Key results:

• net interest income for 1Q 2014 increased by 46.6% yoy to RUB 2,643 mln, net interest margin amounted to 11.6% compared to 11.4% as of the beginning of the year
• net profit for 1Q 2014 amounted to RUB 3.1 mln
• the Bank’s total assets decreased by RUB 1,502 mln ytd to RUB 117,054 mln
• the Bank’s equity decreased by 0.6% ytd to RUB 14,505 mln as of the reporting date

Net interest incomegrew by 46.6% yoy to RUB 2,643 mln, net fee and commission income increased by 5.0% yoy to RUB 607 mln. As a result of active growth of net interest income, level of the net interest margin increased to 11.6% compared to 11.4% as of YE 2013.

Operating income of the Bank as for 1Q 2014 grew by 22.4% yoy to RUB 3,430 mln, operating expenses grew by 13.6% to RUB 1,279 mln mainly due to increase in personnel expenses by 18.9% yoy. In spite of operating expenses growth, cost-to-income ratio reduced to 37.3% from 41.3% as of the year-end 2013.

Due to worsening of economic conditions in Russia and political tension resulted from crisis in the Ukraine, the Bank’s cost of risk has grown, which resulted in a reduction of the Bank’s profitability ratios: return on average equity (ROAE) was 0.1% while return on average assets (ROAA) dropped to 0% (23.8% and 3.0% as of YE 2013 respectively).

Net profit of the Bank for 1Q 2014 amounted to RUB 3.1 mln compared to RUB 642.5 mln as for 1Q 2013. Net profit reduction amid growth of interest and commission income was driven by increase in the provision charge (+157.6% yoy) to RUB 2,140 mln and loss on operations with securities which amounted to - RUB150 mln in 1Q 2014 compared to gain of RUB 265 mln in 1Q 2013. The loss is caused by reduction of prices on the market for debt securities during the reporting period due to unstable political and economic conjuncture. Provision charge (impairment losses) grew due to worsening of the Bank’s retail loan portfolio quality and implementation of a new and more conservative provisioning policy introduced on January 1, 2014. Growth of impairment losses caused cost of risk ratio to reach 9.7% compared to 5.2% in 1Q 2013.

Gross loan portfolio (before provision for loan impairment) grew by 4.0% to RUB 89,671 mln compared to the beginning of the year. Portfolio of loans to individuals rose by 3.9% to RUB 61,589 mln (68.7% of the loan portfolio) and portfolio of loans to corporate clients and individual entrepreneurs grew by 4.1% to RUB 28,082 mln. Share of NPLs (loans overdue more than 90 days) in the loan portfolio grew to 9.5% as of the reporting date compared to 7.5% as of YE 2013. The level of provision coverage of NPLs increased to 93.1% compared to 89.8% as of YE 2013.

Securities portfolio comprising 10.3% of the total assets declined by 28.8% ytd to RUB 12,037 mln. 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 and banks’ promissory notes with rating not lower than BB- (95.7% of the portfolio).

Accounts and deposits of customers dropped by 6.8% ytd to RUB 75,834 mln mostly due to decline in amount of deposits of corporate customers and individual entrepreneurs (-16,7% ytd to RUB 25,727). Deposits and accounts of retail customers stood at approximately the same level as at the beginning of the year: RUB 50,107 mln as of 1Q 2014 compared to RUB 50,480 mln as of YE 2013.

The Bank’s equity calculated in accordance with the Basel Accord reached RUB 15,486 mln, which is comparable with the level of capital as of the beginning of the year (RUB 15,432 mln). Tier 1 capital adequacy ratio was 13.0% and Total capital adequacy ratio was 15.5%.

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 mln)

Key ratios (%)

¹  Calculated as an annualised ratio of impairment losses on loans to customers for a period to average gross loan portfolio.