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Financial Results for the I quarter of 2014

On 20 June 2014, the Supervisory Board of Otkritie FC Bank approved its Condensed Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS) for the three months ended 31 March 2014.

Achievements of the Group in Q1 2014

In Q1 2014, Otkritie FC Banking Group (the ‘Group’) demonstrated an increase in operating income and a growing loan portfolio.

Total operating income less provisions for asset impairment and securities’ revaluation reached RUB 19.3 billion in 1Q 2014, demonstrating a 62.4% increase year on year.

Net interest income and net fee and commission income were the key growth drivers for the Group’s operating income, accounting for 81.1% and 18.8% respectively of the total operating income less provisions for asset impairment and securities’ revaluation.

Net interest margin increased to 5.1% (4.4% in Q4 2013).

Net interest income in Q1 2014 increased by 77.5% year on year to RUB 15.6 billion.

Net profit in Q1 2014 amounted to RUB 2.4 billion.

Return on equity (ROE) amounted to 8.0% in Q1 2014. ROE is to reach 17.0% net of losses from negative revaluation of securities in Q1 2014.

Net fee and commission income in Q1 2014 increased by 86.2% year on year to RUB 3.6 billion. The greater part of the Group’s net fee and commission income was accounted for by settlement transactions (RUB 2.1 billion) and commissions on agents’ fees (RUB 1.1 billion). The retail business segment earned a considerable portion of the total net fee and commission income of the Group: in Q1 2014, net fee and commission income of the retail business segment increased by 132.0% year on year to RUB 1.9 billion.

The Group’s year-on-year operating expenses remained virtually the same compared to 2013 Pro forma1. Payroll expenses accounted for 64.2% of the Group’s total operating expenses. The management of Otkritie FC Bank strictly monitors its operating expenses and takes steps to optimise spending efficiently.

The Cost-Income Ratio (operating expenses to operating income before provision for impairment) was 52.6% (44.0% net of losses from negative revaluation of securities in Q1 2014) (45.8% in Q1 2013).

Stable assets growth at a higher than average market rate

As at 31 March 2014, the Group’s total assets amounted to RUB 1,446.8 billion, demonstrating a 4.9% increase quarter on quarter, higher than the first quarter 2014 average market growth rate of approximately 3.4%. Net loan portfolio accounted for 65.6% of the total assets as at 31 March 2014 (63.8% as at 31 December 2013).

As at 31 March 2014, the Group’s net loan portfolio demonstrated a 7.9% increase quarter on quarter reaching RUB 948.6 billion and outperforming the market average of a 4.6% increase. The key business segments showed impressive results. The Corporate loan book increased by 8.6% quarter on quarter to RUB 598.4 billion. The Retail loan portfolio increased by 5.0% quarter on quarter to RUB 181.7 billion.

The loan loss provision (LLP) ratio in Q1 2014 stood at 3.3% (3.6% as at 31 December 2013). Non-performing loans slightly increased in Q1 2014 in line with overall uncertainty on the market.

The Group’s total liabilities amounted to RUB 1,309.9 billion as at 31 March 2014, increasing by 5.7% quarter on quarter. Customer accounts accounted for 63.6% of the Group’s total liabilities as at 31 March 2014.

Customer accounts amounted to RUB 833.7 billion as at 31 March 2014, increasing by 6.7% quarter on quarter. Term deposits increased by 8.5% to RUB 645.1 billion, accounting for 77.4% of the total customer accounts as at 31 March 2014. The Loans to deposits ratio stood at 113.8% as at 31 March 2014 (112.5% in 2013).

Interbank funding share in the Group’s liabilities structure reduced to 17.7% or RUB 231.6 billion as at 31 March 2014 (20.7% in 2013).

As at 31 March 2014, the securities issued by the Group amounted to RUB 158.8 billion, demonstrating a 26.4% increase quarter on quarter. The growth was attributed to an increase of promissory notes issued by 51.2% reaching RUB 93.2 billion as at 31 March 2014, most of which have been discount bearing promissory notes with maturity ranging from 6 months to 3 years.

Other sources of funding remained unchanged: subordinated debt amounted to RUB 69.0 billion or 5.3% of the Group’s total liabilities as at 31 March 2014.

The Tier 1 Capital Adequacy Ratio was 10.1% as at 31 March 2014 (10.2% as at 31 December 2013); the Group’s total equity reached RUB 136.9 billion, including RUB 29.4 billion of non-controlling interest. As at 31 March 2014, total capital adequacy ratio was 14.6%.

See consolidated IFRS financial statements as at 31 March 2014 at http://ir.open.ru/.

1Pro forma for year 2013 assuming the consolidation of Otkritie Bank since January 1st, 2013.