economy, including natural gas, oil, nuclear energy, chemical and petro- chemical, ferrous and non-ferrous metals, power, engineering, transportation, construction, communications, agriculture, trade, and other industries. rd rd I Gazprombank is the 3 largest bank in Russia by key indices; the 3 largest banking institution in Central and Eastern Europe (2006); and the 137th largest bank in the world in terms of capital (2006). I Winner of The Bank of the Year 2001 and 2005 in Russia awards from The Banker. I Long-term ratings from the international rating agencies at the investment grade: I Moody’s Investors Service: I Foreign currency deposit rating – Baa2; I Debt rating – A3. I Standard & Poor’s: I Counterparty credit rating – BBB-; I Debt rating – BBB-. I Gazprombank’s customer base includes: I Individual customers – over 1.8 million; I Corporate customers – over 40,000. |6| GAZPROMBANK GROUP | Annual report | 2006 I The Bank’s extensive regional network comprises 35 branches, 4 subsidiary banks in Russia, and one affiliated bank in Belarus with a total of 450 offices offering banking services to customers in 55 regions of Russia and Belarus (as of 30 June 2007). I Gazprombank’s workforce is around 6,000. P REGIONAL NETWORK U O R G K N A B M O R P Z A G F O T I A R T R O P A Regions of presence of Gazprombank, its subsidiary and affiliated banks, and their units Gazprombank, its branches and supplementary offices Subsidiary and affiliated banks Cities where Gazprombank is planning to establish branch offices |7| GAZPROMBANK GROUP | Annual report | 2006 HIGHLIGHTS OF THE YEAR I Placement of additional 6.7 million shares at RUR 1,000 each, purchased by the new shareholder NPF “Gazfond” (December 2006). Issued share capital totaled 19,997,777 ordinary shares as of 31 December 2006. I Further development of partnership with OAO “Gazprom”: signing new coopera- tion agreement for the period through 2015 (January 2007); participation in the promotion of Gazprom stock (particularly as a custodian bank). I International ratings upgraded to an investment grade. I Expansion of regional network: new branches in Krasnoyarsk (January 2006), Irkutsk (July 2006), Kemerovo (February 2007) and Samara (March 2007); a rep- resentative office in Beijing (China). Acquisition of Credit Ural Bank (March 2007). I Active development of investment business: project and corporate finance, participation in major international projects initiated by Gazprom and other strategic clients of the Bank. I Successful European Commercial Papers (ECP) issue (February 2006) and two Ruble bond issues at RUR 5 billion each (February and November 2006); three- year USD 500 million syndicated loan (April 2006). I Leading organizer and underwriter of corporate bond