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Corporate Banking

2015 Priorities

In 2015, Otkritie Financial Corporation Bank focused on the following priorities in its corporate business development:

  • to successfully complete the merger with Petrocommerce Bank and to provide the highest level of service to its clients (as a result of the merger with Petrocommerce Bank, the number of Otkritie Financial Corporation Bank’s corporate clients grew from 19,760 to 29,377 in 2015);
  • to focus on managing risks and strengthening credit risk control;
  • to focus on reducing the funding costs by increasing the share of current accounts balances in the funding structure, and on improving the quality of settlements and cash services to generate risk-free income.

Throughout 2015, Otkritie Financial Corporation Bank continued its efforts to strengthen the Group’s positions in the corporate segment by broadening its client base and promoting relations with large and medium-sized businesses. The Bank managed to expand its business despite volatile markets by constantly improving the level of services provided. Its objective is to be a partner, rather than a mere counterparty to its clients. In 2015, the Bank expanded its product offering, in particular, capitalizing on synergies between its corporate business and investment banking.

 

Financial Highlights of 2015 (IFRS)

million roubles

2014

2015

Y-o-y,%

Key balance sheet figures 

Total assets of the segment

782,742

776,737

-0.8

     including net loans to clients

762,911

754,109

-1.2

Total liabilities of the segment

669,300

559,405

-16.4

     including customer accounts

592,237

542,182

-8.5

Key profit & loss figures:

Net interest income1

25,882

36,352

40.5

Net fee & commission income

4,507

5,090

12.9

Total operating income before impairment losses and provisions for other transactions

25,065

17,801

-29.0

Operating expenses

6,462

8,177

26.5

Profit before income tax

17,900

7,748

-56.7

1 Net interest income before gain from remeasurement of cash flows from assets acquired as a result of business combinations and before allowance for impairment of interest-bearing assets.
Note: The financial highlights are shown as of December 31, 2015, for the year ended on December 31, 2015; and as of December 31, 2014, for the year ended on December 31, 2014. 

Comments on Financial Highlights (IFRS)

During 2015, the Group did not focus on loan portfolio growth but concentrated mostly on working with existing clients and risk management aspects. The corporate net loan portfolio declined by 1.2% to RUB 754.1 billion (a 38.4% growth in 2014). This dynamic is the result of new business lending and revaluation of loans denominated in foreign currencies (which accounted for 23.7% of the corporate loan portfolio as at the end of 2015), on the one hand. On the other hand, by pursuing a conservative approach to managing its risks in light of market instability, the Bank significantly increased its provisions for losses by 165.6%, which ultimately reduced the volume of total loan portfolio net of provisions.

In 2015, customer accounts of the corporate business segment declined by 8.5%. Considering available comfortable liquidity buffer the Bank did not offer higher rates on new deposits while a number of corporate deposits matured in accordance with existed schedule.

The corporate segment posted a pre-tax profit of RUB 7.7 billion in 2015 despite the tightening margins and considerable allocations to loan loss provisions. 

The key profit drivers in 2015 were net interest income, net fee and commission income, and tight control over operating expenses, which increased by 26.5%, thereby not exceeding the target level despite the high inflation rate and merger with Petrocommerce Bank in 2015.

Net fee and commission income dominated the structure of non-interest income generated by the corporate business in 2015, totalling 76.8% or RUB 5.1 billion. A 12.9% year-on-year increase in fee and commission income in 2015 was due to growth in commissions from settlements (up 74.1%) and commissions from transactions with precious metals and foreign currencies (up 79.8%).

Precious Metals Market

Leading Positions in Precious Metals Market

Otkritie Financial Corporation Bank has been a leader in the Russian precious metals market for many years. The Bank has major Russian gold miners among its clients. Over the course of 2015, the Bank acquired 535.5 tons of precious metals in bullions, an increase of 59.7% year-on-year, while the turnover of precious metal transactions totalled USD 20.8 billion. Otkritie Financial Corporation Bank has opened more than 100 correspondent accounts in precious metals for Russian and foreign banks. 

Using its well-established trade relations with foreign partners, including major international banks, the Bank supplies precious metals to European countries, India, UAE, China and CIS countries.

In 2015, Otkritie Financial Corporation Bank became an accredited member of the Shanghai Gold Exchange (SGE) and is entitled to operate in the Shanghai free trade zone. This gives the Bank access to the Chinese market, which dominates the world’s production and use of gold. The SGE access guarantees that the Bank can now offer its clients the most favourable conditions for gold bullion purchase in the Russian market.

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

Strategic Objectives of Corporate Banking for 2016

In 2016, in the corporate banking segment the Group intends to:

  • broaden its client base;
  • use a tailor-made approach to customer relations;
  • improve its product offering through synergies between corporate and investment banking;
  • focus on risk-management.