UKRGASBANK
2015 JSB UKRGASBANK ANNUAL REPORT
If you want to achieve your goals, you need only one thing. To go. HONORÉ DE BALZAC
1 UKRGASBANK ANNUAL REPORT • 2015 CONTENT UKRGASBANK
Table of Contents
SECTION 1. Our Business Card ...... 7 1. Our Business Card...... 8 6.2.4. Remote Services. 49 6.3. Retail Banking...... 49 1.1. Members of the Supervisory Board...... 8 6.3.1. Lending...... 49 1.2. Members of the Management Board...... 10 6.3.2. Payment Services...... 50 1.3. Top Executives Who Are Not Members of the Management Board. 11 6.3.3. Time Deposits...... 51 1.4. Mission. Strategic Goals. 12 6.3.4. Alternative Channels and Card Products...... 53 1.5. Licenses and Permits...... 14 6.3.5. International Transfers and Payments...... 54 1.6. Affiliates . 15 6.4. Cash Collection and Valuables Transportation...... 54 1.7. Organizational Structure of JSB UKRGASBANK’s Head Office...... 16 6.5. Investment Business. Securities . 55 1.8. Personnel...... 18 6.6. Treasury Business...... 56 1.9. Our History...... 19 6.6.1. Interbank Market Transactions ...... 56 1.10. Ratings ...... 23 6.6.2. Transactions with Government Debt...... 56 1.11. Financial Performance Review...... 26 6.6.3. Transactions with Bank Metals and Cash Currency . 56 1.12. Membership in Payment Systems...... 27 6.6.4. Development of Correspondent Relations...... 57 1.13. Membership in Interbank Unions, Exchanges, and Associations ...... 27 6.6.5. Marginal Trading Arbitrage Business (Forex Transactions for Private Clients)...... 58 1.14. Structural Divisions...... 28 6.6.6. Investment Coins and Foreign Coins...... 60 6.7. Custody Business...... 60 SECTION 2. 6.8. Individual Banking...... 60 Corporate Governance. 29 6.9. Remote Services...... 62 2. Corporate Governance...... 30 2.1. Corporate Governance System . 30 SECTION 7. 2.2. Major Shareholders...... 30 Partnership and Cooperation...... 65 2.3. Shareholder’s Equity Development...... 31 7. Partnership and Cooperation...... 66 2.4. Dividend Policy . 31 2.5. Management Board and Supervisory Board Compensation...... 32 7.1. International Money Transfer Systems ...... 66 2.6. Identification and Management of Conflicts of Interest . 32 7.2. Car Dealers and Importers...... 66 7.3. Real Estate Developers...... 67 7.4. Consumer Lending Partner Banks...... 68 SECTION 3. 7.5. Cooperation with State Authorities. 68 Risk Management...... 33 7.6. Cooperation with the Individual Deposit Guarantee Fund. 69 3. Risk Management ...... 34 7.7. Concierge Companies...... 69 7.8. Insurance Companies...... 69 7.9. Appraising Companies. 71 SECTION 4. 7.10. Asset Management Companies...... 73 Internal Control System . 37 7.11. Securities Depositories...... 73 4. Internal Control System...... 38 7.12. Stock Exchanges . 73 7.13. Financial Institutions Refinancing Housing Mortgage Loans...... 74 SECTION 5. Information Technologies Development . 39 SECTION 8. 5. Information Technologies Development...... 40 Financial Performance Overview ...... 75 8. Financial Performance Overview...... 76 8.1. Financial Results . 76 SECTION 6. 8.2. Income. 77 Business Development . 41 8.3. Expenses...... 79 6. Business Development. 42 6.1. Corporate Banking . 42 6.1.1. Asset Transactions ...... 42 SECTION 9. 6.1.2. Liability Transactions...... 44 UKRGASBANK Financial Statements ...... 81 6.1.3. Documentary Business . 45 6.2. Small and Medium-sized Enterprises (SME) Business...... 46 6.2.1. Development of the SME Business in UKRGASBANK. 46 6.2.2. SME Asset Transactions. Priority SME Support Programs...... 46 6.2.3. Funding Transactions and Payment Services ...... 47
2 3 UKRGASBANK ANNUAL REPORT • 2015 UKRGASBANK
Dear shareholders, Dear colleagues and partners,
Year 2015 put our country, its economy and the whole Ukrainian people to a serious test. The last year was Some people say that a long journey will only be successful if you consider your very first step carefully. However, especially difficult for Ukraine’s banking sector. UKRGASBANK was no exception. However, the concerted and in early 2015 we could only vacillate on choosing a leg, not on anything else. The situation at that time required us to efficient work of all the Bank’s management and employees enabled the Bank to evolve positively in terms of the clearly understand the goals, to properly choose methods for achieving them, and to proceed incessantly to achieve most of its indicators. UKRGASBANK retained confidence of its partners and customers, improved its positions the goals. Working together, we managed to make each component of this algorithm a success. on Ukraine’s banking market and, as a result, became the only profitable bank with a considerable state-owned The full-scale partnership and all-round support of the Bank’s development strategy by the state represented by interest in the authorized capital. the Ministry of Finance of Ukraine as the main shareholder created a reliable foundation for UKRGASBANK’s revival. The high professional level of our managers enabled the Bank to optimally identify the priority areas of the Bank’s The incessant support by the state played an important role in our achievements, as the state increased its development. The cohesion and the commitment of UKRGASBANK’s entire team supported the full implementation percentage of the Bank’s authorized capital in 2015 to 94.9409 percent. As a result, UKRGASBANK offers a bright of each step in this process. and, for the time being, unique example of the successful bank recapitalization demonstrating a successful blend of the state capital investment and the efficient work of the Bank’s team. So we all can be proud of each step we made along this 365-days long way. It had not been trodden yet, and we blazed the trail for those who would follow us. We became leaders both in implementing public energy efficiency In 2015, UKRGASBANK carried out a number of unique transactions on the Ukrainian market successfully programs and in managing distressed debt. We will make good use of our experience in P&A business, international including the resolution of Kyiv Bank (PJSC JSCB Kyiv) by means of the purchase of its assets and liabilities. Thanks financial cooperation and in many other areas of banking. Our success is evidenced by the profit of more than a to this transaction, not only individual customers, but also legal entities have regained the full control over their quarter billion hryvnias earned in the hardest time for the country which is unique among state-owned banks in funds, so this transaction contributed positively to the stabilization of the domestic banking market as a whole. Ukraine. We also doubled our assets and won 140 thousand new customers who see UKRGASBANK as their reliable and stable business partner. UKRGASBANK’s team created all the necessary preconditions for the long-term stable operation of the Bank. The Bank’s active participation in the public energy efficiency initiatives, the implementation of a number of However, I believe that our confidence in ourselves and redoubled demands to ourselves in the future in spite of programs aimed at supporting agriculture, small and medium enterprises were among the Bank’s key contributors all difficulties along the way toward the achievement of our goals are even more important! We can rely on our own experience and inspiration. And I can calmly tread to the future being aware that all of you are so close. Of course, I’ll to the bank’s successful and vigorous development in 2015, as these steps are extremely important on the path have to consider my first step carefully… toward the recovery of Ukraine’s economy. Without a doubt, it confirms that the Bank is steadily pursuing its goal of becoming an institution attractive to investors as the Public Banking Sector Strategic Reform Principles provide. I am sure that UKRGASBANK has everything it needs to do so.
Yours sincerely, Yours sincerely, Artem Shevaliov, Kyrylo Shevchenko, Chairman of the Supervisory Chairman of the Board, Management Board, JSB UKRGASBANK JSB UKRGASBANK »
4 5 UKRGASBANK ANNUAL REPORT • 2015 SECTION 1 Full name: PUBLIC JOINT STOCK COMPANY JOINT STOCK BANK UKRGASBANK Our Business Card
ADDRESS: 16-22 Bohdana Khmelnytskoho Street, Kyiv, 01030
UKRGASBANK today:
»» is a universal bank with a large customer base »» has more than 22 years of experience on the financial market »» is owned by the state as a beneficiary owner represented by the Ministry of Finance of Ukraine (it holds 94.9409 percent of the Bank’s equity) »» is categorized as a bank with a state-owned interest by the National Bank of Ukraine »» has been included into the list of public assets being of strategic importance for the national economy and security »» comprises 179 branches operating in all oblasts of Ukraine »» is represented by a professional team of 3,500 bankers »» is a payment organization of the Welsend money transfer system »» is a settlement bank of UkrKart payment system »» is an active player on Ukraine’s stock market »» is one of the Top 10 issuers in terms of active payment cards (according to the National Bank of Ukraine) »» is a permanent member of the Individual Deposit Guarantee Fund »» has the status of a bank authorized to disburse pensions and benefits by the Pension Fund of Ukraine and the Ministry of Social Policy of Ukraine »» is a bank authorized to maintain special current accounts of gas supplying companies »» is a member of MasterCard International Inc., Visa International Service Association international payment systems, and UkrKart and NSMEP domestic payment systems »» is a well-known and well-established member of the banking community.
Our bank is focused on the long-term partnership and guarantees high quality of services, personalized attitude and satisfaction from the cooperation to its customers..
A journey of a thousand miles begins with a single step.
6 Laozi UKRGASBANK ANNUAL REPORT • 2015 OUR BUSINESS CARD UKRGASBANK
1. Our Business Card YAROSLAV Date of Birth: January 29, 1974. 1.1. Members of the Supervisory Board MATUZKA Member of the Supervisory Education: (as of January 1, 2016) Board of UKRGASBANK Mr. Matuzka graduated from Kyiv National University of Economics in 2001 with the specialization in Law.
Professional Experience: Mr. Matuzka has been working as the Director of the Legal Department of the Ministry of Finance of Ukraine since March 2011.
Date of Birth: Date of Birth: ANDRII ARTEM December 15, 1977. SHEVALIOV September 18, 1975. SVYSTUN Member of the Supervisory Education: Chairman of the Supervisory Education: Board of UKRGASBANK» Board of UKRGASBANK In 1997, Mr. Shevaliov graduated from the International Mr. Svystun graduated from the National MiningAcademy of Ukraine Relations Institute of the Taras Shevchenko National University with the specialization in the Corporate Management in 2000. of Kyiv as a specialist in International Economic Relations. In 2006, he graduated from Dnipropetrovsk National In 2007, he graduated from the MBA program University with the specialization in Law. of the London Business School. Professional Experience: Professional Experience: Mr. Svystun has been working as the head of the Mr. Shevaliov has been working as the Deputy Minister of Finance. Bank Capitalization State Participation Unit of of Ukraine in charge of the European integration since March 2015. the Financial Policy Department of the Ministry of Finance of Ukraine since August 2014.
Date of Birth: TEIMUR Date of Birth: VALENTYNA July 13, 1963. BAHIROV January 30, 1973. YASHCHUK Member of the Supervisory Education: Deputy Chairman and Education: Board of UKRGASBANK Ms. Yashchuk graduated from Kyiv University of Trade and independent member of Mr. Bahirov graduated from Kyiv State University of Economics in Economics in 1985 with the specialization in Trade Economics. the Supervisory Board 1995 with the specialization in International Economic Relations. of UKRGASBANK In 2004, she graduated from the National Public Administration Professional Experience: Academy under the President of Ukraine as a Master of Public Mr. Bahirov has been an independent member of the Administration with the specialization in Economics. Supervisory Board of UKRGASBANK since April 2015. She has a PhD degree in Economics.
Professional Experience: OKSANA Date of Birth: Ms. Yashchuk has been working as the Director of MARKAROVA October 28, 1976. the Financial Policy Department of the Secretariat of the Cabinet of Ministers of Ukraine. Member of the Supervisory Education: Board of UKRGASBANK In 1997, Ms. Markarova graduated from the National Date of Birth: University of Kyiv-Mohyla Academy as BSc. in Ecology. SHRENIK September 2, 1960. In 1999, Ms. Markarova graduated from the National DHIRAJLAL University of Kyiv-Mohyla Academy as MSc. in Ecology. DAVDA Education: In 2001, she graduated from Indiana State University Independent member of Mr. Davda graduated from the London School of Economics and (USA) as the Master of Public Administration with the Supervisory Board Political Science in 1982 as Bachelor of Laws (cum laude). the specialization in Public Finance.. of UKRGASBANK In 1998, he graduated with the degree of MBA in Finance from INSEAD (Fontainebleau, France). Professional Experience Ms. Markarova has been working as the Deputy Minister ofs Professional Experience: Finance of Ukraine—Chief of Staff since March 2015. Mr. Davda has been a Partner in NECP LLP since 2013.
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Deputy Chairman of the Management Board 1.2. Members of the Management Board (as of January 1, 2016) OLEKSANDR DUBROVIN Born in 1981
Education: Kremenchuk State Polytechnic University
Professional Experience in Banks and Financial Institutions 12 years
Chairman of the Management Board Deputy Chairman of the Management Board KYRYLO SHEVCHENKO NATALIIA LIEBIEDIEVA Born in 1972 Born in 1976
Education: Kharkiv State University of Economics Education: Kyiv International University of Civil Aviation
Professional Experience in Banks and Financial Institutions: Professional Experience in Banks and Financial Institutions: 22 years 17 years
Deputy Chairman of the Management Board SERHII MOSKALENKO First Deputy Chairman of the Management Board Born in 1958 ANDRII KRAVETS Education: S.M. Kirov Institute of Railway Engineering of Born in 1963 Kharkiv, Interregional Academy of Personnel Management Education: Kyiv Institute of Civil Aviation Engineers, École Supérieure de Commerce de Toulouse (France), Professional Experience in Banks and Financial Institutions: 10 years Kyiv National University of Economics
Professional Experience in Banks and Financial Institutions: 16 years Deputy Chairman of the Management Board DENYS CHERNYSHOV Deputy Chairman of the Management Board Born in 1974 OLEKSII ALEKSANDROV Education: Kyiv State University of Economics Born in 1974 Professional Experience in Banks and Financial Institutions: Education: Kharkiv State Technical University of Radioelectronics, 18 years Intersectoral Professional Development Institute of Kharkiv State Polytechnic University, International Institute of Management, Kharkiv Institute of Business and Management, DSc in Economics Professional Experience in Banks and Financial Institutions: 1.3. Top Executives Who Are Not Members of the 19 years Management Board (as of January 1, 2016)
Deputy Chairman of the Management Board Chief accountant NATALIIA VASYLETS NATALIIA KHRUSTALOVA Born in 1974 Born in 1970
Education: Kyiv State University of Economics Education: Kyiv National University of Economics
Professional Experience in Banks and Financial Institutions: Professional Experience in Banks and Financial Institutions: 24 years 22 years
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1.4. Mission. Strategic Goals 2015 Strategic Goals and Key Performance Indicators
KRGASBANK’s mission is to lend to UKRGASBANK is opting for a niche STRATEGIC GOALS PERFORMANCE domestic corporations and individuals, development strategy to concentrate on offer them a full range of top quality the financing of energy efficient projects Implement the best UKRGASBANK is the only bank with the state-owned interest Utechnology-based banking services to support the taking into account the urgent need to improve the energy efficiency of Ukraine’s corporate governance that has already carried out substantial work aimed at sustainable development of Ukraine’s economy. economy practices improving its corporate governance system: The Bank disseminates the environmentally (according to the International Energy conscious culture and energy efficiency ideas »» two independent members were appointed to the Supervisory Agency, Ukrainian companies consume Board; among individuals and Ukrainian companies, three times as much energy as European »» an Audit Committee was established; and offers its customers assistance by funding the companies). »» a Risk Management Committee is in the process of being implementation of energy efficiency and energy established; conservation projects. »» a system of the delegation of powers has been put in place; UKRGASBANK developed its core lines of »» a clear decision-making hierarchy of the Bank’s collegiate bodies has been created (Supervisory Board, Management business for years 2016 and 2017 in line with the Board, Credit Council, ALCO); Public Banking Sector Strategic Reform Principles »» a system has been developed to avoid the conflicts of interest. elaborated by the Ministry of Finance of Ukraine The implementation of the Ecobank with the involvement of PricewaterhouseCoopers concept involves: Improvement of the Bank’s In 2015, UKRGASBANK substantially improved its LLP (PwC UK) together with PwC Ukraine investment appeal financials (it earned profit of UAH 259,7 million in » and with the support by CASE Ukraine Center » transforming the Bank into a financial comparison with the loss of UAH 2,74 million year ago). of Social and Economic Studies, the Reforms institution specialized in environmental Center, the International Prospective Research lending; Also, the Bank expanded its customer base Center, and the Kyiv School of Economics aiming »» developing the Bank’s expertise in analyzing and increased its total assets. at bringing its corporate governance system into and implementing energy efficient projects conformity with the guidelines of the OECD, the in various sectors of the national economy Improvement of bank Throughout the year 2015, UKRGASBANK has been in European Commission and the Basel Committee (the implementation of a joint projects with liquidity indicators to make conformity with all liquidity target ratios specified by the on Banking Supervision. The Bank aims at the IFC); the Bank more sustainable National Bank of Ukraine. The Bank’s liquidity ratios as at developing as a Bank attractive for investors on the »» developing a dedicated range of January 1, 2016, were as follows: basis of the diversification of the role of each state- environmental products for customers; N4 equaled 114.77 percent, N5 equaled 90.63 percent, and owned bank, the ascertainment of competitive »» implementing an environmental and social N6 equaled 83.09 percent. advantages, and the formulation of the vision of management system. As a result of NBU’s 2015 stress test, UKRGASBANK the Bank’s business and operating target model. was identified as one of only four banks in Ukraine Currently, UKRGASBANK is working on the that were not in need of the additional capital. Bank Development Strategy on the basis of the above-mentioned core lines of business for years Maintaining the funding The portfolio of customer deposits amounted UAH UKRGASBANK will also develop state-of- 2016 and 2017 that provides for the following: base 27,5 billion as of January 1, 2016, or 122 percent the-art customer service technologies, higher than at the beginning of the year 2015. including remote service systems, Strategic Goals: Customer Relationship Management systems, etc. Enhancing quality, flexibility In 2015, new target segments and sectors were chosen and »» the exit of the state from the Bank’s capital and efficiency of banking the product range was optimized (the Bank withdrew low- in part or in full (by the end the year 2017) products income low-demand products and introduced new high-income on the basis of developing a bank attractive products). for investors; »» the development as Top 1 environmentally conscious bank (Ecobank) in the Social responsibility, In 2015, the Bank took part in socially focused initiatives, cooperation with the programs and events, such as: cooperation with the International Finance Individual Deposit Guarantee Corporation. »» the disbursement of the guaranteed deposit amounts Fund in the field of the to customers of insolvent bank within the scope of the insolvent bank resolution cooperation with the Individual Deposit Guarantee Fund; »» the participation in the State Energy Efficient Projects Support Program.
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1.5. Licenses and Permits
Banking License No. 123 issued by the »» the opening of correspondent foreign »» foreign exchange transactions on License Series АE № 294714 National Bank of Ukraine on October currency accounts with (non-resident) international markets categorized as issued by the National Securities and Stock Market 6, 2011, under which the Bank may banks and the performance of transactions financial services under Article 4 of the Law Commission on February 14, 2015, with the provide the following banking services: using the same; of Ukraine “On Financial Services and State validity from February 14, 2015, for an indefinite period for the exercise of professional stock market »» raising funds and bank metals to deposits »» the borrowing and lending in foreign Regulation of Financial Service Markets” activities (securities trading activities): Dealing; from an unlimited range of legal entities currency on Ukraine›s foreign exchange and not referred to in paragraphs two to and individuals; market; seventeen of Section 2 of the Procedure License Series АE № 294715 »» opening and maintaining current »» the borrowing and lending in foreign of the Issue of General Foreign Exchange issued by the National Securities and Stock Market Commission on February 14, 2015, with the validity (correspondent) accounts of customers, currency on international markets; Transaction License to Banks and Foreign from February 14, 2015, for an indefinite period for including accounts denominated in bank »» залучення та розміщення іноземної Bank Branches approved by Resolution of the the exercise of professional stock market activities metals; валюти на міжнародних ринках; Board of the National Bank of Ukraine # 281 (securities trading activities): Underwriting; »» investing funds and bank metals raised to »» the trade in the foreign currency on the of August 15, 2011. License Series АE № 294716 deposits, including current accounts, in foreign exchange market of Ukraine [except issued by the National Securities and Stock Market own name, on own conditions and at own for transactions with the foreign currency Commission on February 14, 2015, with the validity risk. cash and cheques (purchase, sale, exchange) from February 14, 2015, for an indefinite period for the performed in cash desks and bureaux de exercise of professional stock market activities (securities change of banks and agents]; The Bank is also in possession of licenses trading activities): Securities management activities. General License No. 123 issued by »» the trade in the foreign currency on international for the exercise of the following business: the National Bank of Ukraine on markets; October 6, 2011, and an Annex to »» the borrowing and lending in bank metals License Series AD № 034432 the General License under which 1.6. Affiliates on the foreign exchange market of Ukraine; issued by the National Securities and Stock Market the Bank may provide the following »» the borrowing and lending in bank metals Commission on June 18, 2012, for an indefinite Institution that held a substantial interest foreign exchange services: period for the exercise of professional stock market in UKRGASBANK as of January 1, 2016: on international markets; activities: Mortgage cover management activities; »» non-trading transactions with foreign »» the trade in bank metals on the foreign »» the state of Ukraine (Ministry of Finance currency valuables; exchange market of Ukraine; License Series АE № 263236 of Ukraine) holds a substantial interest of »» transactions with foreign currency cash »» the trade in bank metals on international issued by the National Securities and Stock Market 94.9409 percent. and cheques (purchase, sale, exchange, markets; Commission on August 28, 2013, with the validity from October 12, 2013, for an indefinite period for the exercise of acceptance for collection) carried out in »» foreign exchange transactions on the Institutions, in which UKRGASBANK professional stock market activities (depository activities): held a substantial interest cash desks and bureaux de change of the foreign exchange market of Ukraine Depository activities of a depository institution; banks; categorized as financial services under as of January 1, 2016: »» transactions with foreign currency cash Article 4 of the Law of Ukraine “On License Series АE № 263237 »» Closed Joint Stock Company “Clearing (purchase, sale, exchange) carried out in Financial Services and State Regulation issued by the National Securities and Stock Market Chamber of Kyiv Universal Exchange”; a Commission on August 28, 2013, with the validity from bureaux de change operating on the basis of of Financial Service Markets” and not October 12, 2013, for an indefinite period for the exercise of substantial interest of 15 percent; agency contracts concluded by banks with referred to in paragraphs two to seventeen professional stock market activities (depository activities): »» Limited Liability Company “Media Servis”; resident legal entities; of Section 2 of the Procedure of the Issue Safekeeping of assets of joint investment institutions; a substantial interest of 10 percent. »» the maintenance of accounts of foreign of General Foreign Exchange Transaction currency accounts of (resident and non- License to Banks and Foreign Bank License Series АE № 263238 issued by the National Securities and Stock Market resident) customers and accounts held by Branches approved by Resolution of the Commission on August 28, 2013, with the validity from non-resident customers in the monetary Board of the National Bank of Ukraine # October 12, 2013, for an indefinite period for the exercise unit of Ukraine; 281 of August 15, 2011; of professional stock market activities (depository »» the maintenance of correspondent foreign activities): Safekeeping of assets of pension funds; currency accounts of (resident and non- License Series АE № 294713 resident) banks; issued by the National Securities and Stock Market »» the maintenance of correspondent accounts Commission on February 14, 2015, with the validity of (non-resident) banks in the monetary from February 14, 2015, for an indefinite period for unit of Ukraine; the exercise of professional stock market activities »» the opening of correspondent foreign (securities trading activities): Brokerage; currency accounts with authorized banks of Ukraine and the performance of transactions using the same;
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1.7. Organizational Structure of JSB UKRGASBANK’s Head Office (as of January 1, 2016)
IT Audit and Information Legal Departmentт Legal Function* Security Unit Examining Commission General Shareholders Meeting
Intrabank Activities and IT Department Internal Revision Reporting Audit Unit Directorate
Liability Transactions and AML Audits Monitoring and Results Regional Network Audit HR Management Department Corporate Secretary Function Audit Unit Consolidation Unit Coordination Unit Supervisory Board (7 persons)
Internal Asset Transactions Unit Audit Methodology, Planning Regional Network Outlets Banking Security Department Classified Documents and Reporting Unit Audit Unit Audit Function Management Unit
Head Office Units Audit Audit Methodology and Regional Network Outlets and Reports Consolidation Monitoring Directorate Audit Directorate MANAGEMENT BOARD Directorate Chairman of the Management Board K. Y. Shevchenko
Chief Accountant Deputy Chairman of the Deputy Chairman of the Deputy Chairman of the First Deputy Chairman of Deputy Chairman of the Deputy Chairman of the Deputy Chairman of the N.H. Khrustalova Management Board Management Board Management Board the Management Board Management Board Management Board Management Board O.V. Dubrovin N.Ye. Vasylets D.V. Chernyshov A.M. Kravets O.V. Aleksandrov S.I. Moskalenko. N.V. Liebiedieva
Banking Business Back Office Finance Department Risk Management Corporate Banking and Treasury Department Retail Banking Department Debt Liabilities Settlement Sales Network Support Department Department Transactional Business Department Department Department
Operations Monitoring and Support Department* Finance and Economics Financial Monitoring Corporate Banking International Cooperation Small and Medium Business Facilities Management Regional Network Department* (AML) Department* Department Department Department Management Department* Department
Customer Transactions Back Office Department Tenders Organization Unit Fraud Identification Corporate VIP Customers Investment Business Contact Center Housekeeping Department* Cash Collection Department Directorate Management Department and Equity Management Department Centralized Customer Transactions Monitoring and Support Department* Mortgage Cover Management Retail Business Overdue Debt Custody Business Card Products and Non- Occupational Safety Unit Unit Management Directorate Directorateі Conventional Sales Channels Department
Reporting, Control, and Methodology Department Information Policy, Marketing, Compliance and Methodology Foreign Exchange Control Oblast and regional and Advertising Department Directorate Department directorates
Intrabank Transactions Support Directorate Credit Decision Making Non-bank Institutions Center* Cooperation Directorate
Operations Department
Tax Accounting Directorate * These structural units will be wound up after the actual dismissal of their staff members
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1.8. Personnel 1.9. Our History
KRGASBANK’s personnel are a team enabling employees to fulfill their potential are 1993 2000 of highly qualified specialists providing applied. all banking services and striving for the The Bank cooperates with a number of Closed Joint Stock Company “Joint Stock The Bank started issuing domestic Ucontinued development of their professional skills Ukrainian universities; their students and Commercial Bank Hajibeybank”—a predecessor to (ENERGY) ЕНЕРГІЯ™ cards and and expertise. graduates work for UKRGASBANK as interns Ukrgasbank—was registered. implementing corporate salary disbursement projects for its largest customers. The management of UKRGASBANK paid and are offered a unique opportunity to start their substantial attention in 2015 to improving the career at a successful financial institution. When 1995 The Bank became a principal member of existing human resource management tools in the selecting future employees for UKRGASBANK, Europay International. Bank; for instance, a new personnel motivation the preference is given to highly professional, The Bank was renamed as JSB Intergasbank system that meets the best motivation practices ambitious and focused candidates. and consisted of the Head Office in 2001 was introduced. In addition, cutting-edge The Bank offers high social guarantees, fair Kyiv and a branch in Odesa. personnel assessment and development systems labor remuneration, training and development, The Bank became active commercially The Bank was renamed as Open Joint-Stock taking into consideration achievements and the ensures occupational safety and security of the and financially. A PC banking system was Company Joint Stock Bank Ukrgasbank. performance of each employee and focused on employees. implemented for the prompt provision of high- The Bank kept promoting banking services in quality services to customers. regions and opened 40 regional branches by the year end. 1996 2002 The Bank was renamed as JSB Ukrgasbank, AS OF THE END OF THE REPORTING PERIOD, obtained a license for transactions with The Banking Supervision and Regulation foreign currency valuables from the NBU, Commission included UKRGASBANK into Group THE BANK’S STAFFING LEVEL TOTALED was linked to REUTERS and became active 2 of the Ukrainian banks on the basis of the in Ukraine’s foreign exchange market. development of its asset and liability business. 1997 The Bank expanded its market presence and was represented in 13 oblasts of Ukraine. JSB Ukrgasbank was reorganized into an open joint stock company. Over 85 percent of 2003 3447 persons , including The Bank was actively integrated into Ukraine’s employees gas sector. Large gas suppliers, such as Ukrgaz, The Bank issued its first Visa International card. are 25 to 49 years old, Intergaz, and others, become customers of the 69 — percent of women, Bank. The Bank was issued a general banking The Bank won the tender for the provision of An average employee is — license. The Bank was audited under international account management services to the World Bank’s standards for the first time by Deloitte & Touche. Private Sector Development project. 31 — percent of men. 37 years old. 1998 2004
The Bank grew its capitalization as a result of the The Bank increased its authorized fund to UAH second issue of shares. 120 million and joined Ukraine’s Top 20 banks. The Bank joined the Association of Ukrainian The Bank issued almost 180,000 cards. The average number of years with the Bank is Banks the same year. The Bank was implementing several salary disbursement projects for its customers. 5 years. 1999 2005 РІК The Bank issued the third issue of its shares to increase its authorized fund from UAH The Bank’s terminals were certified by 6.90 million to UAH 13.95 million. MasterCard Worldwide, and the Bank started In order to implement its strategic development acquiring chip cards of this payment system. More than 76 percent of the Bank’s employees are university plan, the Bank obtained an extension to the A new biometric customer identification graduates. license for raising and investing foreign currency system was implemented in the depository on international markets (MAST-IPRA Depository).
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2006 The Cabinet of Ministers of Ukraine made a 2012 2014 decision to contribute UAH 3.1 billion to the Bank’s The Bank was approved as a pilot bank for authorized capital. Thus, the authorized capital of The Bank continued implementing its strategy In 2014, UKRGASBANK maintained a relatively high business activity and was found to be the implementation of the IFC’s Ukraine the Bank grew to UAH 3.8 billion and the state successfully and strengthened its leading Banking Corporate Governance Project. positions among the largest Ukrainian banks. one of the most dynamic, efficient, stable represented by the Ministry of Finance of Ukraine and reliable banks in Ukraine by leading Moody’s Investors Service assigned the Bank a became a shareholder holding 81.58 percent shares The Bank became an active participant of the economic publications. It was also ranked as B2 long-term foreign currency deposit rating and in the Bank. The Bank was reorganized into a public state “Affordable Housing” program of individual one of the Top 100 companies of Ukraine. E+ financial stability rating. The rating was projected joint stock company the same year. Because of the home loans. Having obtained a license from the to be “stable”. This contributed to raising a first-time financial crisis, the Bank had to optimize its network National Securities and Stock Market Commission In July, UKRGASBANK offered Domovychok syndicated loan of USD 16 million from foreign to reduce administrative costs. for the exercise of the professional activities on the universal credit and deposit card that was declared banks. By the year end, the Bank had more than stock market in the form of the mortgage cover by MasterCard a mass product of the year 2014 in 314,000 private and corporate customers. 2010 management activities, Ukrgasbank was vested November. UKRGASBANK’s information security with the exclusive right to provide the relevant management policy underwent international 2007 The Bank drafted a new development strategy, services to securities issuers. The Bank met its certification in 2014, and was the first such system demonstrated better financial performance, and liabilities to foreign creditors and repaid a USD in Ukraine to get a certificate of conformity with The Bank substantially improved resumed lending. 23 million syndicated loan provided in 2008 by a ISO/IEC 27001:2005. On December 26, 2014, the its performance and increased its In the beginning of the year, the authorized group of international banks. Ukrainian Credit Rating Agency reconfirmed authorized fund to UAH 500 million. capital of the Bank was increased by further UAH UKRGASBANK opened its official pages on its long-term credit rating of uaA+ assigned to The Bank obtained the second USD 46 million 1.9 billion as a result of an additional issue of shares Facebook and Twitter. Ekspert-Rating rating UKRGASBANK with a “stable” outlook and syndicated loan of and a USD 20 million club and the interest held by the Ministry of Finance agency increased UKRGASBANK’s credit rating ranked deposits with UKRGASBANK as “A” loan. The reorganization of the sales network by of Ukraine in the authorized capital went up to and the rating of its series D and E bonds to the (top reliability). The Bank optimized its network, means of the migration to a “single balance sheet” 87.72 percent. The Ministry of Finance of Ukraine uaA- level with a “positive” outlook. implemented new products and services, improved was started. By the year end, the staffing level of included the Bank into a list of commercial banks the reliability of transactions, and improved the Bank exceeded 3,400 persons. tasked with functions of agents for the purposes of services under the existing offers. value-added tax refund in domestic treasury bills. 2013 2008 The Cabinet of Ministers of Ukraine appointed 2015 the Bank as an agent for managing special current The Bank celebrated 20 years of its operations. The Bank was categorized as one of the largest accounts of guaranteed gas suppliers and their The net annual profit of UKRGASBANK A number of positive events marked the year 2015 in UKRGASBANK’s history. domestic credit and finance institutions and structural units, as well as companies that sell exceeded UAH 1 billion and the Bank ranked increased its authorized fund to UAH 700 million. natural gas to gas suppliers. Kredyt-Rating rating second on the market in terms of the profit. The Bank was included into the list of public A USD 23 million syndicated loan was agency assigned the Bank a long-term credit rating In March, UKRGASBANK introduced its assets being of strategic importance for the national raised to fund foreign trade transactions of the of uaBBB with a “stable” outlook and the Bank own Welsend multi-currency money transfer economy and security. Bank’s customers. The Bank also repaid the USD deposit reliability level of “4” (highly reliable). system. The system became international in In February 2015, the National Securities and 20 million club loan and the USD 46 million autumn after the launch in Georgia. The Bank Stock Market Commission made a decision to syndicated loan obtained in 2007 on time and 2011 introduced a special Frendy Card offer for grant UKRGASBANK a license for the exercise in full. The Bank started offering its individual schoolchildren at the beginning of the school of professional stock market activities (securities customers transactions on the Forex market as a The Bank’s capital was increased by further UAH year. The Bank was the first Ukrainian bank to trading activities). new service. 4.3 billion to UAH 10 billion, and the interest offer a special lending program to apartment UKRGASBANK repaid stabilization loans The Bank was ranked first in terms of the held by the state grew to 92.9998 percent. house co-owner associations (condominiums). provided by the National Bank of Ukraine early transparency with the highest transparency rating Due to this, the Bank managed to make The Bank marked its fifth anniversary on the and in full. These loans to the tune of UAH 922.6 of 71.2 percent as a result of a review of the Top the appropriate provisions in accordance with Forex market. UKRGASBANK joined the Polish million were granted to UKRGASBANK for one 30 Ukrainian banks carried out by the Financial requirements of the NBU and international Government’s “Financial Support to Exports” year at the interest rate equivalent to the discount Initiatives Agency together with Standard and auditors. The Bank maintained a strong competitive program implemented by the Polish state-owned rate of the National Bank of Ukraine plus one and Poor’s Corporate Governance Rating Service. stance in the group of the largest Ukrainian banks. Bank Gospodarstwa Krajowego and was assigned a half percentage points. The Bank also repaid in Kredyt-Rating agency reconfirmed the uaBBB a EUR 14 million limit. Ekspert-Rating agency full the USD 200 million deposit lodged by the 2009 long-term credit rating and debt rating of the Bank increased UKRGASBANK’s national credit rating State Treasury Service of Ukraine together with the with the “stable” outlook and the high reliability to uaA+. The Ukrainian Credit Rating Agency accrued interest. The Bank faced substantial changes. (“4”) of bank deposits twice during the year. assigned the same credit rating (uaA+) with a The Bank underwent successfully its first Shareholders applied to the Government Ekspert-Rating rating agency assigned the credit “stable” outlook and rated the deposits in the information security management system for the state to inject capital into the Bank rating of uaBBB+ to the Bank and its debt liabilities Bank at “B” level (highly reliable). monitoring audit and was issued a new certificate of because of the difficult financial situation that came into existence in Ukraine in 2009. (bonds series C, D, and E). conformity with ISO/IEC 27001:2013 information security management standard.
20 21 UKRGASBANK ANNUAL REPORT • 2015 OUR BUSINESS CARD UKRGASBANK
In December, a tender committee set up by 1.10. Ratings UKRGASBANK’s Supervisory Board made a decision to hold the first public tender in Ukraine for the sale of UKRGASBANK’s claims under loan and security agreements. In December, UKRGASBANK was the first Ukrainian bank to issue a customs fees financial guarantee to the State Fiscal Service of Ukraine to the tune of UAH 195 million for one of the leading multinationals. The Bank successfully completed its merger with PJSC JSCB Kyiv within the scope of a unique procedure of keeping the financial stability in the Ukrainian banking sector. After the transfer of liabilities, the owners of funds—not only individuals, but also corporate customers—regained the full control of their accounts. UKRGASBANK received an additional capital injection of UAH 3.8 billion as an additional guarantee of its stability. The interest owned by the state grew from 92.9998 percent to 94.9409 percent as a result. The Ukrainian Credit Rating Agency assigned the top reliability rating to deposits with UKRGASBANK (“A”) among the Ukrainian banks to confirm the Bank’s low sensitivity to the unfavorable external impacts. Standart-Rating rating agency also assigned the Bank the highest possible rating of rd.1(pi). The rating committee of Ekspert-Rating rating agency reconfirmed UKRGASBANK’s national credit rating of uaAA-. According to the agency, a borrower with such a rating has a high creditworthiness in comparison with other Ukrainian borrowers.
22 23 UKRGASBANK ANNUAL REPORT • 2015 OUR BUSINESS CARD UKRGASBANK
24 25 UKRGASBANK ANNUAL REPORT • 2015 OUR BUSINESS CARD UKRGASBANK
1.11. Financial Performance Review as of the end of year 2015 1.12. Membership in Payment Systems
Core Indicators of UKRGASBANK as at the year-end on the basis of the draft financial UKRGASBANK has been a member In addition, UKRGASBANK holds licenses statements of UKRGASBANK as of the end of day December 31, 2015 of MasterCard International Inc. and Visa for acquiring transactions in two payment International Service Association international systems making it possible for the Bank to payment systems, as well as PS UKRKART and operate under the agency agreement drafted by YEAR 2015 YEAR 2014 CHANGE NSMEP (National Mass Electronic Payments UKRGASBANK in accordance with the rules of INDICATORS System) domestic payment systems for many MasterCard International Inc./Visa International UAH thousand % years. Service Association, and the current legislation of Balance Sheet The Bank offers its customers the premium Ukraine. Assets, including: 41 555 340 20 714 713 100,61% American Express cards within the scope of a Core advantages include UKRGASBANK’s Cash and cash equivalents 3 969 997 2 313 610 71,59% marketing agreement with American Express. cooperation with the largest processing centers loans to customers 14 029 078 9 727 446 44,22% UKRGASBANK also carries out functions of within the scope of the provision of services to investment securities available for sale 8 341 186 5 791 831 44,02% UKRKART’s clearing bank and processed card affiliate and associate members of international
Liabilities, including: 37 262 694 19 343 015 92,64% transactions for 11 Ukrainian banks as at the year payment systems, namely: Ukrainian Processing
funds of the National Bank of Ukraine 4 284 258 5 180 214 –17,30% end. Center, UKRKART, and Ukrainian Financial
customer deposits 27 510 140 12 375 658 122,29% Being a principal member of international Network. payment systems (MasterCard International Inc. The sponsorship of banks in gaining Equity 4 292 646 1 371 698 212,94% and Visa International Service Association), the membership of international payment systems Authorized capital 13 837 000 10 000 000 38,37% Bank is experienced in cooperating with banks remains a priority line of card business Statement of Comprehensive Income in connection with their obtaining membership development for UKRGASBANK. Net interest income before the change in the loan impairment provision 726 894 1 098 222 –33,81% of international payment systems and providing Change in the loan impairment provision (1 189 898) (5 048 237) –76,43% them with further professional support. For Net interest income (expenses) after the change in the loan impairment provision (463 004) (3 950 015) –88,28% instance, UKRGASBANK managed to attract 1.13. Membership in Profit from the initial recognition of funds of the National Bank of Ukraine 85 138 – 100,00% new customers in 2015 in spite of the overall Interbank Unions, Net commission income 219 616 190 820 15,09% reduction in the demand for the development
Net (losses)/gains from investment securities available for sale 144 110 (166 624) 215,62% of the card business by new banks. The Bank Exchanges, and Associations
Net gains (losses) from transactions with the foreign currency 1 290 238 905 001 42,57% supports 14 Ukrainian banks in their cooperation »» the Ukrainian Stock Traders Association » Gains (losses) from transactions with derivative financial instruments 64 741 892 386 –92,75% with international payment systems, including 6 » the Ukrainian Interbank Currency Exchange associate members of Visa International Service »» PFTS Stock Exchange Other income 56 859 44 980 26,41% Association and 8 affiliate members of MasterCard »» Ukrainian Exchange Non-interest expenses (1 089 011) (1 349 051) –19,28% International Inc. »» Perspektyva Stock Exchange Profit/loss before tax 308 687 (3 432 503) 1211,97% Advantages of UKRGASBANK as an »» Professional Association of Registrars and Net profit/loss 259 672 (3 382 801) 1402,72% international payment system membership Depositories sponsor include, for instance, its broad ATM »» Universal Commodity Exchange “Contract network that covers all regions of Ukraine and Chamber of the Ukrainian Interbank UKRGASBANK Positions on the Banking Market as of January 1, 20161 consisted of more than 1000 ATMs as of January Currency Exchange” 1, 2016, including 600 bank-owned ATMs and 400 INDICATORS MARKET SHARE ATMs owned by other UKRKART member banks.
Equity 4,12% In addition, UKRGASBANK is involved
Assets 3,32% into ATM partnership with Oschadbank (2,080
Securities portfolio 5,81% ATMs), Ukrsotsbank (860 ATMs) and PRAVEX- BANK (250 ATMs). Loans and advances to customers, including 2,13% If a bank is a member of only one international legal entities 2,00% payment system, UKRGASBANK offers the cash individuals 3,17% advance services for cards of another international Customer deposits, including 3,85% payment system via its own ATMs and POS legal entities 5,17% terminals on the basis of an agency agreement individuals 2,78% without the need for the other bank to become a member of the international payment system in question. 1 Calculated on the basis of core performance indicators of Ukrainian banks provided on the web site of the National Bank of Ukraine, and in accordance with statistical reporting file #02 as of January 1, 2016..
26 27 UKRGASBANK ANNUAL REPORT • 2015 SECTION 2 1.14. Structural Divisions (as of January 1, 2016) UKRGASBANK’s network comprises 245 registered branches (including 179 operating branches) in all oblasts of Ukraine and in the city of Kyiv Corporate Governance
Ukraine Geographical Coverage by UKRGASBANK’s Network of Operating Outlets and ATMs
Чернігівська Волинська Рівненська обл. обл. обл. Сумська 2 1 обл. 4 12 12 34 Житомирська м. Київ обл. 8 29 21 80 4 16
Львівська Київська обл. обл. Полтавська Харківська обл. 11 39 обл. Хмельницька 8 107 Черкаська Луганська Тернопільська обл. обл. обл. обл. 7 28 6 25 Вінницька Івано- 6 14 9 34 3 5 3 11 обл. Франківська Закарпатська обл. 15 42 Кіровоградська обл. Дніпропетровська Донецька 4 11 Чернівецька обл. 6 18 14 обл. обл. обл. 5 4 5 8 33 3 3 1 3 Одеська Запорізька обл. обл. Миколаївська 18 26 обл. Херсонська 6 11 обл.
5 11
Відділення АР Крим
Банкомати
Всього
179 612
When in doubt, follow the suit of the wise and prudent; sooner or later they will win the odd trick.
28 Baltasar Gracián y Morales UKRGASBANK ANNUAL REPORT • 2015 CORPORATE GOVERNANCE UKRGASBANK
2. Corporate Governance increased by means of the private placement of Every year, the General Shareholders Meeting of 2.1. Corporate Governance System additional shares with the current par value at the the Bank makes a decision to allocate the Bank’s expense of additional contributions, such as the profit on the basis of the performance achieved by the Bank in the previous (reporting) year. lodgment of funds by individuals and the state by he corporate governance in These principles underlie the corporate means of the exchange of domestic treasury bonds The profit of the reporting year or a part UKRGASBANK is organized in accordance governance policy, which is binding upon all the for shares in the Bank subject to specific features thereof may be used by decision of the General with requirements of the legislation of structural units of the Bank. regulated by the Law of Ukraine “On Measures to Shareholders Meeting to disburse dividends to Ukraine,T including the Corporate Governance At its current stage of development, the Bank Support Bank Capitalization and Restructuring” shareholders that own ordinary shares in the Principles approved by Decision of the National is characterized by a number of specific features and in accordance with resolutions of the Bank. Holders of preference shares are entitled to Securities and Stock Market Commission # that dictate approaches toward organizing the Cabinet of Ministers of Ukraine on the additional the annual fixed dividend, except for cases covered 955 of July 22, 2014, and the Methodological corporate governance system in the Bank and capitalization of the Bank. by part 3 of Article 31 of the Law of Ukraine “On Recommendations on Improvement of the imposing additional requirements for, and The state in the person of the Ministry of Joint Stock Companies” or other restrictions Corporate Governance in Banks of Ukraine restrictions upon, the operations of the Bank. Finance of Ukraine that holds 94.9409 percent imposed by the banking legislation. The dividends approved by Resolution of the Board of the The state represented by the Ministry of of the Bank’s authorized capital is the largest on preference shares are disbursed in the amount National Bank of Ukraine # 98 of March 28, 2007. Finance of Ukraine holds a significant interest beneficiary owner. No other shareholder owns of UAH 0.01 per preference share. of 94.9409 percent in the Bank’s equity. This more than 1.0 percent of the authorized capital. The dividends are disbursed to shareholders ownership structure of the Bank makes it that hold all types of shares in the Bank once a The corporate governance in the Bank is necessary to satisfy state and public needs, but it As of 1 January 2016: year in full in cash only. The dividend payment based upon the following principles: also may result in a limited application of some »» members of the Supervisory Board did not on ordinary shares must be completed within »» забезпечення акціонерам реальної elements of the generally accepted corporate own any shares in the Bank; six months of the date of the decision of the можthe provision of shareholders with a governance standards. The exercise of interests »» members of the Management Board owned General Shareholders Meeting to pay dividends. realistic opportunity for the exercise of their of the state is assured by representatives of the 50 shares (0.000000004 percent of the The dividends on preference shares must be rights related to the participation in the Ministry of Finance of Ukraine in the Supervisory authorized capital of the Bank). disbursed within six months of the end of the management of the Bank and the assurance Board and the Examining Commission of the reporting year, provided that no restrictions are of the exercise of rights by the state as the Bank. imposed by the banking legislation and subject main owner of the Bank within the scope According to UKRGASBANK’s Articles of 2.3. Shareholder’s Equity to specific decisions of the Supervisory Board. specified by the legislation of Ukraine; Association, its managing bodies are the General Development The dividend shall be paid on shares in the Bank, »» the equitable treatment of shareholders Shareholders Meeting and the Management whose placement result report has been registered regardless of the number of shares held by Board, while the Examining Commission and with the National Securities and Stock Market them; the Supervisory Board are the controlling bodies. № REGISTRATION AUTHORIZED CAPITAL Commission in accordance with the procedure DATE OF THE VALUE, UAH »» the balanced, prudent and efficient The managing and controlling bodies of the Bank AMENDMENT TO prescribed by the legislation. management of the ongoing business by make up a single bank management and control THE ARTICLES OF It is not allowed to grant dividend the Management Board; system enabling the shareholders to regulate and ASSOCIATION disbursement preferences for different shareholder »» the strategic management of the Bank and control the operations of the Bank. 1 December 2002 64 567 571 groups within the same share category. the efficient control over activities of the The Bank’s management system is based upon 2 December 2003 90 000 000 The period of limitation counted from the
Management Board by the Supervisory the subordination of an inferior managing body 3 August 2004 120 000 000 date of notification of shareholders eligible
Board; to the superior one. 4 June 2005 170 000 000 for dividends about the date, the amount, the » » the specification of goals and core The General Shareholders Meeting is the 5 May 2006 200 000 000 procedure, and the time frame of the disbursement business lines of the Bank by the General highest managing body of the Bank that manages thereof for a specific year shall be treated as the 6 December 2006 300 000 000 Shareholders Meeting; the Bank’s activities in general, specifies goals and deadline for the obtainment of the dividends due 7 May 2007 400 000 000 »» the timely disclosure of the full and true core lines of business. by the shareholders. The date of notification shall information about the Bank, including 8 November 2007 500 000 000 be determined on the basis of the stamp of the its financial standing, economic 9 May 2008 600 000 000 post office that distributed the registered letters performance, significant events, ownership 2.2. Major Shareholders 10 December 2008 700 000 000 with the relevant notice. and management structure to enable (as of January 1, 2016) 11 July 2009 3 800 000 000 Dividends not claimed by a shareholder within shareholders and customers of the bank to 12 January 2010 5 700 000 000 the specified time frame shall be deposited on an As of January 1, 2016, the Bank’s equity amounted make balanced decisions; to UAH 13,837,000,000 and was divided into 13 July 2011 10 000 000 000 appropriate account with the Bank. No interest »» the efficient control over the financial and 13,836,522,922 registered ordinary shares 14 May 2015 13 204 000 000 shall accrue on the amounts so deposited.
business performance of the Bank aimed at and 477,078 registered preference shares. 15 August 2015 13 837 000 000 protecting rights and legitimate interests of shareholders and customers of the Bank. In 2015, the Bank’s authorized capital grew by UAH 3,837,000,000. The authorized capital was 2.4. Dividend Policy 30 31 UKRGASBANK ANNUAL REPORT • 2015 SECTION 3 2.5. Management Board as well as by a contract governed by the civil law or and Supervisory Board the labor law to be concluded with the Chairman and each member of the Management Board. Compensation The amount of the labor remuneration of the According to UKRGASBANK’s Articles of Chairman and the members of the Management Risk Management Association, the procedure of the payment of Board, including incentives and compensations compensations to members of the Supervisory shall be prescribed by a dedicated decision of Board is to be specified in contracts UKRGASBANK’s Supervisory Board. governed by the civil law to be concluded with each Supervisory Board member. The said contract governed by the civil law may be subject to payment or non-payable. 2.6. Identification and The Chairman and the members of Management of Conflicts of UKRGASBANK’s Supervisory Board, who are Interest state officials, shall exercise the duties vested in them by the UKRGASBANK’s Articles of The conflicts of interest are identified and Association, the Charter of the Supervisory Board managed in accordance with requirements of of UKRGASBANK, and the relevant contracts the Conflict of Interest Policy of UKRGASBANK governed by the civil law on a non-paid basis Joint Stock Bank Public Joint Stock Company (subject to the compensation of documented drafted in accordance with the legislation of expenses associated with the exercise of functions of Ukraine, including the Corporate Governance members of UKRGASBANK’s Supervisory Board Principles approved by Decision of the National in accordance with the procedure prescribed by the Securities and Stock Market Commission and relevant contracts governed by the civil law). the Methodological Recommendations on The independent members of UKRGASBANK’s Improvement of the Corporate Governance in Supervisory Board shall exercise the duties vested Banks of Ukraine approved by Resolution of in them by the UKRGASBANK’s Articles of the Board of the National Bank of Ukraine # 98 Association, the Charter of the Supervisory Board of March 28, 2007, as well as UKRGASBANK’s of UKRGASBANK, and the relevant contracts Articles of Association and other internal governed by the civil law on a paid basis (subject procedures and policies. to the compensation of documented expenses The Supervisory Board organizes regular (at associated with the exercise of functions of least once a year) polling of managers of the Bank members of UKRGASBANK’s Supervisory Board in order to detect potential and actual conflicts of in accordance with the procedure prescribed by the interest on their part. relevant contracts governed by the civil law). The The information supplied by the managers amount of their compensation shall be approved in questionnaires is analyzed, accumulated and by decision of the General Shareholders Meeting of made accessible to members of the Supervisory UKRGASBANK. The compensation of independent Board, the Management Board, the Examining members of UKRGASBANK’s Supervisory Board Commission, the internal audit function and the shall be set as a percentage of the remuneration Risk Management Department. or the salary of the Chairman of the Management The Supervisory Board exercises control over Board. the compliance with the process of identifying, The procedure of the labor remuneration and detecting and managing potential and/or existing provision of performance incentives to the Chairman conflict of interest. and members of the Management Board is defined by the Law “On Joint Stock Companies” and other legislative acts, as well as by the UKRGASBANK’s Articles of Association, the charter of the Management Board, policies of labor remuneration and provision of performance incentives for the The most dangerous ways are those Chairman and members of the Management Board, that lead nowhere.
32 Gabriel Laub UKRGASBANK ANNUAL REPORT • 2015 RISK MANAGEMENT UKRGASBANK
3. Risk Management The Risk Management Strategy specifies the following goals of the Bank’s risk 6. The reputational risk is — management process: the existing or potential risk to proceeds and the capital arising from the negative »» the attainment of business plan targets taking into account potential perception of the Bank’s image on the part of customers, counterparties, risks by ensuring the optimum balance between risks and profits; shareholders or supervisors. It affects the Bank’s ability to establish new relations »» the assurance of the stable development of the Bank within with counterparties, offer new services or maintain existing relations. the scope of the implementation of the Bank’s overall development strategy defined by the Supervisory Board; »» the exercise of banking activities and the making of management decisions on the basis of the optimal balance of the risk and the profitability at all management levels of the Bank; »» the efficient management of the Bank’s capital. The following parties are engaged into the management of risks in the Bank: The Bank is using the following risk map: Supervisory Board 1. The Supervisory Board determines and approves the risk management strategy that specifies the range of The credit risk is — risks and procedures of managing them; sets forth risk limits and the Bank’s risk tolerance levels; controls the risk to proceeds and the capital arising from failure of a debtor the operating efficiency of risk management system; approves the Bank Continuity Plan; recognizes sources or counterparty to meet their contractual obligations. of the capitalization and other funding of the Bank; specifies the lending policy of the Bank. 2. The market risk is — the risk of losses arising under the influence of adverse changes in market prices, such Management Board as changes in foreign exchange rates, interest rates, values of financial instruments. The Management Board is in charge of the overall approach toward the management of risks and the implementation of risk management strategies and principles approved by the Supervisory Board. The Bank’s Management Board delegates its day-to-day risk management powers to committees of the Bank and specifies authority limits of these committees. 2.1. The exchange rate risk is — the existing or potential risk to proceeds and the capital arising from unfavorable changes in foreign exchange rates and prices for bank metals. 2.2. The interest rate risk is — Credit Council the existing or potential risk to proceeds and the capital of the Bank arising from The Credit Council has the overall responsible for monitoring and managing the credit and investment portfolio, the unfavorable changes in interest rates on the market. It affects both the profitability of implementation of the credit and other policies of the Bank in respect of clients of the Bank; the organization of the lending the Bank, and the value of its assets, liabilities and off-balance-sheets instruments. to customers of the Bank taking into account strategic and other current business plans of the Bank; the decision making on the engagement of the Bank into asset transactions with customers within the authority limits (including lending 2.3. The pricing risk is — transactions); the support to measures focused on managing credit risk in transactions with customers of the Bank. the risk arising from unfavorable changes in prices for variable yield securities.
3. Assets and Liabilities Management Committee The liquidity risk is — The Assets and Liabilities Management Committee has the general responsibility for setting internal liquidity the risk to proceeds and the capital that arises because of the inability of the Bank gap limits, internal currency position limits broken down by currencies and position types, making decisions on to meet its obligations as they fall due without suffering unsustainable losses or optimizing the currency structure of the balance sheet, specifying the limits of the trading loss, setting the interest the inability to manage unexpected outflows of funds, changes in funding sources rate sensitivity limits, making decisions on the optimization of the structure of assets and liabilities, monitoring the and/or to meet off-balance-sheet commitments. There is also the market liquidity compliance with regulations and funding regulation parameters, and the funding policy performance indicators. risk that arises because of the inability of the Bank to meet its position gaps at current market rates without suffering unsustainable losses and/or the inability of managers of the Bank to take into account changes in market conditions that affect the Bank’s ability to raise funds in required amounts at acceptable rates Operational Risk Management Committee and/or to liquidate assets rapidly and with the minimum loss of their value. The Operational Risk Management Committee is responsible for implementing the operational risks identification, evaluation and monitoring system; setting levels of the Bank’s operational risk tolerance by means of the implementation of limits, 4. regulations and procedures; ensuring the efficient interaction among nits of the Bank at all levels of the operational risk The operational risk is — management, the compliance with requirements of the National Bank of Ukraine and provisions of the current legislation of Ukraine on the operational risk management; developing the corporate culture of the operational risk management. the risk of loss arising from inadequate corporate governance, control system or The Risk Management Department provides methodological support to the financial and operational risk failed information technologies and information processing processes in terms of management processes; prepares proposals on setting the Bank’s tolerance to financial and operational their manageability, versatility, reliability, controllability and uninterrupted operation. risks; carries out independent ongoing assessment of the consistency of existing policies and procedures with financial and operational risks; supports the quantitative and qualitative assessment on the basis of 5. the determined indicators of risks that are faced by the Bank or can potentially arise in its activities. The internal audit function develops internal audit procedures (methodology) and assesses the availability,
The legal or compliance risk is— the sufficiency and the efficiency of the internal control system (the financial and operational audits, the existing or potential risk to proceeds and the capital arising from the failure of the performance audits of the relevant structural units and offices of the Bank); it audits and evaluates the Bank to comply with requirements of laws, regulatory instruments, accepted the operating efficiency of risk management system, develops recommendations on making good the practices or ethical standards, or the possibility of their ambiguous construction. detected violations, improving the internal control system and the status of the risk management;
34 35 UKRGASBANK ANNUAL REPORT • 2015 SECTION 4 controls their implementation; informs the Supervisory Board and the Management Board of the Bank about audit results, the status of the internal control system and risk management system. Managers of standalone structural units that generate risks (front office) are responsible for the absolute compliance with the specified risk acceptance policies and procedures, the proper performance of functions assigned to the relevant units in accordance with the internal risk management policies, and for the provision of the complete and timely information to other parties involved into the risk management process. Managers of standalone structural units that support operations generating the risks (back office) are responsible for the compliance with the specified risk acceptance limits and conditions, and the proper performance of Internal Control System functions assigned to the relevant units in accordance with the internal risk management policies, and for the provision of the complete and timely information to other parties involved into the risk management process.
The management of risks is based upon the following principles:
1. Efficient risk management system. The risk management system is developed on the basis of the business profile of the Bank, regulatory requirements and expectations of shareholders, the Supervisory Board and the Management Board of the Bank. This system supports the efficient identification, evaluation, limitation, monitoring and control of risks. 2. Comprehensive risk management approach. Risks need to be treated comprehensively to ensure the proper risk management quality. Risks are evaluated from the point of view of their impact on the internal capital and liquidity of the Bank. The level of risks and interrelations between them are to be taken into consideration while making strategic and tactical management decisions. 3. Risk assessment. The qualitative and quantitative analysis of all risks is carried out on an ongoing basis; the risk assessment results are reported with the specified frequency (at least once a quarter) and in case of substantial (actual or expected) changes in the external or internal operating environment of the Bank. 4. Independence of the risk management function. Risks are analyzed, evaluated, monitored and controlled by the Risk Management Department that has resources and powers sufficient for these functions.
5. Anti-crisis management and bank continuity management. The Bank develops specific risk management procedures in case of crisis or contingencies defined in specific internal policies of the Bank.
6. Adequacy of information systems and risk reporting. Efficient information systems are created to measure, evaluate, aggregate and report the size, the structure and the quality of the Bank’s transactions broken down by risks, products and counterparties. 7. Stress testing. The Bank applies stress tests while developing the development strategy and business plans, the risk management strategies and policies, the business continuity plan, and must make sure that the worst-case scenario is identified, that potential losses in case of the materialization of the worst-case scenario are determined, and that vulnerabilities and weaknesses in the system of the protection against risks are detected.
The high quality of the risk management system in the Bank is confirmed by the fact that UKRGASBANK Each man had only one genuine vocation— was the only bank with the Ukrainian capital found not to be in need of the additional capitalization as a result of the stress test of Top 20 banks carried out at the end of the year 2015. to find the way to himself.
36 Herman Hesse UKRGASBANK ANNUAL REPORT • 2015 SECTION 5 4. Internal Control System
he internal control system of the Bank and regulations of other agencies. The Compliance consists of the Supervisory Board, the and Methodology Directorate coordinates Management Board, the internal audit the work of compliance controllers and issues function,T the chief accountant with deputies, recommendations/reservations in respect of the Information Technologies managers of separated structural units (branches, potential compliance risks. directorates) of the Bank, the Risk Management The Bank has approved its Internal Control Department, the Compliance and Methodology System Organization Policy to define the general Development Directorate, heads of independent structural units, ways of improving the organization of the internal and officers of the Bank who exercise the internal control in the Bank and the operating efficiency of control in accordance with powers vested in them the internal control system in order to ensure the by the internal policies of the Bank. stable and safe operation of the Bank and protect A dedicated Compliance and Methodology interests of depositors and creditors. The Internal Directorate tasked with ensuring compliance of Control System Organization Policy defines the the internal policies of the Bank with requirements core entities of the internal control system, allocates of regulatory instruments of the National Bank of powers to them, defines stages of the internal control Ukraine, the applicable legislation and requirements system, the organizational principles of the internal of other regulating agencies in the field of the control system, and ensures the monitoring and banking regulation has been established to improve control over the operation of the internal control the organization of the internal control system in the system in the Bank. Bank and exercise the compliance-related functions. Responsible compliance controllers have been appointed at the level of standalone structural units. Their core function is to control the timely development and updates of internal policies within the operating area of the relevant structural unit in line with changes in regulatory instruments of the National Bank of Ukraine, the current legislation
I shall either find a way or make one.
38 Philip Sidney UKRGASBANK ANNUAL REPORT • 2015 SECTION 6 5. Information Technologies Development
In the field of the Bank automation, the core activities include the assurance of UKRGASBANK’s technology Business Development and information competitiveness on the modern banking market from the point of view of the service quality and the convenience of their use for customers.
The business processes automation aimed at improving the customer service and enhancing customer satisfaction is a strategic line of the IT development in the Bank.
For instance, the following IT projects were implemented in UKRGASBANK in 2015:
1. IP telephony implementation: »» the work of the contact center was organized in Rivne. »» a system for the recording of conversations of the Bank customers with the contact center or conversations of collectors with bank customers was integrated.
2. Expansion of communication channels: »» the work was carried out to expand communication channels in more than 15 branches of oblast directorates to provide more comfortable conditions for the uninterrupted work to the staff of branches.
3. Guest access to the Internet in branches of the Bank: »» Wi-Fi hotspots were installed to offer guest access to the Internet in 17 branches in regions to make the customer experience in the branches more comfortable. 4. Migration toward the terminal mode of operation of oblast directorates: »» the terminal operation mode was introduced to speed up the operation of the software and support the interaction of Vinnytsia, Volyn, Dnipropetrovsk and Zhytomyr Oblast directorates with the Head Office. 5. PC buffer stock: »» the buffer stock of 161 PCs was set up in oblast directorates for the timely replacement of the equipment in case of repairs and to provide new equipment to new employees.
6. Optimization of the printer product range: »» 71 printers were replaced in order to optimize the printing equipment stock and save on expendables . 7. IT outsourcing quality control: »» the automated Help Desk system was upgraded to enable the automated processing of requests addressed to outsourcing companies and control the time of their implementation. »» a mechanism of control over the time of the request implementation by outsourcing companies and the coordination between different outsourcing companies was introduced. 8. Information systems implementation and development: »» the Siebel “Fast Sales” CRM system was launched. It enabled the Bank to make targeted offers to homogeneous customer groups making the Bank officers more efficient and improving the profitability per customer (up to +10 percent in retail business). »» WebBank front office system was implemented to consolidate the customer information in a single database and reduce the customer service time from 50 minutes to 15 minutes when selling individual deposit products. »» the BCZ-Card+ cards management system was integrated with the automated banking system SCROOGE and the card product portfolio was migrated to SCROOGE in order to support the migration toward a single customer account and the further development of modern services for clients. Procrastination is a sin if a long journey awaits you. Shota Rustaveli 40 UKRGASBANK ANNUAL REPORT • 2015 BUSINESS DEVELOPMENT UKRGASBANK
6. Business Development Structure of the Corporate Credit Portfolio by Sector, percent 6.1. Corporate Banking Core customers of the Bank are: Diagram 1 015, UKRGASBANK improved its positions on Ukraine’s financial market »» state-owned oil/gas, transport and energy 11% substantially by increasing its market share, companies; Others 2volumes of banking transactions, portfolios and »» forestry enterprises; 5% commission income. The banking activities in the »» agroindustrial companies; corporate segment were focused on expanding »» food and beverage companies; Processing industry 39% the customer base, broadening the range of »» manufacturers and distributors of medical banking transactions and services, improving products and pharmaceuticals; Fuel and service quality, introducing a flexible customized »» machinery and equipment manufacturers; 7% energy sector customer service approach. Increasing portfolios »» retail shops. of customer funds and attracting new corporate ТTransport, warehousing customers was a priority for the corporate 6.1.1. Asset Transactions2 business. UKRGASBANK cooperated actively during Over the year 2015, the amount of corporate the year with both large state-owned enterprises loans grew by UAH 2.2 billion (disregarding 14% and private companies of Ukraine. The major exchange rate differences) or 20 percent to UAH Wholesale and retail trade objective for the Bank was to enter into 15.3 billion as of December 31, 2015. comprehensive service relations with customers The Bank was focused on developing a high- and their counterparties. quality diversified credit portfolio. For this reason, 23% The Bank won more than 1,400 new the Bank pursued a balanced policy with asset Agroindustrial sector customers. By the year end, UKRGASBANK transactions accompanied by measures aimed provided services to more than 8,000 corporate at mitigating risks, increasing the yield from customers (disregarding the internal customer transactions, and improving the credit service re-segmentation carried out at the end of the year quality. The Bank set stringent requirements for 2015). the financial standing of borrowers, the coverage Taking into account the specific features of of the loan amount by the collateral, the positive transport sector—for 7 percent, the processing »» non-secured loans to VIP customers; the corporate banking development in 2015, the credit history, the business prospects and the industry—for 5 percent (Diagram 1). »» non-secured overdraft facilities; Bank kept incessantly improving and adapting project efficiency. The borrower performance UKRGASBANK offers its corporate customers »» non-secured overdraft facilities for VIP its products and services to meet the needs of analysis took into account the business specifics, 17 lending programs that have been improved customers; its customers, and aligning them to customers’ the contractual requirements, the account over the year and adapted to customers’ needs, »» overdraft facilities for state-owned forestry business and market. As a result, UKRGASBANK turnover and other indicators. business requirements and markets. enterprises; increased the volumes of banking transactions. An indicative offer is issued to a customer In general, this programs offer both short-term »» Formula Uspikhu program; For instance, the amount of outstanding loans together with recommendations on the possibility and long-term loans, including specialized loans »» non-secured Hryvnia Avansom overdraft grew by 20 percent and that of customer deposits of the loan operation and the appropriateness of depending on operating specifics of the borrowers. facility; grew by 188 percent. On the deposit market, the the further review of the loan application. The The lending programs offer competitive interest »» business vehicles finance program; Bank strengthened its positions and demonstrated maximum time for the review of loan applications rates, loans in both domestic and foreign currency »» new agricultural machinery finance an increase in corporate funds and deposits by and the issue of an indicative offer to corporate (USD, EUR), the possibility of granting non- program; UAH 9.6 billion (disregarding exchange rate customers set by internal policies is 30 days. secured loans (overdrafts, VIP programs), and »» new manufacturing equipment finance differences). In 2015, the following sectors accounted for the customization of lending terms. program; the largest percentages of the corporate credit »» commercial real estate finance program; portfolio: the fuel and energy sector accounted for »» corporate loan secured with a deposit 39 percent, the agriculture and food industry— program. Currently, the following lending for 23 percent, the trade—for 14 percent, the programs are on offer: In 2015, the Bank implemented the »» working capital loans to legal entities of the 2 The corporate credit portfolio (without SME customers following corporate lending programs: according to the internal segmentation) is specified in this corporate segment; section without the interest accrued by the bank and before »» working capital loans to state-owned »» corporate lending on the basis of a Master provisions. forestry enterprises; Loan Agreement concluded for up to 36
42 43 UKRGASBANK ANNUAL REPORT • 2015 BUSINESS DEVELOPMENT UKRGASBANK
3 months and setting out a limit for the 6.1.2. Liability Transactions Amounts due to corporate customers, in UAH millions secured asset transactions. Loan agreements During the year 2015, the amount of corporate for credit facilities, overdrafts, guarantees deposits denominated in hryvnia equivalent went Diagram 2 and letters of credit are concluded within up by UAH 9.6 billion (disregarding exchange the scope of the master agreement without rate differences) or 188 percent. For instance, the additional collateral to secure each loan amount of time deposits increased by UAH 4,841 agreement; million or 258 percent. Balances of demand funds »» a program of loans for the standby grew by UAH 4,727 million or 147 percent over 7 038,7 gas supply system was implemented the year. in the course of the cooperation with In spite of the situation prevailing at the HighTechLeasing company. It offers loans banking market of Ukraine in 2015, the level Time deposits for the purchase and the installation of of confidence of corporate customers in Demand funds standby gas supply systems to ensure the UKRGASBANK remained sufficiently high. Thus, uninterrupted operation of the customer’s the Bank retained its core clients and increased the 1 876,9 8 446,9 enterprise in case of natural gas supply number of corporate and public customers, and difficulties; received a substantial inflow of funds. 3 213,2 »» the program of loans to utilities for the Over the year, the Bank optimized its pricing purchase of the special vehicles, machinery to take into consideration the market situation, 01.01.2015 01.01.2016 and equipment for the core business. The standardized its deposit programs to align loans are granted as regular loans, lines them with customer needs and their operating of credit and for topping up the working environment, introduced new services, took capital in the form of the overdraft facilities; measures to resume cooperation with dormant »» the grain-secured loans to agroindustrial customers, etc. In 2015, the Bank implemented the business. These plans were regularly updated companies. These loans are secured by the A balanced interest-rate policy and following corporate deposits products: during the year. In 2016, we plan to unify pledge of the grain kept at a warehouse on flexible corporate deposit conditions make »» new Osvita deposit products were offered pricing plans and reduce their number. the basis of a double warehouse receipt UKRGASBANK one of the leaders on the funding to state-owned and municipal higher and »» new prices were approved in 2015 for the issue by the grain storage facility and owned market (Diagram 2). vocational education establishments in temporary disability social insurance funds, by the customer; accordance with Resolution of the Cabinet pension funds and other budget-funded »» the financing of the working capital of of Ministers of Ukraine # 657 of August 26, organizations. A dedicated program was By the end of the year 2015, 14 deposit agricultural producers program. These are 2015. These are 3 to 350 (inclusive) calendar offered to district heating and centralized programs were offered to corporate working capital loans to fund the expenses days’ deposits within the ongoing budget water supply utilities for servicing their customers: on sowing, cultivating and harvesting crops period repayable by December 20 of the special investment-program accounts. secured with the collateral up to 60 percent; »» Standart deposits; same period at the latest. These deposits can »» as a result of a tender organized by »» the program of backing promissory notes to »» Standart plus deposits; be topped up. the State Treasury Service of Ukraine, top up the working capital of agroindustrial »» Prohresyvnyi deposits; »» Corporate Overnight deposits. These are one UKRGASBANK has become one of the enterprises calls for the Bank’s undertaking »» Zolotyi Standart deposits; (1) banking day deposits (disregarding days banks to be involved into the provision to pay a backed promissory note presented »» Investytsiinyi deposits; off and holidays) that cannot be topped up. of payment services to budget-funded by the holder and not paid by the issuer »» Biudzhetnyi deposits; »» master deposit agreements. This is a flexible institutions for the cash disbursement on the that has been accepted by way of the full »» Shvydkyi Rukh deposits; deposit product making it possible to lodge basis of cheques issued by the State Treasury or partial (less own pecuniary contribution »» Depozytna liniia deposits; an unlimited number of time deposits Service of Ukraine in years 2015 to 2017. of the promissory note issuer) payment »» Tyzhnevyi deposits; (tranches) on different terms. under the goods sales or supply contract. »» Oschadnyi Depozytnyi Sertyfikat deposits; »» (as regards the amount, the tenor, the » The program covers up to 60 percent of » Perspektyva deposits; interest rate, etc.) under the same Master 6.1.3. Documentary Business the sowing, cultivating and harvesting »» Corporate Overnight deposits; Deposit Agreement making it possible campaign or the target annual cost of »» Osvita deposits; for the customer to plan its finances, and In 2015, the volume of documentary animal husbandry or poultry production »» Master deposit agreements. lodge deposit tranches on the basis of transactions of the Bank’s customers (e.g., taking into account other working capital applications for the tranche lodgment being guarantees and letters of credit) went up asset transactions of the Bank and/or other an inseparable part of the General Deposit substantially. This confirmed a great interest of the
banks with the same customer. 3 Agreement. customers and their unfailing confidence. During The corporate deposits portfolio (without SME customers » according to the internal segmentation) is specified in this » As of the end of the year 2015, 16 pricing the reporting year, the Bank issued (opened) and section without the interest expenses accrued by the bank. plans were offered for payment services serviced documentary transactions to the tune of depending on lines of the customers’ UAH 1,260 million.
44 45 UKRGASBANK ANNUAL REPORT • 2015 BUSINESS DEVELOPMENT UKRGASBANK
The Bank offers its customers a full range of 100,000,000); the product range was updated and Number of SME Customers documentary transaction services used for the aligned to the needs of this business segment. settlement of accounts (e.g., documentary letters In parallel, measures were taken to recruit and Diagram 3 of credit and documentary remittance) and train officers of all levels of the SME hierarchy for securing the performance of undertakings aimed at improving the service quality. 35 000 (guarantees and standby letters of credit) both As a result, the Bank managed not only to 31 582 30 000 under contracts between residents of Ukraine keep, but also to expand its SME customer base. 26 074 and under foreign trade contracts without any For instance, the number of SME customers grew 25 000 limitation of the ownership form of customers in 2015 by 21 percent to 31,600 and their sector affiliation. If necessary, the Bank with 5,700 new SME customers coming to 20 000 involves leading international finance and credit UKRGASBANK, 9,700 new current accounts institutions as confirming banks and guarantor and 3,300 new deposit accounts opened for SME 15 000 banks in supporting its transactions. customers (Diagram 3). 10 000 In the guarantee segment, the Bank offers traditional guarantees (tender guarantees, 6.2.2. SME Asset Transactions. 5 000 performance bonds, payment guarantees, advance Priority SME Support Programs 0 payment refund guarantees, etc.) In addition, 01.01.2015 01.01.2016 the Bank has been entered into the register of The Bank substantially intensified its work on guarantors authorized to issue financial guarantees the acquisition of new SME borrowers in 2015. to the benefit of the State Fiscal Service of Ukraine SME Loan Portfolio in accordance with the Customs Code of Ukraine Over the year, the credit portfolio grew by 36 (customs guarantees) and the Tax Code of Ukraine percent to the equivalent of UAH 436 million as (VAT refund guarantees). of January 1, 2016. At that, the portfolio quality Diagram 4 A customs guarantee is an exclusive product substantially improved and the percentage of overdue loans dropped to 26 percent (Diagram of UKRGASBANK which is not offered by other 500 banks of Ukraine. The guarantee is issued to the 4). 436 450 benefit of the State Fiscal Service to secure the In 2015, the Bank upgraded its SME loan 400 performance of customs fee payment undertakings product range to better align it with needs of such 320 by the party in charge of such payments. At the customers, their business and market, and to make 350 end of the year 2015, the Bank successfully issued sure that the level of credit risk is acceptable. 300 its first customs guarantee to the tune of more The lending terms were updated within the 250 than UAH 195 million. scope of the project with the German Ukrainian млн грн 200 Foundation. Special preferential conditions were 150 developed for eco-loans for the environmental 100 6.2. Small and Medium- protection, contamination reduction, renewable 50 sized Enterprises (SME) energy and energy efficiency purposes (Diagrams 0 Business 5 and 6). 01.01.2015 01.01.2016 6.2.1. Development of the SME The Bank placed specific importance Business in UKRGASBANK on the implementation of lending in the following areas: The loans are provided to SME clients for »» Specific GUF-funded lending programs In 2015, the Bank identified SMEs as a »» under the state housing energy efficiency the purchase of new equipment, agricultural offer loans at the lowest interest on the dedicated business segment and assigned it a measures encouragement program. machinery and vehicles manufactured in the financial market. high development priority because of the volume The program provides for the refund of 40 to 70 Republic of Belarus and sold in Ukraine. The of transactions with SME customers and the percent of the loan principal amount granted program calls for the partial refund of the 6.2.3. Funding Transactions and prospects of their development. for the purchase of energy efficient materials interest by the government of the Republic of A new organizational hierarchy was set up in and equipment under energy efficiency Belarus. Payment Services the Bank and its regional network to support the measures taken by associations of apartment »» under the Bank’s project of cooperation In 2015, the Bank took the following implementation of the strategic SME development house co-owners (condominiums) and housing with the German Ukrainian Foundation measures: plans; new customer segmentation criteria were cooperative societies (cooperatives). (GUF). introduced (and the ultimate proceeds volume »» under the Bank’s project of cooperation »» rebuilt its SME deposit product range; for the SME segment was increased to UAH with the Republic of Belarus. »» simplified pricing arrangements;
46 47 UKRGASBANK ANNUAL REPORT • 2015 BUSINESS DEVELOPMENT UKRGASBANK
Structure of the SME Credit Portfolio as of January 1, 2015 SME Funding
Diagram 5 Diagram 7
67% 1000 900 Term loans 800 33% 700 400 Overdue loans 600 500 Deposit accounts 400
UAH million Demand accounts 300 205 529 200 100 192 0 01.01.2015 01.01.2016
Structure of the SME Credit Portfolio as of January 1, 2016
Diagram 6 UKRGASBANK’s strategy for the year 2016 calls for the consistent development 6.3. Retail Banking of the cooperation with the SME 6.3.1. Lending customers in the field of: In 2015, it was a priority for the retail business 74% »» lending under priority lending programs line to maintain UKRGASBANK’s positions in Term loans of the Bank; the retail lending segment. To this end, the Bank »» the participation in state programs of has been working on making its existing product 26% support to SMEs and condominiums; range more competitive and implementing Overdue loans »» the development of loyalty programs innovative products. for, and the cooperation with, customers In view of the current situation on the implementing energy and environmental market and the difficult economic environment modernization measures in their in the country, we paid specific attention to businesses; retail overdraft facilities and non-secured loans »» the provision of high-quality services designated for the purchase of the energy efficient (including the remote access) to SMEs and equipment. the micro-segment. In 2015, UKRGASBANK together with other state-owned bank joined the State Targeted 6.2.4. Remote Services Economic Program of Energy Efficiency and Renewable Energy and Fuel Development for »» - developed and implemented new service of SME customers by 134 percent to the equivalent АБ «УКРГАЗБАНК» здійснює планові years 2010 to 2015 terms and conditions; of UAH 929 million (Diagram 7). захUKRGASBANK is implementing measures To implement this governmental program, »» - provided automated support of bank The commission income of the Bank derived aimed at the continued improvement of its UKRGASBANK developed and approved its Tepla account contracts (in terms of pricing) at from payment and other services provided to SME system of the remote provision of services to its Oselia targeted retail lending program that calls the program level. customers grew from UAH 5.9 million in Q1 2015 customers. for the provision of retail loans for the purchase to UAH 12.6 million in Q4 2015, and amounted to A new remote service system was implemented of the energy efficient equipment and/or materials Thanks to that, the Bank managed to increase UAH 35.4 million in annual terms (Diagram 8). in 2015 that meets the more stringent security, with the subsequent partial reimbursement of the in 2015 balances on current and deposit accounts service, and integration requirements and enabled loan from the state budget by the State Energy increasing the number of its SME users.
48 49 UKRGASBANK ANNUAL REPORT • 2015 BUSINESS DEVELOPMENT UKRGASBANK
Commission Income Loans issued under the ‘Warm House’ program during 2015
Diagram 8 Diagram 9 15 000 3500 3289 3365
12 566 3000 12 000 2579 2500 9 379 1987 9 000 2000 7 544 Number of loans granted 1331 5 917 1500 under the Tepla Oselia program тис. грн 6 000 1000 718
3 000 500 196 16 0 0 May June July August October September NovemberDecember
I кв. 2015 II кв. 2015 III кв. 2015 IV кв. 2015 Overdraft limits granted during 2015 broken down by products
Efficiency and Energy Conservation Agency of Diagram 10 Ukraine. 6.3.2. Payment Services 3 600 The Tepla Oselia loans granted in May to Overdrafts/Card-based December 2015 totaled 14,549 loans to the tune UKRGASBANK offers a full range of payment loans of almost UAH 244 million (by the end of the year services to private customers and keeps on improving 2015, the Bank attained the level of about 3,000 its product range. loans per month)(Diagram 9). By the end of the year 2015, more than 880,000 Particular attention was paid in 2015, as well current accounts (including card accounts) with the as in the previous years to the highly profitable total balance of UAH 2,850.2 million were held in overdraft facilities for individuals. The Bank UKRGASBANK by individuals which accounts for has been granting overdrafts both under its 26.3 percent of the total portfolio of retail liabilities. Domovychok product that has both deposit In 2015, the balance of demand accounts went up by 13 718 and loan components, and by setting overdraft UAH 1,275.1 million. Domovychok limits within the scope of card-based salary During the year, more than 1,910 thousand card disbursement projects. Granting 17,318 overdraft accounts were opened. limits to the tune of UAH 127,434,018.93 in ProZapas deposit card products remained 2015, which is 20 percent more than in 2014 traditionally popular. By the year end, the balances (14,414 limits to the tune of UAH 99,549,142.46) of ProZapas card accounts exceeded UAH 1,562.6 with the interest payable on the day of the lodgment (Diagram 10) is a bright testimony of our work. million accounting for around 60 percent of the total 6.3.3. Time Deposits 4 of funds. At that, the Bank maintained its existing balance of individual card accounts. In 2015, Sprava Chesti deposit program was lending programs for the purchase of cars, new UKRGASBANK is a bank authorized to Raising individual deposits is one of the kept in operation. Under this program, the Bank and secondary-market homes (Diagram 11) in disburse pensions and benefits by the Pension Fund important sources for the development of the transfers charitable contributions of 1 percent p.a. view of changes in the applicable legislation, the of Ukraine and the Ministry of Social Policy of funding base of the Bank. UKRGASBANK offers its for the treatment and rehabilitation of victims of situation on the market, and the lending practices Ukraine. Currently, more than 41,000 people receive customers various deposit products: classic deposits the anti-terrorist operation (ATO). The charitable under the current economic environment. their pensions and benefits on accounts held with with the interest paid monthly or on maturity; contributions were transferred to the National Over the last 5 years (2011 to 2015) the Bank. The extension of the contract till January deposits with the interest capitalization; products Military Medicine Clinical Center “Main Military UKRGASBANK’s retail loan portfolio grew by 91.5 1, 2017, makes it possible for UKRGASBANK to making it possible to top up and partly withdraw Clinical Hospital” in order to speed up the use percent from UAH 2,505.4 million to UAH 4,796.95 keep providing services to pensioners and benefit funds, as well as deposit programs that call for the of funds for the treatment and the rehabilitation million. In 2015 alone, it grew by 18 percent from recipients in all regions of Ukraine and offer them a automatic extension of the validity period with the starting from 2015. The funds are used to buy UAH 4,062.9 million to 4,796.95 million (Diagram broad range of services. interest disbursement on maturity or on a monthly medicines and medical equipment for the treatment 12). basis. The Bank also offered its customers a deposit of servicemen of the Ukrainian Armed Forces and
50 51 UKRGASBANK ANNUAL REPORT • 2015 BUSINESS DEVELOPMENT UKRGASBANK
Overdraft limits in 2013-2015. Business development. Number of retail time deposits, %
Diagram 11 Diagram 13 0,1% 20 000 6,4% 17 318 EUR Gold, CHF 14 414 15 000
Number of granted 25,9% 10 000 limits 6800 USD
5 000
0 2013 2014 2015 67,6% Retail Credit Portfolio Development, UAH million UAH
Diagram 12 »» ranked 9th among banks being members of 5 000,00 4 796,95 lodged to the tune of the equivalent of UAH 1.1 payment systems in terms of the cards in circulation 4 500,00 4 062,90 billion. (according to the NBU); 4 000,00 In addition, the Bank offered a new deposit »» ranked 7th among banks being members of 3 500,00 3 249,50 program—Prybutkova Simka—for 7-day deposits payment systems in terms of the number of active 2 922,40 cards in circulation (according to the NBU). 3 000,00 with the automatic extension. By the year end, there 2 505,40 2 500,00 were 1,000 accounts opened under this program and the automatic extension of the tenor was accepted For instance, the Bank issued 802,961 cards, of 2 000,00 by owners of 87 percent of the deposits. which 85 percent are active, as of December 31, 1 500,00 During the year, the Bank operated loyalty 2015. 1 000,00 programs for individuals offering supplements The number of issued cards as of December 500,00 to the applicable interest rates for the renewal of 31, 2015, grew by 68,470 (about 9 percent) year 0,00 a deposit, for a large amount of a deposit, and for on year. ex-depositors of insolvent banks who received The number of active cards as of December 31, compensations from the Individual Deposit 2015, grew by 84,631 (about 14 percent) year on 01.01.2012 01.01.2013 01.01.2014 01.01.2015 01.01.2016 Guarantee Fund. Supplements were also offered to year. owners of the pension card accounts with the Bank The amount of card payments in 2015 went up on lodging a deposit for a certain tenor. by UAH 744.2 million (87 percent) year on year. other people injured in the ATO zone. During the year, the Bank promoted various Over the year, the individual deposit portfolio In 2015, the Bank made active use of By the year end, an amount of more than UAH deposit programs making it possible for the grew by UAH 2,842.0 million (35.6 percent) to UAH opportunities and preferences offered by 95 million was raised under the Sprava Chesti customers to lodge their deposits on favorable 7,971.4 by the year end or 73.3 percent of the total MasterCard Rewards program to encourage its deposit program and the charitable contribution terms. liabilities of individuals. In comparison with the year customers to pay with cards in shops, service amounted to UAH 1,413,735.17. For instance, Zrostaiemo Razom deposit 2012, the deposit portfolio grew by UAH 4,846.3 centers and Internet shops. This program offers As of the end of the year 2015, almost 69,000 program was in place till November 2015. It offered million (or 155 percent over 5 years) (Diagram 14). holders of Debit MasterCard cards an opportunity deposit accounts were held by 52,000 depositors. an opportunity to deposit funds for 6 to 12 months to get additional gifts, prizes and valuable Thus, about 24 percent of customers have entered with the possibility of topping up the deposit within 6.3.4. Alternative Channels and certificates if they pay with their cards. In addition into deposit contracts with the Bank. Traditionally, the first 30 days of the deposit date. Card Products to Domovychok credit cards, the access to this most individual deposit accounts are held in UAH Rizdviani Mriyi deposit program operated service was offered in 2015 to holders of Debit (67.6 percent), USD (almost 26 percent), EUR (6.4 from November 2015 till January 2016. Under this as of December 31, 2015, UKRGASBANK: MasterCard salary cards. This decision contributed percent), CHF and banking gold (0.1 percent each) program, the interest for the whole deposit tenor to the increase in the cashless payment volumes. (Diagram 13). was disbursed on the date of the deposit. Within 4 The individual deposits portfolio is specified without the three months of the program, 10,000 deposits were interest expenses accrued by the bank.
52 53 UKRGASBANK ANNUAL REPORT • 2015 BUSINESS DEVELOPMENT UKRGASBANK
Retail time deposits, in UAH millions Odesa, Poltava, Rivne, Sumy, Kharkiv, Kherson, Ukrgasbank is one of the most powerful and and Cherkasy Oblasts. reliable institutions on Ukraine’s stock market. UKRGASBANK’s cash collection units own 31 The Bank obtained its first permit for the Diagram 14 7 971,40 vehicles. All of them are well protected and meet exercise of professional activities on the securities the requirements of regulations of the National market from the Ministry of Finance of Ukraine Bank of Ukraine. The vehicles are tracked by a back in 1996. GPS monitoring system making it possible to In January 2015, UKRGASBANK operated 5 129,40 determine the location of vehicles instantly. on the stock market on the basis of licenses of the 3 972,30 UKRGASBANK’s 108 well-trained cash State Securities and Stock Market Commission for 3 771,00 collectors equipped with means of individual the exercise of the following professional activities 3 125,10 protection provide services to customers. Officers on the stock market: the brokerage on the basis of of the State Guard Service of the Ministry of license series AB # 520288 of February 10, 2010; the Interior of Ukraine are involved into transporting dealing activities on the basis of license series AB # foreign currency valuables. 520289 of February 10, 2010; the underwriting on the basis of license series AB # 520290 of February UKRGASBANK’s cash collection function offers a 10, 2010; and the securities management activities broad range of services: on the basis of license AB # 520091 of February 10, »» the collection of valuables from banks; 2010. In February 2015, UKRGASBANK obtained 01.01.2012 01.01.2013 01.01.2014 01.01.2015 01.01.2016 »» the collection of valuables from customers; »» the delivery of collected valuables from new licenses from the National Securities and customers to the Bank’s cash desk; Stock Market Commission for the exercise of the »» the transportation of valuables of following professional activities on the stock market: » » the system ranked 2nd among 16 resident payment a customer or the Bank; By the year end, the balances of card accounts systems in terms of domestic transfers in year the brokerage on the basis of license series AE # of individual customers of the Bank amounted to »» the prompt delivery of valuables to own units of the 294713 of February 14, 2015, valid indefinitely; the 2015 according to the National Bank of Ukraine; Bank, including the self-service software suites; » UAH 2,640.9 million. » the National Bank of Ukraine declared »» the transportation of valuables owned dealing activities on the basis of license series AE The end-2015 balances of ProZapas savings Welsend an “important payment system”; by customers between regions; # 294714 of February 14, 2015, valid indefinitely; » card accounts totaled UAH 1,562.6 million. » the system turnover grew in 2015 by a »» ATM loading and unloading; the underwriting on the basis of license series AE # factor of 2.5 in comparison with 2014; »» the collection and the transportation »» the Welsend software was used to automate 294715 of February 14, 2015, valid indefinitely; and of valuables owned by customers on the securities management activities on the basis 6.3.5. International Transfers the compensation disbursement to retail the basis of once-off contracts. customers of banks with the provisional of license AE # 294716 of February 14, 2015, valid and Payments administration and banks under liquidation The Bank’s cash collection and valuables indefinitely. UKRGASBANK keeps developing money (over UAH 8 billion were disbursed in 2015); transportation services are used by other banks, In 2015, UKRGASBANK provided mortgage »» the Welsend customers can send and receive transfers for individuals and processing payments money transfers between Ukraine and Armenia; corporate and SME customers, as well as by cover management services on the basis of license from individual customers to corporate customers. »» the yield from the system grew by 13 percent individuals. series AD # 034432 of June 18, 2012 issued by the The Bank offers services of any of the in 2015 in comparison with 2014. In 2015, the number of cash collection and National Securities and Stock Market Commission. following 8 international money transfer systems: In addition, the Bank makes individual foreign valuables transportation services entered into by This is the first and only license in Ukraine for Welsend, WesternUnion, Unistream, LEADER, currency transfers via SWIFT and domestic UKRGASBANK went up by 15 percent. As at the the exercise of the mortgage cover management MoneyGram, RIA, Zolotaya Korona and currency transfers via SEP NBU systems. year end, there were 699 active accounts serviced activities on the stock market. As a mortgage cover INTELEXPRESS. The Bank offers its individual customers the by the Bank’s cash collection function. manager, the Bank serviced issues of mortgage Welsend international payment system, possibility to pay for goods, work and services bonds with the par value of almost UAH 372.25 of which UKRGASBANK is the payment offered by enterprises, organizations and sole Thus, the successful implementation of million during the year 2015. organization, was registered by the National Bank traders. the strategy of the development of cash During the year, UKRGASBANK was identified of Ukraine on March 11, 2013, and has been collection and valuables transportation as a leader among securities traders in various offering services to the customers ever since. In services enabled the Bank: rankings. For instance, UKRGASBANK ranked » 2015, Welsend found 18 new partners in Ukraine 6.4. Cash Collection and » to increase the Bank›s share of the market of cash 3rd with the percentage of 11.66 percent in the collection from legal entities and individuals; and abroad. The transfers within Ukraine exceeded Valuables Transportation »» to increase the commission income; Ranking of Securities Traders in Terms of Deals in UAH 9 billion in 2015. This is 2.5 times as much »» to optimize expenses associated with with T-Bills on the Exchange and OTC Market as in 2014. There were 340,000 individual transfers In 2015, UKRGASBANK continued developing cash collection activities; as published by Cbonds portal and the self- over the year. and implementing cash collection and valuables »» to improve the Bank’s image as an active player regulated organization Association of Ukrainian transportation services. on the cash collection service market. Stock Traders. In 2015, the Bank treated the Welsend The Bank’s cash collection function is 6.5. Investment Business. In 2015, UKRGASBANK entered into 493 development as its strategic priority. The system present in 13 oblasts of Ukraine: Vinnytsia, (brokerage, dealing, underwriting, securities entered a radically new stage of its development Securities and achieved the following as of January 1, 2016: Dnipropetrovsk, Zakarpattia, Volyn, Kyiv, Lviv, management) contracts totaling UAH 38.54 billion. 54 55 UKRGASBANK ANNUAL REPORT • 2015 BUSINESS DEVELOPMENT UKRGASBANK
As of January 1, 2016, the Bank’s securities to support export and import transactions. Securities portfolio as of 01.01.2016, in UAH millions portfolio grew considerable since January 1, 2015, Traditionally, USD and EUR account for the bulk to UAH 11.75 billion (Diagram 15). of transactions. The amount of the currency sold Diagram 15 11 751,93 The structure of the Bank’s securities and purchased on Ukraine’s interbank currency investments in 2015 changed mainly in terms of market in 2015 exceeded the equivalent of UAH the increase in the percentage of governmental 45.9 billion (Diagrams 18, 19). securities (by 5.69 percentage points) and certificates of deposit issued by the National Bank 6.6.2. Transactions with 6 914,62 6 556,64 of Ukraine which accounted for 24.27 percent of Government Debt investments as at January 1, 2016 (Diagram 16). In 2015, the Bank exercised functions of 5 340,84 In 2015, UKRGASBANK continued brokerage a primary dealer on the government securities 4 208,00 activities on the stock market. market and has been one of the largest operators The Bank did not raise funds on the debt on the market in question. The Bank’s strategy securities market during 2015. in this area called for maintaining the achieved volumes and the yields of the domestic treasury bill (OVDP) portfolio. For instance, the OVDP 6.6. Treasury Business T-bill portfolio of the Bank amounted to UAH 5,765.9 and USD 39.3 million at par value as of 6.6.1. Interbank Market 01.01.2012 01.01.2013 01.01.2014 01.01.2015 01.01.2016 January 1, 2016. Transactions Throughout the year 2015, the Bank was UKRGASBANK is co-operating actively on the among the top five OVDP securities traders Structure of Investments into Securities, percent interbank market with both Ukrainian banks and in terms of the volume of transactions on the ex-USSR and other foreign banks. exchange and over-the-counter (OTC) market Diagram 16 UKRGASBANK adheres to the principle of (according to OVDP trader rankings published long-term mutually beneficial partnership with by the Cbonds.info portal). 100% its counterparty banks while entering into master In 2015, the OVDP sales and purchase 90% agreements on the interbank transactions. transactions on the secondary market totaled 24,27% For instance, the Bank entered into 89 master about UAH 37.6 billion. As a primary dealer on 80% 48,62% agreements with solvent banks, including 9 non- the governmental securities market, the Bank Shares and units 70% 65,46% resident banks as at January 1, 2016. purchased OVDP bills to the tune of UAH 1.3 Government and Most interbank transactions of the Bank are billion and USD 40.07 million. 60% 84,11% 84,88% municipal bonds swap deals, under which banks grant each other Corporate bonds 50% 54,58% loans (make deposits) in different currencies in NBU Certificates 40% the equivalent amounts with the same maturity. 6.6.3. Transactions with Bank of Deposit The relatively low level of risk inherent in such Metals and Cash Currency 30% transactions makes it possible to maintain an UKRGASBANK carries out bank metal and 50,26% 20% appropriate level of the short-term liquidity. bureau-de-change transactions in more than 170 33,44% 20,58% While transacting on interbank markets, branches throughout Ukraine. The information 10% 15,28% 13,92% the Bank pursues a conservative credit policy about gold and foreign currency exchange rates is 0,61% 1,20% 1,10% 1,11% 0,57% 0% focused on minimizing risks on the basis of published on the Bank’s official website. setting counterparty bank limits for interbank With its widespread branch network, transactions and applying customized approach UKRGASBANK has traditionally been an active 01.01.2012 01.01.2013 01.01.2014 01.01.2015 01.01.2016 toward each bank. member of the Bank metal market. It carries The impeccable reputation of the Bank out the entire spectrum of transactions with the enables it to raise non-secured interbank loans banking gold, including the sales and purchase of Gold bars are supplied to the Bank by well- 6.6.4. Development of as demonstrated by the interbank transaction banking metals and raising deposits denominated reputed refining companies Argor Heraeus S.A. Correspondent Relations portfolio that exceeded UAH 4.5 billion at the end in banking metals. Almost 2,200 troy ounces of (Switzerland) and Valcambi (Switzerland). of the year 2015 (Diagram 17). gold were held on individual current and deposit UKRGASBANK carries out bureau-de-change As of January 1, 2016, UKRGASBANK held In 2015, the Bank was active on the interbank accounts with UKRGASBANK as of January 1, transactions in US Dollars, Euro, Swiss Francs, 62 nostro correspondent accounts denominated currency market where it sold and bought 2016. English Pounds of Sterling, Russian Rubles, and in 16 currencies with 27 financial institutions, foreign currency to meet its own needs as well Polish Zloty. Exchange rates in the Bank’s bureaux including the leading clearing banks of the as on the basis of instructions of its customers de change is competitive and convenient for the Bank’s customers. 56 57 UKRGASBANK ANNUAL REPORT • 2015 BUSINESS DEVELOPMENT UKRGASBANK
Loans and deposits from other banks as of 01.01.2016, Purchase of Foreign Currency on Customer Instructions in 2015, UAH million in UAH millions
Diagram 18 Diagram 17 CHF; GBP; EUR; 2 262,1 160,0 7,1 Non-secured transactions 6 406,3 PLN; 4,9
2 237,2 Swap deals USD; RUB; 29 787,2 Others; 108,6 world, such as Deutsche Bank Trust Company entered on real market terms on a 24/7 basis via 113,5 Americas, Deutsche Bank AG, JP Morgan Chase the Internet using a trading terminal installed on Bank, Commerzbank AG, Commerzbank AG the client’s PC, smartphone or tablet. No physical Luxembourg Branch, VTB Bank (Deutschland) delivery of the currency takes place; the customer AG, UniCredit Bank AG, mBank S.A., Industrial only receives the gains or losses from the sold and Sales of Foreign Currency on Customer Instructions in 2015, UAH millioн and Commercial Bank of China. purchased currency. This correspondent accounts network meets The largest liquidity providers on the all the payment needs of UKRGASBANK’s international Forex market are the Bank’s partners Diagram 19 customers and the Bank itself both in terms of its for arbitrage deals. geographical and currency coverage. The transactions take place in line with the EUR; GBP; As of January 1, 2016, 60 Ukrainian banks Ukrainian legislation. The transactions rules have 3,6 held 288 vostro correspondent accounts with been registered by the National Bank of Ukraine. 4 421,2 UKRGASBANK. In addition to the opportunity to transact In 2015, UKRGASBANK opened a nostro in accordance with the Ukrainian legislation, PLN; correspondent account denominated in Yuan customers are offered lucrative trading terms. 4,9 Renminbi with Industrial and Commercial No commission is charged for lodging and Bank of China to broaden the range of foreign withdrawing funds and for the 24/7 information CHF; currency transactions, speed up the customer and technical support. 36,4 service, improve the quality of mutual account One can start transacting on the international settlements and interbank payments. Forex market by entering into the relevant agreement at any UKRGASBANK’s branch. The minimum threshold for this amounts to USD 100. 6.6.5. Marginal Trading In 2015, about 350 private clients USD; RUB; Arbitrage Business (Forex started transacting on the Forex market via 4 447,3 Transactions for Private Clients) UKRGASBANK. Over seven years, there are 3,500 486,6 customers making use of this service. Others; UKRGASBANK offers private clients an In 2015, customers invested about USD 1.3 491,5 opportunity to transact on a 24/7 basis on the million into Forex transactions and carried out international Forex market on marginal trade over 380,000 transactions. conditions without physical delivery. Deals are
58 59 UKRGASBANK ANNUAL REPORT • 2015 BUSINESS DEVELOPMENT UKRGASBANK
Development of Securities Accounts Opened in Years 2008 to 2015 6.6.6. Investment Coins and By the end of the year 2015, UKRGASBANK Foreign Coins serviced more than 25,000 securities accounts. Securities accounted for on these accounts SECURITIES ACCOUNT OWNER CATEGORY NUMBER OF SECURITIES ACCOUNTS In 2015, UKRGASBANK continued include 624 tranches of securities issued by the The state of Ukraine 1 offering for sale coins made by the well-reputed Ukrainian issuers. The depository assets serviced Legal entities 786 international manufacturers of numismatic by the depository institution of UKRGASBANK residents 753 products: Mennica Polska (Poland), Perthmint totaled UAH 185 billion in terms of the par value joint investment institutions 36 (Australia), New Zealandmint (New Zealand), of securities and rights in securities (Diagram insurance companies 16 JVP Investment Coins (Germany), Treasure of 20). banks 6 Oz (Australia). As at the end of the year 20215, UKRGASBANK Over the year 2015, UKRGASBANK sold over provided services to 18 managers of the state- non-state pension funds 12 2,000 coins to the tune of more than UAH 2.5 owned assets, which manage securities owned by securities traders 14 million. the state in accordance with Laws of Ukraine “On other than enumerated above 669 Management of State Property Objects”, “On the non-residents 33 Cabinet of Ministers of Ukraine”, and other laws Individuals 24 607 6.7. Custody Business by holding them on the securities account held by residents 24 563 UKRGASBANK engages into the custody the depository institution for the state of Ukraine. non-residents 44 business on the basis of licenses issued More than 22,000 securities accounts were by the National Securities and Stock opened as of December 31, 2015, for securities holders within the scope of the cooperation of the Market Commission: Ownership of Securities Accounts as of January 1, 2016 depository institution of UKRGASBANK with 32 »» license for the exercise of the custody companies in the field of the dematerialization of business by a depository institution, series securities. Diagram 20
AE # 263236 issued on August 28, 2013, The number of securities tranches serviced by 30 000 valid indefinitely from October 12, 2013; our depository institution went up in 2015 from 25 394 24 189 24 387 »» license for the joint investment institution 367 to 624. As a result, the volume of depository 25 000 22 323 custody activities, series AE # 263237 issued assets in terms of the par value of securities in the Number on August 28, 2013, valid indefinitely from hryvnia equivalent under control of the depository 20 000 October 12, 2013; institution grew from UAH 13 billion to UAH 185 of opened »» license for the pension fund custody billion. 15 000 accounts activities, series AE # 263238 issued on For this reason, UKRGASBANK ranked 1st 10 000 8610 August 28, 2013, valid indefinitely from in terms of the depository assets by par value (the October 12, 2013. total par value of securities in UAH) serviced by 5 000 the depository institution of UKRGASBANK 1145 1335 The depository institution of UKRGASBANK (Custody Business Directorate) as of the last day of 0 is a client of the National Bank of Ukraine Q4 2015 according to depository rankings issued 2009 2010 2011 2012 2013 2014 2015 (under inter-depository code 300996) and the by the Professional Association of Registrars and Central Depository of the Public Joint Stock Depositories. Company “National Depository of Ukraine” and the assurance of the confidentiality on the and documents, transactions with securities, (depository code of the securities account 6.8. Individual Banking basis of oblast directorates of the Bank. insurance and concierge services. 100024-UAH30300996). This arrangement The Premier Banking service model provides Various savings and deposit products, elite enables the Bank to transact with all securities In August 2015, the VIP banking unit was for the assignment of a dedicated personal cards of Gold, Platinum and Infinite levels, circulating in these depository systems, including transformed into the new segment of Premier service manager to each customer tasked with overdrafts, certificates of deposit and individual governmental, corporate and municipal Banking. This step was aimed at broadening the prompt solution of issues and the comfortable safe deposit box rental remained the most popular securities. substantially the range of products and services performance of transactions, a dedicated contact banking products among Premier Banking The depositor institution of UKRGASBANK offered to the customers, improving the service center line for Premier Banking customers, customers in 2015. accounts for rights in securities owned by quality and its accessibility in all oblast centers of preferential terms for banking products, a broader By the end of the year 2015, the Bank had the state and rights in securities owned by Ukraine. The transformation included a complete range of financial services, special prices and more than 1,200 Premier Banking customers. The resident and non-resident individuals and legal rebranding and the approval of the development loyalty programs. The customers can make use amount of funds raised from Premier Banking entities, joint investment institutions, pension strategy of this business area. The strategy calls of financial consultancy and personal financial customers exceeded UAH 1.14 billion. This is funds, banks, and other financial non-banking for opening 20 special Premier zones for the planning services, safes for the storage of valuables the highest amount of a deposit per customer for institutions. comfortable provision of services to customers
60 61 UKRGASBANK ANNUAL REPORT • 2015 BUSINESS DEVELOPMENT UKRGASBANK
In 2015, the Contact Center handled 420,000 incoming phone calls, which is the Bank. The Premier Banking credit portfolio equivalent on the average to 35,000 calls per month, as well as 1,834 messages exceeded UAH 462 million. sent via the “Complaints and Proposals” section of the Bank’s website. This is 54 percent more than a year ago. During 2015, the Contact Center handled 463 incoming voice messages left by customers via the IVR-menu of the Bank’s hotline. 6.9. Remote Services Starting from February 2015, the Contact Center handled 239,000 inquiries of customers in respect of the compensation for the guaranteed deposit amounts within the scope of the Bank’s cooperation with the Individual Deposits Guarantee Fund. Most calls were made by former customers of the following banks: VAB Bank, IMEXBANK, NADRA, City Commerce Bank, Kyivska In view of the rapid development of information technologies, UKRGASBANK strives for Rus Bank, Delta Bank. This figure also includes calls made by customers of PJSC JSCB Kyiv in developing the state-of-the-art technologies and systems for the interaction between connection with the registration for the re-opening of their accounts with UKRGASBANK. customers and the Bank to improve the banking service efficiency and promptness. The Contact Center also engages into the outgoing communication with the Bank’s customers and prospects in order to attract new customers, motivate and inform the existing customers.
Currently, the following remote banking service channels are made available to customers of the Bank: »» the network of ATMs, POS terminals As a result of the year 2015: and self-service terminals; »» corporate Internet banking; »» mobile banking (M-banking) »» new deposits to the tune of UAH 48,801,226 »» website of the Bank. were lodged with the Bank; »» overdraft facilities were opened on salary cards to the tune of UAH 1,153,719; »» 285 Domovychok deposit/credit cards to the tune of UAH 2,373,550 were issued.
Contact Center In 2016, the Contact Center plans for the development of the remote services, including the The Contact Center is a standalone unit of the Bank processing phone calls and e-mail on expansion of the self-service functionality of the IVR menu, the implementation of the self- a 365/7/24 basis. It is also an efficient and affordable channel for the remote sales of service by phone, etc. banking products and services. Priorities of the Contact Center include the professionalism, the accurate provision of the information, the customized approach, and the efficient communication with current customers and prospects from all business segments. Network of ATMs, POS Terminals and Self-service Terminals
Services of the Contact Center include: In order to improve the payment card services, the Bank keeps expanding the terminal infrastructure and the range of services offered via the terminal network. »» the provision of the reference information In general, 22 ATMs were installed and connected to UKRGASBANK’s network in 2015. Customers carried about the Bank’s operations; out 13.8 million transactions to the tune of UAH 12.4 billion via the Bank’s ATM network in 2015. »» the provision of advice to customers on banking The average amount withdrawn by customers via ATMs every month products, services, promotion campaigns and prices; grew to UAH 1.03 billion versus 755 million year on year. »» the provision of support to card holders; The amount of payments received via self-service terminals grew by »» the registration of complaints and UAH 6.8 million year on year to 26.9 million in 2015. proposals made by customers. The network of POS terminals of the Bank consisted in 2015 of more than 700 terminals used to process more than UAH 204 million during the year.
62 63 UKRGASBANK ANNUAL REPORT • 2015 SECTION 7 Corporate Internet Banking UKRGASBANK offers legal entities, sole traders, private notaries and attorneys a system for the remote real-time account processing—a Client-Internet-Bank system— with the following functionality: Partnership and »» domestic currency, foreign currency and bank metal payments; »» applications for the foreign currency Cooperation purchase, sale, and conversion; »» issue of statements of accounts, review of the account turnovers and balances; »» the exchange of electronic messages with the Bank; »» the additional services, such as salary disbursement projects and the financial control centers (management of accounts of reporting organizations); »» a mechanism of the assurance of the payment security (USB tokens, OTP SMS text messages, payment amount or number limits).
M-Banking
UKRGASBANK offers its cardholders the Mobile Banking (M-Banking) service to enable the customers to access information about their card accounts and make some transactions with their cards at any time from their own mobile phones. In addition, the SMS text message notification service provides the information about amounts credited to the customer’s card account. This service is becoming more and more popular among customers of the Bank. At the year end, these services were used by more than 300,000 cardholder customers of the Bank.
Website of the Bank
The Bank’s website is actively used by customers as a source of the information about the Bank and its activities, and as a remote sales channel. For instance, 6,871 online requests for banking products and services were sent via the Bank’s website to the Contact Center in 2015.
You only get to know people in dispute or underway. 64 Herbert George Wells UKRGASBANK ANNUAL REPORT • 2015 PARTNERSHIP AND COOPERATION UKRGASBANK
7. Partnership and Cooperation 7.1. International Money Transfer Systems
AIS Group This is one of the largest car operators representing 16 brands on the Ukrainian market. AIS Group owns 34 car centers and The Bank sends and disburses funds via international money transfer systems, such as Welsend, garages, 19 spare parts shops, and an assembly plant. Western Union, Unistream, LEADER, MoneyGram, RIA, Zolotaya Korona and Intelexpress.
Welsend This is an international payment system whose payment organization Bogdan Corporation This is one of the leading car operators with a widespread network of is UKRGASBANK. It was registered by the National Bank of Ukraine on trade and service branches that represents brands, such as Hyundai, February 4, 2013, and has been providing services to customers since Great Wall, Jac, Saipa, Bogdan, Subaru, Lifan, Lada, and Uz-Daewoo on February 11, 2013. In September 2013, Welsend got international the car loans market. The Bank cooperates with the Corporation via its by opening up in Georgia. Armenia followed in November 201. lending and insurance assistance company (Avtoriteyl Asystans), whose representatives work at dealership showrooms of Bohdan Avto Holding, Hyundai Motor Ukraine and Bogdan Industriia.
Western Union Ukrgasbank cooperated with this system as a sub-agent of Transbank from June 2002 till June 2009; after that, the Bank cooperated with the system as a sub-agent of the Finance and Credit Banking Corporation, which has Avtotrading Atoll Group This is a managing company of a car sub-holding whose core business the agent status, from February 2010 till August 2014. Since February includes the car distribution, retail sales and post-sales services of 2014, UKRGASBANK is a sub-agent of UFG Private Joint Stock Company. cars offered by VW Group (Skoda, Seat, VW), Ford, Hyundai, Suzuki, Renault, Peugeot, and Harley-Davidson® motorcycles. Avtotrading Atoll Group is a company of Atoll Holding group of companies, Unistream The Bank has been working with this system which is one of the Top 5 players on the Ukrainian car market. since May 2009 as a direct agent.
LEADER international The Bank has been working with this system money transfers since October 2006 as a direct agent. VD Group This is one of the largest operators on the Ukrainian passenger car market. The company’s strategy involves developing a new format of sales and services in the form of VD AvtoCity car cities. Today, VD AvtoCity is an MoneyGram The Bank has been working with this system since May association of modern dealership centers in Kyiv and Odesa with the 2007 as a direct agent, and recruiting other organizations total area of 50,000 square meters. They offer more than 190 models as MoneyGram sub-agents since May 2015. of well-known brands, more than 175 service posts and service up to 450 cars per day. VD Group includes companies being leaders in their RIA The Bank has been working with this system since respective sectors. The VD Group has its own insurance and leasing September 2010 as a direct agent. companies (VD Strakhuvannia and VD Leasing), as well as developer companies, such as VD Budivnytstvo, VD Engineering and others. Zolotaya Korona The Bank has been working with this system since September 2009 as a direct agent.
INTELEXPRESS The Bank has been working with this system since August 2012 as a direct agent. 7.3. Real Estate Developers
7.2. Car Dealers and Importers UKRGASBANK cooperates under mortgage lending programs with more than 60 accredited developers in various regions of Ukraine. Core partners under the new real estate lending programs are: Throughout the year 2015, UKRGASBANK engaged into fruitful cooperation with more than 300 car dealers and importers under targeted lending “Car Loan” programs. Kyivmiskbud This is a leader of Ukraine’s construction sector. This company is Partners of the Bank include the following leaders of the Ukrainian car market: the largest and the best-known operator of the real estate market focused on meeting the needs of mid-income individuals. The UkrAVTO Corporation This is a leader of Ukraine’s car market, a general importer and an company is focused on making its offer as affordable as possible official dealer of more than 20 car brands known worldwide. The Bank for as many consumers as possible. In 2015, Kyivmiskbud cooperates with UkrAVTO via its Ekspres Kredyt system of UKRAVTOLIZING commissioned 309,151 square meters of apartments. assistance company, which is a structural unit of UkrAVTO.
66 67 UKRGASBANK ANNUAL REPORT • 2015 PARTNERSHIP AND COOPERATION UKRGASBANK
OMOKS This is a developer of Chaika residential area, 7.6. Cooperation with the Individual Deposit Guarantee which includes projects, such as Chaika (18 buildings, 1650 apartments), Chaika 2 (8 buildings, 1667 apartments), Fund Chaika 3 and Chaika 4 (8 buildings, 1832 apartments), and Sotstaun (13 buildings, 1832apartments). In 2015, Chaika was found to be the Best Residential Area of the Year. UKRGASBANK as an agent of the Individual Deposit Guarantee Fund has successfully configured Ukrbud This corporation includes design institutes, construction and installation companies established back in 1930s, including and implemented the process of the high-quality and prompt provision of services to depositors Ukrenerhomontazh, Ukrbud Development, Budivelni Merezhi, etc. of insolvent banks. In 2015, the Bank disbursed compensations to depositors of more than Today, the company’s portfolio includes more than 20 projects, 46 insolvent banks. The Bank disbursed guaranteed compensation amounts to more than including residential areas, such as Parkova Dolyna, Vyshyvanka, 240,600 customers to the tune of UAH 8.1 billion. More than 30 percent of former insolvent Kharkivskyi, Oberih, Hertzen Park, Kozatskyi, Sadovyi, Kazka, bank depositors became customers of UKRGASBANK. The ongoing increase in the number of Novopecherskyi Dvir, Lisovyi, Artemivskyi, Horky Park Hall. depositors of the Bank offers the evidence of a professionally configured process of the high- quality and prompt provision of services to customers, and the high level of trust in the Bank.
Fedorchenko BVK Company This is the largest developer in the city of Sumy with more than 25 production plants. In 2015, this company 7.7. Concierge Companies commissioned 32,000 square meters of apartments.
7.4. Consumer Lending Partner Banks Concierge Service SmartLine offers 24/7 assistance in meeting requests for amenity and business services in various areas. A customer can expect a quick and professional solution of any issue, customized approach and the high service quality at all times. In 2015, the Bank continued developing its partnership and agency network for sales of banking products that became one of the alternative sales channels. For instance, UKRGASBANK continued developing an innovative service, 7.8. Insurance Companies such as selling consumer loans of another bank as an agent. Ukrainian Insurance Group This is a modern and energetic nation-wide insurance company with The Bank is going to develop its partnership and agency network, and expand 100 percent foreign capital. It ranks as one of the Top 10 Ukrainian the range of services that agents and partners will be able to offer. insurers in terms of its core financials. Ukrainian Insurance Group has been a full-fledged member of Vienna Insurance Group, a leader on the insurance market of Central and Eastern Europe, since February 2008. 7.5. Cooperation with State Authorities
Ukrainian Fire This is a company with 23 years of experience represented Insurance Company by 49 structural units throughout Ukraine. It has about 1,000 insurance product sales branches and customer service The Bank started a massive effort aimed at entering into cooperation agreements centers operating on the basis of agency agreements. with oblast/raion and city state administrations in 2015 within the scope of the Tepla Oselia program of lending for the energy efficient equipment and materials that calls for the compensation of the interest or the partial compensation of the principal under Kniazha Vienna This company is developing its own branch network throughout loans obtained for the purchase of the energy efficient equipment and materials. Insurance Group the country, and is focused on individual and SME customers. In 2015, 18 cooperation agreements were signed, under which the Bank’s borrowers were granted 3,456 loans. The most successful programs were implemented with Vinnytsia (1,105 contracts), Lviv (713 contracts), Rivne (590 contracts) and Kyiv (425 contracts) oblast state administrations. This company has been operating on Ukraine’s insurance Krayina market since 1994. It is in possession of licenses for 25 insurance classes. It is one of the Top 30 Ukrainian insurance companies in terms of insurance premiums.
Ekspres Strakhuvannia This company was established in 2008 with the participation of UkrAVTO Corporation, a leader of the Ukrainian automobile market. The company has licenses for 23 insurance classes.
68 69 UKRGASBANK ANNUAL REPORT • 2015 PARTNERSHIP AND COOPERATION UKRGASBANK
Unives The company is licensed to offer 20 core statutory and voluntary Ukrfinpolis This is a company with eight years of experience on the insurance classes. It has been a reliable insurance partner over more Ukrainian insurance market. It operates in Kyiv. The company than 12 years of the stable cooperation on the insurance market. is focused on developing the regional network, expanding the customer base, broadening sales channels, increasing insurance premium proceeds and financial performance. VUSO This company has been operating since 2001 and is specialized in providing statutory and voluntary insurance services to individuals and legal entities. HDI Strakhuvannia This company has been operating since 1992. After changes in the structure of shareholders, this company continued its operation as a part of Talanx International AG holding (Germany). Arsenal Strakhuvannia This is a modern and dynamically developing company that offers the broadest range of insurance services. Illichivske This company has become a leader of the insurance market after 10 years of activity.
VD Strakhuvannia This company registered in 2007 is in possession of permanent licenses for 11 voluntary insurance classes and is a part of VD Group that has UTICO This company was established in 1994. The company gained its been an active member of Ukraine’s car market for many years. deserved reputation of a reliable insurer guided by principles of honesty, integrity and transparency in dealing with clients and partners.
AXA Strakhuvannia This company is one of the leaders on Ukraine’s risk insurance market and a part of the French AXA Group. AXA has been a UNISON Strakhuvannia This company has 12 years of experience on the Ukrainian market No. 1 insurance brand worldwide for the last five years. and attaches priority to the best and most efficient insurance technologies. It offers corporate insurance of companies and their employee teams, as well as the individual risk insurance.
TAS Insurance Group This company has been operating in Ukraine since October 1998 as a part of a large investment and finance group. It is licensed to offer insurance under 32 classes. 7.9. Appraising Companies
PROSTO Strakhuvannia This company is in possession of 22 licenses issued by the National Commission in Charge of the State Regulation of Financial Service Markets (9 for statutory insurance classes and 13 for voluntary insurance classes), In the course of its business, UKRGASBANK cooperates with the leading appraisers, including: and offers insurance services to both individuals and legal entities.
This company was founded in 1995. It has obtained 26 licenses for Ukrainian Insurance Capital Uvekon Group This company has been working in Ukraine since 1996. It has the insurance under various voluntary and statutory classes. highly qualified appraisers holding RICS, FIABCI and TEGoVA international certificates. The company has a widespread network of 14 branches and 13 representative offices in all oblasts of Ukraine. It is also one of the leading providers of property UNIQA This company has been working in Ukraine since 2006, and appraisal services in Ukraine in the fields of tangible and intangible is a part of UNIQA Insurance Group. Today, it is one of the assets, as well as the pecuniary appraisal of land plots. leaders of the Ukrainian insurance market that offers all non- life insurance classes via its nation-wide network. Akademiia Otsinky i Prava This company has been operating on Ukraine’s market since 2002. It offers property appraisal services: tangible and intangible objects, Universalna This company ranks among Top 10 Ukrainian insurers. It was land plots. It is a member of self-regulated organizations in the field established in 1991 and is currently present in all regions of Ukraine. of the appraisal. It has a nation-wide network of 24 representative Universalna offers its services to individual and corporate customers. offices in all oblasts of Ukraine, and specialists of the company are in possession of international certificates (TEGoVA).
UBI Insurance Group This company established in 2000 is licensed to offer 17 KBA This company has been operating on Ukraine’s market since 2007. It classes of insurance. It is a universal Ukrainian insurance offers property appraisal services: tangible and intangible objects, as company with the specialization in insuring risks of oil/gas and well as the pecuniary valuation of land plots. KBA has a widespread energy companies. It is a strategic partner of a number of large network of representative offices in 17 oblasts of Ukraine. Ukrainian companies. Its network of regional branches and representative offices covers the entire territory of Ukraine.
70 71 UKRGASBANK ANNUAL REPORT • 2015 PARTNERSHIP AND COOPERATION UKRGASBANK
Renta Group This company has been operating on Ukraine’s market since 2004 Parus This company has been operating in Kyiv and Odesa Oblasts since 2006. and offers tangible object and intangible asset appraisal services. This company offers tangible and intangible asset appraisal services. Renta Group has 18 representative offices in 13 oblasts of Ukraine.
BK-Ekspert This company offers tangible and intangible asset appraisal services. It RG Satellite This company offers tangible object and intangible asset appraisal has been operating on Ukraine’s market since 2009. BK-Ekspert has a services, the pecuniary valuation of land plots, and business consultancy. widespread network of representative offices in 10 oblasts of Ukraine.
In 2015, the Bank also established cooperation with Ukrainska Profesiina Otsinka TA-Ekspert-Servis This company appraises tangible and intangible objects, including company, which has been offering tangible object and intangible asset appraisal land plots. It has been operating on Ukraine’s market since services, the expert pecuniary valuation of land plots since 2009. 2009. The company has a widespread network of representative offices in 10 oblasts of Ukraine, cooperates with many Ukrainian banks, for instance, in the field of the collateral monitoring. 7.10. Asset Management Companies
B.G.S.-AKTYV This company founded in 2003 is a part of BGS Group of consultancy companies specializing in the provision of audit, accounting, and consultancy services. B.G.S.-AKTYV has representative offices in some oblasts of Ukraine and offers tangible asset appraisal services. In 2015, UKRGASBANK cooperated with stock market members (asset management companies, securities traders, depositories) in respect of selling and buying securities on stock exchanges.
Baker Tilly Ukraine This company has been operating in Ukraine since 1999. It is an independent member of Baker Tilly International that offers high-quality audit, consultancy, independent appraisal, 7.11. Securities Depositories accounting and management accounting services. National Depository This company ensures the operation of the unified depository accounting of Ukraine system and supports the provision of depository services. NDU’s sole SPETSOTSINKA Ukrayina The company offers a full range of appraisal services in respect of (NDU) competence includes the numbering of securities (the assignment tangible and intangible assets, as well as the pecuniary appraisal of of codes), the standardization of the depository accounting and land plots. It has been operating on Ukraine’s market since 1998. The document exchange related to transactions with securities, et al. company has practical experience of the cooperation with the Ukrainian The Bank has been NDU’s client since 2007. At that time, it entered and foreign banks and companies in the field of the independent into a depository agreement for the opening and the maintenance of property appraisal. It has a widespread network of representative a securities account, the custody of, and the accounting for securities, offices covering 18 oblasts of Ukraine. Employees of the company in which rights are owned by depositors of the depository institution. have RICS and TEGoVA certificates, and are FIABCI members. In 2009, the Bank entered into an agreement for the opening an issuer’s securities account, and deposited the global Kanzas This company has been operating on Ukraine’s market since certificates of the Bank’s ordinary and preference shares. 2002. Kanzas has a widespread network of representative offices This institution exercises activities involving the depository Depository of the National in 20 oblasts of Ukraine, and offers tangible and intangible asset accounting for, and service of, the circulation of domestic and Bank of Ukraine appraisal services, and the pecuniary valuation of land plots. foreign bonds of Ukraine, special-purpose domestic bonds, treasury notes of Ukraine, and local bonds, as well as debt securities that certify the loan relations of local self-government bodies that Aktyv Plus The company offers property appraisal services: tangible and have been placed outside of Ukraine, and the service of corporate intangible objects, as well as the pecuniary valuation of land plots. transactions of the issuer on securities accounts of customers. This company has been operating on Ukraine’s market since 2002. Aktyv Plus has a network of representative offices in 7 oblasts of Ukraine. 7.12. Stock Exchanges Global Appraisal This company has a widespread network of representative offices in all oblasts of Ukraine and provides tangible and intangible Perspektyva Stock Exchange This exchange established in 2006 became a leader on asset appraisal services, information and consultancy services Ukraine’s market due to the active implementation of in the field of the real estate market analysis, reviews and trading, settlement and information technologies. forecasts. It has a team of highly qualified specialists. The Bank has been a member of Perspektyva Stock Exchange since 2007 and is transacting in securities at this exchange.
72 73 UKRGASBANK ANNUAL REPORT • 2015 SECTION 8 PFTS Stock Exchange This is one of the largest trade organizers on the securities market of Ukraine that maintains an inter-regional real- time electronic securities trading system. The Bank has been a member of PFTS Stock Exchange since 1997 and is transacting in securities at this exchange both for own account and on the basis of customer instructions. UKRGASBANK is one of PFTS’ shareholders Financial Performance and held an interest of 0.19 percent as at the end of the year 2015.
Ukrayinska Birzha This is one of the trade organizers on the securities market of Overview Ukraine. The Bank has been a member of this exchange since its establishment in 2008 and is transacting in securities at this exchange both for own account and on the basis of customer instructions.
Kyiv International This exchange was established in 1995 as a non-state market- Stock Exchange based nation-wide securities market institution that services the international flows of financial instruments. The Bank has been a member of Kyiv International Stock Exchange since 2013 and is transacting in securities at this exchange both for own account and on the basis of customer instructions.
7.13. Financial Institutions Refinancing Housing Mortgage Loans
Housing Loans Refinancing The agency was established in February 2012 by Oschadbank Agency (ARZHK) (70.87 percent), Ukreximbank (9.71 percent), UKRGASBANK (9.71 percent) and PJSC JSCB Kyiv (9.71 percent). The core business of ARZHK is to acquire claims under long- term home mortgage loans granted by mortgage creditor banks, and to raise long-term funding for the provision of mortgage loans by means of the issue of ordinary mortgage bonds.
ТIt is only when we reach our destination that we realize that we were on the right way. 74 Paul Valery UKRGASBANK ANNUAL REPORT • 2015 FINANCIAL PERFORMANCE OVERVIEW UKRGASBANK
8. Financial Performance Overview 8.1. Financial Results As a result of the year 2015, UKRGASBANK’s profit as of the end of day December 31, 2015, amounted to UAH 260 million in accordance with the financial statements. The 2015 financial result is positive and is larger than the 2014 result by UAH 3,643 million. The This performance result was affected by the following factors: the net interest income key contributors to the 2015 profit increase were the reduction in the loan impairment provision before the change in the loan impairment provision in the amount of UAH 727 million, by UAH 3,858 million, the profit from the initial recognition of funds of the National Bank of the net commission income of UAH 220 million, the net profit from investment Ukraine in the amount of UAH 85 million, the increase in the net commission income by UAH 29 securities available for sale in the amount of UAH 144 million, and the net gains from million, the increase in the result from transactions with investment securities by UAH 311 million, transactions with foreign currencies in the amount of UAH 1,290 million. and the result from transactions with foreign currencies by UAH 385 million(Diagram 21).
Financials, UAH million 8.2. Income The 2015 income of the Bank totaled UAH 5,307.4 million, including the interest income of Diagram 21 UAH 3,509.4 million (66.1 percent), the commission income of UAH 296.9 million (5.6 percent), 26% and the net gain from transactions with the foreign currency of UAH 1,290.2 million (24.3 1500 percent), the gain from transactions with derivative financial instruments of UAH 64.7 million 1 290 1 212% 1 403% 55% (1.2 percent), and the other income of UAH 146.1 million (2.8 percent) (Diagram 22). 1000 905 771 Income Structure 15% 500 351 309 260 Diagram 22 191 220 19% 92% 0 4 819,5 5 307,4 UAH million
–500 100% 1,2% –463 (17,3) п. п. 2,7% (778) 18,5% 1,8 п. п. –1000 80% 0,9% 24,3% 5,5 п. п. 18,8% Gains (losses) from transactions –1500 (1 349) 5,6% with derivative financial 0,6 п. п. instruments 60% 5% Other income (including the profit from the initial recognition of the –2000 NBU funds)
40% Net gains (losses) from transactions with the foreign currency –2500 9,5 п. п. 66,1% 58,6% Commission income
20% Interest income
–3000 Gains (losses) from investment securities available for sale 1,9 п. п. 0% –1,8% 0,1% –3500 (3 433) (3 383) 2014 2015
–4000 –20% (3 950)
Net interest Net Net gains Other Non-interest Profit/loss before Net profit / income (expenses) commission (losses) from non-interest expenses tax loss after the change income transactions income in the loan with the foreign impairment currency provision
2015 Trends 2014 2015
76 77 UKRGASBANK ANNUAL REPORT • 2015 FINANCIAL PERFORMANCE OVERVIEW UKRGASBANK
The net interest income accounts for the largest percentage of the Bank’s income. In 2015, 8.3. Expenses it went up by UAH 685.1 million (24 percent) to UAH 3,509.4 million as of January 1, 2016. The interest income increase was caused by the expansion of the portfolio of interest- In 2015, the Bank’s expenses disregarding provisioning and profit tax bearing assets. In 2015, the Bank actively provided loans to the real sector of the economy expenses amounted to UAH 3,798 million (Diagram 23). and increased the customer credit portfolio by UAH 4.3 billion and the portfolio of investment securities available for sale (OVDP T-bills and NBU certificates of deposit) by UAH 2.5 billion. 2013-2015 Expense Structure (without provisions and profit tax) Interest Income by Business Segment
YEAR 2014 YEAR 2015 Diagram 23
BUSINESS SEGMENTS INCOME, UAH PERCENTAGE INCOME, UAH PERCENTAGE CHANGE, % MILLION OF INTEREST MILLION OF INTEREST 2 817,7 3 798,1 UAH million INCOME, % INCOME, %
SME 40,7 1,4 40,9 1,2 0,49
Legal entities 1 462,8 51,8 1 929,9 55,0 31,93 100% (12,3) п. п. Individuals 334,7 11,9 269,7 7,7 –19,42 90% 24,7% Financial institutions 161,4 5,7 28,1 0,8 –82,59 80% 37,0% Asset management et al. 824,7 29,2 1 240,9 35,4 50,47 2,0% 70% Operating and general Total 2 824,3 100,0 3 509,5 100,0 24,26 0,3 п. п. administrative 1,7% 60% Commission expenses Interest expenses In 2015, the Bank obtained the commission income in the amount of UAH 296.9 million 50% (5.9 percent of the total income) which is UAH 57.9 million or 24.2 percent more than a year ago. 40% 73,3% Commission Income Breakdown by Transaction Type 30% 61,3% 12,0 п. п.
YEAR 2014 YEAR 2015 20%
TYPE OF TRANSACTION INCOME, UAH PERCENTAGE OF INCOME, UAH PERCENTAGE OF CHANGE, % 10% MILLION COMMISSION MILLION COMMISSION INCOME, % INCOME, % 0% Payment transactions 199,2 83,3 254,6 85,7 27,81 2014 2015
Agency transactions on the forex market 19,6 8,2 20,7 7,0 5,61
Transactions with securities 1,7 0,7 1,9 0,6 11,76
Guarantees and letters of credit 0,8 0,3 3,0 1,0 27,50 The interest expenses, which totaled UAH 2,782.5 million in 2015, account for the largest percentage of the Bank’s expenses. They grew by UAH 1,056.4 million or 61.2 percent year on year. The interest Other transactions 17,7 7,4 16,7 5,6 –5,65 expenses grew because of the expansion of the portfolio and the increase in the cost of interest- Total 239,0 100 296,9 100 24,23 bearing liabilities. During 2015, the National Bank of Ukraine adjusted its discount rate several times. As of January 1, 2016, it was relatively high and equaled 22 percent affecting directly the The 2015 commission income increase was caused mainly by the increase in the income cost of the Bank’s funding. For instance, the cost of interest-bearing liabilities grew in 2015 by 1.06 from transactions with customers by UAH 45 million (27 percent), including the income from p.p. year on year to 10.88 percent. In spite of the low confidence of the population and business payment services provided to customers in the amount of UAH 39 million (29 percent). in the Bank sector, the Bank managed to more than double its customer funding portfolio. In addition, the Bank increased its commission income from transactions with banks by UAH 12 million (18 percent). In 2015, the Bank started developing its transactional business. As a result, its commission income from guarantees and letters of credit went up almost by a factor of 4. Interest Expenses by Business Segment YEAR 2014 YEAR 2015
TYPE OF TRANSACTION EXPENSES, UAH PERCENTAGE EXPENSES, UAH PERCENTAGE CHANGE, % MILLION OF INTEREST MILLION OF INTEREST EXPENSES, % EXPENSES, %
SME (23,1) 1,3 (39,4) 1,4 70,56
Legal entities (415,8) 24,1 (961,6) 34,6 131,27
Individuals (701,2) 40,6 (1 083,4) 38,9 54,51
Financial institutions (585,9) 33,9 (698,2) 25,1 19,2
Asset management et al. (0,1) – – – 0,00
Total (1 726,1) 100,0 (2 782,6) 100,0 59,79
78 79 UKRGASBANK ANNUAL REPORT • 2015 SECTION 9 2015 Structure of the Other Operating and Other Non-Interest Expenses
Diagram 24 10,7% 6,0% UKRGASBANK Financial Expenses from the valuation of Depreciation and assets held for sale amortization Statements 10,3% 43,5% as of the end of day December 31, 2015 (summary) Taxes and duties (other Payroll expenses than profit tax)
0,6% Marketing and advertising 1,9% Valuables security and collection expenses
4,7% 4,2% Office lease and maintenance, office expenses Other operating expenses 7,3% 5,1% Professional services Communication expenses 5,8% Fixed assets repair and maintenance
The expenses on customer funds account for the largest portion of interest expenses: 74.9 percent (UAH 2,084.4 million). Interest expenses under transactions with financial institutions grew by UAH 112.3 million (19.2 percent) in 2015 year on year mainly due to the increase in the cost of interbank funding. Other operating and other non- interest expenses, which went down by 60.1 million (10 percent) in 2015 to UAH 938.3 million, account for almost a third of all expenses (24.7 percent) (Diagram 24).
Whoever starts treading in confidence will end up in doubts, but who starts in doubts will end up in confidence. Jonathan Swift
80 Section 9 provides indicators of UKRGASBANK’s annual financial statements for the year ended on December 31, 2015, compiled in accordance with International Financial Report- ing Standards. UKRGASBANK’s complete 2015 annual financial statements can be found at www.ukrgasbank.com/about/fin_results/auditors_report/ UKRGASBANK ANNUAL REPORT • 2015 UKRGASBANK FINANCIAL STATEMENTS UKRGASBANK
82 83 UKRGASBANK ANNUAL REPORT • 2015 UKRGASBANK FINANCIAL STATEMENTS UKRGASBANK
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