Key results:

- net profit for 1H 2014 amounted to RUB 269 million

- the Bank’s total assets increased by RUB 2,679 million YTD to RUB 121,236 million

- the Bank’s equity increased by 5.5% YTD to RUB 14,505 million as of the reporting date

Net interest income grew by 25.7% YoY to RUB 4,837 million, net fee and commission income increased by 15.6% YoY to RUB 1,632 million. Net interest margin amounted to 10.7% compared to 11.4% as for the year of 2013.

Operating income of the Bank as for 1H 2014 grew by 15.5% YoY to RUB 7,148 million, operating expenses grew by 6.2% to RUB 2,643 million mainly due to increase in personnel expenses by 9.9% YoY. In spite of operating expenses growth, cost-to-income ratio reduced to 36.5% from 41.3% as of the year-end 2013.

Due to worsening of economic conditions in Russia amid sanctions imposed by the USA and the EU, funding costs and the Bank’s cost of risk have grown as well as the results on operations with securities have reduced, consequently the Bank’s profitability ratios decreased: return on average equity (ROAE) was 3.6% while return on average assets (ROAA) dropped to 0.4% (23.8% and 3.0% as of YE 2013 respectively).

Net profit of the Bank for 1H 2014 amounted to RUB 269 million compared to RUB 1,663.9 million as for 1H 2013. Net profit reduction amid growth of interest and commission income was driven by increase in the provision charge (+137.1% YoY) to RUB 4,167 million as well as low results on operations with securities which amounted to RUB132 million in 1H 2014 compared to RUB 572 million in 1H 2013 due to reduction of prices on the Russian debt securities market. Provision charge (impairment losses) grew due to worsening of the Bank’s retail loan portfolio quality. Growth of impairment losses caused cost of risk ratio to reach 9.3% compared to 6.0% in 1H 2013.

Gross loan portfolio (before provision for loan impairment) grew by 7.9% to RUB 93,070 million compared to the beginning of the year. Portfolio of loans to individuals rose by 7.8% to RUB 63,898 million (68.7% of the loan portfolio) and portfolio of loans to corporate clients and individual entrepreneurs grew by 8.2% to RUB 29,172 million. Share of NPLs (loans overdue more than 90 days) in the loan portfolio grew to 11.4% as of the reporting date compared to 7.5% as of YE 2013. The level of provision coverage of NPLs increased to 90.9% compared to 89.8% as of YE 2013.

Securities portfolio comprising 10.4% of the total assets declined by 25.5% YTD to RUB 12,585 million. Asian-Pacific Bank adheres to conservative investment policy; major part of the portfolio of securities is government and municipal bonds as well as corporate bonds with rating not lower than BBB- (95.7% of the portfolio).

Accounts and deposits of customers dropped by 6.2% YTD to RUB 76,362 million mostly due to decline in amount of deposits of corporate customers and individual entrepreneurs (-24% YTD to RUB 23,421). Deposits and accounts of retail customers amounted to RUB 52,940 million as of 1H 2014, increased by 4.9% compared to RUB 50,480 million as of YE 2013.

The Bank’s equity calculated in accordance with the Basel Accord increased by 5.6% YTD and reached RUB 16,299 million. Tier 1 capital adequacy ratio was 13.5% and Total risk weighted capital adequacy ratio was 15.9%.

Ratings

Asian-Pacific Bank’s positions in the Russian and international markets are confirmed by the leading rating agencies:

- long-term foreign and local currency issuer default rating (IDR) B+, short-term foreign currency IDR B by Fitch

- viability rating b+ and support rating 5 by Fitch

- long-term foreign and local currency deposit ratings B2 by Moody`s

- standalone E+ bank financial strength rating (BFSR) and Not Prime short-term bank deposit ratings by Moody`s

- bank credit rating A+(I) - very high level of solvency, rating sublevel – I (the highest) by Expert RA.

The outlook on all of the ratings is stable

Key financials (RUB million)

Key ratios (%)