2 1 2 0 steps the AnnuAl RepoRt up AnnuAl RepoRt steps contents EURASIAN BANK HIGHLIGHTS .................................................................... 3 LETTER FROM THE CHIEF EXECUTIVE OFFICER .......................................................... 5 the MANAGEMENT TEAM ................................................................................. 8 5-YEAR SELECTED IFRS CONSOLIDATED FINANCIALS .......................... 10 .. .SUMMARY OF CONSOLIDATED PERFORMANCE ...............................................13. 1 MARKET ENvIRONMENT .................................................................13 BUSINESS SEGMENTS .....................................................................16 .. FINANCIAL STATEMENTS HIGHLIGHTS ......................................................... 25. 2 STATEMENT OF INCOME 2012 vS. 2011 ......................................... 25 BALANCE SHEET 2012 vS 2011 ...................................................... 28 up STATEMENT OF INCOME 2011 vS. 2010 ......................................... 36 BALANCE SHEET 2011 vS 2010 ...................................................... 40 .. .RECENT DEVELOPMENTS ......................................................................... 49. 3 RECENT DEvELOPMENTS ............................................................ 49 CORPORATE GOvERNANCE ........................................................ 50 Management TEAM ..................................................................... 51 . .. RISK MANAGEMENT ............................................................................... 65 4 RISK MANAGEMENT STRUCTURE ................................................. 65 FORWARD LOOKING STATEMENTS .................................................71 .. .CONSOLIDATED FINANCIAL STATEMENTS ..................................................... 73 5 CONSOLIDATED FINANCIAL STATEMENTS .................................. 73 2012 COMPANY INFORMATION ............................................................ 134 steps annual report 2012 the annual report 2012  3 2 up Financial.figures.in.this.annual.report.are. EURASIAN BANK as well as the rest of the country. The 2011 ac- taken.from.the.corresponding.year’s.audited. HIGHLIGHTS quisition of the consumer lender ProstoCredit gave the Bank the strong platform that has led consolidated.financial.statements.and.their. >>JSC Eurasian Bank is a Kazakhstan bank offer- to it becoming a leading consumer lender in accompanying.notes..In.the.management. ing corporate, SME and retail banking services to Kazakhstan. Commercial banking is focused on discussion,.numbers.may.be.rounded,.or. its clients. Eurasian Bank ended 2012 as the 10th Natural Resources, Energy and Power, Transport largest bank in Kazakhstan by assets, with 3.4% and Agriculture. The Bank has a small presence represented.graphically..Totals.and.percent. of banking sector assets. Eurasian Bank’s activi- in Russia to assist Kazakhstan corporates trading changes.presented.in.the.document.reflect.the. ties are currently focused on the Almaty Region, within the Customs Union. calculations.of.the.unrounded.numbers,.and.may. be.different.from.the.calculations.performed.on. the.rounded.figures..The.reader.should.read.the. Key.Financial.Figures.(KZT bln) accompanying.audited.financial.statements.and. kztbln 2009 2010 2011 2012 notes.for.the.2011-2012.years..Prior.years.audited. total Assets 321.3 356.9 369.4 470.5 Customer Loans 149.0 213.3 256.0 354.6 financial.statements.are.available.on.the.company. Client Deposits 240.6 245.8 245.6 314.7 website.(www.eubank.kz)..For.simplification,. equity 24.2 25.6 31.9 47.8 Management’s.report.presents.data.in.millions,. Operating Income 8.7 12.3 25.6 38.3 and.on.occasion,.charts.with.billions.of.tenge..The. Costs 24.4 10.9 17.5 25.2 audited.financial.statements.are.all.in.thousands. Net Income -12.1 0.6 6.0 9.8 of.tenge..In.all.cases,.the.units.are.stated. total Comprehensive Income -9.7 1.4 6.3 10.0 tier 1 Capital Adequacy Ratio (FMsC) 11.8% 9.4% 6.6% 8.0% total Capital Adequacy Ratio (FMsC) 17.1% 14.2% 11.8% 13.0% convenience, has been converted at the year end 2012 the National Bank of the Republic of Market.Shares Kazakhstan (NBRK) official rate of 150.74 tenge Jan-10 Jan-11 Jan-12 Jan-13 to the US dollar. While the tenge tends to trade Assets 2.8% 3.0% 2.9% 3.4% in a fairly stable range against the US dollar, there was a one time devaluation from 120 tenge Customer Loans (Net) 2.0% 2.5% 2.6% 3.2% to the US dollar to 150 tenge to the US dollar in Corporate Deposits 2.3% 3.3% 3.3% 3.9% ny comparative data to the February 2009. Readers who may be converting Retail Deposits 5.1% 3.8% 2.3% 2.9% Kazakhstan banking sec- financial figures presented in the report in tenge, tor (including market shares, should be aware that data for 2009 and prior loan portfolio quality) is years is not convertible to US dollars at the 2012 Ratings drawn from official reports to rate. The data on the official rate for the tenge is InternationalScale NationalScale Outlook the Kazakhstan financial reg- presented on the NBRK’s website (www.nation- Kz-Rating BB+ A+ stable ulator, the Committee for the albank.kz). rating date 28-Dec-12 28-Dec-12 28-Dec-12 Control and Supervision of Forecasts and historical data for the the Financial Market and Financial Organizations Kazakhstan economy are available from multila- A Foreign LocalCurrency NationalScale Outlook of the National Bank (FMSC), and are also avail- teral organizations, such as the World Bank and Currency able in English from their website (www.afn.kz). International Monetary Fund. Historical data is   Long-term Short-term Long-term Short-term Long-term  All data reported to the regulator is accounted also available from the Kazakhstan Government’s standard & poor's B+ B B+ B kzBBB stable under Kazakhstan GAAP on a non-consolidated official Statistical Agency, and available from basis. The numbers are not directly compara- their website (www.stat.kz). A number of domes- rating date 12-Dec-11 9-Nov-09 12-Dec-11 9-Nov-09 12-Dec-11 12-Dec-11 ble to the IFRS data for the Eurasian Bank Group tic and international financial institutions and re- presented in the financial statements and in the search groups make forecasts available for their Long-term Senior Subordinated BankFinancial Long-term BankDeposits Unsecured Debt Strength Short-term Outlook  management discussion. clients. Any historical economic data is based Debt Any figure recorded in tenge that has on data from the Statistical Agency, or from Moody's B1 B1 B1 B2 e+ Np Negative been converted into US dollars for the readers Government releases. rating date 9-Jul-03 24-Feb-09 30-Jun-10 18-Mar-11 9-Jul-03 9-Jul-03 24-Feb-09 steps annual report 2012 the annual report 2012 LETTERFROMTHECHIEFEXECUTIVEOFFICER 5 4 up LETTER FROM the ChIeF eXeCutIVe OFFICeR Dear.Shareholders,.Customers.and. Partners,.2012.has.been.a.year.of. strong.results.and.growth to our processes, to our systems, and leverag- ing an acquisition of a consumer finance business into a big growth engine for the organization. That acquisition, ProstoCredit, is now fully inte- grated into the Bank’s operations. We continue to focus our attention on improving the organi- zation’s processes to improve profitability and his past year has been the vali- customer service, and to increase our ability to dation of a road begun in 2010. manage our risks dynamically. Our management Results in 2012 were industry team has seen the addition of three new experts leading in terms of loan and pro- in their field, in Operations, in IT and in Wealth fi tability growth, as well as in re- Management. Our benchmarks for efficiency, turn to shareholders. We are now customer service and risk management are not a bank with almost 5,000 em- only domestic, but also international. ployees, almost 1,900 points of Again we have outpaced our peers on many tsale, branches in all regions of the country, and fronts: net loan growth of 39% outpaced the sec- an active client relationship with about 6% of the tor’s 7.6% growth, NPLs fell to 6.9% of the loan adult population. While our overall market share portfolio, against the 36.7% level of the sector, MIcHAEL EGGLEToN of the loan market is just over 3%, in retail (ex- our Net Interest Margin was 7.7% (7.0% under mortgage) we have approximately 10% of the FMSC criteria for the parent company) against Chief>Executive>Officer> market. the sector average of 4.2% according to local Eurasian>Bank> April>2013 None of this would have been possible with- regu latory standards. Managing growth and loan out the hard work of the past three years, in quality means that we were able to deliver 24.7% terms of radical change to our risk management, Return on Average Equity to our shareholders steps annual report 2012 the annual report 2012 LETTERFROMTHECHIEFEXECUTIVEOFFICER 7 6 up oUR BENcHMARKS foR excess of the interest rates that it is possible to re- EffIcIENcy, cUSToMER SERvIcE ceive in the segment. We aim to keep a balanced portfolio of businesses, as this is the best way to ANd RISK MANAGEMENT ARE diversify our risks. It could be that regulatory ac- tion would lead us to reconsider our business 97 NoT oNLy doMESTIc, BUT ALSo PERcENT mix, with a view of ensuring our long-term via- internatioNAL of the population is bility and return on risk adjusted capital. aware of the Bank The delicate state of the global economy does and payment terminal growth, improved pro- give us some pause for reflection. We operate in oUR LoAN BooK coNTINUES