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Corporate Banking

2014 Priorities

The Bank provides the same outstanding level of service to major national companies as it does to small and medium-sized businesses.

In 2014, the product development strategy of Otkritie FC Bank focused on intense development of the remote banking, optimisation of existing business processes, improvement of the Bank’s automated banking system and enhancing customer service. The objective was to extend the high quality client base, to increase the number of products per client, and consequently to boost the Bank’s commission income.

During the recent years, the key players in the banking market have been concentrating on the development of the settlements and cash management services for clients, considering fees generated by these services to be a risk-free income driver. This trend continued in the volatile economic environment of 2014.

In the second half of 2014, Otkritie FC Bank revised its corporate business development priorities to shift its focus from expanding business volume and increasing its loan market share towards better credit risk control, loan portfolio quality management and building a highly liquid collateral base.

In 2014, the number of the Bank’s corporate clients grew by 17.6 % to 19,760. New clients accounted for 27 % of the total number with the majority representing businesses with annual revenues of up to RUB 10 billion.



Financial Highlights of 2014

In millions of Roubles

2014

2013

Y-o-y,%

Selected financial position data:

Total segment assets

782,689

571,099

37.0

     of which, net loans to clients

762,911

551,169

38.4

Total segment liabilities

669,300

488,483

37.0

     of which, client accounts

592,237

428,689

38.2

Selected income statement data:1

Net interest income 2

25,882

18,876

37.1

Net Fee and comission income

4,507

3,713

21.4

Total operating income before impairment loss and provision

25,065

18,761

33.6

Operating expenses

6,462

5,827

10.9

Profit before taxation

17,900

13,189

35.7

1 Income statement of Otkritie Bank for the year 2013 was not recognised as the Group gained control in late 2013.
2 Net interest income before gain on remeasurement of cash flows generated by the assets acquired as a result of the business combination and before provisions for impairment losses on interest-bearing assets.
Note: The financial highlights are shown as of December 31, 2014, for the year ended on December 31, 2014; and as of December 31, 2013, for the year ended on December 31, 2013.

Comment on Financial Highlights (IFRS)

Otkritie FC Banking Group’s corporate loan portfolio was up 38.4 % in 2014 (compared to 30.6 % in 2013) to RUB 762.9 billion in line with the client base diversification.

In 2014, corporate deposits also grew significantly — by 38.2 % (compared to 60.2 % in 2013) to RUB 592.2 billion, driven mainly by an increase in the number of clients, improved service and a diversified product line.

Corporate banking posted pre-tax profit of RUB 17.9 billion (up by 35.7 % year-on-year). The key profit drivers in 2014 were net interest income, net fee and commission income, and tight control of operating expenses, which only rose by 10.9 % (below the 2014 inflation rate of 11.4 %).

Net fee and commission income dominated the structure of non-interest income generated by the corporate segment in 2014, totalling 78.4 %, or RUB 4.5 billion. A 21.4 % increase in net fee and commission income in 2014 was due to growth in commissions from settlements (up 39.7 %) and documentary transactions (up 10.6 %).

In a volatile economic environment, the Bank paid close attention to credit risk management so that loan portfolio quality remained stable throughout 2014, with non-performing loans accounting for 1.4 % (compared to 1.9 % as at the end of 2013).

Precious Metals Market

Leading Positions in Precious Metals Market

Year after year, Otkritie FC Bank reaffirms its leadership position in the precious metals market. Otkritie FC Bank was recognised as the Best Russian Bank in the precious metals market in 2014, earning this award for the eighth time in a row.

The major Russian gold miners are among Otkritie FC Bank’s clients. In 2014, the Bank acquired 103 tons of gold bullion (up by 3 % from 2013) and 232 tons of silver bullion, purchasing a total of USD 42.8 billion in precious metals, up by 40.8 % from 2013.

Otkritie FC Bank has set up a full financing system cycle for companies in the precious metals industry, from exploration and mining of precious metals to processing and sales in the international markets. Using its well-established trade relations with foreign partners, including top class foreign banks, the Bank supplies precious metals to European countries, India, UAE, China and CIS countries. In 2014, the Bank sold 38 tons of gold and 90 tons of silver in the international markets. The Bank also offers products to hedge against fluctuations in precious metals prices.

Since 2011, Otkritie FC Bank has been a member of the London Bullion Market Association (LBMA).

Strategic Objectives of Corporate Banking for 2015

Key objectives of the corporate banking segment for 2015 include:

  • focusing on risk management;
  • optimising business processes and technologies to reduce costs and enhance customer service;
  • expanding the client base while maintaining its diversified structure, with an emphasis on medium-sized businesses;
  • boosting fee and commission income and settlement volumes.