Top-30 banks in Russia 2009 to 2014 retrospective: Before the storm?

Top 30 banks in Russia
2009 to 2014 retrospective:
Before the storm?
Based on publicly available IFRS financial statements
Deloitte FSI CIS Analytical Center
February 2016

2Top 30 banks in Russia 2009 to 2014 retrospective: Before the storm?
Table of Contents
Introduction 3
Key observations 4
2009-2014 restrospective 5
Significant growth since 2009 6
Fragile profitability 10
Questionable sustainability 14
Conclusion 21
Methodology 22
Appendices 24
Disclaimer
This publication presents an observation of some financial indicators of the Top 30 banks in Russian from 2009 until 2014, based on publicly available IFRS financial
statements.
This material is not intended to be comprehensive and does not constitute investment, legal or tax advice, nor does it constitute an offer or solicitation for any purchase
or sale of any financial instrument or a recommendation for any investment product or strategy.
Information contained in this material has been obtained from sources believed to be reliable but no representation or warranty is made by Deloitte as to the quality,
completeness, accuracy, fitness for a particular purpose or noninfringement of such information. In no event shall Deloitte be liable (whether in contract, tort, equity or
otherwise) for any use by any party of, for any decision made or action taken by any party in reliance upon, or for any inaccuracies or errors in, or omissions from, the
information contained herein and such information may not be relied upon by you in evaluating the merits of participating in any transaction. All information contained
herein is as of the date referenced and is subject to change without notice. Numbers in various tables may not sum due to rounding.

Introduction
Based on their financial statements prepared in accordance with the International Financial
Reporting Standards (hereinafter “IFRS”) as of 30 June 2015, sixteen of the Top 30 banks we
selected for this publication collectively reported RUB 183 billion of net losses, while the remaining
banks (*) had a combined RUB 145 billion of net profits, a figure falling to RUB 60 billion when
excluding Sberbank. Most of them suffered sharp decreases in their loan production and net
interest income during the period, as well as declines in loan portfolio credit quality.
Six months have passed since then and a large majority of the banks are now preparing their
2015 year-end financial statements, in a macroeconomic environment still severely affected by
international sanctions and strong volatility on the currency and energy markets. These factors are
thought to have had a significant impact on the Russian economy; however, a closer analysis of
the financial dynamics since 2009 indicates that these factors affected a banking industry that was
already showing clear signs of deterioration prior to 2014.
In this publication we consider various performance indicators for a sample including 30 leading
banks operating in the Russian Federation (or “Top 30”, see Appendix 1) in order to provide a
retrospective view of some of the key financial dynamics in the banking sector from 2009 to 2014.
Our analysis was based exclusively on publicly available IFRS financial statements.
(*) 27 of the Top 30 banks selected for this publication disclosed their IFRS financial statements as of 30 June 2015.

Key observations
While the 2008-2009 crisis hit a fast-paced economy, the 2014 crisis hit a Russian banking sector that seemed to be still looking for a
second wind since the previous crisis. Looking beyond the significant increase of assets since 2009 (page 6) or the amount of profits
generated between 2010 and 2013 (page 10), the Top 30 banks’ financial performances indicated some signs of vulnerability, such as
an increasing dependence on ever-higher lending volumes to compensate for the deterioration of interest margins (page 13) and of loan
portfolio quality.
Significant growth post-2008
crisis veiled the fragility
of the market.
Racing for more and more lending volumes under much stronger market competition, the Top 30 banks observed clear signs of
deterioration in their credit portfolios in recent years, in particular in loans to individuals starting 2012. This deterioration was particularly
reflected in the growth of the corresponding effective provision rates (page 17), but also in the rising ratios of non-performing loans and
an acceleration of the level of cessions and write-offs of loans over the last three years (page 18). The deterioration trend on retail lending
markets therefore existed prior to the 2014 events, and which did not seem to significantly affect corporate lending portfolios up to 2014.
The lending market was
showing signs of overheating
long before the 2014 events.
With risk-weighted assets rising since 2009, the Common Equity Tier 1 ratios of the Top 30 banks significantly dropped over the six year
period (pages 19-20), providing them with less and less potential buffer to absorb any further market deterioration. From a capitalisation
perspective, the selected banks consequently appear to be in much weaker shape in 2014 than they were at the peak of the previous
financial crisis in 2009.
Capital adequacy: weaker
in 2014 than in 2009.

2009-2014 restrospective
Before the storm?

Significant growth
since 2009
Assets and lending
Six years have passed since the previous major global financial crisis in 2008-2009. During this
period, the Top 30 banks operating in the Russian Federation increased their asset sizes and loan
portfolios by more than three times, with assets rising from RUB 19 trillion as of 31 December
2009 to RUB 60 trillion as of 31 December 2014, and with loan portfolios growing from RUB
13 trillion to RUB 43 trillion (Figure 1.1). Temporarily slowing in 2009 due to the impact of the
imported financial turmoil, the Top 30 rapidly returned to their previous cruising pace, expanding
and accelerating lending production and capacities almost exclusively through organic growth
rather than through acquisitions and consolidations.
Figure 1.1. Top 30 banks: Total asset and loan growth (Index 100: 2009)
(Source: Selected banks' publicly available IFRS financial statements/Deloitte FSI CIS Analytical Center)
90
80
70
60
50
40
30
20
10
0
350
300
250
200
150
100
50
0
2009 2010 2011 20132012 2014
Total assets
Total loan portfolio
Index total assets (gross)
Index total assets, excl. 2014 currency effects
Index total loan portfolio (gross)
13 15
21 26
31
43
60
4437
19 22
30
118
118
162
157
194
198 231
242
317
331
100
100
RUBtr
Index100:2009
276

With the total loan portfolios representing 70 percent (weighted average) of their combined
balance sheets, the Top 30 banks primarily focused on the lending activity over anything else, with
a strong preference for corporate lending over retail lending. The corporate loans ranged between
76 and 80 percent of the loan portfolios from 2009 to 2014 (Figure 1.2).
However, a closer look at the six-year dynamic indicates that starting in 2011 retail lending grew
faster than corporate lending (2014 Index: retail at 399 and corporate at 314). This gap in the
growth rate would look even greater as of 31 December 2014 if the corporate loan growth is not
adjusted at year-end for loans denominated in foreign currency.
Figure 1.2. Top 30 banks: corporate and retail loan portfolios
450
400
350
300
250
200
150
100
50
0
40
35
30
25
20
15
10
5
0
2009 2010 2011 20132012 2014
Corporate loan portfolio
Retail loan portfolio (gross)
Index corporate loan portfolio (gross)
Index retail loan portfolio (gross)
10
119
167
246
328
399
100
3
12
3
17
4
19
6
23
8
33
10
100
116
160
186
221
314
RUBtr
Index100:2009
(Source: Selected banks' publicly available IFRS financial statements / Deloitte FSI CIS Analytical Center)
Figure 1.3. Top 30 banks: Share of retail lending, changes between 2009 and 2014
(in number of banks and loan portfolio shares)
18
16
14
12
10
8
6
4
2
0
-30 to -15
percentage points
-15 to -5
percentage
points
-5 to +5
percentage
points
+15 to +30
percentage
points
+5 to +15
percentage
points
Corporate banks (banks whose loan portfolio is mostly oriented toward legal entities)
Retail banks (banks whose loan portfolio is mostly oriented to individuals)
19
1 1
15
5
2
2
2
2
Numberofbanks
Only two banks decreased the
share of their retail loan portfolio
between 2009 and 2014.
Eleven banks increased the share of
their retail loan portfolio between
2009 and 2014.
* Bank A
The faster pace of retail growth is observable at the aggregate and at the individual level of each
bank. Out of three banks that reversed their core lending allocation between corporate and retail
since 2009, two shifted towards retail lending and almost all other structural moves observed
during this period were oriented toward more loans to individuals rather than to legal entities
(Figure 1.3). This remains true independently of each bank’s core lending orientation.
This focus on retail can have multiple interpretations, depending on each bank’s profile, such
as a strategy to better diversify credit risk, a strategy to keep capturing new market share from
a still promising market, or a way to better compensate shrinking corporate margins with more
profitable retail margins (Figure 2.5).
(* As an example, Bank A's share of retail lending represented 12 percent of its loan portfolio in 2009.
In 2014, this share of retail portfolio rose to 25 percent of its total loan portfolio (i.e. increased
between +5 and +15 percentage points of the total loan portfolio))

Funding balances
On the liabilities side, the Top 30 banks significantly grew their overall funding from customer
accounts over the six-year period, from RUB 11 trillion in 2009 to RUB 33 trillion in 2014 (Figure
1.4). However, this growth of 2.9 times was slightly slower in comparison to the loan portfolios
(3.2 times higher between 2009 and 2014), consequently increasing the weighted average loan-
to-deposit ratio (LTD) from 114 to 131 percent over the period (Figure 1.5). The LTD ratio is much
higher when excluding Sberbank from the calculation, rising from 128 to 141 percent for the
same period.
From a segmentation point of view, the structure of the customer accounts between corporate
and retail segments showed a steady balance, with corporate accounting for 53 percent versus 47
percent for retail on average since 2009 (Figure 1.6). This differs significantly from the structure of
the lending portfolios where the aggregate share of corporate loans prevailed more significantly
over retail since 2009 (78 percent on average, see Figure 1.2). This illustrates the importance for
the Top 30 banks of capturing more retail funding to sustain their corporate lending objectives.
Looking at the intermediate dynamics, one may note that the Top 30 banks’ weighted average
LTD ratio returned to the 2009 level already in 2011, but it took five years to regain the simple
average LTD ratio. This illustrates a great disparity in the lending/funding balance within the Top
30 banks.
Figure 1.4. Top 30 banks: Cumulative liabilities and customer accounts
90
80
70
60
50
40
30
20
10
0
350
300
250
200
150
100
50
0
2009 2010 2011 2013 2014
Total liabilities
Total customer accounts
Index total liabilities
Index customer accounts
11 14 18 22 26
33
60
44
37
19 22
30
126
118
163
157
191
194 228
231
290
317
100
100
2012
RUBtr
Index100:2009
Figure 1.5. Top 30 banks: Loan-to-deposit (LTD) ratios
Weighted average LTD
Weighted average LTD (excl. Sberbank)
Simple average LTD
145%
135%
125%
115%
105%
95%
85%
2009 2010 2011 20132012 2014
114%
107%
114%
118%
121%
131%
140%
118%117%
112%
126%
137%
128%
119%
120%
127%
129%
141%

Both corporate and retail customer account segments experienced a similar growth rate until 2013
(Indexes: 245) before significantly diverging in 2014 (index 343 and 279, respectively, partly due to
the currency conversion effect of USD and EUR corporate deposits as of 31 December 2014.
From the perspective of the split between term and demand deposits (figure 1.7), one may note
that the share of term deposits consistently counted for circa 70% of the total customers’ port-
folios on average since 2009. Both term and demand deposits showed a growth pace relatively
similar until 2013 (respective Index: 231 and 223), before largely fastening for term deposits in
2014 (respective Index: 310 and 245), the latest being here again affected by foreign currency
effects as of December 31, 2014.
Figure 1.6. Top 30 banks: Growth of corporate and retail customer accounts
400
350
300
250
200
150
100
50
0
40
35
30
25
20
15
10
5
0
2009 2010 2011 20132012 2014
Corporate customers accounts
Retail customers accounts
Index corporate customers accounts
Index retail customers accounts
5
135
184
206
245
343
100
6 7 8 9 9 10 11 12 14
17 16100
133
164
200
245
279
RUBtr
Index100:2009
Figure 1.7. Top 30 banks: Term deposits versus current accounts (Index 100: 2009)
55
50
45
40
35
30
25
20
15
10
5
0
350
300
250
200
150
100
50
0
2009 2010 2011 20132012 2014
Total term deposits
Total current accounts
Index term deposits
Index current accounts
8 10 13 14
18
24
9
8
8
3
5
6
133
124
164
161
178
221
223
231
245
310
100
100
RUBtr
Index100:2009

Profitable between 2010 and 2013, the Top 30 banks’ performance suffered significantly from the
2008 and 2014 crises. While the imported 2008 credit crunch hit a fast-paced domestic economy,
2014 brought along Western sanctions, a slump in energy prices and a sharp fall of the rouble, all
of which had a negative impact on the Russian banking sector, which was still looking to catch a
second wind after 2009, despite appearing to be in good shape.
Figure 2.0. Top 30 banks: Aggregate profits before tax versus
aggregate losses before tax
1,000
800
600
400
200
0
(200)
(400)
2009 2010 2011 20132012 2014
Aggregate losses before tax
Aggregate profits before tax
(163)
493
(165)
(0) (18) (7) (27)
826795
151
458
719
RUBbn
Fragile profitability

Figure 2.2. Top 30 banks: Number of profitable banks versus loss-making (before tax)
Figure 2.1. Top 30 banks: Profit before tax — Sberbank versus others
(45)
374
800
700
600
500
400
300
200
100
0
(100)
2009 2010 2011 20132012 2014
Sberbank — PBT
Others — Aggregated PBT
(44)
456448
230
306
344340
396
227
30
RUBbn
Profits and losses (before taxation)
The aggregate results (before taxation) of the Top 30 in 2009 reached RUB 14 billion in losses
(Figure 2.0), and RUB 44 billion after excluding Sberbank (Figure 2.1). From a pure volume
perspective, it took only one year for the Top 30 Russian banks to recover from their previous
crisis-related losses. The Top 30 then showed strong profitability until 2013, before brutally
crashing in 2014. As of 31 December 2014, ten out of the Top 30 banks went back to the red
zone (versus seven during the 2009 crisis (Figure 2.2)), posting losses (before taxation) equalling
the total peak level six years earlier. These events help shed some light on the fragile nature of the
Russian banking sector’s profitability.
30
25
20
15
10
5
0
2009 2010 2011 20132012 2014
Loss-making
Profitable
20
2728
23
27 27
10
32
7
3 3
Numberofbanks
ROE, ROA, NIM and Costs-to-Assets ratios
The weighted average return on equity (ROE) of the Top 30 banks plunged dramatically in 2014
to 3.7 percent, down from a 12.7-16.8 percent corridor between 2010 and 2013 (Figure 2.3).
The 2014 ROE ratio is 700 basis points (bp) lower after excluding Sberbank, illustrating the
predominance of the market leader on the Russian banking market. A very similar dynamic is
observed for the weighted return on assets (ROA), which also plunged in 2014 (Figure 2.4). One
may note that the simple average curves for both ROE and ROA show much lower figures than the
weighted average, reflecting disparities in the financial performance within the Top 30.

Figure 2.3. Top 30 banks: Return on equity (ROE)
30%
25%
20%
15%
10%
5%
0%
(5%)
(10%)
(15%)
2009 2010 2011 20132012 2014
(8.9%)
ROE — Weighted average
ROE — Weighted average (excl. Sberbank)
ROE — Simple average
10.1%
9.7% 10.1%
6.5%
(0.2%)
16.8%
14.9% 13.2%
3.7%
(4.0%)
9.6%
(3.2%)
9.3%10.6%11.7%
(1.6%)
12.7%
Figure 2.4. Top 30 banks: Return on assets (ROA)
ROA — Weighted average
ROA — Weighted average (excl. Sberbank)
ROA — Simple average
3.5%
3.0%
2.5%
2.0%
1.5%
1.0%
0.5%
0%
(0.5%)
(1.0%)
(1.5%)
(2.0%)
2010 2011 201320122009 2014
(1.5%)
1.5% 1.2% 1.2%
(0.8%)
(0.9%)
(0.2%)
1.6%
(0.3%)
1.4%
1.7%
1.9%
1.3%
(0.5%)
1.3% 1.2% 1.0%
(0.3%)

The Top 30 banks’ weighted average net interest margin (NIM) (*) showed a 120 bp decline since
2010 (from 6.1 to 4.9 percent, see Figure 2.5). This illustrates the increasing price competition in
the Russian banking markets over the past few years, which put downward pressure on interest
margins in both the retail and corporate lending markets.
On the operating expenses side, the weighted average costs-to-assets ratios for the Top 30 banks
(Figure 2.6) showed an overall decline since 2009, from 2.8 to 2.2 percent. While the sharp
decrease in 2014 was mostly due to the impact of foreign currency volatility on assets at year’s
end, the general dynamic over the six-year period nevertheless indicates that the banks started to
pay more attention to cost controls and operational efficiencies since 2010.
(*) from 2010-2014 only, due to the absence and/or insufficiency of publicly available information
Figure 2.5. Top 30 banks: Net interest margin
NIM — Weighted average
NIM — Weighted average (excl. Sberbank)
NIM — Simple average
7.5%
7.0%
6.5%
6.0%
5.5%
5.0%
4.5%
4.0%
2011 201320122010 2014
6.2%
5.9%
5.3%
5.6%
5.1%
6.1%
5.7%
4.9%
5.5%
5.3%
5.2%
5.3%
4.6%
5.0%
4.5%
Figure 2.6. Top 30 banks: Costs to assets
Costs to assets — Weighted average
Costs to assets — Weighted average (excl. Sberbank)
Costs to assets — Simple average
3.75%
3.50%
3.25%
3.00%
2.75%
2.50%
2.25%
2.00%
1.75%
2010 2011 201320122009 2014
3.2%
3.4% 3.3%
3.1% 3.1%
2.8%2.8%
2.8%
2.2%
2.7%
2.8%2.8%
2.7%
2.6% 2.6%
2.7%
2.5%
2.1%

The substantial profitability observed between 2010 and 2013 might have suggested that the
Top 30 banks were in better shape to absorb another downturn in early 2014 than they were six
years earlier. However, a closer analysis of the past years’ dynamics indicates the opposite. There
is no question that the unfavourable events in 2014 significantly affected the banks. However,
the impact and speed at which the Top 30 banks’ performance plunged in 2015 raise legitimate
questions about the real representativeness of past years’ performances, and more importantly, the
sustainability of the industry in its current form, considering the breadth of the sample.
A closer look at the Top 30 banks’ core and non-core performance, loan portfolio quality and
capital adequacy may provide answers to the questions above.
Core banking performance
Figure 2.7 illustrates the structure of core banking income, composed of the net interest income,
net commission income, operating expenses and impairment. Non-core banking income, consisting
of all other gains/losses, mostly related to financial and currency instruments, is illustrated in Figure
3.0.
Figure 2.7: Top 30 Banks — Structure of Core Banking Income
2,500
2,000
1,500
1,000
500
0
2009 2010 2011 20132012 2014
1,024
Net interest income
Net commission income
Operating expenses
Impairment allowances
1,023
1,248
1,466
1,846
2,137
1,303
1,162
1,027
835
638
934
383
170
537437352
89
296292228
535
192
722
RUBtr
Questionable sustainability

A few observations can be drawn from Figure 2.7. On the one hand, one may note the weight
of the credit risk losses compared to the revenues generated. If the credit risk represents one of,
if not the most significant burdens on banks’ profitability during the crisis, its comparative weight
appears massive in 2009 and 2014 (78 and 49 percent of net interest income respectively, see
Figure 2.8). This means very little room for the Top 30 banks to absorb any further deterioration
of net margins or a decline in lending volumes without seeing their results reach negative figures.
Conversely, low credit loss years corresponded to very profitable years, illustrating the significant
influence of credit risks on the banks’ profitability (Figure 2.9).
On the other hand, one may also note the suddenness and magnitude at which credit losses
increased in 2014: accumulated allowances for loan loss provisions multiplied by 8.4 times com-
pared to their 2011 levels, while net interest income multiplied by only 1.7 and net commissions
by 2 for the same period.
Figure 2.8. Top 30 banks: Share of annual allowances for impairment versus annual
net interest income
100%
80%
60%
40%
20%
0%
2009 2010 2011 20132012 2014
Net interest income
Impairment allowances
78%
30%
10% 14%
25%
49%
Figure 2.9. Top 30 banks: Profits before tax and annual allowances for impairment
Profits before tax (PBT)
Annual allowances for loan impairment (absolute values)
1,200
1,000
800
600
400
200
0
(200)
2010 2011 201320122009 2014
RUBbn (Source: Selected banks' publicly available IFRS financial statements/Deloitte FSI CIS Analytical Center)

Non-core banking
Analysis of non-core banking performance since 2009 (Figures 3.0 and 3.1) is another way to illustrate
the disparity and fragility of the Top 30 banks’ profits. Although moderate in comparison to net interest
income, the net contributions of non-core banking activities remained largely positive over the four-year
period (only RUB 34 billion of cumulative losses against RUB 661 billion of cumulative gains between 2010
and 2013), before plunging to zero in 2014 (only a RUB 17 billion gain). The volatility on financial markets
in 2014 explains this dynamic; however, some of the selected banks still managed to generate significant
gains (RUB 151 billion), while others recorded significant losses that doubled their 2009 peak-level losses
(RUB 135 billion of cumulative losses in 2014 versus RUB 63 billion in 2009).
Figure 3.0. Top 30 banks: Non-core banking: cumulative gains versus
cumulative losses
250
200
150
100
50
0
(50)
(100)
(150)
(200)
2009 2010 2011 20132012 2014
Non-core banking: cumulated Losses
Non-core banking: cumulated Gains
Net non-core banking Income
(135)
151
(64)
(4) (13) (7) (11)
158
219
184 158
127
154
114
212
147
17
120
RUBbn
Figure 3.1. Top 30 banks: Net non-core banking results versus net interest
income results
2,500
2,000
1,500
1,000
500
0
2009 2010 2011 20132012 2014
Net interest income
Net non-core banking income
2,1371,846
1,466
1,024 1,023 1,248
147212120 154 114
RUBbn

Credit quality and provisioning
The analysis of the credit quality dynamics and provisioning during the six-year period provides an
additional perspective on the sharp decline in banks’ profitability in 2014 and another view on the
disparities in credit risk appetites in recent years.
In the context of a recovering macroeconomic environment after 2009, the effective loan
provision rate expectedly decreased, shrinking from 9.8 percent (weighted average) in the midst of
the previous financial crisis down to 5.5 percent at the end of 2014 (Figure 3.2). The provisioning
dynamic reached the trough in 2013 at 5.2 percent, before slightly returning to a rising mode in
2014, giving some indication of a new wave of credit deterioration.
This last dynamic mirrors the provision rate dynamics for retail and for corporate loan portfolios
(Figure 3.3). Apart from their common decrease after 2009 (220 bp spread in 2009 narrowing
to 50 bp at the end of 2014), retail provision rates rose again in 2012, from 4.2 to 5.9 percent
in 2014, while corporate provision rates, interestingly, did not deviate from their declining trend
during that period. Such divergence of curves indicates two things. First, the retail lending market
started to deteriorate before 2014 (actually since early 2012), despite the significant volume of
new loans that were originated during the period. Second, this dynamic did not seem to have
affect the corporate loan portfolios to the extent that it affected retail portfolios.
Figure 3.2. Top 30 banks: Effective loan provision rates
Effective loan provision rate — Weighted average
Effective loan provision rate — Weighted average (excl. Sberbank)
Effective loan provision rate — Simple average
12%
11%
10%
9%
8%
7%
6%
5%
4%
2011 201320122009 2014
10.4%
7.9%
6.4%
5.7%
6.9%
9.9%
9.4%
5.5%
5.6%
7.0%
8.0%
9.3%
6.3%
5.9% 6.2%
2010
6.4%
5.2%
5.8%
Figure 3.3. Top 30 banks: Effective loan provision rates for retail
and corporate portfolios separately
Effective loan provision rate — Weighted average
Retail loan provision rate — Weighted average
Corporate loan provision rate — Weighted average
11%
10%
9%
8%
7%
6%
5%
4%
3%
2011 201320122009 2014
10.3%
9.9%
7.4%
6.0%
5.4%
9.9%
9.4%
5.2%
4.2%
5.9%
5.5%
5.6%
7.0%
8.1%
7.1%
2010
5.4%
4.7%
5.2%

The dynamics of non-performing loans (NPL) as well as bad loan cessions and write-offs since
2009 also indicate economic deterioration.
The NPL ratio (>90 days overdue) to the loan portfolio expectedly decreased after the crisis of
2008-2009, but reversed trend from 2013 (Figure 3.4). This reversed trend is more apparent when
considering only retail lending, with its upward dynamic starting in 2012, rising from 2.4 to 4.0
percent during the two-year period. This points to economic deterioration prior to the 2014 crisis.
Interestingly, it also illustrates the time lag of credit deterioration between retail and corporate
loan portfolios, which was also observed during the previous financial crisis.
Figure 3.5. Top 30 Banks: Cessions and write-offs of bad loans
750
600
450
300
150
0
2,500
2,000
1,500
1,000
500
0
2009 2010 2011 20132012 2014
Stock of loan-loss provisions
Sales of loans and write-offs
Index sales of loans and write-offs
Index Stock of Loan Loss Provisions
1,281
207 187
311
394
627
100
1,438
151
1,460
131
1,431
221
1,642
277
2,372
451100
112 114 112
128 185
RUBbn
Index100:2009
Figure 3.4. Top 30 banks: Non-performing loans ratio (>90 days overdue)
versus loan portfolios
NPL ratio — Weighted average
NPL ratio — Retail lending, weighted average
NPL ratio — Corporate lending, weighted average
6.5%
6.0%
5.5%
5.0%
4.5%
4.0%
3.5%
3.0%
2.5%
2.0%
1.5%
1.0%
2011 201320122009 2014
6.3%
5.2%
3.4%
2.7%
2.5%
6.1%
5.1%
2.7%
2.4%
4.0%
2.9%
2.6%
5.4%
4.9%
2010
2.4%
3.1%
2.5%
Bad loan cessions and write-offs accelerated significantly over the six-year period. Their volumes
multiplied by 6.3 from 2009 to 2014 while the stock of provisions collectively increased by
only 1.9 times during the same period (Figure 3.5). This trend, visible between 2012 and 2014,
illustrates the deterioration of credit portfolios since 2012 but also the increasing need for the Top
30 banks to relieve their balance sheets of bad assets in order to meet capital obligations.
3.2%

Capital adequacy
Substantially growing their asset and loan portfolios every year since 2009, the Top 30 banks are
naturally facing increasing challenges regarding risk management and capital adequacy. As illus-
trated in Figure 4.0, the Top 30 banks’ risk-weighted assets (RWA) increased threefold since 2009,
mimicking the loan portfolio trend (Index 332 and 324, respectively), with RWA reaching RUB 48
trillion in 2014 versus RUB 14 trillion in 2009 (Figure 4.1).
Figure 4.0. Top 30 banks: Risk-weighted assets and total assets
400
350
300
250
200
150
100
50
0
95%
90%
85%
80%
75%
70%
65%
60%
55%
50%
2009 2010 2011 20132012 2014
RWA/assets ratio — Weighted average
Index cumulative RWA
Index cumulative assets
87% 90% 90% 91% 91% 89%
119
123
159
163
197
205
235
246
325
332
100
100
%RWA/Assets
Index100:2009
RUBtr
Figure 4.1. Top 30 banks: CET1 versus risk-weighted assets (RWA)
50
40
30
20
10
0
2009 2010 2011 20132012 2014
Cumulative RWA
Cumulative CET1
CET1 Ratio — Weighted average
CET1 Ratio — Weighted average (excl. Sberbank)
15.5%
14.5%
13.5%
12.5%
11.5%
10.5%
9.5%
8.5%
7.5%
14
12.7% 11.4%
11.4% 11.2%
9.3%
12.8%
2
18
2
24
3
30
3
36
4
48
4
13.8%
13.2%
11.2%
12.1%
11.8%
9.9%
%CET1vsRWA
The Common Equity Tier 1 (CET1) capital, which best measures banks’ capital adequacy and
financial strength, did not observe the same increase as the risk-weighted assets. Remaining
within the RUB 1.8-4.5 trillion corridor since 2009, it mechanically drove CET1 ratios from 12.8
percent in 2009 down to only 9.3 percent in 2014, and from 13.8 percent down to 9.9 percent
when excluding Sberbank from the analysis. This decline illustrated the increasing pressure on
the banks’ capitalisation year after year since 2009, despite the profitable period that lasted until
2013. It also points to their fragility ahead of 2015 in comparison to 2009 when the same Top 30
banks showed better levels of core capitalisation during the last financial crisis.

The increasing share of retained earnings in the composition of core capital (CET1) is another
indicator of instability. While retained earnings comprised 36 percent of the CET1 during the
peak of the 2008-2009 crisis, this item comprised more than 56 percent as of 31 December 2014
(Figure 4.2), when Tier 1 adds-in do not represent a sufficient alternative buffer to absorb any
economic downturn (2 percent in 2014, down from 9 percent in 2009, Figure 4.3). The Top 30
banks face serious concerns regarding their profitability and limited capital buffers; such a high
level of retained earnings may represent a significant risk in the event of further degradation of the
macroeconomic environment.
Figure 4.3: Top 30 Banks — Tier 1 Adds-in versus CET1
6
5
4
3
2
1
0
2009 2010 2011 20132012 2014
Cumulative Tier 1 adds-in
Cumulative CET1
0.2
1.9
0.2
2.3
0.2
2.7
0.2
3.4
0.2
4.0
0.1
4.5
RUBbn
Figure 4.2. Top 30 banks: Retained earnings versus CET1
400
350
300
250
200
150
100
50
0
10
8
6
4
2
0
2009 2010 2011 20132012 2014
Cumulative retained earnings
Cumulative CET1
Index cumulative retained earnings
Index cumulative CET1
0.7
213 216 290
360
370
100
1.9 1.4
2.3
1.5
2.7
1.9
3.4
2.4
4.0
2.5
4.5100
122 146
183
216
241
RUBbn
Index100:2009

Conclusion
Engaged for years in a race for ever-higher lending volumes, the Top 30 banks demonstrated
significant growth in size and profitability after the 2008-2009 crisis. However, these banks
also observed stronger market competition, which directly affected their revenues, as well as a
deterioration of their credit portfolios starting 2012, particularly in the retail segment.
Compensating for the declining margins by continuously increasing their loan production until
last year, the banking sector entered into a new paradigm in 2015. With no immediate prospects
for sufficient lending growth, capitalisation constraints and an expectation that credit portfolios
will further deteriorate (in both the retail and corporate segments), some banks’ resistance might
be seriously challenged in the coming years. How many of them will pass the test? Their financial
performance as of 31 December 2015 will probably give a first indication.

Methodology (1/2)
indicators for the selected banks for a specific year divided by the sum of the respective indicators
for the selected banks in 2009).
Except where otherwise specified, all weighted average ratios shown, used or referred
to in this publication are calculated on an aggregate basis (i.e. the sum of the respective
numerators for the selected banks divided by the sum of the respective denominators for the
selected banks).
Except where specifically notified, all simple average ratios shown, used or referred to in this
publication are based on the simple average ratio for all banks in the sample.
As the quality and quantity of the disclosures may vary from bank to bank, and/or from year to
year, it is possible that some information necessary to calculate certain financial indicators, indexes
or ratios is not fully available or disclosed. Only in those cases, the corresponding bank(s) was
(were) excluded from the analysis in the respective chart. To uphold the relevance of the respective
chart(s), however, at least 91 percent of the sampled banks were covered (i.e. the chart(s) reflect(s)
more than 90 percent of the Top 30 banks in our sample).
This publication is based exclusively on the publicly available financial statements prepared in
accordance with International Financial Reporting Standards (“IFRS”) for 2009 to 2014, inclusively,
for the 30 leading banks by assets operating in the Russian Federation (“the Top 30 banks”), the
list of which is presented in Appendix 1.
The term “Top 30 banks” does not refer to nor represent any official, formal or public rating
whatsoever, and is only used to designate a sample of the leading banks (“the sample” or “the
population”) for the sole purpose of preparing this publication.
Some of the selected banks are also subsidiaries of a parent banking group already represented
in our sample. To avoid double counting, only the contribution of that parent banking group was
considered. This rule was consistently applied for all type of indicators in this publication, with the
exception of simple average ratios.
Except where otherwise specified, all aggregated figures shown, used or referred to in this
publication are based on the sum of the respective figures for the selected banks.
Except where otherwise specified, all index ratios shown, used or referred to in this publication are
calculated on an aggregate basis using the year 2009 as Index 100 (i.e. the sum of the respective

Methodology (2/2)
Acronym/term Description General formula
PBT Profit before tax —
ROE Return-on-equity Net profit(loss)/shareholder’s equity
ROA Return-on-assets Net profit(loss)/total assets
NIM Net interest margin Net interest income/average interest bearing assets (year 0; year -1)
Costs-to-assets Costs-to-assets Operating expenses/total assets
EPR Effective provision rate Total loan-loss provisions/total loan portfolio (gross)
Retail provision rate Retail loan portfolio provision rate Total loan-loss provisions on retail loan portfolio/total retail loan portfolio (gross)
Corp. provision rate Corporate loan portfolio provision rate Total loan loss provisions on corporate loan portfolio/total corporate loan portfolio (gross)
NPL ratio Non-performing loans ratio Total loans overdue more than 90 days/total loan portfolio (gross)
LTD Loans-to-deposits Total loans (gross)/total customer accounts
RWA Risk-weighted assets —
CET1 Common Equity Tier 1 —
CET1 ratio Common Equity Tier 1 ratio CET1 versus RWA

Appendices
Appendix 1: The sample 25
Appendix 2: Loan portfolio structures 26

Appendix 1: The sample
Sberbank
VTB
Gazprombank
VTB 24
Financial Corporation Otkritie
Alfa Bank
Bank of Moscow
Russian Agricultural Bank
UniCredit
Rosbank
Promsvyazbank
Raiffeisen
Bank of Khanty-Mansiysk
Credit Bank of Moscow
Bank Saint-Petersburg
AK BARS
Binbank
Russian Standard
Nordea Bank
Uralsib
Citibank
Svyaz-Bank
Home Credit Bank
Zenit
MDM
ING Bank
Globex
SMP Bank
Petrocommerce Bank
UBRiR
Assets in 2014 (RUB bn)
0 2 500 5 000 7 500 10 000 12 500 15 000 17 500 20 000 22 500 25 000

Appendix 2: Loan portfolio structures (1/2)
Bank
Is the bank a
subsidiary of
another bank
included in the Top
30 banks sample?
Share of the
corporate loan
portfolio (gross)
in the total loan
portfolio (gross) as of
31 December 2009.
Share of the
corporate loan
portfolio (gross)
in the total loan
31 December 2010.
Share of the
corporate loan
portfolio (gross)
in the total loan
31 December 2011.
Share of the
corporate loan
portfolio (gross)
in the total loan
31 December 2012.
Share of the
corporate loan
portfolio (gross)
in the total loan
31 December 2013.
Share of the
corporate loan
portfolio (gross)
in the total loan
31 December 2014.
Sberbank - 78% 79% 78% 74% 72% 74%
VTB - 83% 82% 82% 78% 76% 79%
Gazprombank - 90% 91% 90% 88% 88% 90%
VTB 24 yes, VTB 22% 13% 11% 13% 12% 13%
FC Otkritie - 91% 89% 87% 85% 80% 89%
Alfa-Bank - 86% 87% 88% 85% 82% 84%
Bank of Moscow yes, VTB 85% 88% 91% 89% 85% 82%
Russian Agricultural Bank - 89% 89% 85% 83% 82% 82%
UniCredit Bank - 82% 83% 82% 77% 73% 81%
Rosbank - 56% 52% 41% 36% 33% 34%
Promsvyazbank - 87% 91% 91% 89% 88% 90%
Raiffeisen - 71% 75% 72% 68% 60% 65%
Bank of Khanty-Mansiysk yes, FC Otkritie 77% 76% 67% 65% 63% 50%
Credit Bank of Moscow - 83% 83% 82% 76% 69% 67%
Bank Saint Petersburg - 92% 93% 93% 91% 86% 85%

Appendix 2: Loan portfolio structures (2/2)
Bank
Is the bank a
subsidiary of
another bank
included in the Top
30 banks sample?
Share of the
corporate loan
portfolio (gross)
in the total loan
31 December 2009.
Share of the
corporate loan
portfolio (gross)
in the total loan
31 December 2010.
Share of the
corporate loan
portfolio (gross)
in the total loan
31 December 2011.
Share of the
corporate loan
portfolio (gross)
in the total loan
31 December 2012.
Share of the
corporate loan
portfolio (gross)
in the total loan
31 December 2013.
Share of the
corporate loan
portfolio (gross)
in the total loan
31 December 2014.
AK BARS - 87% 87% 84% 80% 76% 77%
Binbank - 78% 86% 88% 88% 85% 78%
Russian Standard - 12% 10% 8% 5% 4% 5%
Nordea Bank - 93% 93% 92% 91% 89% 92%
Uralsib - 72% 72% 71% 64% 51% 48%
Citibank - 43% 50% 64% 65% 61% 67%
Svyaz-Bank - 96% 93% 89% 81% 74% 74%
Home Credit Bank - 1% 0% 0% 0% 0% 0%
Zenit - 90% 93% 92% 89% 87% 86%
MDM - 67% 76% 75% 73% 73% 76%
ING Bank - 100% 100% 100% 100% 100% 100%
Globex - 97% 98% 98% 98% 98% 98%
SMP Bank - 89% 91% 95% 95% 92% 89%
Petrocommerz Bank - 90% 92% 91% 88% 82% 80%
UBRiR - 53% 56% 59% 54% 44% 55%

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