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UBRD News Update

UBRD and Harbin Bank sign bilateral trade finance framework facility agreement

In December 2016 Ural Bank for Reconstruction and Development and Harbin Bank Co Ltd have signed uncommitted bilateral trade finance framework facility agreement as part of previously signed cooperation agreement. According to the document the parties undertake to finance the export-import operations of their customers with partners from China both in yuan and US dollars.

“Chinese banks are very cautious and always have a conservative approach to business. I believe that this agreement, which allows us to attract unsecured financing, is our achievement. It shows confidence and recognition of UBRD as a reliable partner, “ said Sergei Sisoshvili, VP, Head of International Business Department in UBRD.

According to the Federal Customs Service of Russia the share of trade with China in 10 months of 2016 is 14.1%. During this period the trade turnover between the two countries reached USD 58.745 bln, which is 1.7% more than in the same period of 2015. Main exports are fuel and energy products (58.6%), crude oil (26.3%), natural gas (10.8%), metals (10.3% ),  and imports: machinery, equipment and vehicles (47.1%), chemical products (18.7%), food products (13.4%).

Y-2015 results (RAS)

In 2015 the Ural Bank for Reconstruction and Development has implemented its plans, showed an increase in key financial indicators, maintained its leading position in the banking market and demonstrated the effectiveness of the existing business model.

Equity increased from RUB 24.8 bln to RUB 27.1 bln (+ 9%), including as a result of operating profit. Net assets grew by RUB 109.9 bln (+46%), reaching RUB 346.6 bln by January 1, 2016. Stock market trading, business lending, and revaluation of the foreign currency component of assets were key growth drivers. Total loan portfolio amounted to RUB 187.55 bln (+6%) as of January 1, 2016.

One of the main tasks of the year was work on the quality of the loan portfolio, particularly, reduction of arrears in corporate segment, maintenance of the required profitability of retail business given a gap of rates in assets and liabilities, decrease of anticipated losses on new retail loans by the end of the year. These goals were realized through improved approaches to credit risk assessment, implementation of new data and algorithms in the scoring models, switching focus in retail to loyal customers.

As a result, the Bank’s funding base increased by RUB 108.2 bln (+48%) and amounted to RUB 331.9 bln as of January 1, 2016. Most of the increase was ensured by the inflow of retail deposits (+ 43%); generally, the volume of retail deposits increased from RUB 93.17 bln to RUB 133.66 bln in 2015. In addition, the Bank has increased the fund raising in the repo market and interbank lending.

As of January 1, 2016, profit after tax amounted to RUB 2.2 bln, which is 14% more than in 2014.

In November 2015 UBRD assumed obligations under reorganization of VUZ-bank buying out 99.99% of shares.

DIA announcement

The State Corporation Deposit Insurance Agency (DIA, the Agency) has selected the investor to participate in the prevention of bankruptcy of VUZ Bank JSC (the Bank) after consideration of proposals received from applicants interested in participating in the its rehabilitation.

A key criterion for the selection of investors is the smallest aggregate amount of financial assistance provided by the Agency to the financial rehabilitation of VUZ Bank.

UBRD (the Investor) was selected as a candidate that offered the most favorable conditions of financing measures to prevent bank’s failures. In accordance with the plan of DIA‘s participation in preventing the bankruptcy of the Bank the reduction of the authorized capital up to RUB 1 is envisioned and its subsequent increase by issue of new shares in favor of the Investor, allowing the latter to become the main shareholder of the Bank.

Also in accordance with the amendments to the plan of DIA‘s participation in preventing the bankruptcy of the Bank a financial assistance to cover the imbalance between the fair value of assets and the carrying value of liabilities in the amount of RUB 5.7 bln for 10 years is to be provided by DIA.

In future a reorganization of the Bank in the form of its accession to the Investor prior to October 1, 2025 is planned.

Given these activities the Bank will carry out its regular activities, fulfilling the full range of banking services and provide an uninterrupted service to customers.

UBRD will have a capital increase

UBRD is listed among regional banks in respect of which measures to improve their capitalization will be implemented by Deposit Insurance Agency (DIA).

The additional capitalization will be carried out by transfer of federal loan bonds.

The list approved by Dmitry Medvedev, PM, includes 10 credit institutions: The Ural Bank for Reconstruction and Development, Tatfondbank, Asian-Pacific Bank, Zapsibkombank, International Bank of Saint-Petersburg, Surgutneftegasbank, Commercial bank Kuban Credit, Investment Bank of Chelyabinsk Chelyabinvestbank, Pervobank, Sarovbusinessbank.

UBRD acts as lead arranger of a syndicated loan Savings Bank Belarusbank

Ural Bank for Reconstruction and Development acted as lead arranger with Alfa-Bank acting as mandated lead arranger and agent of a syndicated loan to Savings Bank Belarusbank (Belarus). The agreement for a facility in the amount of EUR 203 mln for the term of 6 months was signed on July 10, 2015.

17 financial institutions took part in the transaction: among them, in addition to UBRD and Alfa-Bank, are Novikombank, Promsvyazbank, Transcapitalbank, Bank Finservice, GLOBEX bank, Uralsib, Gazprombank, Svuaz-Bank (lead arrangers), Asian-Pacific Bank, Banca Intesa, Bank ZENIT, Kazkommertsbank, Absolut Bank, Oil Investment Bank, and Nefteprombank (organizers).

JSC Savings Bank Belarusbank is the largest universal financial institution in Belarus that offers its customers more than 100 types of banking products and services, including cash and settlement services, lending, deposit banking, leasing, factoring, cash collection, international and interbank settlements, currency exchange and conversion operations, operations with bank cards, consulting and depository services.

In June 2015 the Bank acted as co-arranger of the syndicated loan for Alfa-Bank (Belarus) in the amount of USD 30,000,000 and EUR 4,000,000.

UBRD co-arranges a syndicated loan to Alfa-Bank (Belarus)

Ural Bank for Reconstruction and Development acted as co-arranger of the syndicated loan to CJSC Alfa-Bank (Belarus); and Alfa-Bank (Russia) acted as lead arranger. The Agreement was signed on June 29, 2015; the first tranche of USD 2,500,000 was disbursed on July 6. The second tranche of the same amount is to be disbursed in three weeks.

The syndicated loan to Alfa-Bank (Belarus) in the amount of USD 30,000,000 and EUR 4,000,000 involved eight credit organizations. Along with UBRD and Alfa-Bank, Novinkombank, Bank Zenit, Svyaz-Bank, Bank Finservice a cted as co-organizers, and Baltikums Bank and Asian-Pacific Bank as general managers. The term of the facility is 6 months with the possibility of extension for the same period.

After signing the agreement the combined ATM network of the Ural Bank for Reconstruction and Development has exceeded 22 th. units.

Now customers of both financial institutions will be able to withdraw money using a card of any payment system without commission.

As of June 1, 2015 UBRD’s AMT network accounted 1194 machines, and Ak Bars’ network accounted 1201 machine.

The consolidated network also includes ATMs of Alfa-Bank, United Settlement System and partner banks of VTB Group.

UBRD and Ak Bars consolidate ATM networks

After signing the agreement the combined ATM network of the Ural Bank for Reconstruction and Development has exceeded 22 th. units.

Now customers of both financial institutions will be able to withdraw money using a card of any payment system without commission.

As of June 1, 2015 UBRD’s AMT network accounted 1194 machines, and Ak Bars’ network accounted 1201 machine.

The consolidated network also includes ATMs of Alfa-Bank, United Settlement System and partner banks of VTB Group.

UBRD to indemnify depositors of Plato-Bank

Ural Bank for Reconstruction and Development won the tender to indemnify depositors, including individual entrepreneurs, of the credit institution Plato-Bank, LLC. This was reported on the website of the State Corporation Deposit Insurance Agency (DIA).

On May 13, 2015 the Central Bank of Russia has revoked banking license held by Ekaterinburg-based Plato-Bank (Registration No. 2071). Plato-Bank’s retail deposit portfolio amounted to RUB 740 mln as of April 1, 2015.

UBRD awarded by Visa for 1 mln cards issued

UBRD was awarded by the international payment system Visa at the conference New Horizons that explores leaders of the banking industry in the Russian regions and was held in Yekaterinburg.

UBRD received the award for the emission of one million Visa cards and for the successful cooperation with Visa for 15 years. The first card from Visa was issued by UBRD in 2000, the millionth – at the end of 2014.

3-2-3 Strategy summary

2014 was rich in foreign economic and geopolitical events. Difficult economic situation and sanctions against Russia were the key aspects of the year and required adjustments to many processes. UBRD responded quickly to market events and developments working over any opportunities.

An important event of the end of the year was the increase of the Central Bank key rate to 17% resulting in increase of interest rates on deposits by banks. Under these conditions, the banking system received a big cash inflow from depositors and new opportunities for development in 2015. Moreover, the risk of depositors’ distrust that was formed in the course of the year was removed from the banking system.

After completing the 3-2-3 strategy UBRD fulfilled the plan by the number of active clients of the Bank: as of January 01, 2015 UBRD had 1,007,259 customers. In 2014 the number of customers increased by 15%.

In 2014 the Bank conducted two waves of optimizations in the front area and the head office. As of December 2014 the number of employees was 6,108.

Last quarter was very successful the corporate business in terms of deposits, which have increased by 166%.

In December 2014 UBRD managed a big inflow of customers: every second client visited our office during the month. Despite the intense pressure on the front area, in December the average waiting time in service offices was minimal during the year.

Retail Business: From January to September approaches to risk assessment were severely tightened resulting in decrease of the approval rate by one third. Starting from September the number of applications received decreased due to the general decline in demand for loans.

Corporate Business: In April and May there was a sharp decrease in the number of loan applications. Since June the number of applications has stabilized at 900-950, and the percentage of approved applications stood at the level of 45-50%. At the end of the year there was a significant decrease in the number of applications related to the difficult situation in the economy and the currency market.

Bank’s assets in 2014 increased by 17.5% and amounted RUB 236.7 bln.

Equity in 2014 increased from RUB 17.4 bln to RUB 24.8 bln (+42.4%). As of January 1, 2015 N1 ratio was 13.54% (with a minimum requirement of 10%).

Pre-tax profit of the Bank at the end of 2014 amounted to more than RUB 2 bln; net profit amounted to RUB 1.9 bln.

Net operating income in 2014 increased by 44.7%.

Results of the implementation strategy 3-2-3
3-2-3 Strategy was formulated in 2011 with four main objectives: creating value for customers, creating conditions for staff, ensuring efficiency and achieving financial results. An action-plan was launched for each of these blocks, and by the end of 2014 UBRD has achieved the intended result. Thus, the Bank achieved the targets of 1 mln customers and creation of necessary infrastructure, and the target income.

As of October 1, 2014 the Bank had 555 offices (as of 2011 – 200 offices, the planned number in the strategy – 550).

Income of the Bank for the past period has increased by more than triple RUB 45.8 bln (as of 2011 – RUB 13 bln).

The number of customers has doubled to 1,007,259 customers (as of 2011 – 570,000)

UBRD implemented several major projects in the HR field: introduction of the system of motivation and grades, development of integrated approaches for assessment and staff development, organization and arrangement of actions to support internal corporate values.

A significant change in the development of branch network and the perception of the Bank’s image was the rebranding conducted in 2012. New image, design and office space seriously affected the success of communication and interaction with customers, which contributed to a rapid increase in the customer base.

“During the implementation of the strategy we have practically rebuilt the bank in terms of internal processes, as well as in terms of management of key business processes. Today we have the necessary infrastructure, all possible channels of communication with customers, and most importantly, a serious competitive advances relative to the market”, says Anton Solovyov, President of UBRD

Challenges in 2015
To compensate and take into account all the negative fluctuations in the economy, we need a clear implementation of the budget approved for 2015 (reducing the overall size of the budget amounted to 17.6 - 20%). As far as this reduction is sufficient, the results of the Q1 2015 will show.

UBRD managed cost optimization and will continue to minimize costs, reviewing and improving the efficiency of business processes. These actions are carried out in order to respond adequately to the events taking place in the markets.