SLIDE 1
RESULTS 2016
SLIDE 2 Macroeconomic and internal financial conditions
In 2016 the process of slowdown in the decline in the Russian economy continued against the background of relatively stable internal financial conditions and a number of external factors: increased volatility in world commodity and financial markets and low growth in the world economy. In 2016 the limits on oil production by the countries – suppliers impacted positively on commodity markets and dynamics of prices on hydrocarbons as well as contributed to the strengthening of the Russian currency by more than 20% by year-end (60,1618
RUB/$ against 72,8827 RUB/$ at the end of 2015).
Negative factor, restricting access to international capital markets and increasing the cost of raising funds in the domestic market, remained sectoral sanctions imposed against several Russian credit institutions. In 2016 the continuing slowdown in the decline in GDP (0.4% p.a. in 3Q vs 0,6% p.a. in 2Q) accompanied by the
- f signs of recovery in economic activity of certain
sectors and regions of the Russian Federation. CBR recorded a slowdown in inflation according to the baseline forecast of 5.4% - 5.8% at the end of 2016 as well as reducing the risks of inflation. In these circumstances, a moderately tight monetary policy of CBR was aimed for maintaining of financial stability and creating incentives for savings by economic entities, contributing to the further slowing of inflation and its output on the target level of 4% in 2017. Reduction of the key rate (in June 2016 from 11 % to 10.5% p.a. and from 10.5% to 10% p. a. in September 2016) was accompanied by a signal to the market on its possible further reduction in 1-2Qs 2017.
January 01 , 2016 January 01 , 2017
Rate RUB/$ 72,8827 60,6569 Key rate of the Bank of Russia (% p.a.)
11 10
Inflation (% p.a.) 12,9 5,4 Brent ($/barrel) <40 >55
SLIDE 3 Development of the Russian banking sector in 2016, dynamics
Indicator Annual change, % 2016 vs 2015 (in bns. of RUBs) Assets
80 063 /83 000 Aggregate loans to economy
40 939/43 985 Loans to non-financial organizations
30 135/ 33 301 Loans to individuals 1,1 (1,4*) 10 804/ 10 684 Loans to financial institutions-residents (excl. credit
institutions)
67,4 2 777/1 659 Profit 384,4 930/192 Deposits of individuals 4,2 (9,2*) 24 200/23 219 Customer accounts and deposits (excl. credit institutions)
24 322 /27 064 Due to the Bank of Russia
2 726/5 363 Provisions for possible losses +3,5 5 594/ 5 406
(* - excl. amendments for currency revaluation) Source: http://www.cbr.ru/analytics/
In 2016, in the framework of implemented moderately tight monetary policy, the Bank of Russia has proposed to the banking sector some changes and measures aimed for stabilization of the Russian economy and financial sector: expanding the Lombard list (added 45 issues of securities additionally), clarifications in a structure of obligations, subject to reservation, which included in the calculation of required provisions for the Russian credit institutions. In 2016 the Bank of Russia continued the process of active recovery in the Russian banking system: a number of
- perating banks (with the right to conduct banking operations) decreased over the year by 63 to 623 (178 credit
institutions are unprofitable). According to the CBR information as at January 01, 2017 a number of credit institutions with revoked (cancelled) licenses for banking operations comprised 351 for the whole period of recovery. The concentration of banking assets in 2016 has not changed significantly, where traditionally the first 50 of credit institutions (by total assets) have accumulated up to 88.7% of the banking assets and only 11.3% are the assets of the remaining banks (87% and 13% in 2015, respectively).
SLIDE 4
Business Profile
NK Bank (joint stock company), License № 2755 is a private commercial Bank, focused on services for corporate business and private customers, operates in the Russian banking market since 1993. The Bank's primary business includes the classic banking operations with securities, foreign currency, loans and guarantees, financial services and products for wealthy customers (Private banking). RETAIL BUSINESS: traditional banking products and services for individuals CORPORATE BUSINESS: services and products for large business and medium-sized enterprises PRIVATE BANKING: unique products and financial services for wealthy customers Moscow Exchange OJSC (trader on currency, money and capital markets) Member of the Moscow International Currency Association Associate member of IPS Visa International Affiliate member of IPS MasterCard Worldwide Member of the Russian National SWIFT Association Member of the Association of Regional Banks of Russia (Association “Russia”) Member of SRO National Finance Association User of Reuters, Bloomberg, Info system RVS – Bills
Bank Deposits B3/NP Assets 166
Baseline Credit Assessment b3
Dynamics of capital 134 Outlook negative Total loan portfolio 152
Counterparty Risk Assessment B2(cr)/NP(cr)
Loans to legal entities 152 Loans to individuals 111 Customer accounts 153 Deposits of individuals 151 Total financial result 144
PRIORITIES PARTICIPATION RATINGS MOODY’S INVESTORS SERVICE (November 2016) RANKINGS EXPERT RA (as at 01.01.2017)
SLIDE 5 Shareholders
Smirnov Sergey Grigoryev Viktor
Chairman of Executive Board of JSC NK Bank since 2005. More than 20 years of successful business experience in the Russian banking system as a Chairman (CEO) and a Member of the Board
- f Directors in commercial banks.
Professional corporate management skills and personal leadership qualities have defined the Bank’s success in
- vercoming economic crisis in 1990th, 2004, 2008 – 2010.
Experience of the leader has allowed the Bank to find its niche in the Russian banking system, the ability to look
- ne step further - to determine accurately the main
vectors of development for the Bank. President of JSC NK Bank since 2011. More than 25 years of successful business experience as a Head, Chairman and a Member of the Board
- f Directors of industrial enterprises
and holdings. Business interest : industrial, oil and gas, energy and other assets of key sectors. In a period of 2008 - 2015 the shareholder invested in development of the Bank:
Additional share issue : 55.5 m rubles in 2009 Subordinated loans in amounts of 148.5 m rubles in 2009 and 324 m rubles in 2014 Free of charge financing: 150 m rubles in 2013 and 15 m rubles in 2015.
V.Grigoryev
90,0%
10,0%
- attract financially stable partners and new customers
- organic business development and extension of the Bank's activities
- participate in financially stable and long term projects
HIGH SHAREHOLDERS’ INTEREST IN DEVELOPMENT OF THE BANK HELPS TO:
SLIDE 6 Corporate management
BOARD OF DIRECTORS EXECUTIVE BOARD
Grigoryev Victor, Chairman of the BoDs Grigoryeva Ksenia, Member of the BoDs Mekhryakov Vladimir, Independent Member of the BoDs Kiyko Svetlana, Independent Member of the BoDs Yakubenko Philipp, Member of the BoDs
- Development and strategy
- Compensations
- Risk management
- Compensations
- Development and strategy
- Risk management
- Audit and internal control
Smirnov Sergey, CEO Deputy CEOs, Members of the ExB: Batraev Vladislav Grigoryeva Ksenia Gusarova Natalya Demchenko Vladimir Dremova Olga Lyalyushko Julia Solganik Janna Merkulova Elena, Chief Accountant
SLIDE 7 Financial profile
ASSETS DYNAMICS
in thousands of RUBs (rf 806*) 01.01.2016 01.01.2017 Cash and equivalents 1 196 166 574 180 Cash and balances with CBR 310 764 613 939 Required reserves 93 973 116 745 Due from banks 261 269 815 581 Financial assets at fair value thought profit / loss 527 227 432 639 Net loan receivables 12 032 103 10 554 804 Net investments in securities and other financial assets 1 171 131 1 933 937 Property, equipment and intangible assets 37 021 301 763 Long-term assets held- for- sale 481 428 539 293 Other assets 356 876 170 022 As at January 01, 2017 the Bank's assets amounted to 15 937,0 m rubles, the share of working assets - 78,68%, return on assets (ROA) - 1.30%
STRUCTURE
The structure of the Bank’s assets at the reporting date is traditionally in a large part comprised of the loan portfolio - 44%, securities portfolio - 15%, highly liquid assets – 13%, interbank loans portfolio in Russian banks for up to 30 days - 22% and other assets. 01 01 2017 01 01 2016 Liabilities Assets 15 936 158 Assets 16 373 985 13 783 165
14 334 098
Liabilities
rf.806*, in
54%
TERM CUSTOMER ACCOUNTS/LIABILITIES – 71,11% LOANS/CUSTOMER ACCOUNTS –63,27% *Published RAS financial statements, reporting forms 807, 806 incl. events after the reporting date 01.01.2017
43,91% 22,32% 12,57% 14,85% 6,35% Loans Interbank Loans Cash and equivalents Securities Other assets Structure of Assets as at January 01, 2017 ( %)
SLIDE 8 LIABILITIES STRUCTURE
in thousands of RUBs (rf 806*) 01.01.2016 01.01.2017 Due to banks 390 209 26 067 Customer accounts (non-credit organizations) 11 851 264 10 588 550 Deposits of individuals incl. individual entrepreneurs 8 072 715 6 624 979 Debt securities issued 1 861 293 2 979 960 Current income tax 16 087 57 Other liabilities 207 749 179 958 Provision for impairment losses on contingent loan commitments 7 496 8 573 As at January 01, 2017 a large part of the Bank's liabilities is diversified by sources and traditionally comprised of the balances on current customer accounts and term deposits
- f individuals (48.7 % of borrowed customer
funds), where almost 50% of customer funds borrowed for a term of 1 -3 years. Sources of equity (capital) of the Bank as at January 01, 2017 amounted to 2 152,0 m rubles (the annual growth of 5.5% at the expense of received profit). Profit earned by the Bank in 2016 allowed to get out of losses by the end of 2015 and to create the additional provisions for loan impairment.
Financial profile
5 000 000 10 000 000 15 000 000 1 2 3 4
0,2% 1,4%
Due to banks Other liabilities Debt securities issued Customer accounts
76,8% 21,6% as at January 01, 2017 Structure of Liabilities
rf.806*,
as at January 01, 2016 5 000 000 10 000 000 15 000 000
2,7% 1,6%
13,0%
82,7%
*Published RAS financial statements, reporting forms 807, 806 incl. events after the reporting date 01.01.2017 rf.806*,
SLIDE 9 SOURCES OF EQUITY (CAPITAL) DYNAMICS
Financial profile
1 2 3 4 5
01.01.2016 01.01.2017
1. Equity (capital)
equity 3.Registered share capital
- 4. Core equity
- 5. Sources of
additional equity
2 358,4 2 622,5
2 185,4
2 102,6 1 388,8 1 650,0 2 034,4 324,0 527,2
Equity (Basel III) as at January 01, 2017 (in millions of RUBs)
2 095,3
3 000 2 500 2 000 1 500 1 000
STRUCTURE
The rate of growth of the Bank's equity in 2016 (Basel III) amounted to 11,20%, return
According to the published reporting (RAS), the Bank's capital showed the increase of 113 m rubles in 2016. in thousands of RUB (rf 806*) 01.01.2016 01.01.2017 Share capital 1 388 750 1 650 000 Share premium 307 834 307 834 Equity reserves 83 325 83 325 Revaluation of securities at fair value, available-for-sale less deferred tax liabilities (increased at deferred tax assets) 303 Retained earnings (uncovered loss) of previous years 398 582 62 193 Unused profit (loss) for the period
49 338 The structure of the Bank’s capital did not change significantly in 2016. As at the reporting date the capital includes a subordinated loan in the amount of 324,0 m rubles, maturity in 2024. 5 6 10 11.41 11.41 14.28
(Н1.1) (Н1.2) (Н1.0)
Mandatory ratios as at January 01, 2017 (rf.135)
CBR, minimum ratio NK Bank, actual ratio
CAPITAL/ASSETS – 16,46% *Published RAS financial statements, reporting forms 807, 806 incl. events after the reporting date 01.01.2017
SLIDE 10 Financial result
in thousands of RUB (rf 807*) 01.01.2016 01.01.2017 Interest income from, total (incl.): 1 498 026 1 229 440 Due from banks 131 136 93 463 Loans to customers (non-credit institutions) 1 262 464 1 070 013 Investments in securities 104 426 65 964 Net interest income (negative interest margin) after provision for possible losses 232 805 203 591 Net operating income from, total (incl.): 195 263 459 951 securities, available-for-sale 337 236 168 foreign currency (incl. revaluation) 139 968 184 531 precious metals 19 002 39 252 Income from equity in capital of other legal entities 9 625 214 840 Commission income 178 226 195 965 Other operating income 30 542 34 237 Net income 626 815 1 075 132
NK Bank earned a profit in amount of 49 338 thousand rubles in 2016. Financial result for the reporting period amounted to 49 556 thousand rubles.
STRUCTURE OF INCOME (%) 2015 vs 2016
1 400 000 1 200 000 1 000 000 800 000 600 000 400 000 200 000 72,9% 0,50%
Equity
1,0%
Precious metals
1,6% 7,3%
Foreign currency
7,4%
Securities
9,3%
Commission
54,6% 1,6%
Other
1,8%
Precious metals
14,0%
Securities
9,2%
Commission
10,1%
Equity
8,7%
Foreign currency Interest Interest Other
*Published RAS financial statements, reporting forms 807, 806 incl. events after the reporting date 01.01.2017
SLIDE 11 in thousands of RUB (rf 807*) 01.01.2016 01.01.2017 Interest expenses on, total (incl.): 642 071 637 639 Due to banks 58 854 16 746 Customer accounts (non-credit institutions) 468 107 511 232 Debt securities issued 115 110 109 661 Changes in reserve for possible loan losses, total 623 150 388 210 Commission expenses 18 393 26 351 Operating expenses 723 417 1 020 688
Financial result
STRUCTURE OF EXPENSES (%) 2016 vs 2015
1 200 000 1 000 000 800 000 600 000 400 000 200 000
49,0% 30,6% 19,1%
1,3%
35,0% 31,0% 33,0% 1,0%
Interest Operating Provision Commission Commission Operating Provision Interest
*Published RAS financial statements, reporting forms 807, 806 incl. events after the reporting date 01.01.2017
SLIDE 12 23,94% 51,07% 5,02% 2,35% 17,63% 1 2 3 4 5
Share in the total debt (by categories of quality)
102 731 1 358 338
400 000 600 000 800 000 1 000 000 1 200 000 1 400 000 1 600 000
1 2 3 4 5 1 2 3 4 5 (by categories of quality, ths. RUBs)
Lending is the main activity of the Bank and the basis for its financial result. The Bank follows the main principles of management for the LP: its acceptable quality in current economic situation, efficient operation with overdue debt and individual approach to customers. Acceptable level of overdue debt in corporate loan portfolio of 7.91% of the total loan portfolio as at January 01, 2017 is a result of individual approach to analyses of the borrowers' risks.
Moderate increase of the loan portfolio, its profitability and quality combined with effective debt recovery is one
- f the main priorities for the Bank.
Net loan receivables amounted to 10,6 bn rubles, incl. the Loan portfolio in amount of 8,6 bn rubles as at January 01, 2017 .
Credit policy of the Bank provides lending to customers with successful and transparent businesses and involves the effective long-term cooperation. The Bank maintains a conservative approach in assessment of credit risks of the borrowers taken into account the current economic conditions. The Bank offers the customers the following forms of lending:
- short and medium-term lending,
- lines of credit,
- investment lending,
- lending against account turnover.
Loan portfolio
LOAN RECEIVABLES
as at January 01, 2017
PROVISIONS in amount of 1 508 530 ths. RUBs
SLIDE 13 Loan portfolio
NK Bank traditionally provides services to corporate customers and SMEs of different industries. As at January 01, 2017 the loans to SMEs comprised over 36% of the total loan portfolio and more than half of the corporate loan portfolio - 51%. As at January 01, 2016 the respective shares comprised 44% and 74%.
DYNAMICS STRUCTURE OF CORPORATE LP STRUCTURE OF LP (SECTORS) DYNAMICS
The structure
LP by sectors has significantly changed towards increasing the share of loans to corporate customers and reducing the share of loans to retail customers in 2016. As at January 01, 2016 the respective shares comprised 16% and 40% of the total loan portfolio. Financial intermediation 8% 23% Wholesale and 8% Construction 24% Real estate 25% Industrial production 12% Other Retail 29% 36% Corporate 34% SMEs
SLIDE 14
Loan portfolio
STRUCTURE OF LP STRUCTURE OF LP (TYPES OF LOANS) STRUCTURE OF RETAIL LP
Corporates 71% 29% Individuals Lines with limit of indebtedness 3% 18% 79% Lines with disbursement Loans Consumer loans Mortgage Overdrafts Real estate purchase & construction Other 19% 30% 0,5% 0,2% 8,1% 42,2% Auto loans
SLIDE 15
Securities portfolio
Management strategy for SP of NK Bank implies both the debt instruments (listed in the Lombard list of the Bank of Russia in rubles and major currencies) and equity securities - shares of industrial, scientific and manufacturing enterprises which are not traded on organized securities markets.
STRUCTURE OF SP DYNAMICS STRUCTURE OF SP (BONDS) SP BOOK VALUE
Bank’s securities portfolio as at January 01, 2017 amounted to 2.37 bn rubles (incl. revaluation), that exceeds the Bank's investments in securities more than 1.4 as at January 01, 2016. In addition, the structure of SP has changed due to increase in share of equity securities (51% and 49%, respectively.) Debt instruments listed in the Lombard list of CBR allow to use such options of the monetary policy of the Bank of Russia as REPOs, intraday loans and other liquidity- providing options, if necessary.
182 506.00 3 016.00 59 355.00 736 928.00 41.00 1 186 219.00
(in thousands of RUBs)
Shares of industrial enterprises Shares of jewelry enterprise Bonds of credit institutions State Bonds Eurobonds Corporate Bonds
Shares Bonds 51% 49%
17% 5% 62% 16% Eurobonds
State Bonds Bonds of CI Corporate Bonds
SLIDE 16 Issuer Type of share Number of pieces % in the share capital of the Issuer Balance value, RUBs* as at January 01, 2017 Aerospace Equipment Corporation Joint Stock Company (AEC JSC)
39 172 258 4.90% 330 158 689.78
JOINT STOCK COMPANY SCIENTIFIC-DESIGN BUREAU OF COMPUTING SYSTEMS (JSC SDB CS)
999 19.98% 319 795 515.00
JOINT STOCK COMPANY AVECS
605 4.92% 76 835 000.00 Public joint-stock company Plant
ATLANT
26 923 14.21%
111 874 450.00
Joint Stock Company Plant
ELECON
530 992 4.98% 259 319 198.88 Joint Stock Company Karachev Plant ELEKTRODETAL
272 535 4.98% 88 236 100.80 Total
1 186 218 954.46
Equity securities portfolio
*incl. revaluation
Portfolio of equity securities (which are not traded on organized securities markets) of the Bank has formed at 100% of the shares of corporate issuers - industrial and scientific-production enterprises with a good dividend history, which are provided by the government contracts for their products or participation in cooperation under the state orders. Engineering and industrial companies focused on innovations, manufacturing, installation and sales of their products (parts of products) for aerospace industry are the customers of the Bank for a long time. In 2017 the Bank expects dividend payments on investments in all shares, based on full and timely implementation of the issuers’ plans for production and sales. Financing of the contracts for manufactured products is provided both from the state budget and by the issuers. Sales contracts financed from the state budget are signed for long periods, that allows to plan the dividend model for the future between 3-5 years.
SLIDE 17 Direct equity investments in companies with a structural growth and attractive dividend yield is an alternative financial instrument of investments for the Bank since the end of 2015 . The shares (which are not traded on organized securities markets) of companies with their own scientific and industrial bases, have formed a large part of the Bank's securities portfolio. SP management by increasing positions in the shares
- f corporate issuers brings the Bank income in a form of
dividends and growth of shareholder value in the medium term. One of the major economic reasons for decision to form the Bank's securities portfolio, including the shares
- f industrial companies, was the issuers’ adopted and
approved policies for dividend payments.
Equity securities portfolio
Issuer Issuer’s profit (2015, RUBs) Dividends received by the Bank (2016,RUBs)
Aerospace Equipment Corporation Joint Stock Company (AEC JSC)
1 151 077 867 49 288 677
JOINT STOCK COMPANY SCIENTIFIC- DESIGN BUREAU OF COMPUTING SYSTEMS (JSC SDB CS)
228 149 000 15 863 291
JOINT STOCK COMPANY AVIAAVTOMATIKA
named after V. Tarasov 360 817 297 108 068 790 Long experience of lending to the industry, as well as the experience of lending secured by equity securities of industrial companies, allows the Bank to analyze deeper the industry and the risks as a whole and for each company in details.
INCOME ON INVESTMENTS IN SHARES OF ISSUERS
173 220 758
TOTAL
In 2016 the Bank has received the income from the sale of the ordinary and preferred shares of Public joint-stock company Tambov factory Electropribor in amount of 248 581 000 RUBs.
SLIDE 18
Information and Contacts
Licenses
Banking License № 2755 dd 25. 11. 2015 License № 2755 for operations with precious metals dd 25. 11. 2015 License № 045-07255-010000 for dealer activities dd 19. 12. 2003 License № 045-07248-100000 for brokerage activities dd 19. 12. 2003 License № 045-07265-000100 for depository activities dd 19. 12. 2003 License № 12573 Н for data encryption dd 15. 11. 2012 NK Bank is listed in the register of banks, meeting the requirements established for acceptance the bank guarantees for taxation purposes.
Contacts
Gusarova Natalia, Deputy CEO Yanchikova Elena, FI and Settlements, Director Ph.: 8(495) 411- 8844 E-mail: office@nkbank.ru
Audit RAS/IFRS
Audit’s Modern Technologies Ltd., Reg # 11606057684 www.audit-sta.ru
SLIDE 19
Banking License № 2755 125047, Moscow, 2 Miusskaya square, Russia Tel.: 8 (495) 411-88-44 E-mail: office@nkbank.ru www.nkbank.ru
