Annual Report Zenit Banking Group 2011
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ANNUAL REPORT ZENIT BANKING GROUP 2011 TEAMWORK RUGBY IS A TEAM SPORT THAT IS KNOWN FOR ITS PASSION AND FAST PACE. THE AIM OF THE GAME IS TO TOUCH DOWN AN OVAL BALL OVER THE TRY LINE OR KICK THE BALL IN THE H-SHAPED GOAL POSTS OF THE OPPOSING TEAM WHICH BRINGS SCORES TO THE TEAM. THE BALL IS PASSED FROM PLAYER TO PLAYER BY HAND (BUT ONLY IN A BACKWARDS DIRECTION) OR BY KICKING IT (IN ANY DIRECTION) ALONG THE PITCH. THE TEAM THAT SCORES THE MOST GOALS IS THE WINNER. THE RULES OF RUGBY ALLOW FOR A FIERCELY CONTESTED CONTACT SPORT. IT IS RENOWNED AS AN HONEST SPORT THAT IS PLAYED ACCORDING TO GENTLEMAN’S RULES; A SPECTACULAR AND UNCOMPROMISING GAME THAT DEMANDS INTENSE STRENGTH, TECHNICAL AND SPEED TRAINING FROM ITS PLAYERS, AS WELL AS STAMINA, MOBILITY, WRESTLING SKILLS AND AN UNSHAKEABLE BELIEF IN VICTORY. IT IS WORTH MENTIONING THE CURIOUS WAY IN WHICH RUGBY FIRST APPEARED. IN 1823, A PUPIL OF RUGBY SCHOOL IN ENGLAND, WILLIAM WEBB ELLIS, COMMITTED A FOUL IN A GAME OF FOOTBALL BY PICKING UP THE BALL AND RUNNING WITH IT. THUS, A NEW SPORT WAS INVENTED, RUGBY. THE FIRST TIME RUGBY WAS OFFICIALLY PLAYED IN THE SOVIET UNION WAS IN 1923 IN MOSCOW BETWEEN THE “SOCIETY FOR THE PHYSICAL EDUCATION OF WORKERS” AND THE “MOSCOW YACHT CLUB”. THE FIRST NATIONAL RUGBY CHAMPIONSHIP IN THE USSR TOOK PLACE IN 1936. HOWEVER, IT WAS ONLY AFTER THE 1957 WORLD FESTIVAL OF YOUTH AND STUDENTS IN MOSCOW THAT THE SPORT GAINED A WIDER FOLLOWING ACROSS THE SOVIET UNION. IN 1986, IN AUSTRALIA THE CONGRESS OF THE INTERNATIONAL RUGBY FOOTBALL FEDERATIONS TOOK A DECISION TO HOLD A WORLD CUP TOURNAMENT AMONG NATIONAL TEAMS. EVER SINCE, THE RUGBY WORLD CUP HAS BEEN HELD EVERY FOUR YEARS. IT IS ONE OF THE LARGEST SPORTING EVENTS IN THE WORLD, BEING IN THE SAME LEAGUE AS THE FOOTBALL WORLD CUP AND THE SUMMER OLYMPIC GAMES. RUGBY IS A CONTINUALLY GROWING SPORT THAT IS ATTRACTING NEW FANS AND PLAYERS YEAR ON YEAR, AS CONFIRMED BY STATISTICS ON THE INCREASE IN VIEWER FIGURES AND THE SPORT’S FINANCIAL SHOWING. RUGBY SEVENS HAS ALSO BEEN ADDED TO THE LIST OF OLYMPIC SPORTS FOR THE 2016 AND 2020 GAMES. FOOTBALL REMAINS THE MOST POPULAR SPORT IN THE WORLD, BUT MANY SPORTS PUBLICATIONS PUT RUGBY IN SECOND PLACE. RUGBY IS NOW PLAYED IN MORE THAN 120 COUNTRIES OF THE WORLD. THE NUMBER OF PLAYERS OF THE SPORT RUNS INTO THE MILLIONS, WHILE FANS CAN BE NUMBERED IN THEIR BILLIONS. ONCE YOU HAVE WATCHED A LIVE RUGBY MATCH, YOU BECOME A FAN INSTANTLY AND FOREVER! ZENIT BANKING GROUP IS WORKING ACTIVELY TO DEVELOP AND PROMOTE THE SPORT OF RUGBY IN RUSSIA THROUGH A LONG-RUNNING PROGRAMME THAT SUPPORTS AND FINANCES CHILDREN’S AND YOUTH RUGBY IN VARIOUS REGIONS OF THE COUNTRY. BANK ZENIT MAINTAINS A PARTNERSHIP WITH THE RUSSIAN RUGBY UNION, BEING THE UNION’S OFFICIAL SPONSOR. THE BANK IS ALSO THE GENERAL SPONSOR OF THE RUSSIAN NATIONAL RUGBY TEAM. ANNUAL REPORT 2011 CONTENTS ANNUAL REPORT 1 STATEMENT FROM THE CHAIRMAN OF THE BOARD OF DIRECTORS OF OJSC BANK ZENIT | 6 2 ZENIT BANKING GROUP TODAY | 10 ZENIT BANKING GROUP 2.1 ZENIT Banking Group – key facts | 11 2011 2.2 History of ZENIT Banking Group | 15 3 CORPORATE GOVERNANCE | 20 3.1 Shareholders of OJSC Bank ZENIТ | 21 3.2 Group Structure | 22 3.3 Corporate Governance Structure | 23 3.4 Board of Directors of OJSC Bank ZENIT | 25 3.5 Management Board of OJSC Bank ZENIT | 27 4 OPERATIONS OF ZENIT BANKING GROUP | 30 4.1 Strategy of ZENIT Banking Group | 31 4.2 Review of the Russian Economy and Performance of the Banking Sector in 2011 | 33 4.3 Summary of ZENIT Banking Group Development in 2011 | 42 4.4 Overview of business of ZENIT Banking Group | 47 4.5 ZENIT Banking Group’s Regional Network Development | 48 4.6 Corporate Banking | 54 4.7 Small and Medium Businesses (SMB) | 64 4.8 Investment Banking | 68 4.9 Retail Banking | 74 4.10 Private Banking | 78 4.11 Risk Management | 79 4.12 Charity and Sponsorship Programmes | 84 5 DEVELOPMENT OF INFORMATION TECHNOLOGIES | 88 6 ORGANIZATIONAL DEVELOPMENT AND HUMAN RESOURCES MANAGEMENT | 92 7 FINANCIAL STATEMENTS | 96 Consolidated Statement of Income | 97 Consolidated Statement of Comprehensive Income | 98 Consolidated Statement of Financial Position | 99 Consolidated Statement of Changes in Equity | 100 Consolidated Statement of Cash Flows | 102 8 REFERENCE INFORMATION | 104 9 LIST OF SUBDIVISIONS OF ZENIT BANKING GROUP | 112 3 ZENIT BANKING GROUP THE RUSSIAN NATIONAL is General Sponsor of the RUGBY TEAM Russian National Rugby Team. In May 1975, the USSR Rugby Federation became member of the Fe’de’ration Internationale de Rugby Amateur (FIRA), and in 1976, the USSR national team successfully qualified for Group B of the European Championship. From 1979 onwards, the Soviet team became a fixture in Group A, the first division of the European Championship, taking third place in the competition in 1978, 1981 and 1983, and second place in 1985-1987, 1989 and 1990. The national team’s players were merited with the title “Master of Sport, International Class” according to the Soviet Union’s ranking system for athletes. Having suffered only two defeats over the course of 10 matches in the European Nations Cup in 2009-2010, the Russian team for the first time in its history qualified for the main world rugby forum. Thus, in 2011, the Russian National Rugby Team made its de’but at the Rugby World Cup in New Zealand. STATEMENT FROM THE CHAIRMAN OF THE BOARD ANNUAL REPORT 2011 1 OF DIRECTORS OF OJSC BANK ZENIT crucial points. Firstly, despite the difficult market The Group also supports charitable sports initiatives. STATEMENT FROM THE CHAIRMAN conditions in 2011, ZENIT Banking Group made Bank ZENIT has a long tradition of promoting OF THE BOARD OF DIRECTORS a net profit of RUR 2.5 billion. Total assets of the rugby in the Russian Federation. The Bank has Group increased by almost RUR 50 billion (up by been a general sponsor of the Russian National OF OJSC BANK ZENIT 23.5%). Capital, as calculated in accordance with Rugby Team for many years, and last year we were the Basel Accord, also continued to grow, totalling proud to celebrate a landmark achievement of our RUR 33.7 billion at the year end, with Total equity sportsmen – the debut of the Russian national team reaching RUR 23.9 billion. in the Rugby World Cup in New Zealand. DEAR SHAREHOLDERS, One of our main goals in 2011 was to increase our Looking forward to 2012, there is every indication PARTNERS AND COLLEAGUES, loan portfolio, and, as you will see in this report, the that the macroeconomic climate will remain strained. emphasis was very much on stimulating growth of For this reason, our main priorities in 2012 will be The year that has just ended was relatively difficult lending to individual customers. As priority areas to maintain financial stability, improve operational for the Russian and international financial sectors: for development, products such as mortgage and efficiency and deliver business growth. We will the pace of recovery of the world’s largest economies car loans yielded impressive results. The Group continue to modernize our banking network and did not bear out the optimistic expectations of also continued to strengthen its risk management infrastructure, develop sales and customer service investors. While the Russian economy performed policies, aiming to maintain a reasonable balance technologies and integrate state of the art solutions relatively well in comparison to many other between the growth of the loan portfolio and into our IT systems. countries, it also remained subject to various risks. preserving its high quality. Another important goal was to develop the customer service infrastructure But, above all, our core mission is to ensure Nevertheless, when viewed in the light of previous through the opening of new branches and expansion that ZENIT Banking Group’s activities satisfy the years, 2011 was a fairly successful one for the of joint projects with partners and clients. needs of our clients and meet the interests of our Russian banking sector. Many banks demonstrated shareholders to the fullest extent. Mutual trust is the growth of their loan portfolios which was essentially As in previous years, in 2011 ZENIT Banking foundation on which banking business has always “frozen” following a period at the very height of the Group continued to take an active part in the been built. On behalf of the Group, I would like to crisis; new products and services were offered and implementation of socially important projects in the thank you all for many years of fruitful cooperation plans for business development and consolidation Russian Federation. This was made, on the one hand, and assure you that we will continue to do our best to were implemented. in the form of extending commercial loans, such as reward your trust in us. mortgage loans and financing of small and medium- The banking sector did, however, remain under sized businesses, under specialized governmental pressure from a tense liquidity situation and programmes that are targeted at resolving core instability on the capital markets. social issues. On the other hand, we continued our With best regards, charitable activities in the fields of art and culture, A.A. Sokolov, It is against this background that we should evaluate youth programmes and sports development. Out of Chairman of the Board of Directors the performance of ZENIT Banking Group in 2011. all our numerous charitable initiatives, two projects A.A. Sokolov Over the reporting period, we achieved notable particularly stand out, both in terms of scale and Chairman of the successes, not only growing our business in the long-term commitment.