International Financial Reporting Standards
Consolidated Condensed Interim Financial Information
(Unaudited)
CONTENTS
CONSOLIDATED CONDENSED INTERIM FINANCIAL INFORMATION
Consolidated Condensed Interim Statement of Financial Position... 1
Consolidated Condensed Interim Statement of Profit or Loss and Other Comprehensive Income... 2
Consolidated Condensed Interim Statement of Changes in Equity... 3
Consolidated Condensed Interim Statement of Cash Flows ... 4
NOTES TO THE CONSOLIDATED CONDENSED INTERIM FINANCIAL INFORMATION 1 Introduction... 5
2 Operating Environment of the Group ... 7
3 Summary of Significant Accounting Policies... 8
4 Critical Accounting Estimates and Judgements in Applying Accounting Policies ... 8
5 New Accounting Pronouncements... 9
6 Cash and Cash Equivalents ... 9
7 Loans and Advances to Customers ... 10
8 Investment Securities Available for Sale... 13
9 Repurchase Receivables... 14
10 Due to Banks ... 15
11 Customer Accounts ... 15
12 Debt Securities in Issue ... 15
13 Subordinated Debt... 16
14 Share Capital ... 16
15 Interest Income and Expense ... 17
16 Customer Acquisition Expenses ... 17
17 Income from Insurance Operations... 18
18 Fee and Commission Expense ... 18
19 Administrative and Other Operating Expenses... 19
20 Income Taxes ... 19
21 Segment Analysis ... 19
22 Maturity Analysis... 24
23 Management of Capital... 25
24 Contingencies and Commitments ... 26
25 Financial Derivatives... 28
26 Fair Value of Financial Instruments ... 29
27 Related Party Transactions ... 32
Report on review of Interim Financial. Information
To TCS Group Holding PLC
Introduction
We have reviewed the accompanying consolidated condensed interim statement of financial position of TCS Group Holding PLC and its subsidiaries (the 'Group') as of June 3o, 2015 and the related consolidated condensed interim statements of profit or loss and other comprehensive income for the three-month and six-month periods then ended, changes in equity and cash flows for the six-month period then ended and other explanatory notes. Management is responsible for the preparation and fair presentation of this consolidated condensed interim financial information in accordance with International Accounting Standard 34, "Interim Financial Reporting" as adopted by the European Union. Our responsibility is to express a conclusion on this condensed consolidated interim financial information based on our review.
Scope of Review
We conducted our review in accordance with International Standard on Review Engagements 24io, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity." A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the accompanying consolidated condensed interim financial information is not prepared, in all material respects, in accordance with International Accounting Standard 34, "Interim Financial Reporting" as adopted by the European Union.
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PricewaterhouseCoopers Limited Chartered Accountants
Limassol, August 26, 2015
ithio o of Directors, M erector In thousands of RR Note 30 June 2015 (Unaudited) 31 December 2014 ASSETS
Cash and cash equivalents 6 15,959,588 10,699,577
Mandatory cash balances with the CBRF 907,408 685,510
Due from other banks 356,951
Loans and advances to customers 7 75,570,919 74,579,998
Financial derivatives 25 8,763,689 8,879,972
Investment securities available for sale 8 11,844,984 216,535
Repurchase receivables 9 1,629,259 5,366,280
Current income tax assets 1,107,313 1,094,088
Guarantee deposits with payment systems 2,569,621 2,967,132
Tangible fixed assets 449,278 541,348
Intangible assets 1,277,754 1,125,307
Other financial assets 1,260,376 1,890,667
Other non-financial assets 544,380 759,860
TOTAL ASSETS 122,241,520 108,806,274
LIABILITIES
Due to banks 10 3,898,411 10,331,216
Customer accounts 11 71,700,219 43,366,434
Debt securities in issue 12 11,000,623 19,414,780
Current income tax liabilities 12,593
Deferred income tax liabilities 1,164,661 1,039,795
Subordinated debt 13 11,109,931 11,250,686
Other financial liabilities 1,422,543 1,822,270
Other non-financial liabilities 820,881 599,432
TOTAL LIABILITIES 101,117,269 87,837,206
EQUITY
Share capital 14 188,112 188,112
Share premium 14 8,622,919 8,622,919
Treasury shares 14 (327,718) (4,474)
Share-based payment reserve 27 583,404 587,200
Retained earnings 12,069,379 11,800,358
Revaluation reserve (11,845) (225,047)
TOTAL EQUITY 21,124,251 20,969,068
TOTAL LIABILITIES AND EQUITY 122,241,520 108,806,274
Approved for issue and signed on behalf of the Board of Directors on 26 August 2015.
In thousands of RR
Note Six months ended 30 June 2015 (Unaudited) Three months ended 30 June 2015 (Unaudited) Six months ended 30 June 2014 (Unaudited) Three months ended 30 June 2014 (Unaudited) Interest income 15 19,109,761 9,722,610 19,539,563 9,875,596 Interest expense 15 (6,193,184) (3,297,424) (4,344,578) (2,124,301)
Net interest income 12,916,577 6,425,186 15,194,985 7,751,295 Provision for loan impairment 7 (7,999,036) (3,858,497) (8,543,047) (4,171,683)
Net interest income after
provision for loan impairment 4,917,541 2,566,689 6,651,938 3,579,612 Customer acquisition expense 16 (1,501,441) (784,542) (1,738,533) (667,026) Gains less losses from operations
with foreign currencies 112,379 390,309 145,930 278,954
Income from insurance operations 17 424,808 188,541 376,043 196,842
Gain from sale of impaired loans 7 6,346 6,346 17,004
-Fee and commission income 355,087 244,277 84,564 56,640
Fee and commission expense 18 (628,698) (334,599) (459,217) (229,825) Administrative and other operating
expenses 19 (3,430,897) (1,730,000) (2,931,838) (1,527,134)
Other operating income/(loss) 35,154 (467) 92,467 69,044
Profit before tax 290,279 546,554 2,238,358 1,757,107
Income tax expense 20 (86,886) (150,186) (577,087) (458,182)
Profit for the period 203,393 396,368 1,661,271 1,298,925
Other comprehensive income/(loss):
Items that may be reclassified to profit or loss
Investment securities available for sale and Repurchase
receivables
- Gains less losses arising during
the period, net of tax 204,593 146,178 18,397 20,646
- Gains less losses/(Losses less gains) reclassified to profit or
loss upon disposal, net of tax 8,609 5,917 (11,565) (11,565)
Other comprehensive income
for the period, net of tax 213,202 152,095 6,832 9,081
Total comprehensive income
for the period 416,595 548,463 1,668,103 1,308,006
Earnings per share for profit attributable to the owners of the Group, basic
(expressed in RR per share) 1.14 2.24 9.28 7.26
Earnings per share for profit attributable to the owners of the Group, diluted
The notes set out on pages 5 to 34 form an integral part of this Consolidated Condensed Interim Financial Information In thousands of RR Note Share capital Share premium Share-based payment reserve Revalua-tion Reserve Treasury shares Retained earnings Total Balance at 31 December 2013 186,162 8,622,919 477,740 - (2,524) 11,266,710 20,551,007 Profit for the
six-months period ended 30 June 2014 (Unaudited) - - - 1,661,271 1,661,271 Other comprehensive income: Revaluation of investment securities available for sale and transfers to profit or loss upon disposal or
impairment - - - 6,832 - - 6,832
Total comprehensive income for the six-months period ended 30 June 2014 (Unaudited) - - - 6,832 - 1,661,271 1,668,103 Share issue 1,950 - - - (1,950) - -Share-based payment reserve 27 - - 23,427 - - - 23,427 Balance at 30 June 2014 (Unaudited) 188,112 8,622,919 501,167 6,832 (4,474) 12,927,981 22,242,537 Balance at 1 January 2015 188,112 8,622,919 587,200 (225,047) (4,474) 11,800,358 20,969,068 Profit for the
six-months period ended 30 June 2015 (Unaudited) - - - 203,393 203,393 Other comprehensive income: Revaluation of investment securities available for sale and Repurchase
receivables - - - 213,202 - - 213,202
Total comprehensive income for the six-months period ended 30 June 2015 (Unaudited) - - - 213,202 - 203,393 416,595 GDRs buy-back 14 - - - - (323,808) - (323,808) Share-based payment reserve 27 - - 62,396 - - - 62,396
Shares sold under
ESOP - - (66,192) - 564 65,628
-Balance at 30 June 2015
In thousands of RR
Note Six months ended 30 June 2015 (Unaudited) Six months ended 30 June 2014 (Unaudited) Cash flows from operating activities
Interest received 17,213,302 18,152,968
Interest paid (6,393,682) (4,317,329)
Customers acquisition expenses paid (625,320) (1,004,918)
Cash received from trading in foreign currencies 1,068,372 415,497
Cash received from insurance operations 656,589 424,053
Cash received from sale of impaired loans 7 7,809 62,142
Fees and commissions paid (675,437) (447,707)
Fees and commissions received 355,087 84,564
Other operating income received 14,628 169,102
Administrative and other operating expenses paid (1,795,475) (1,518,341)
Income tax paid (31,075) (789,629)
Cash flows from operating activities before changes in
operating assets and liabilities 9,794,798 11,230,402
Changes in operating assets and liabilities
Net (increase)/decrease in CBRF mandatory reserves (221,898) 236,339 Net increase in loans and advances to customers (9,065,883) (9,763,589) Net decrease/(increase) in guarantee deposits with payment
systems 373,021 (47,249)
Net increase in Due from banks (350,000)
-Net decrease other financial assets 797,975 143,857
Net increase in other non-financial assets - (82,813)
Net (decrease)/increase in due to banks (6,438,991) 5,195,095
Net increase/(decrease) in customer accounts 28,671,405 (1,159,061)
Net decrease in other financial liabilities (778,690) (96,250)
Net increase in other non-financial liabilities - 2,377
Net cash from operating activities 22,781,737 5,659,108
Cash flows from investing activities
Acquisition of tangible fixed assets (26,408) (55,353)
Acquisition of intangible assets (152,898) (324,199)
Acquisition of investments available for sale 8 (8,525,240) (4,397,922) Proceeds from sale of investments available for sale 8 918,803 602,135
Net cash used in investing activities (7,785,743) (4,175,339)
Cash flows from financing activities
Proceeds from debt securities in issue - 143,149
Repayment of debt securities in issue (8,310,421) (11,155,151)
GDRs buy-back 14 (323,808)
-Net cash used in financing activities (8,634,229) (11,012,002)
Effect of exchange rate changes on cash and cash equivalents (1,101,754) 500,933
Net increase/(decrease) in cash and cash equivalents 5,260,011 (9,027,300)
1 Introduction
This consolidated condensed interim financial information for the six-months period ended 30 June 2015 for TCS Group Holding PLC (the “Company”) and its subsidiaries (together referred to as the “Group” or “TCS Group Holding PLC”) has been prepared in accordance with International Accounting Standard 34 (IAS 34) “Interim Financial Reporting” as adopted by the European Union.
The Company was incorporated, and is domiciled, in Cyprus in accordance with the provisions of the Companies Law, Cap.113.
The Board of Directors of the Company at the date of authorisation of this consolidated condensed interim financial information consists of Constantinos Economides, Alexios Ioannides, Mary Trimithiotou, Philippe Delpal, Jacques Der Megreditchian and Martin Cocker.
The Company Secretary is Altruco Secretarial Limited, Kanika International Business Center, 6th floor, Profiti, Ilia No 4 Germasogeia, 4046 Limassol, Cyprus. Mail: P.O.Box 50734, 3609, Limassol, Cyprus. At 30 June 2015 and 31 December 2014 share capital of the Group is comprised of “Class A” shares and “Class B” shares. A “Class A” share is an ordinary share with a nominal value of USD 0.04 per share and carrying one vote. A “Class B” share is an ordinary share with a nominal value of USD 0.04 per share and carrying 10 votes. As at 30 June 2015 the number of “Class A” shares is 90,494,146 and “Class B” shares is 92,144,679. As at 31 December 2014 the number of “Class A” shares is 90,494,146 and “Class B” shares is 92,144,679.
On 25 October 2013 the Group completed an initial public offering of its “Class A” ordinary shares in the form of global depository receipts (GDRs) listed on the London Stock Exchange plc.
During the three months ended 30 June 2015 the Group repurchased 1,843,682 GDRs at amount of RR 323,808 thousand at market prices.
As at 30 June 2015 and 31 December 2014 the entities holding either Class A or Class B shares of the Company were: 30 June 2015 31 December 2014 Country of Incorporation Tadek Holding & Finance S.A. 50.45%* 50.45%* British Virgin Islands Guaranty Nominees Limited (JP Morgan Chase Bank NA) 41.86%** 43.91%** United Kingdom
Rousse Nominees Limited 2.88% 2.88% Guernsey
Vostok Emerging Finance Ltd 3.49% - Bermuda
Altruco Trustees Limited 1.32%*** 1.32%*** Cyprus
Tasos Invest & Finance Inc. 0.00%**** 0.00%**** British Virgin Islands
Vizer Limited 0.00%***** 0.00%***** British Virgin Islands
Maitland Commercial Inc. 0.00%***** 0.00%***** British Virgin Islands
Norman Legal S.A. 0.00%***** 0.00%***** British Virgin Islands
Lorimer Ventures Limited - 1.44% Cyprus
Total 100.00% 100.00%
* The shareholding of Tadek Holding & Finance S.A. consists of Class B shares.
** Guaranty Nominees Limited is a company holding class A shares of the Company for which global depositary receipts were issued under a deposit agreement made between the Company and JP Morgan Chase Bank NA signed in October 2013. The percentage of class A shares held by Guaranty Nominees Limited in the total share capital of the Company is equal to 41.86% (31 December 2014: 43.91%). *** The shareholding of Altruco Trustees Limited represents Class A shares under the ESOP (Note 27) only.
1 Introduction (Continued)
***** Vizer Limited, Maitland Commercial Inc and Norman Legal S.A. each own 25 Class B shares of the Company at 30 June 2015 and 31 December 2014.
As at 30 June 2015 and 31 December 2014 the ultimate controlling party of the Company is Mr. Oleg Tinkov.
As at 30 June 2015 and as at 31 December 2014 the beneficial owner of Tadek Holding & Finance S.A., Tasos Invest & Finance Inc., Vizer Limited, Maitland Commercial Inc and Norman Legal S.A. was Russian entrepreneur Mr. Oleg Tinkov, the beneficial owner of Rousse Nominees Limited was Baring Vostok Private Equity Fund IV, L.P. and the beneficial owner of Lorimer Ventures Limited was Horizon Capital Private Equity Fund. Mr. Oleg Tinkov controls 91.1% of the aggregated voting rights attaching to the Class A and B shares.
Subsidiaries and structured entity included in this consolidated condensed interim financial information are listed below:
30 June 2015 31 December 2014 Name Nature of business Percentage of ownership Percentage of voting rights Percentage of ownership Percentage of voting rights Country of registration JSC “Tinkoff Bank” Banking operations 100% 100% 100% 100% Russia JSC Tinkoff Insurance Insurance operations 100% 100% 100% 100% Russia LLC TCS Services 100% 100% 100% 100% Russia LLC T-Finance Assets holding 100% 100% 100% 100% Russia
TCS Finance Ltd Financing - - - - Ireland
Goward Group Ltd Investment holding company 100% 100% 100% 100% British Virgin Islands LLC Feniks Collection services 100% 100% 100% 100% Russia
JSC “Tinkoff Bank” (the “Bank”) provides on-line retail banking services in Russia. The Bank specialises in issuing credit cards. On 2 April 2015 the Bank changed its corporate name from CJSC Tinkoff Credit Systems Bank.
JSC Tinkoff Insurance (the “Insurance Company”) provides insurance services mainly to clients of the Group.
TCS Finance Ltd is a structured entity which issued debt securities for the Group. This entity was consolidated as it was specifically set up for the purposes of the Group, and the Group has exposure to substantially all risks and rewards through outstanding guarantees of the entity’s obligations. The Group guarantees all obligations of this entity represented by the bonds issued of RR 8,876,245 thousand out of RR 11,000,623 thousand as of 30 June 2015.
LLC Feniks is a debt collection agency. The Bank owns 51% and Goward Group Ltd. owns 49% of voting shares in the collection agency. The subsidiary provides debt collection services to the Group.
Principal activity. The Group’s principal business activity is retail banking and insurance operations within the Russian Federation through the Bank and Insurance Company. The Bank has operated under general banking license № 2673 issued by the Central Bank of the Russian Federation (“CBRF”) since 8 December 2006. The Insurance Company operates under an insurance license issued by the Central Bank of the Russian Federation.
1 Introduction (Continued)
The Bank participates in the state deposit insurance scheme, which was introduced by the Federal Law № 177-FZ “Deposits of individuals insurance in Russian Federation” dated 23 December 2003. The State Deposit Insurance Agency guarantees repayment of 100% of individual deposits up to RR 1,400 thousand per individual in case of the withdrawal of a license of a bank or a CBRF-imposed moratorium on payments.
Registered address and place of business. The Company’s registered address is Kanika International Business Center, 6th floor, Profiti Ilia 4 Germasogeia, Limassol 4046 Cyprus. The Bank’s registered
address is 1-st Volokolamsky proezd, 10, building 1, 123060, Moscow, Russian Federation. The Group’s principal place of business is the Russian Federation.
Presentation currency. This consolidated condensed interim financial information is presented in thousands of Russian Rubles (RR).
2 Operating Environment of the Group
Russian Federation. The Russian Federation displays certain characteristics of an emerging market. Its economy is particularly sensitive to oil and gas prices. The legal, tax and regulatory frameworks continue to develop and are subject to frequent changes and varying interpretations (Note 24). During the six month period ended 30 June 2015 the Russian economy was negatively impacted by a decline in oil prices and ongoing political tension in the region and international sanctions against certain Russian companies and individuals. As a result during the first half of 2015:
the CBRF exchange rate fluctuated between RR 49.1777 and RR 69.664 per USD; the CBRF key refinancing interest rate decreased from 17.0% p.a. to 11.5% p.a.; the RTS stock exchange index ranged between 755 and 1,069;
Russia’s credit rating was downgraded by Fitch Ratings in January 2015 to BBB-, whilst Standard & Poor’s cut it to BB+, putting it below investment grade for the first time in a decade. In February 2015 Moody’s downgraded Russia’s rating to Ba1 from Baa3. Fitch Ratings still have Russia as investment grade. All these rating agencies indicated a negative outlook, meaning further downgrades are possible;
the inflation rate reached the level of 8.28% compared to 4.73% in the first half of 2014;
the unemployment rate at the end of the second quarter compared to the same period last year increased by 0.4% and amounted to 5.4%;
access to international financial markets to raise funding was limited for a number of large entities and banks due to international sanctions; and
capital outflows increased compared to preceding years.
The financial markets continue to be volatile and are characterised by frequent significant price movements and increased trading spreads. Subsequent to 30 June 2015:
the CBRF exchange rate fluctuated between RR 55.4756 per USD and RR 70.7465 per USD; the RTS stock exchange index ranged between 724 and 932;
the CBRF key refinancing interest rate decreased from 11.5% p.a. to 11.0% p.a.
bank lending activity decreased as banks are reassessing the business models of their borrowers and their ability to withstand the increased lending and exchange rates; and
These events may have a further significant impact on the Group’s future operations and financial position, the effect of which is difficult to predict. The future economic and regulatory situation and its impact on the Group’s operations may differ from management’s current expectations.
2 Operating Environment of the Group (Continued)
Management determined loan impairment provisions using the “incurred loss” model required by the applicable accounting standards. These standards require recognition of impairment losses that arose from past events and prohibit recognition of impairment losses that could arise from future events, including future changes in the economic environment, no matter how likely those future events are. Thus final impairment losses from financial assets could differ significantly from the current level of provisions. Refer to Note 4.
3 Summary of Significant Accounting Policies
Basis of preparation. This consolidated condensed interim financial information has been prepared in accordance with IAS 34 “Interim Financial Reporting” as adopted by the European Union (EU) and should be read in conjunction with the annual consolidated financial statements for the year ended 31 December 2014 which have been prepared in accordance with International Financial Reporting Standards (IFRS), as adopted by the EU, and the requirements of the Cyprus Companies Law, Cap. 113. Except as described below, the same accounting policies and methods of computation were followed in the preparation of this consolidated condensed interim financial information as compared with the annual consolidated financial statements for the year ended 31 December 2014.
Interim period tax measurement. Interim period income tax expense is accrued using the effective tax rate that would be applicable to expected total annual earnings, that is, the estimated weighted average annual effective income tax rate applied to the pre-tax income of the interim period.
Due from other banks. Amounts due from other banks are recorded when the Group advances money to counterparty banks with no intention of trading the resulting unquoted non-derivative receivable due on fixed or determinable dates. Amounts due from other banks are carried at amortised cost.
Seasonality. The management do not consider that the Group’s business exhibits material differences due to seasonality.
Adoption of New or Revised Standards and Interpretations. Certain new standards, interpretations and amendments to the existing standards, as disclosed in the consolidated financial statements for the year ended 31 December 2014, became effective for the Group from 1 January 2015.
These new or amended standards or interpretations did not have any material impact on this consolidated condensed interim financial information.
At 30 June 2015 the principal rate of exchange used for translating foreign currency balances was USD 1 = RR 55.5240 (31 December 2014: USD 1 = RR 56.2584).
4 Critical Accounting Estimates and Judgements in Applying Accounting Policies
The Group makes estimates and assumptions that affect the amounts recognised in the consolidated condensed interim financial information and the carrying amounts of assets and liabilities within the next financial year. Estimates and judgements are continually evaluated and are based on management’s experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Management also makes certain judgements, apart from those involving estimations, in the process of applying the accounting policies. Judgements that have the most significant effect on the amounts recognised in the consolidated condensed interim financial information and estimates that can cause a significant adjustment to the carrying amount of assets and liabilities within the next financial year include:
4 Critical Accounting Estimates and Judgements in Applying Accounting Policies (Continued)
Impairment losses on loans and advances. The Group regularly reviews its loan portfolio to assess impairment. In determining whether an impairment loss should be recorded in profit or loss for the period, the Group makes judgments as to whether there is any observable data indicating that there is a measurable decrease in the estimated future cash flows from a portfolio of loans before the decrease can be identified with an individual loan in that portfolio. This evidence may include observable data indicating that there has been an adverse change in the payment status of borrowers in a group, or national or local economic conditions that correlate with defaults on assets in the group. The primary factor that the Group considers as objective evidence of impairment is the overdue status of the loan. In general, loans where there are no breaches in loan servicing are considered to be unimpaired. Given the nature of the borrowers and the loans it is the Group’s view and experience that there is a very short time lag between a possible loss event that could lead to impairment and the non or under payment of a monthly installment. Management uses estimates based on historical loss experience for assets with credit risk characteristics and objective evidence of impairment similar to those in the portfolio when estimating its future cash flows. The methodology and assumptions used for estimating both the amount and timing of future cash flows are reviewed regularly to reduce any differences between loss estimates and actual loss experience.
In accordance with internal methodology for the provision estimation the Group uses its historical retail loan loss statistics for assessment of probabilities of default. The last twelve months of historical loss data give the most weighting in calculating the provision for impairment. This framework allows the Group to have better information to estimate losses on loans to individuals as all latest trends are taken into account, and to reduce the implied probabilities volatility. The loan loss provision includes adjustment on the future expected recovery of impaired loans which was estimated at 1.7% of the provision of loan impairment and was based on conservative sampling of historical data. As at 30 June 2015 the positive effect of the above adjustment on provision for loan impairment is approximately RR 414,794 thousand (2014: RR 315,302 thousand).
To the extent that the incurred losses as at 30 June 2015 resulting from future cash flows vary by 0.5% (30 June 2014: 0.5%) from the calculated estimate, the result would be approximately RR 475,418 thousand (30 June 2014: RR 456,458 thousand) higher or lower.
5 New Accounting Pronouncements
Since the Group published its last annual consolidated financial statements for the year ended 31 December 2014, no new accounting pronouncements have been issued.
The Group has not early adopted any of the new standards and interpretations disclosed in the ‘New Accounting Pronouncements’ note in its last annual financial statements and effective for its annual periods beginning on or after 1 January 2015.
6 Cash and Cash Equivalents
In thousands of RR 30 June 2015 31 December 2014 Cash on hand 20,483 25,571
Cash balances with the CBRF (other than mandatory reserve deposits) 1,928,532 2,295,541 Placements with other banks and organizations with original maturities of
less than three months 14,010,573 8,378,465
Total Cash and Cash Equivalents 15,959,588 10,699,577
Placements with other banks and organizations with original maturities of less than three months includes placements under reverse sale and repurchase agreements in the amount of 1,584,195 thousand as at 30 June 2015 (31 December 2014: none).
Cash and cash equivalents are neither impaired nor past due. Refer to Note 26 for the disclosure of the fair value of cash and cash equivalents.
7 Loans and Advances to Customers In thousands of RR 30 June 2015 31 December 2014 Loans to individuals:
Credit card loans 85,249,333 85,064,092
Installment loans 7,758,455 6,534,975
Cash loans 1,377,318 1,564,940
POS loans 698,566 743,319
Total loans and advances to customers before impairment 95,083,672 93,907,326
Less: Provision for loan impairment (19,512,753) (19,327,328)
Total loans and advances to customers 75,570,919 74,579,998
Credit cards are issued to customers for cash withdrawals or payment for goods or services, within the range of limits established by the Bank. These limits may be increased or decreased from time-to-time based on management decision. Credit card loans are not collateralized.
During June 2015 the Group acquired a portion of JSC Svyaznoy Bank’s credit card portfolio of RR 1,643 mln. The acquired portfolio consists of neither past due, not impaired credit card loans.
The Bank has a restructuring programme for delinquent borrowers who demonstrate a willingness to settle their debt by switching to fixed monthly repayments of outstanding amounts (“installment loans”). POS (“Point of sale”) loans represent POS lending through the Bank’s programme “POS loans” (KupiVKredit). This programme funds online purchases through internet shops for individual borrowers. Cash loans represent a product for existing borrowers of the Bank who have positive credit history and who do not have loans in other banks. Cash loans are loans provided to customers via the Bank’s debit cards. These loans are available for withdrawal without commission.
Presented below is an analysis of issued, activated and utilised cards based on their credit card limits as at the end of the reporting period:
In units
30 June 2015
31 December 2014 Credit card limits
Up to 10 RR thousand 468,764 657,321 10 – 20 RR thousand 281,356 288,254 20 – 30 RR thousand 208,043 228,313 30 – 40 RR thousand 164,651 186,365 40 – 50 RR thousand 145,966 161,874 50 – 60 RR thousand 123,289 136,570 60 – 80 RR thousand 228,533 254,678 80 – 100 RR thousand 185,025 204,724
More than 100 RR thousand 423,341 376,673
7 Loans and Advances to Customers (Continued)
Movements in the provision for loan impairment for the 6 months period ended 30 June 2015 are as follows: In thousands of RR As at 31 December 2014 Sales of impaired loans Amounts written-off during the period Provision for impairment during the period As at 30 June 2015 Loans to individuals:
Credit card loans 15,609,454 (37,954) (6,463,219) 5,947,833 15,056,114
Installment loans 3,133,634 (4,558) (1,013,385) 1,758,386 3,874,077
Cash loans 457,893 - (220,700) 165,708 402,901
POS loans 126,347 - (73,795) 127,109 179,661
Total provision for loan
impairment 19,327,328 (42,512) (7,771,099) 7,999,036 19,512,753
Movements in the provision for loan impairment for the 3 months period ended 30 June 2015 are as follows: In thousands of RR As at 31 March 2015 Sales of impaired loans Amounts written-off during the period Provision for impairment during the period As at 30 June 2015 Loans to individuals:
Credit card loans 14,937,185 (37,954) (2,753,260) 2,910,143 15,056,114
Installment loans 3,539,981 (4,558) (485,599) 824,253 3,874,077
Cash loans 548,959 - (220,700) 74,642 402,901
POS loans 169,528 - (39,326) 49,459 179,661
Total provision for loan
impairment 19,195,653 (42,512) (3,498,885) 3,858,497 19,512,753
Movements in the provision for loan impairment for the 6 months period ended 30 June 2014 are as follows: In thousands of RR As at 31 December 2013 Sales of impaired loans Amounts written-off during the period Provision for impairment during the period As at 30 June 2014 Loans to individuals:
Credit card loans 8,372,032 (1,005,116) - 7,096,392 14,463,308
Installment loans 884,867 (285,079) - 1,142,933 1,742,721
POS loans 116,680 - - 75,169 191,849
Cash loans 31,747 - - 228,553 260,300
Total provision for loan
7 Loans and Advances to Customers (Continued)
Movements in the provision for loan impairment for the 3 months period ended 30 June 2014 are as follows: In thousands of RR As at 31 March 2014 Sales of impaired loans Amounts written-off during the period Provision for impairment during the period As at 30 June 2014 Loans to individuals:
Credit card loans 11,057,281 - - 3,406,027 14,463,308
Installment loans 1,123,497 - - 619,224 1,742,721
POS loans 152,583 - - 39,266 191,849
Cash loans 153,134 - - 107,166 260,300
Total provision for loan
impairment 12,486,495 - - 4,171,683 16,658,178
During six months period ended 30 June 2015 the Group sold impaired loans to third parties (external debt collection agencies) with a gross amount of RR 43,975 thousand (six months period ended 30 June 2014: RR 1,335,333 thousand), and provision for impairment of RR 42,512 thousand (30 June 2014: RR 1,290,195 thousand). The difference between the carrying amount of these loans and the consideration received was recognised in profit or loss as gain from the sale of impaired loans in the amount of RR 6,346 thousand (six months period ended 30 June 2014: RR 17,004 thousand).
During three months period ended 30 June 2015 the Group sold impaired loans to third parties (external debt collection agencies) with a gross amount of RR 43,975 thousand and provision for impairment of RR 42,512 thousand (three months period ended 30 June 2014: none). The difference between the carrying amount of these loans and the consideration received was recognised in profit or loss as gain from the sale of impaired loans in the amount of RR 6,346 thousand for the three months period ended 30 June 2015.
7 Loans and Advances to Customers (Continued)
Analysis of loans to individuals by credit quality is as follows:
30 June 2015 31 December 2014 In thousands of RR Credit card loans Install-ment loans Cash loans POS loans Credit card loans Install-ment loans Cash loans POS loans Neither past due nor impaired: - new 2,623,390 - - 84,201 965,111 - - 291,659 Loans collectively assessed for impairment (gross): - non-overdue 64,884,251 4,881,899 953,701 411,017 66,142,385 4,083,880 1,080,654 305,023 - less than 30 days overdue 3,121,123 611,401 59,414 32,129 3,230,355 490,447 68,554 27,136 - 30 to 90 days overdue 3,095,369 624,491 69,026 45,232 3,015,618 518,151 79,082 19,892 - 90 to 180 days overdue 3,591,906 681,078 96,896 75,974 3,126,610 609,545 107,693 22,388 - 180 to 360 days overdue 3,720,096 959,586 198,281 50,013 4,625,476 832,952 228,957 77,221 - loans in courts 4,213,198 - - - 3,958,537 - - -Less: Provision for loan impairment (15,056,114) (3,874,077) (402,901) (179,661) (15,609,454) (3,133,634) (457,893) (126,347) Total loans to individuals 70,193,219 3,884,378 974,417 518,905 69,454,638 3,401,341 1,107,047 616,972
Loans in category “new” represent loans provided to new borrowers for which the date of the first payment did not occur before the reporting date and purchased loans for which the date of first payment did not occur before the reporting date.
Loans in courts are loans to delinquent borrowers, against which the Group has filed claims to courts in order to recover outstanding balances.
The Group assesses non-overdue loans for impairment collectively as a homogeneous population with similar credit quality as disclosed above.
The Group considers overdue loans as impaired. Refer to Note 26 for the estimated fair value of loans and advances to customers. Information on related party balances is disclosed in Note 27.
8 Investment Securities Available for Sale
In thousands of RR 30 June 2015 31 December 2014
Corporate bonds 11,536,241 216,535
Russian government bonds 308,743
8 Investment Securities Available for Sale (Continued)
The movements in investment securities available for sale during six months ended 30 June 2015 are as follows:
In thousands of RR 2015
Carrying amount at 1 January 216,535
Purchases 8,525,240
Redemption of investment securities available for sale (918,803)
Interest income accrued on investment securities available for Sale and Repurchase receivables 378,202
Interest received (322,880)
Receipt under Sale and Repurchase agreements 5,366,928
Pledged under Sale and Repurchase agreements (1,629,907)
Foreign exchange loss on investment securities available for sale in currency (36,834)
Revaluation through other comprehensive income 266,503
Carrying amount at 30 June 11,844,984
The movements in investment securities available for sale for three months ended 30 June 2015 are as follows:
In thousands of RR 2015
Carrying amount at 31 March 7,257,140
Purchases 6,455,240
Redemption of investment securities available for sale (445,299)
Interest income accrued on investment securities available for Sale and Repurchase receivables 242,032
Interest received (200,928)
Receipt under Sale and Repurchase agreements 648
Pledged under Sale and Repurchase agreements (1,629,259)
Foreign exchange loss on investment securities available for sale in currency (24,709)
Revaluation through other comprehensive income 190,119
Carrying amount at 30 June 11,844,984
9 Repurchase Receivables
Repurchase receivables represent securities sold under sale and repurchase agreements through which the counterparty has the right, by contract or custom, to sell or repledge. The repurchase agreements are long-term in nature and mature by 20 April 2016 (31 December 2014: short-term in nature and matured on 14 January 2015).
In thousands of RR 30 June 2015 31 December 2014
Available-for-sale securities sold under sale and repurchase agreements
Corporate bonds 1,629,259 5,098,868
Russian government bonds - 267,412
10 Due to Banks
In thousands of RR 30 June 2015 31 December 2014
Loan from OJSC Sberbank of Russia 2,251,046 2,994,061
Sale and repurchase agreements with CBRF 1,486,337 5,002,399
Due to other banks 161,028 329,208
Short-term loan from CBRF - 2,005,548
Total due to banks 3,898,411 10,331,216
On 14 March 2014 the Bank raised a loan from OJSC Sberbank of Russia in the amount of RR 3,000 mln with a contractual interest rate of 11.2% maturing on 13 September 2015.
As at 30 June 2015, in amounts due to banks are included liabilities of RR 1,486,337 thousand from sale and repurchase agreements with CBRF.
On 10 December 2014 the Bank raised a loan from CBRF in the amount of RR 1,000 mln with a contractual interest rate of 11.25%. The loan was fully redeemed on 10 March 2015.
On 18 November 2014 the Bank raised a loan from CBRF in the amount of RR 1,000 mln with a contractual interest rate of 11.25%. The loan was fully redeemed on 16 February 2015.
Refer to Note 26 for the estimated fair value of due to banks.
11 Customer Accounts
In thousands of RR 30 June 2015 31 December 2014
Legal entities
- Current/settlement accounts of corporate entities 222,541 196,242
- Term deposits of corporate entities 1,525,147 1,878,589
Individuals
- Current/settlement accounts of individuals 15,009,909 11,056,383
- Term deposits of individuals 54,942,622 30,235,220
Total Customer Accounts 71,700,219 43,366,434
Refer to Note 26 for the estimated fair value of customer accounts. Information on related party balances is disclosed in Note 27.
12 Debt Securities in Issue
In thousands of RR
Maturity date 30 June 2015
31 December 2014 USD denominated bonds issued in September 2012 18.09.2015 8,876,245 14,426,424 RR denominated bonds issued in July 2012 14.07.2015 2,096,336 2,094,954 RR denominated bonds issued in May 2013 24.05.2016 28,042 1,131,498 RR denominated bonds issued in April 2012 16.04.2015 - 1,538,870 Euro-Commercial Paper issued in February 2014 26.02.2015 - 223,034
12 Debt Securities in Issue (Continued)
On 18 September 2012 the Group issued USD denominated bonds with a nominal value of USD 250 mln at 10.75% coupon rate maturing on 18 September 2015. On 1 April 2015 as a result of a tender the Group redeemed USD denominated bonds with nominal value of USD 80,090 thousand at 2.5% premium, with the total amount of the redemption equal to RR 4,751 mln (equivalent to USD 82,403 thousand). The amount of premium paid amounted to RR 116,549 thousand.
On 16 July 2012 the Group issued RR denominated bonds with a nominal value of RR 2,000 mln at 13.9% coupon rate maturing on 14 July 2015.
On 28 May 2013 the Group issued RR denominated bonds with a nominal value of RR 3,000 mln at 10.25% coupon rate maturing on 24 May 2016. As a result of an offer event as at 25 November 2014 securities with nominal value of RR 1,880 mln were repurchased by the Group. In November 2014 the Group has set the coupon rate of RR denominated bonds at 14.00% till the next offer event. On 29 May 2015 as a result of an offer event securities with nominal value of RR 1,092 mln were repurchased by the Group. In May 2015 the Group has set the coupon rate of RR denominated bonds at 12.50% till maturity. On 19 April 2012 the Group issued RR denominated bonds with a nominal value of RR 1,500 mln at 13.25% coupon rate maturing on 16 April 2015. On 16 April 2015 the Group redeemed RR denominated bonds at maturity at amount of RR 1,500 mln at nominal value.
On 27 February 2014 the Group issued USD denominated Euro-Commercial Paper (ECP) with a nominal value of USD 4 mln with a discount of 5.5% maturing on 26 February 2015. On 26 February 2015 the ECP was fully redeemed.
All the debt securities issued by the Group are traded on stock exchanges. Refer to Note 26 for the disclosure of the fair value of debt securities in issue.
13 Subordinated Debt
As at 30 June 2015 the carrying value of the subordinated debt was RR 11,109,931 thousand (31 December 2014: RR 11,250,686 thousand). On 6 December 2012 and 18 February 2013 the Group issued USD denominated subordinated bonds with a nominal value of USD 125 mln with zero premium and USD 75 mln at a premium of 7.0% at 14.0% coupon rate (applicable to both tranches) maturing on 6 June 2018. The claims of lenders against the Group in respect of the principal and interest on these bonds are subordinated to the claims of other creditors in accordance with the legislation of the Russian Federation. Refer to Note 26 for the disclosure of the fair value of financial instruments.
14 Share Capital
In thousands of RR except for number of shares
Number of authorised shares Number of outstanding shares Ordinary shares Share premium Treasury shares Total At 31 December 2013 190,479,500 181,189,075 186,162 8,622,919 (2,524) 8,806,557 At 31 December 2014 190,479,500 182,638,825 188,112 8,622,919 (4,474) 8,806,557 GDRs buy-back - - - - (323,808) (323,808)
Shares sold under ESOP - - - - 564 564
14 Share Capital (Continued)
Treasury shares represent “Class A” shares of the Group under the ESOP and Equity LTIP and all held by a trustee and GDRs repurchased from the market in April to June 2015. Refer to Note 27.
In June 2014 the Group issued 1,449,750 ordinary “Class A” shares with a par value of USD 0.04 per share, fully paid, to Altruco Trustees Limited under the ESOP. Refer to Note 27.
15 Interest Income and Expense
In thousands of RR Six-Months Period Ended 30 June 2015 Three-Months Period Ended 30 June 2015 Six-Months Period Ended 30 June 2014 Three-Months Period Ended 30 June 2014 Interest income
Loans and advances to customers, including:
Credit card loans 17,768,079 8,984,230 18,781,808 9,498,657
Installment loans 429,358 226,890 210,069 122,267
Cash loans 317,100 152,213 344,305 131,457
POS loans 193,745 99,000 122,400 64,626
Investment securities available for sale and
Repurchase receivables 378,202 242,032 70,144 56,545
Placements with other banks 16,708 13,268 10,837 2,044
Reverse Repurchase agreements 6,569 4,977 -
-Total Interest Income 19,109,761 9,722,610 19,539,563 9,875,596
Interest expense Customer accounts 4,054,144 2,374,143 2,555,859 1,275,560 Subordinated debt 816,977 376,660 493,296 249,729 Eurobonds 813,415 369,244 730,946 290,989 Due to banks 288,777 94,804 153,166 121,751 RR denominated bonds 217,566 82,573 360,504 175,312 Euro-Commercial Paper 2,305 - 50,807 10,960
Total Interest Expense 6,193,184 3,297,424 4,344,578 2,124,301
Net Interest Income 12,916,577 6,425,186 15,194,985 7,751,295
16 Customer Acquisition Expenses
In thousands of RR Six-Months Period Ended 30 June 2015 Three-Months Period Ended 30 June 2015 Six-Months Period Ended 30 June 2014 Three-Months Period Ended 30 June 2014
Marketing and advertising 727,895 396,905 905,974 282,893
Staff costs 661,554 324,418 682,344 308,723
Credit bureaux 78,223 42,810 92,652 46,840
Telecommunication expenses 27,062 13,925 43,452 23,651
Personalisation, printing and distribution 6,707 6,484 13,703 4,919
Acquisition and partnerships - - 408
16 Customer Acquisition Expenses (Continued)
Customer acquisition expenses represent expenses paid by the Group on services related to origination of credit card customers (mailing of advertising materials, processing of responses, marketing and advertising etc). The Group uses a variety of different channels for the acquisition of new customers. Staff costs represent salary expenses and related costs of employees involved in customer acquisition. Included in staff costs are statutory social contributions to the pension fund for the six-months period ended 30 June 2015 in the amount of RR 137,516 thousand (six-months period ended 30 June 2014:_RR_132,768 thousand). Included in staff costs are statutory social contributions to the state pension fund for the three-months period ended 30 June 2015 in the amount of RR 68,847 thousand (three-months period ended 30 June 2014:_RR_49,273 thousand).
17 Income from Insurance Operations
In thousands of RR Six-Months Period Ended 30 June 2015 Three-Months Period Ended 30 June 2015 Six-Months Period Ended 30 June 2014 Three-Months Period Ended 30 June 2014
Insurance premiums earned 560,533 284,271 405,610 216,061
Insurance agency fees 3,810 2,965 40,219 18,412
Insurance claims incurred (139,535) (98,695) (69,786) (37,631)
Total income from insurance
operations 424,808 188,541 376,043 196,842
Staff and administrative expense for insurance operations are included in Note 19.
18 Fee and Commission Expense
In thousands of RR Six-Months Period Ended 30 June 2015 Three-Months Period Ended 30 June 2015 Six-Months Period Ended 30 June 2014 Three-Months Period Ended 30 June 2014 Payment systems 392,789 215,841 175,971 99,663 Service fees 209,020 105,819 276,146 125,473
Banking and other fees 26,889 12,939 7,100 4,689
Total fee and commission
expense 628,698 334,599 459,217 229,825
Service fees represent fees for statement printing, mailing services and sms services. Payment systems fees represent fees for MasterCard and Visa services.
19 Administrative and Other Operating Expenses In thousands of RR Six-Months Period Ended 30 June 2015 Three-Months Period Ended 30 June 2015 Six-Months Period Ended 30 June 2014 Three-Months Period Ended 30 June 2014 Staff costs 2,033,563 1,041,415 1,697,383 919,609
Taxes other than income tax 428,149 182,627 379,530 200,425
Rental expenses 228,467 111,569 182,038 94,530
Depreciation of tangible fixed assets 127,197 60,259 125,219 60,114
Communication services 113,373 60,845 164,765 67,932
Expenses on deposit insurance 108,243 62,007 83,216 42,817
Information services 103,649 54,737 51,342 20,471
Amortization of intangible assets 87,892 43,355 50,189 31,832
Professional services 59,496 35,354 60,295 30,646
Stationary and office expenses 29,317 15,147 26,399 12,929
Transportation 6,719 3,691 6,762 2,992
Other administrative expenses 104,832 58,994 104,700 42,837
Total administrative and other
operating expenses 3,430,897 1,730,000 2,931,838 1,527,134
Included in staff costs are statutory social contributions to the pension fund and share-based remuneration: In thousands of RR Six-Months Period Ended 30 June 2015 Three-Months Period Ended 30 June 2015 Six-Months Period Ended 30 June 2014 Three-Months Period Ended 30 June 2014 Statutory social contribution to the
pension fund 379,736 182,563 241,388 71,939
Share-based remuneration 62,396 29,002 23,427 14,479
20 Income Taxes
Income tax expense comprises the following:
In thousands of RR Six-Months Period Ended 30 June 2015 Three-Months Period Ended 30 June 2015 Six-Months Period Ended 30 June 2014 Three-Months Period Ended 30 June 2014 Current tax (17,851) (8,969) (726,049) (389,993) Deferred tax (69,035) (141,217) 148,962 (68,189)
Income tax expense for the
period (86,886) (150,186) (577,087) (458,182)
21 Segment Analysis
Operating segments are components that engage in business activities that may earn revenues or incur expenses, whose operating results are regularly reviewed by the chief operating decision maker (CODM) and for which discrete financial information is available. The CODM is the person or group of persons who allocates resources and assesses the performance for the Group. The functions of CODM are performed by the Board of Directors of the Group.
21 Segment Analysis (Continued)
Description of products and services from which each reportable segment derives its revenue The Group is organised on the basis of 2 main business segments:
Retail banking – representing private banking services, private customer current accounts, savings, deposits, investment savings products, custody, credit and debit cards, consumer loans and mortgages;
Insurance operations – representing insurance services provided to individuals. Factors that management used to identify the reportable segments
The Group’s segments are strategic business units that focus on different services to the customers of the Group. They are managed separately because each business unit requires different marketing strategies and represents different types of businesses.
Measurement of operating segment profit or loss, assets and liabilities
The CODM reviews financial information prepared based on International financial reporting standards adjusted to meet the requirements of internal reporting. The CODM evaluates performance of each segment based on profit before tax.
Information about reportable segment profit or loss, assets and liabilities Segment information for the reportable segments as at 30 June 2015 is set out below:
In thousands of RR Retail banking Insurance operations Eliminations Total
Cash and cash equivalents 15,790,851 735,104 (566,367) 15,959,588
Mandatory cash balances with the CBRF 907,408 - - 907,408
Due from other banks - 356,951 - 356,951
Loans and advances to customers 75,570,919 - - 75,570,919
Financial derivatives 8,763,689 - - 8,763,689
Investment securities available for sale 11,844,984 - - 11,844,984
Repurchase receivables 1,629,259 - - 1,629,259
Current income tax assets 1,084,647 22,666 - 1,107,313
Guarantee deposits with payment systems 2,569,621 - - 2,569,621
Tangible fixed assets 448,574 704 - 449,278
Intangible assets 997,428 280,326 - 1,277,754
Other financial assets 1,251,256 31,605 (22,485) 1,260,376
Other non-financial assets 427,779 116,601 - 544,380
Total reportable segment assets 121,286,415 1,543,957 (588,852) 122,241,520
Due to banks 3,898,411 - - 3,898,411
Customer accounts 72,266,586 - (566,367) 71,700,219
Debt securities in issue 11,000,623 - - 11,000,623
Deferred income tax liabilities 1,139,320 25,341 - 1,164,661
Subordinated debt 11,109,931 - - 11,109,931
Other financial liabilities 967,329 477,699 (22,485) 1,422,543
Other non-financial liabilities 810,375 10,506 - 820,881
21 Segment Analysis (Continued)
Segment information for the reportable segments for the year ended 31 December 2014 is set out below:
In thousands of RR Retail banking Insurance operations Eliminations Total
Cash and cash equivalents 10,692,202 896,304 (888,929) 10,699,577
Mandatory cash balances with the CBRF 685,510 - - 685,510
Loans and advances to customers 74,579,998 - - 74,579,998
Financial derivatives 8,879,972 - - 8,879,972
Investment securities available for sale 216,535 - - 216,535
Repurchase receivables 5,366,280 - - 5,366,280
Current income tax assets 1,080,050 14,038 - 1,094,088
Guarantee deposits with payment systems 2,967,132 - - 2,967,132
Tangible fixed assets 540,702 646 - 541,348
Intangible assets 864,181 261,126 - 1,125,307
Other financial assets 1,890,667 32,581 (32,581) 1,890,667
Other non-financial assets 648,062 111,798 - 759,860
Total reportable segment assets 108,411,291 1,316,493 (921,510) 108,806,274
Due to banks 10,331,216 - - 10,331,216
Customer accounts 44,255,363 - (888,929) 43,366,434
Debt securities in issue 19,414,780 - - 19,414,780
Current income tax liabilities 12,593 - - 12,593
Deferred income tax liabilities 1,013,610 26,185 - 1,039,795
Subordinated debt 11,250,686 - - 11,250,686
Other financial liabilities 1,553,207 301,644 (32,581) 1,822,270
Other non-financial liabilities 594,158 5,274 - 599,432
Total reportable segment liabilities 88,425,613 333,103 (921,510) 87,837,206
Segment information for the reportable segments for six and three months ended 30 June 2015 and 30 June 2014 is set out below:
In thousands of RR Retail banking Insurance operations Eliminations Total
Six Months ended 30 June 2015 External revenues:
Interest income 19,096,561 13,200 - 19,109,761
Income from insurance operations 151,173 420,998 (147,363) 424,808
Gain from sale of impaired loans 6,346 - - 6,346
Fee and commission income 355,087 - - 355,087
Gains less losses from operations with
foreign currencies 112,379 - - 112,379
Other operating income 31,745 4,571 (1,162) 35,154
Total revenues 19,753,291 438,769 (148,525) 20,043,535
Interest expense (6,193,184) - - (6,193,184)
Provision for loan impairment (7,999,036) - - (7,999,036)
Customer acquisition expense (1,381,060) (267,744) 147,363 (1,501,441)
Fee and commission expense (628,698) - - (628,698)
Administrative and other operating expenses (3,290,912) (141,147) 1,162 (3,430,897)
21 Segment Analysis (Continued) In thousands of RR Retail banking Insurance operations Eliminations Total
Three Months ended 30 June 2015 External revenues:
Interest income 9,710,682 11,928 - 9,722,610
Income from insurance operations 74,555 185,576 (71,590) 188,541
Gain from sale of impaired loans 6,346 - - 6,346
Fee and commission income 244,277 - - 244,277
Gains less losses from operations with foreign
currencies 390,309 - - 390,309
Total revenues 10,426,169 197,504 (71,590) 10,552,083
Interest expense (3,297,424) - - (3,297,424)
Provision for loan impairment (3,858,497) - - (3,858,497)
Customer acquisition expenses (720,667) (135,465) 71,590 (784,542)
Fee and commission expense (334,599) - - (334,599)
Administrative and other operating expenses (1,658,937) (71,702) 639 (1,730,000)
Other operating loss (4,399) 4,571 (639) (467)
Segment result 551,646 (5,092) - 546,554 In thousands of RR Retail banking Insurance operations Eliminations Total
Six Months ended 30 June 2014 External revenues:
Interest income 19,539,563 1,488 (1,488) 19,539,563
Gains less losses from operations with
foreign currencies 278,954 - - 278,954
Income from insurance operations 188,584 335,825 (148,366) 376,043
Fee and commission income 84,564 - - 84,564
Other operating income 109,471 - - 109,471
Total revenues 20,201,136 337,313 (149,854) 20,388,595
Interest expense (4,346,066) - 1,488 (4,344,578)
Provision for loan impairment (8,543,047) - - (8,543,047)
Customer acquisition expenses (1,722,200) (164,699) 148,366 (1,738,533) Losses less gains from operations with
foreign currencies (133,024) - - (133,024)
Fee and commission expense (459,217) - - (459,217)
Administrative and other operating expenses (2,848,430) (83,408) - (2,931,838)
21 Segment Analysis (Continued) In thousands of RR Retail banking Insurance operations Eliminations Total
Three Months ended 30 June 2014 External revenues:
Interest income 9,875,596 748 (748) 9,875,596
Gains less losses from operations with
foreign currencies 278,954 - - 278,954
Income from insurance operations 99,434 178,431 (81,023) 196,842
Fee and commission income 56,640 - - 56,640
Other operating income 69,044 - - 69,044
Total revenues 10,379,668 179,179 (81,771) 10,477,076
Interest expense (2,125,049) - 748 (2,124,301)
Provision for loan impairment (4,171,683) - - (4,171,683)
Customer acquisition expenses (657,688) (90,361) 81,023 (667,026)
Fee and commission expense (229,825) - - (229,825)
Administrative and other operating
expenses (1,476,384) (50,750) - (1,527,134)
Segment result 1,719,039 38,068 - 1,757,107
Reconciliation of reportable segment revenues, profit or loss, assets and liabilities:
In thousands of RR Six-Months Period Ended 30 June 2015 Three-Months Period Ended 30 June 2015 Six-Months Period Ended 30 June 2014 Three-Months Period Ended 30 June 2014 Total revenues for reportable segments 20,192,060 10,623,672 20,538,449 10,558,847
Intercompany transactions (148,525) (71,590) (149,854) (81,771)
Total consolidated revenues 20,043,535 10,552,082 20,388,595 10,477,076
Total consolidated revenues comprise interest income, income from insurance operations, gain from sale of impaired loans, fee and commission income, income from sale of investment securities available for sale, gains less losses from operations with foreign currencies and other operating income.
In thousands of RR Six-Months Period Ended 30 June 2015 Three-Months Period Ended 30 June 2015 Six-Months Period Ended 30 June 2014 Three-Months Period Ended 30 June 2014 Total reportable segment result 290,279 546,554 2,238,358 1,757,107
21 Segment Analysis (Continued)
In thousands of RR 30 June 2015 31 December 2014
Total reportable segment assets 122,830,372 109,727,784
Intercompany balances (588,852) (921,510)
Total consolidated assets 122,241,520 108,806,274
In thousands of RR 30 June 2015 31 December 2014
Total reportable segment liabilities 101,706,121 88,758,716
Intercompany balances (588,852) (921,510)
Total consolidated liabilities 101,117,269 87,837,206
22 Maturity Analysis
The expected maturity analysis of financial instruments at carrying amounts as monitored by management at 30 June 2015 is presented in the table below.
In thousands of RR Demand and less than 1 month From 1 to 3 months From 3 to 6 months From 6 to 12 months From 1 to 5 years Total Assets
Cash and cash equivalents 15,959,588 - - - - 15,959,588
Mandatory cash balances with the
CBRF 249,229 70,326 109,072 215,167 263,614 907,408
Due from other banks - - 178,222 178,729 - 356,951
Loans and advances to
customers 8,149,390 13,757,116 15,556,246 18,891,352 19,216,815 75,570,919 Financial derivatives 45,485 2,374,756 - 4,379,103 1,964,345 8,763,689 Investment securities available for
sale 104,407 439,130 1,225,101 2,737,387 7,338,959 11,844,984
Repurchase receivables - - - - 1,629,259 1,629,259
Guarantee deposits with payment
systems 277,102 467,780 528,956 642,358 653,425 2,569,621
Other financial assets 1,260,376 - - - - 1,260,376
Total financial assets 26,045,577 17,109,108 17,597,597 27,044,096 31,066,417 118,862,795
Liabilities
Due to banks 161,028 2,251,046 - 1,486,337 - 3,898,411
Customer accounts 19,693,154 5,556,939 8,618,510 17,001,750 20,829,866 71,700,219 Debt securities in issue 2,096,336 8,876,245 - 28,042 - 11,000,623
Subordinated debt 103,645 - - - 11,006,286 11,109,931
Other financial liabilities 1,422,543 - - - - 1,422,543
Total financial liabilities 23,476,706 16,684,230 8,618,510 18,516,129 31,836,152 99,131,727
Net liquidity gap at 30 June
22 Maturity Analysis (Continued)
The expected maturity analysis of financial instruments at carrying amounts as monitored by management at 31 December 2014 is presented in the table below.
In thousands of RR Demand and less than 1 month From 1 to 3 months From 3 to 6 months From 6 to 12 months From 1 to 5 years Total Assets
Cash and cash equivalents 10,699,577 - - - - 10,699,577
Mandatory cash balances with the
CBRF 237,363 119,996 101,590 175,452 51,109 685,510
Loans and advances to
customers 9,193,912 15,127,382 16,389,873 18,488,062 15,380,769 74,579,998
Financial derivatives - - - 2,705,553 6,174,419 8,879,972
Investment securities available for
sale - - - - 216,535 216,535
Repurchase receivables - 608,718 348,211 1,339,036 3,070,315 5,366,280 Guarantee deposits with payment
systems 365,776 601,836 652,064 735,539 611,917 2,967,132
Other financial assets 1,890,667 - - - - 1,890,667
Total financial assets 22,387,295 16,457,932 17,491,738 23,443,642 25,505,064 105,285,671
Liabilities
Due to banks 5,331,607 2,005,548 748,515 2,245,546 - 10,331,216
Customer accounts 15,015,964 7,591,138 6,426,760 11,099,362 3,233,210 43,366,434 Debt securities in issue 98,808 672,865 2,670,368 15,972,739 - 19,414,780
Subordinated debt - - - - 11,250,686 11,250,686
Other financial liabilities 1,822,270 - - - - 1,822,270
Total financial liabilities 22,268,649 10,269,551 9,845,643 29,317,647 14,483,896 86,185,386
Net liquidity gap at
31 December 2014 118,646 6,188,381 7,646,095 (5,874,005) 11,021,168 19,100,285
Cumulative liquidity gap at
31 December 2014 118,646 6,307,027 13,953,122 8,079,117 19,100,285
-23 Management of Capital
The Group’s objectives when managing capital are (i) for the Bank to comply with the capital requirements set by the CBRF, (ii) for the Group to comply with the financial covenants set by the terms of RR and USD denominated securities issued; (iii) to safeguard the Group’s ability to continue as a going concern.
The Group considers total capital under management to be equity as shown in the consolidated condensed interim statement of financial position. The amount of capital that the Group managed as of 30 June 2015 was RR 21,124,251 thousand (31 December 2014: RR 20,969,068 thousand). Compliance with capital adequacy ratios set by the CBRF is monitored daily and submitted to the CBRF monthly with reports outlining their calculation reviewed and signed by the Bank’s Chief Executive Officer and Chief Accountant. Other objectives of capital management are evaluated annually.