ANNUAL REPORT 2012 Preliminarily approved Approved by the Annual General by the Board of Directors Meeting of Shareholders on 16 April 2013 on 24 May 2013 (Minutes No. 761 dated 16.04.2013) (Minutes No. 23 dated 24.05.2013) ANNUAL REPORT BANK PETROCOMMERCE 2012 CONTENTS ADDRESS BY THE CHAIRMAN OF THE BOARD OF DIRECTORS AND THE PRESIDENT OF THE BANK ............................................................. 4 1. DEVELOPMENT OF BANK PETROCOMMERCE IN 2012. THE BANK AND THE BANKING COMMUNITY ............................................................ 5 M AJOR HIGHLIGHTS OF 2012 AND KEY PERFORMANCE INDICATORS ...................... 6 T HE BANK’S OPERATING ENVIRONMENT ............................................................... 8 T HE BANK’S PERFORMANCE IN 2012 .................................................................. 12 S TRATEGIC AREAS OF DEVELOPMENT .................................................................. 16 R EGIONAL DEVELOPMENT .................................................................................. 17 2. OVERVIEW OF DEVELOPMENT OF MAJOR BUSINESS AREAS IN 2012 ......................... 18 C ORPORATE BUSINESS ....................................................................................... 19 C ORPORATE LENDING ..................................................................... 22 F ACTORING .................................................................................... 25 SME LENDING ................................................................................................. 26 R ETAIL BUSINESS .............................................................................................. 28 RETAIL LENDING ............................................................................. 29 R ETAIL DEPOSITS ........................................................................... 30 B ANK CARDS ................................................................................. 31 P RIVATE BANKING AND WEALTH MANAGEMENT ................................................... 33 F INANCIAL MARKETS ......................................................................................... 35 3. RISK MANAGEMENT SYSTEM ................................................................................. 38 4. CORPORATE SOCIAL RESPONSIBILITY AND CHARITY ................................................. 46 H UMAN RESOURCES ......................................................................................... 47 S OCIAL RESPONSIBILITY AND CHARITY ................................................................ 49 E COLOGY AND ENVIRONMENTAL PROTECTION ...................................................... 49 5. FINANCIAL STATEMENTS ........................................................................................ 50 AUDITOR’S REPORT ........................................................................................... 51 BALANCE SHEET ................................................................................................ 53 STATEMENT OF INCOME ...................................................................................... 55 CASH FLOW STATEMENT .................................................................................... 57 R EPORT ON CAPITAL ADEQUACY, PROVISION FOR IMPAIRMENT OF LOANS AND OTHER ASSETS ................................. 59 M ANDATORY RATIOS ........................................................................................ 61 6. GENERAL INFORMATION ....................................................................................... 62 L ICENCES ......................................................................................................... 63 M EMBERSHIP ................................................................................................... 64 C ONTACTS ....................................................................................................... 65 Bank Petrocommerce | 2012 3 ADDRESS BY THE CHAIRMAN OF THE BOARD OF DIRECTORS DEAR SHAREHOLDERS, CLIENTS AND PARTNERS! AND THE PRESIDENT The year 2012 may be considered yet another milestone for Bank Petrocom- OF BANK PETROCOMMERCE merce – we celebrated our 20th anniversary. Throughout the period of its history, the Bank has more than once proved its reliability. We strived for conquering the most challenging summits during the phase of market expansion, while com- ing out even stronger in the aftermath of severe economic crises. We welcomed 2012 as a bank with established traditions, values and solid positions on the Rus- sian fi nancial market. We confi rmed the status of a reliable Russian bank, which always meets its obligations. 2012 was the second year of successful implementation of the Bank’s strategy. It means that we fi rmly follow the path to our goals. The Bank has adjusted all the key elements to new business objectives, the main of them being asset diversi- fi cation ensured by entry to the bank market segments capable of generating high margins, thus boosting our profi tability. The Bank has completed the ad- justment of its product range and sales system to the current operating environ- ment: high volatility prevailing on the international fi nancial markets, enhance- ment of state banks’ positions and intensifi cation of competition among private market players. In 2012, Bank Petrocommerce continued to develop its traditional business seg- ment – corporate lending – while entering the open retail and SME lending mar- ket by off ering clients transparent competitive products, state-of-the-art tech- nological solutions and high quality of services. The shift of the development vector and focus on product segments generating high margins made us intro- duce certain adjustments to risk evaluation procedures. It allowed to speed up Leonid Fedun retail and SME loan portfolio growth rates while maintaining the quality at the same level. Overall, in 2012, the Bank continued to improve its risk management systems. Combined with the reasonably conservative policy, it allowed to reduce the share of overdue debt in the Bank’s loan book. In 2013, Bank Petrocommerce will continue to pursue the path of organic growth outpacing the market in the core business areas and boosting its profi tability. We strive for maintaining all our competitive advantages by off ering market prices combined with high reliability, cutting edge technologies and transparent cus- tomer relationship. We are confi dent that the coming years will evidence robust growth and sustainable performance of Bank Petrocommerce. Chairman of the Board of Directors Leonid Fedun President, Chairman of the Managing Board Vladimir Nikitenko Vladimir Nikitenko Bank Petrocommerce | 2012 4 DEVELOPMENT OF BANK PETROCOMMERCE IN 2012. THE BANK AND THE BANKING COMMUNITY 1. DEVELOPMENT OF BANK PETROCOMMERCE IN 2012. THE BANK AND THE BANKING COMMUNITY MAJOR HIGHLIGHTS OF 2012 AND KEY Major highlights of 2012 comprise fi rst and foremost substantial strengthening PERFORMANCE INDICATORS of the Bank’s positions in key business areas: retail and SME lending as well as factoring. The strategy of focused growth pursued by Bank Petrocommerce ensured a signifi cant improvement of the core indicators: profi tability, performance and business diversifi cation. Stability, reliability and fi nancial sustainability of Bank Petrocommerce are proved by high ratings and awards: in 2012, Bank Petrocommerce won the national prize as the “Company of 2012” awarded by the RBC group for reliability and stability; Bank Petrocommerce was awarded the “Financial Elite of Russia – 2012” award for reliability; in June 2012, RIA Rating Agency (RIA Novosti Group) assigned its A+ national scale credit rating to Bank Petrocommerce; in August 2012, Expert RA rating agency assigned a high rating to the Bank’s risk management system (A.rm), which evidences the compliance of the risk management practice with the state-of-the-art quality standards. In 2012, the Bank entered new regions – Voronezh and Yekaterinburg – in accordance with the strategy of regional business development and geographical diversifi cation. CREDIT RATINGS Standard & Poor’s Rus-Rating International scale: В+/В/Stable International scale: BBB-/Stable National scale: ruA National scale: АА-/Stable Moody’s Investors service Expert RA International scale: B1/NP/Negative National scale: А+/Stable Financial Strength Rating: E+ RIA Rating Moody’s Interfax National scale: А+/Stable National scale: A2.ru CHANGES IN THE BANK’S RANKINGS* Assets Bank cards issued Corporate loans 26 29 23 25 25 47 24 22 Retail loans Retail deposits 4 56 23 24 Corporate 01.01.2012 accounts & deposits Factoring 01.01.2013 Bank Petrocommerce | 2012 * All rankings are listed as per RBC.Rating, save for the factoring (in accordance with the Association of Factoring Companies). 6 1. DEVELOPMENT OF BANK PETROCOMMERCE IN 2012. THE BANK AND THE BANKING COMMUNITY BUSINESS INDICATORS BUSINESS INDICATORS 01.01.2013 01.01.2012 Growth rate, % Assets, RUR, bln 226.0 196.1 + 15.2% Gross Loan Portfolio1, RUR, bln, including 150.2 128.3 + 17.1% retail loans, RUR, bln 19.0 12.3 + 54.5% corporate loans2, RUR, bln 112.2 102.4 + 9.6% factoring, RUR, bln 16.9 13.6 + 24.3% loans to small business, RUR, bln 2.1 0.09 23-fold Customer Accounts & Deposits3, RUR, bln, including 155.7 132.9 + 17.2% retail accounts & deposits, RUR, bln 75.0 66.0 + 13.6% corporate accounts & deposits3, RUR, bln 80.7 66.9 + 20.6% Liquidity Reserves4, RUR, bln 57.7 53.1 + 8.7% Share Capital, RUR, bln 6.7 6.7 -