Q1 2011 IFRS Report

BANK VOZROZHDENIE

International Financial Reporting Standards
Interim Quarterly Financial Statements
(unaudited)

31 March 2011

CONTENTS

Statement of financial position .......................................................................................................................................1
Statement of comprehensive income .............................................................................................................................2
Statement of changes in equity ......................................................................................................................................3
Statement of cash flows .................................................................................................................................................4

Notes to the financial statements

1 INTRODUCTION ................................................................................................................................................5
2 PRINCIPLES OF ACCOUNTING POLICIES, CRITICAL ACCOUNTING
ESTIMATES AND JUDGMENTS........................................................................................................................5
3 CASH AND CASH EQUIVALENTS ....................................................................................................................5
4 TRADING SECURITIES .....................................................................................................................................5
5 DUE FROM OTHER BANKS ..............................................................................................................................6
6 LOANS AND ADVANCES TO CUSTOMERS.....................................................................................................6
7 SECURITIES AVAILABLE FOR SALE .............................................................................................................11
8 INVESTMENT SECURITIES HELD TO MATURITY.........................................................................................12
9 OTHER ASSETS ..............................................................................................................................................12
10 DUE TO OTHER BANKS..................................................................................................................................12
12 DEBT SECURITIES IN ISSUE..........................................................................................................................13
13 SUBORDINATED LOANS ................................................................................................................................13
14 INTEREST INCOME AND EXPENSE ..............................................................................................................14
15 FEE AND COMMISSION INCOME AND EXPENSE ........................................................................................14
16 ADMINISTRATIVE AND OTHER OPERATING EXPENSES ...........................................................................15
17 SEGMENT ANALYSIS......................................................................................................................................15
18 FINANCIAL RISK MANAGEMENT ...................................................................................................................19
19 CONTINGENCIES AND COMMITMENTS. ......................................................................................................20

Bank Vozrozhdenie
IFRS Interim Quarterly Statements
Statement of financial position as at March 31, 2011

(in millions of Russian Rubles)
1USD = 28,4290 Russian Ruble as at 31 March 2011 March 31, 2011 December 31, 2010
1USD = 30,4769 Russian Ruble as at 31 December 2010 (unaudited)

ASSETS
Cash and cash equivalents 32 977 32 151
Mandatory cash balances with the Central Bank of the Russian Federation 1 396 1 072
Trading securities held to maturity 14 725 12 182
Due from other banks 465 5 860
Loans and advances to customers 114 498 104 046
Investment securities available for sale 1 974 2 043
Investment securities held to maturity 176 -
Premises, equipment and intangible assets 3 061 3 132
Other financial assets 1 199 1 644
Other assets 4 002 4 028

TOTAL ASSETS 174 473 166 158

LIABILITES
Due to other banks 7 841 7 772
Customer accounts 136 874 130 334
Debt securities in issue 6 856 5 794
Subordinated loans 4 102 4 293
Other financial liabilities 1 132 611
Other liabilities 491 494

TOTAL LIABILITIES 157 296 149 298

SHAREHOLDERS’ EQUITY
Share capital 250 250
Share premium 7 306 7 306
Retained earnings 9 544 9 227
Other reserves/Funds 77 77

TOTAL SHAREHOLDERS’ EQUITY 17 177 16 860

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY 174 473 166 158

1

Bank Vozrozhdenie
Statement of Comprehensive Income as at March 31, 2011

(in millions of Russian Rubles)
1USD = 28,4290 Russian Ruble as at 31 March 2011 3M 2011 3M 2010
1USD = 29,3638 Russian Ruble as at 31 March 2010 (unaudited) (unaudited)

Interest income 3 146 3 641
Interest expense (1 782) (2 183)

Net interest income 1 364 1 458
Provision/Recovery of provision for loan impairment (350) (625)

Net interest income after provision for loan impairment 1 014 833

Fee and commission income 1 092 900
Fee and commission expense (86) (73)
(Losses less gains)/ Gains less losses arising from trading securities 43 (27)
Income from trading in foreign currencies 830 537
Expenses from trading in foreign currencies (726) (482)
Foreign exchange translation gains less losses (38) 3
Other operating income 60 28
Administrative and other operating expenses (1 798) (1 531)
Provision for impairment of other assets 5 -

Profit before tax 396 188
Income tax expense (79) (91)

PROFIT FOR THE REPORTING PERIOD 317 97

Other comprehensive income:
Available-for-sale investments:
Gains less losses arising during the year (10) 10
Income tax recorded directly in other comprehensive income 10 2

Other comprehensive income for the year - 12

TOTAL COMPREHENSIVE INCOME FOR THE YEAR 317 109

Earnings per share for profit attributable to the equity holders of the
Bank, basic and diluted
(expressed in RUB per share)
Ordinary shares 13 4
Preference shares with fixed dividend amount 15 4

2

Bank Vozrozhdenie
Statement of Changes in Equity for the period ended on March 31, 2011

Share Share Other Retained Total equity
capital premium reserves/ earnings
funds

Balance at December 31, 2009 250 7 306 70 8 660 16 286

Total comprehensive income for 2010 - - 7 581 588

Dividends declared - - - (14) (14)


Total comprehensive income for 2011 - - - 317 317

Dividends declared - - - - -

Balance at March 31, 2011 250 7 306 77 9 544 17 177

Share Share Other Retained Total equity
capital premium reserves/ earnings
funds


Total comprehensive income for 2009 - - 18 1 217 1 235

Dividends declared - - - (14) (14)


Total comprehensive income for 2009 12 97 109

Dividends declared - - - - -

Balance at March 31, 2010 250 7 306 82 8 757 16 395

3

Bank Vozrozhdenie
Statement of Cash Flows for the period ended on March 31, 2011

3M 2011 3M 2010
(in millions of Russian Rubles) (unaudited) (unaudited)
Cash flows from operating activities
Interest received 3 030 3 195
Interest paid (1 829) (2 052)
Fees and commissions received 1 083 913
Fees and commissions paid (86) (73)
Net income received from trading securities 5 6
Net income received from trading in foreign currencies 104 52
Other operating income received 22 27
Administrative and other operating expenses paid (1 673) (1 409)
Income tax paid (195) (108)

Cash flows from operating activities before changes in operating assets
and liabilities 461 551

Changes in operating assets and liabilities
Net increase in mandatory cash balances with the Central Bank of the Russian
Federation (324) (128)
Net increase in trading securities (2 792) (93)
Net decrease/(increase) in due from other banks 5 372 (600)
Net increase in loans and advances to customers (11 464) (826)
Net decrease in other financial assets 446 137
Net increase/(decrease) in other assets 126 (60)
Net increase/ (decrease) in due to other banks 185 (2 298)
Net increase in customer accounts 7 774 7 262
Net increase/(decrease) in debt securities in issue 1 070 (1 619)
Net increase in other financial liabilities 513 552
Net decrease in other liabilities (25) (7)

Net cash used in operating activities 1 342 2 871

Cash flows from investing activities
Acquisition of investment securities available for sale (15) -
Proceeds from from disposal of investment securities available for sale 59 155
Acquisition of investment securities held to maturity (175) (146)
Acquisition of fixed and intangible assets (54) (97)
Proceeds from disposal of fixed and intangible assets - 1
Proceeds from disposal of long term assets available for sale 181 -
Dividends 20 5

Net cash (used in)/from investing activities 16 (82)

(532) (1 132)
Effect of exchange rate changes on cash and cash equivalents

826 1 657
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the year 32 151 34 101

Cash and cash equivalents at the end of the financial period 32 977 35 758

4

Bank Vozrozhdenie
Notes to the interim Financial Statement according to IFRS as at March 31, 2011

1 Introduction

These interim financial statements of Bank Vozrozhdenie has been prepared in accordance with International
Financial Reporting (IAS) 34 “Interim fiancial statements” (the IFRS (IAS) 34) for three months ended March 31,
2011.

Presentation currency: these financial statements are presented in millions of Russian Roubles (“RR
millions”)
The official CBRF exchange rate was applied for reevaluation of balances on FX accounts, which is as of
March 31, 2011 comprised RR28.4290, as of December 31, 2010 - RR30.4769 , and as of March 31,
2010 – RR29.3638 per one USD and relatively RR40.0223, RR40.3331 and RR39.7028 per one EUR.

2 Principles of accounting policies, critical accounting estimates and judgments

This interim financial statement is to be considered along with Bank’s annual financial statements for the
year ended December 31, 2010.

This interim financial statement doesn’t contain all notes which are obligatory to disclosure in a full
version of financial statement.

Principles and methods of accounting policy applied in this interim financial statement comply with the
principles and methods applied and described in the Bank’s annual Financial Statement for the year
ended December 31, 2010.

Judgments made by the Bank’s management applying accounting policy comply with the judgments
described in the Bank’s annual Financial Statement for 2010. The Bank’s Management didn’t apply any
new estimates and judgments. As a result of applying estimates and judgments described in the Bank’s
financial statements for the year ended December 31, 2010 the Bank’s assets, revenues and income for
three months ended March 31, 2011 didn’t change materially.

3 Cash and cash equivalents

(in millions of Russian Rubles) 2011 2010

Cash on hand 7 561 10 792
Correspondent accounts and overnight placements with other banks
- Russian Federation 9 322 202
- other countries 12 437 15 823
Cash balances with the CBRF (other than mandatory reserve deposits) 3 657 5 334

Total cash and cash equivalents 32 977 32 151

Cash and cash equivalents are not impaired and are not collateralized.

4 Trading securities
Trading securities (in millions of Russian Rubles) 2011 2010

Corporate Bonds 3 897 1 869
State Internal loan Bonds (OVGVZ) 3 651 3 898
Municipal Bonds 2 834 1 126
Federal loan bonds (OFZ) 2 282 269
CBRF bonds 1 511 4 588
Corporate Erobonds 549 431

Total debt securities 14 724 12 181

Corporate shares 1 1

Total trading securities 14 725 12 182

5

Bank Vozrozhdenie

4 Trading securities (continued)

The entire trading securities portfolio includes trading securities quoted on the market.

Trading securities are carried at fair value which also reflects any credit risk related write-downs. As
trading securities are carried at their fair values based on observable market data, the Bank does not
analyze or monitor impairment indicators. Trading securities are used by Bank basically for managing
liquidity risk.

The Bank is licensed by the Federal Comission on the Securities Markets for trading in securities.

5 Due from Other Banks


Deposits with CBRF - 4 500
Short-term placements with other banks 143 1 055
Insurance deposits with non-resident banks 322 305

Total due from other banks 465 5 860

The Bank has a significant concentration of credit risk with the CBRF. In total, credit risk exposure to the
CBRF is estimated to have amounted to RR 13,464 million (2010: RR15,494 million), comprising cash
and cash equivalents, mandatory reserve deposits with the CBRF and trading securities.

6 Loans and Advances to Customers

Corporate loans – large 35 205 31 715
Corporate loans – medium 53 590 48 206
Corporate loans – small 19 767 18 705
Mortgage loans 10 538 9 806
Other loans to individuals 6 936 6 804

Total loans and advances to customers (before provision for loan
impairment) 126 036 115 236

Less: Provision for loan impairment (11 538) (11 190)

Total loans and advances to customers 114 498 104 046

In accordance with the annually approved Credit policy loans are divided into corporate and retail. Taking
into consideration the Bank’s customer policy requirements for 2011 the corporate portion of borrowers is
further divided on the basis of total amount owned by the customer into the following categories: large –
in excess of RR 750 million, medium – from RR 100 million to RR 750 million, small less than RR 100
million (2010: large – in excess of RR 750 million, medium – from RR 100 million to RR 750 million, small
less than RR 100 million). Retail loans are divided into categories by product: mortgage loans and other
loans to individuals including customer loans, car loans and bank card loans.

6

Bank Vozrozhdenie

6 Loans and advances to customers (continued)

Movements in the provision for loan impairment during 3M 2011 are as follows:

Corporate Corporate Corporate Mortgage Other loans Total
loans – large loans – loans – loans to
(in millions of Russian Rubles) medium small individuals
Provision for loan impairment
at January 1, 2010 2 014 5 086 3 026 480 584 11 190
Charges to/ (release of) provision
for loan impairment during the
year (29) 314 51 21 (7) 350
Amounts written off during the
year as uncollectible - - (2) - - (2)

at March 31, 2011 1 985 5 400 3 075 501 577 11 538

Movements in the provision for loan impairment during 2010 are as follows:
at January 1, 2010 1 631 4 129 2 660 449 570 9 439
during the year 383 957 476 31 25 1 872
Amounts written off during the
year as uncollectible - - (110) - (11) (121)

at December 31, 2010 2 014 5 086 3 026 480 584 11 190

Economic sector risk concentrations within the customer loan portfolio are as follows:

2011 2010
(in millions of Russian Rubles) Amount % Amount %
Manufacturing 32 337 26 28 261 24
Trade 28 651 23 27 118 24
Individuals 17 474 14 16 610 14
Construction 10 596 8 10 251 9
State and public organizations 8 497 7 8 097 7
Transport and communications 7 319 6 6 849 6
Finance 5 697 4 2 916 3
Agricultural 4 977 4 4 406 4
Other 10 488 8 10 728 9

Total Loans and advances to
customers (Before provisions for
loan impairment) 126 036 100 115 236 100

State and public organizations exclude government owned profit oriented businesses.

At March 31, 2011 the Bank had 25 borrowers with aggregated loan amounts equal or above RUB 750
million. The total aggregate amount of these loans was RUB 35 205 million or 27.9% of the gross loan
portfolio.

At December 31, 2010 the bank had 23 borrowers with aggregated loan amounts equal or above RUB
750 million. The total aggregate amount of these loans was RUB 31 715 million or 27.5% of the gross
loan portfolio.

7

Bank Vozrozhdenie


Analysis by credit quality of loans outstanding at March 31, 2011 is as follows:
loans – loans – loans – loans to
(in millions of Russian Rubles) large medium small individuals
Neither past due nor impaired:
- Large borrowers with credit history
over two years 19 692 - - - - 19 692
- Large new borrowers 13 889 - - - - 13 889
- Loans assessed on a portfolio basis - 48 263 16 899 9 884 6 348 81 726

Total neither past due nor impaired 33 581 48 263 16 899 9 884 6 348 114 975
Past due but not impaired
- less than 30 days overdue - 43 55 318 99 515
- 30 to 90 days overdue - - - 46 8 54
- 90 to 180 days overdue - - - 15 3 18
- 180 to 360 days overdue - - - 40 9 49

Total past due but not impaired - 43 55 419 119 636
Loans collectively determined to be
impaired (gross)
- less than 30 days overdue - 873 34 - - 907
- 30 to 90 days overdue - - 58 - 13 71
- 90 to 180 days overdue - 232 84 - 9 325
- 180 to 360 days overdue - 739 67 - 21 827
- over 360 days overdue - 2 860 2 351 - 179 5 390

Total loans collectively determined
to be impaired (gross) - 4 704 2 594 - 222 7 520
Loans individually determined to be
impaired (gross)
- less than 30 days overdue 774 - - - - 774
- 30 to 90 days overdue - - - 1 13 14
- 90 to 180 days overdue - - - - 5 5
- 180 to 360 days overdue - - 86 - 10 96
- over 360 days overdue 850 580 133 234 219 2 016

Total loans individually determined
to be impaired (gross) 1 624 580 219 235 247 2 905
Less impairment provisions (1 985) (5 400) (3 075) (501) (577) (11 538)

Total loans and advances to
customers less provision 33 220 48 190 16 692 10 037 6 359 114 498

8

Bank Vozrozhdenie


Analysis by credit quality of loans outstanding at December 31, 2010 is as follows:
loans – loans – loans – loans to
(in millions of Russian Rubles) large medium small individuals
Neither past due nor impaired:
- Large borrowers with credit history
over two years 17 805 - - - - 17 805
- Large new borrowers 10 974 - - - - 10 974
- Loans to medium size entities - 3 042 - - - 3 042
- Loans assessed on a portfolio basis - 39 792 15 960 9 327 6 258 71 337

Total neither past due nor impaired 28 779 42 834 15 960 9 327 6 258 103 158
Past due but not impaired
- less than 30 days overdue - 200 29 169 55 453
- 30 to 90 days overdue - 2 - 34 6 42
- 90 to 180 days overdue - 223 - 20 8 251
- 180 to 360 days overdue - - - 17 5 22

Total past due but not impaired - 425 29 240 74 768
Loans collectively determined to be
impaired (gross)
- 30 to 90 days overdue - - 56 - 23 211
- 90 to 180 days overdue - - 26 - 31 619
- 180 to 360 days overdue - 100 68 - 81 1 257
- over 360 days overdue - 870 2 347 - 101 1 782

Total loans collectively determined
to be impaired (gross) - 970 2 497 - 227 3 694
Loans individually determined to be
impaired (gross)
- less than 30 days overdue 2 086 914 - - - 3 000
- 30 to 90 days overdue - - - - 8 8
- 90 to 180 days overdue - 16 - - 6 22
- 180 to 360 days overdue - 1 180 86 - 13 1 279
- over 360 days overdue 850 1 867 133 239 218 3 307

Total loans individually determined
to be impaired (gross) 2 936 3 977 219 239 245 7 616
Less impairment provisions (2 014) (5 086) (3 026) (480) (584) (11 190)

customers 29 701 43 120 15 679 9 326 6 220 104 046

9

Bank Vozrozhdenie


The primary factors that the Bank considers in determining whether a loan is impaired are its overdue
status and reliability of related collateral, if any.

The Bank applied the portfolio provisioning methodology prescribed by IAS 39, Financial Instruments:
Recognition and Measurement, and booked portfolio provisions for impairment losses that were incurred
but have not been specifically identified with any individual loan at the end of the reporting period. Since
2011 the Bank changed level of essentiality for assessment of loans on individual basis, that caused
increase of loans collectively determined to be impaired/

The Bank’s policy is to classify each loan as ‘neither past due nor impaired’ until specific objective
evidence of impairment of the loan is identified. The impairment provisions may exceed the total gross
amount of individually impaired loans as a result of this policy and the portfolio impairment methodology.
Neither past due nor impaired, but renegotiated loans represent the carrying amount of loans that would
otherwise be past due or impaired whose terms have been renegotiated. Past due but not impaired loans
represent collateralised loans where the discounted fair value of collateral covers the overdue interest
and principal repayments. The amount reported as past due but not impaired is the whole balance of
such loans, not only the individual instalments that are past due.

The value of collateral at March 31, 2011 was as follows:

Unsecured loans
6 096 8 229 2 371 797 1 362 18 855
Secured loans:
- residential real estate - - - 7 734 1 213 8 947
- production real estate 16 120 24 255 8 214 - - 48 589
- equipment and inventories,
motor vehicles 5 292 9 812 6 010 - 470 21 584
- securities (shares, promissory
notes) - - 19 1 10 30
- cash deposits - - 16 - 48 64
- state guarantees and
guarantees of the RF
constituents - 1 974 674 - - 2 648
- third parties’ guarantees 5 906 6 148 2 373 95 2 484 17 006
- other assets (other types of
property, rights) 1 791 3 172 90 1 911 1 349 8 313
customers (before provisions
for loan impairment) 35 205 53 590 19 767 10 538 6 936 126 036

10

Bank Vozrozhdenie


The value of collateral at December 31, 2010 was as follows:

Unsecured loans 5 613 7 404 2 046 707 1 140 16 910
Secured loans:
- residential real estate - - - 8 999 1 399 10 398
- production real estate 13 928 24 127 8 273 - - 46 328
- equipment and inventories,
motor vehicles 3 978 8 791 6 001 - 483 19 253
- securities (shares, promissory
notes) - - 22 1 10 33
- cash deposits - 116 17 - 51 184
- state guarantees and
guarantees of the RF
constituents - 1 571 507 - - 2 078
- third parties’ guarantees 5 061 3 266 1 694 97 2 458 12 576
- other assets (other types of
property, rights) 3 135 2 931 145 2 1 263 7 476
customers (before provisions
for loan impairment) 31 715 48 206 18 705 9 806 6 804 115 236

7 Securities Available for Sale


Municipal bonds 1 166 1 171
Corporate Eurobonds 197 197
Corporate bonds 112 111
RF Eurobonds 59 122

Total debt securities 1 534 1 601

Corporate shares 440 442

Total investment securities available for sale 1 974 2 043

The movements in investment securities available for sale are as follows:


Carrying amount at 1 January 2 043 1 312
Fair value gains less losses (10) (5)
Interest income accrued 11 4
Interest income received 1 55
Purchases 15 1 589
Disposals of investment securities available for sale (59) (876)
Writing off of investment securities available for sale - (30)
Other (27) (6)

Carrying amount at March 31/December 31 1 974 2 043

11

Bank Vozrozhdenie

8 Investment securities held to maturity


Corporate promissory notes 176 -

Total investment securities held to maturity 176 -

Corporate promissory notes are the promissory notes of one Russian large company nominated in
Russian rubles. These promissory notes have maturity date on December 2011 and discount rate of
5.0%.

9 Other Assets


Inventories 2 787 2 827
Deferred income tax asset 718 566
Investment properties 467 601
Non-current assets held for sale 103 114
Other 37 42

Total other assets (before provisions) 4 112 4 150

Less provisions on impairment of other assets
(110) (122)

4 002 4 028
Total other assets

10 Due to Other Banks

Placements of other banks 7 095 6 936
Correspondent accounts of other banks 746 836

Total due to other banks 7 841 7 772

11 Customer Accounts

State and public organisations
- Current/settlement accounts 316 245
- Term deposits 1 355 1 501

Other legal entities
- Current/settlement accounts 31 069 28 201

Individuals
- Current/demand accounts 14 796 16 539

Total customer accounts 136 874 130 334

12

Bank Vozrozhdenie

11 Customer Accounts (continued)

State and public organisations exclude government owned profit orientated businesses.

Economic sector concentrations within customer accounts are as follows:

2011 2010
(in millions of Russian Rubles) Amount % Amount %
Individuals 84 767 62 85 251 65
Finance 14 425 11 12 594 10
Trade 13 476 10 10 341 8
Manufacturing 6 448 5 6 129 5
Transport and communications 2 752 2 3 663 3
Construction 5 579 4 3 335 3
State and public organisations 1 670 1 1 746 1
Agriculture 919 1 1 358 1
Other 6 838 4 5 917 4

Total customer accounts 136 874 100 130 334 100

12 Debt Securities in Issue


Promissory notes 6 651 5 534
Deposit certificates 205 260

Total debt securities in issue 6 856 5 794

According to the terms of issue the Bank has paid off bonds circulated on the domestic market with nominal value of
RR 3000 millions in March of 2010.

13 Subordinated loans

Subordinated loans represent long-term deposits of the Bank’s customers, which mature from 2011 to 2018 and bear
contractual interest rate from 2.3% to 9.2% (2010: from 2.3% to 9.2%). The contractual interest rates are regularly
revised in accordance with the terms of the subordinated loans agreements №7 and №9. The debt ranks after all
other creditor’s claims incase of liquidation. The details of subordinated loans attracted by the Bank are disclosed in
the table below:
2011 2010
Start date Maturity date Currency Contractua Nominal Contractu Nominal
l interest value, RR al interest value, RR
rate, % million rate, % million
Subordinated
May 2000 April 2011 USD
loan 1 2,25 210 2,25 241
Subordinated
June 2005 June 2013 USD
loan 2 5,75 285 5,75 305
Subordinated
December 2005 December 2013 USD
loan 3 8,0 199 8,0 214
Subordinated
March 2006 March 2014 USD
loan 4 6,5 142 6,5 153
Subordinated
May 2006 May 2014 USD
loan 5 6,5 85 6,5 91
Subordinated
June 2006 June 2014 USD
loan 6 6,5 142 6,5 153
Subordinated
December 2006 December 2013 USD
loan 7 8,0 1 019 7,75 1 000
Subordinated
April 2007 April 2014 USD
loan 8 8,0 510 7,75 500
Subordinated
July 2008 August 2018 RR
loan 9 9,21 1 425 9,21 1 545
Subordinated
August 2010 August 2018 RR
loan 10 8,0 85 8,0 91

Total
subordinated 4 102 4 293

13

Bank Vozrozhdenie

loans

Subordinated loans №3, 10 were received by the Bank from a related party.

14 Interest Income and Expense

3M 2011 3M 2010

Interest income
Loans and advances to customers - legal entities 2 295 2 764
Loans and advances to customers - individuals 639 515
Trading securities 132 239
Correspondent accounts and due from other banks 66 105
Investment securities available for sale 13 18
Investment securities held to maturity 1 -

Total interest income 3 146 3 641

Interest expense
Term deposits of individuals 1 231 1 428
Term deposits of legal entities 262 493
Debt securities in issue 93 129
Subordinated loans 99 93
Due to other banks 85 33
Current/settlement accounts of legal entities 12 7

Total interest expense 1 782 2 183

Net interest income 1 364 1 458

15 Fee and Commission Income and Expense

3M 2011 3M 2010

Fee and commission income 293 222
Settlement transactions 232 217
Cash transactions 247 192
Credit/debit cards and cheques settlements 115 117
Payroll projects 54 49
Cash collection 62 40
Guarantees issued 89 63
Other

Total fee and commission income 1 092 900

Fee and commission expense 70 52
Credit/debit cards and cheques settlements 5 6
Settlements with currency and stock exchanges 5 4
Settlement transactions 2 3
Cash transactions 4 8
Other

Total fee and commission expense 86 73

Net fee and commission income 1 006 827

14

Bank Vozrozhdenie

16 Administrative and Other Operating Expenses

3M 2011 3M 2010

Staff costs 1 063 871
Administrative expenses 145 162
Depreciation of premises, equipment and intangible assets 122 122
Other costs related to premises, equipment and intangible assets 112 103
Contributions to the State Deposit Insurance Agency 83 68
Rent 69 60
Taxes other than income tax 58 37
Other 146 108

Total administrative and other operating expenses 1 798 1 531

Included in staff costs are statutory social security and pension contributions (unified social tax) of
RR 249 million (2010: RR 171 million).

17 Segment Analysis

Operating segment is a distinguishable component of the Bank that is engaged in providing products or
services (business segment) with the purpose to generate income, whose operating results are regularly
reviewed by the Bank’s Management Board based on management accounts prepared in accordance
with Russian accounting rules in terms of each operating segment. The functions of the chief operating
decision maker (CODM) are performed by the Management Board of the Bank. Operating management
and performance of an operating segment are the responsibility of the Deputy Chairman of the
Management Board of the Bank supervising the corresponding business line.

Transactions between the operating segments are on normal commercial terms and conditions. Funds
are ordinarily reallocated between operating segments, resulting in funding cost transfers disclosed in
interest income and expense. Interest rates for these funds are differentiated depending on the attraction
terms and are based on market indicators.

Segment assets and liabilities include operating assets and liabilities representing a major part of the
Bank’s assets and liabilities, as well as funds reallocated between operating segments, but excluding
taxation. Internal charges and transfer pricing adjustments have been reflected in the performance of
each operating segment. Segment performance is based on profitability and cost-effectiveness of
operating assets.

The CODM evaluates performance of each segment based on profit before tax.

The table below represents the segment information of interest-bearing assets and interest-bearing
liabilities per reportable segments for 3 months ended 31 March 2011 and 31 December 2010.

For the purpose of preparation of the management accounts the amount of assets and liabilities is
calculated as average balances for the respective accounting period.

15

Bank Vozrozhdenie

17 Segment Analysis (continued)

(in millions of Corporate Retail Bank cards Financial Liquidity Other Total
Russian Rubles) business business transactions business

31 March 2011

Total assets of
reportable segments 100 070 14 937 2 384 44 385 - - 161 766

Total liabilities of
reportable segments 58 227 67 923 15 456 4 896 - 1 465 147 967

31 December 2010

Total assets of
reportable segments 86 386 12 580 2 436 42 392 - - 143 794

Total liabilities of
reportable segments 50 269 60 491 14 227 3 174 - 1 519 129 680-

The table below represents the information of income and expenses per reportable segments for 6
months ended 31 March 2011. The Bank’s management considers operating income before provision for
loan impairment as a key measurement of reportable segments results.

(in millions of Russian Corporate Retail Bank cards Financial Liquidity Other Total
Rubles) business business transactions business

2011
- Interest income 2 341 520 96 213 - 1 3 171
- Non-interest income 767 185 346 41 - 8 1 347
- Transfer income 702 1 401 60 60 363 33 2 619

Total revenues 3 810 2 106 502 314 363 42 7 137

- Interest expense (471) (1 220) (12) (43) - (33) (1 779)
- Non-interest expense (28) - (59) (8) - (2) (97)
- Transfer expense (2 097) (360) (46) (116) - - (2 619)

Total expenses (2 596) (1 580) (117) (167) - (35) (4 495)

Operating income
before provision for
loan impairment 1 214 526 385 147 363 7 2 642

Provision for loan
impairment (530) (16) 4 - - - (542)

Operating income 684 510 389 147 363 7 2 100

Administrative and other
operating expenses (681) (648) (312) (15) - (11) (1 667)

Profit/(loss) before tax
(Segment result) 3 (138) 77 132 363 (4) 433

16

Bank Vozrozhdenie


The reconciliation of assets, liabilities, income and expenses of the Bank’s reportable segments for 9
months ended 31 March 2011.

Reconciliation of reportable segment assets

March 31, 2011 December 31,
(in millions of Russian Rubles) (unaudited) 2010

Total reportable segment assets 161 776 143 794
Assets unallocated between operating segments 15 823 19 707
Interest claim 1 535 1 351
Differences in financial statements format * (3 986) 2 080
Deviation due to recording of reportable segment assets without regard to
the events after the end of the reporting period - (39)
Differences in fair valuation of securities 57 19
Adjustment of provisions for loan impairment based on the incurred loss
model (619) (735)
Recognition of commission income from lending using the effective interest
method (206) (220)
Fair valuation of instruments with non-market rates (1) (1)
Recognition of financial instruments using the effective interest method 211 324
Provision for impairment of inventories (117) (122)

Total assets 174 473 166 158

Reconciliation of reportable segment liabilities
March 31, 2011 December 31,
(in millions of Russian Rubles) (unaudited) 2010

Total reportable segment liabilities 147 967 129 680
Liabilities unallocated between operating segments 1 623 1 105
Liabilities on interest payment 2 175 2 068
Differences in financial statements format * 5 550 16 473
Deviation due to recording of reportable segment liabilities without regard
to the events after the end of the reporting period - (5)
Recognition of liabilities at amortised cost (19) (23)

Total liabilities 157 296 149 298

* Differences in financial statements format arise from presentation of assets and liabilities of reportable
segments calculated as average balances for the reporting period for the purpose of management
account preparation.

17

Bank Vozrozhdenie


Reconciliation of income and expense before tax of the reportable segments

Reconciliation of profit before tax and other material income or expenses (interest and expense? Non-
interest income expense, provision for loan impairment? Administrative and other operating expenses) for
the reportable segments with the statement on comprehensive income under IFRS for 3 months ended
31 March 2011:

Before Interes Non-interes Interes Non interes Provision Administrativ
tax profit income income expense income for loan e and othe
(in millions of Russian impairmen operating
Rubles) expenses

Total reportable segment
result 433 3 171 1 347 (1 779) (97) (542) (1 667)
Recognition of commission
income from lending using
the effective interest
method 13 12 1 - - - -
Recognition of other fees
and commissions by
reference to completion of
the specific transaction 8 - 8 - - - -
Recognition of interest
income/expense using the
effective interest method (5) - (2) (3) - - -
Differences in fair valuation
of trading securities 40 (44) 84 - - - -
Fair valuation of instruments
with non-market rates - - - - - - -
Adjustment of provisions for
loan impairment based on
the incurred loss model 134 - (58) - - 192 -
Accrued Bank’s liabilities on
unused vacation payments,
and other (102) - - - - - (102)
Differences in depreciation
charge on premises and
equipment and capitalised
software implementation
costs, (22) - - - - - (22)
Recognition of financial
instruments using the
effective interest method (112) (112) - - - - -
Reclassification of
management accounts items - 119 (166) - 54 - (7)
Provision for impairment of
inventories 5 - - - - - -
Other 4 - 4 - - - -

Profit before tax 396 3 146 1 218 (1 782) (43) (350) (1 798)

The abovementioned discrepancies arise from differences in assessment of assets and liabilities as well
as in recording income and expenses under IFRS.

18

Bank Vozrozhdenie

18 Financial Risk Management

The risk management function within the Bank is carried out in respect of financial risks, operational risks
and legal risks. Financial risk comprises market risk (including currency risk, interest rate risk and other
price risk), credit risk, liquidity risk and geographical risk. The primary objectives of the financial risk
management function are to establish risk limits, and then ensure that exposure to risks stays within
these limits. The operational and legal risk management functions are intended to ensure proper
functioning of internal policies and procedures to minimise operational and legal risks.

Policy and methods of financial risk management accepted by the Bank comply with the policy and
methods described and applied in the Bank’s annual financial report for the year ended December 31,
2009.

The tables below summarize the Bank’s exposure to currency risk and Bank’s liquidity position taking into
account expected contractual time left before redemption of assets and liabilities.

Currency risk. The Bank is exposed to currency risk due to the fact that its assets and liabilities are
denominated in different currencies as well as due to existence of open currency positions resulting from
foreign currency transactions.

The table below summarises the Bank’s exposure to currency risk at 31March 2011:

(in millions of Russian Rubles) RR USD Euro Other Total

Monetary financial assets
Cash and cash equivalents 19 564 5 438 7 957 18 32 977
Mandatory cash balances with the
CBRF 1 396 - - - 1 396
Trading securities 10 230 4 200 294 - 14 724
Due from other banks 141 322 2 - 465
Loans and advances to customers 103 119 8 699 2 680 - 114 498
Investment securities available for
sale 113 255 1 166 - 1 534
Investment securities held to
maturity 176 - - - 176
Other financial assets 965 94 93 - 1 152

Total monetary financial assets 135 704 19 008 12 192 18 166 922

Monetary financial liabilities
Due to other banks 3 982 1 700 2 159 - 7 841
Customer accounts 111 570 15 209 10 088 7 136 874
Debt securities in issue 6 752 49 55 - 6 856
Subordinated loans 1 530 2 572 - - 4 102
Other financial liabilities 1 118 14 - - 1 132

Total monetary financial
liabilities 124 952 19 544 12 302 7 156 805

Net balance sheet position 10 752 (536) (110) 11 10 117

Credit related commitment 18 588 905 1 323 - 20 816

19

Bank Vozrozhdenie

18 Financial Risk Management (continued)

The above analysis includes only monetary assets and liabilities. Investments in equities and non-
monetary assets are not considered to give rise to any material currency risk.

Liquidity risk. Liquidity risk is defined as the risk that an entity will encounter difficulty in meeting
obligations associated with financial liabilities due to discrepancies between terms of climes on active
operations and maturity of liabilities. The Bank is exposed to daily calls on its available cash resources
from overnight deposits, current accounts, maturing deposits, loan draw downs, guarantees and from
margin and other calls on cash settled derivative instruments.

The analyses of Bank’s liquidity risk as at March 31, 2011 is as follows:

Demand and From 1 to From 6 to Over Total
less than 6 months 12 months 12 months
(in millions of Russian Rubles) 1 month

Assets
Cash and cash equivalents 32 977 - - - 32 977
Mandatory cash balances with the
CBRF 512 373 233 278 1 396
Trading securities 14 725 - - - 14 725
Due from other banks 141 1 1 322 465
Loans and advances to customers 10 809 35 121 27 759 40 809 114 498
Investment securities available for sale 442 111 1 363 58 1 974
Investment securities held to maturity - 176 - - 176
Other financial assets 1 152 - - - 1 152

Total financial assets 60 758 35 782 29 356 41 467 167 363

Liabilities 1 068 278 118 6 377 7 841
Due to other banks 51 996 35 137 21 145 28 596 136 874
Customer accounts 701 3 295 2 842 18 6 856
Debt securities in issue 234 6 - 3 862 4 102
Subordinated loans 1 132 - - - 1 132
Other financial liabilities

Total financial liabilities 55 131 38 716 24 105 38 853 156 805

Net liquidity gap based on expected
maturities at 31 March 2011 5 627 (2 934) 5 251 2 614 10 558

Cumulative liquidity gap at 31 March
2011 5 627 2 693 7 944 10 558

The above analysis is based on expected maturities. The entire portfolio of trading securities is therefore
classified within demand and less than one month based on management’s assessment of the portfolio’s
realisability.

The expected maturity of investment securities available for sale is based on offer agreement date.

19 Contingencies and Commitments

Credit related commitments. The primary purpose of these instruments is to ensure that funds are
available to a customer as required. Guarantees and standby letters of credit, which represent irrevocable
assurances that the Bank will make payments in the event that a customer cannot meet its obligations to
third parties, carry the same credit risk as loans. Documentary and commercial letters of credit, which are
written undertakings by the Bank on behalf of a customer authorising a third party to draw drafts on the
Bank up to a stipulated amount under specific terms and conditions, are collateralised by the underlying
shipments of goods to which they relate or cash deposits and therefore carry less risk than a direct
borrowing.

20

Bank Vozrozhdenie

19 Contingencies and Commitments (continued)

Commitments to extend credit represent unused portions of authorisations to extend credit in the form of
loans, guarantees or letters of credit. With respect to credit risk on commitments to extend credit, the
Bank is potentially exposed to loss in an amount equal to the total unused commitments. However, the
likely amount of loss is less than the total unused commitments since most commitments to extend credit
are contingent upon customers maintaining specific credit standards. The Bank monitors the term to
maturity of credit related commitments because longer-term commitments generally have a greater
degree of credit risk than shorter-term commitments. Outstanding credit related commitments are as
follows:


Unused limits on overdraft loans 9 321 10 497
Guarantees issued 7 779 8 987
Undrawn credit facilities 2 488 1 561
Letters of credit for payments in the Russian Federation 196 70
Import letters of credit 1 032 935

Total credit related commitments 20 816 22 050

The total outstanding contractual amount of undrawn credit lines, letters of credit, and guarantees does
not necessarily represent future cash requirements, as these financial instruments may expire or
terminate without being funded.

21

Q1 2011 IFRS Report

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Q1 2011 IFRS Report