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Financial Results for the I quarter of 2012

NOMOS announces its Q1 2012 interim financial results

The Supervisory Board of NOMOS Bank on 29 May 2012 approved the Condensed Interim Consolidated Financial Statements in accordance with IFRS as of 31 March 2012 and for the 3 months ended 31 March 2012, including a review of the report by the independent auditor.

Group achievements in the first quarter of 2012

Strong operating performance in all segments

In the first quarter of 2012, Nomos delivered a strong performance with an annualized return on average equity (RoAE) ratio of 20.1%, in line with company guidance (2011: 18.2%). The return on average assets (RoAA) was healthy at 2.4% (2011: 2.0%).

First-quarter combined operating income before provisions for impairments was up 30.9% yoy to RUB 10.7 billion. Net interest income, net fees and commissions and trading income are the key drivers of the Group’s revenue generation, comprising respectively 68%, 16% and 13% of Group revenue. The net interest margin was 5.1%, in line with first quarter 2011.

Income from net fees and commissions increased in the first quarter of 2012 by 47.7% yoy to RUB 1.7 billion due to the development of cross-selling and the successful distribution of insurance products. The majority of net fees and commissions income comes from settlements (RUB 0.7 billion), documentary operations (RUB 0.5 billion) and from cash operations (RUB 0.3 billion). The net fees and commissions income earned by the Retail segment in first quarter 2012 increased 102.6% yoy to RUB 0.6 billion, as the Bank continued to focus on distribution of insurance products, foreign currency transactions and payment settlements.

In first quarter 2012 the Bank earned RUB 1.4 billion of net trading income. The Bank fully recovered the securities trading loss of RUB 0.6 billion reported for the full year 2011 and additionally earned RUB 0.9 billion on securities trading in the first quarter of 2012.

Operating expenses were down by 6.3% qoq to RUB 4.6 billion in first quarter 2012. The cost to income ratio (the ratio of operating expenses to operating income before provision for impairment) was 43.0%, in line with company guidance. In addition to day-to-day initiatives to increase productivity, Nomos is pursuing its efforts to restructure the branch network in order to reduce the level of decentralized back office work.

In first quarter of 2012, Nomos delivered good profitability and contributed to creating shareholder value. Nomos’ net profit was RUB 4.0 billion, of which RUB 3.2 billion is attributable to Nomos Bank shareholders. Earnings per share for the first quarter 2012 was RUB 34.82. Earnings per Global Depositary Receipt (GDR) was USD 0.6 based on an exchange rate at 31 March 2012 of 29.3 RUB/USD.

In first quarter 2012 the Group’s total assets were RUB 670.3 billion. Customer loans were stable at RUB 450.1 billion representing 67.2% of the total assets.

Total net customer loans grew by 0.5% qoq, adjusting for movements in exchange rates the net customer loan portfolio increased by 3.0% with strong growth in retail and corporate segments. The retail loan book grew 6.6% qoq to RUB 61.9 billion. The corporate loan book grew 2.2% qoq to RUB 327.9 billion adjusting for movements in exchange rates the corporate loan portfolio growth would be approximately 2.9% to RUB 337.3 billion. The small business loan portfolio increased 1.9% qoq to RUB 30.5 billion. Repo loans went down by 23.6% qoq to RUB 29.8 billion.

The cost of risk was stable at 0.8%. The ratio of loan loss provisions to gross loans declined to 4.1% in first quarter 2012 versus 4.4% at the end of 2011. The non-performing loans (NPLs: loans overdue more than 90 days) coverage ratio decreased from 212.7% at the end of 2011 to 164.0% at the end of first quarter 2012 reflecting the migration of two loans into the NPL category. This migration had no impact on the quarterly profitability of NOMOS as the loans were adequately provisioned in Q4 2011.

The Group funding structure remained stable and well diversified with deposits representing 64.5% or RUB 380.9 billion of the total liabilities, interbank accounting for 17.8% or RUB 105.2 billion of the total liabilities and bonds and promissory notes issued representing 11.2% or RUB 66.1 billion. The Group’s net loans to deposits ratio was 118.2% at 31 March 2012.

The Tier 1 capital ratio continued to improve during the first quarter of 2012 and was 12.8% at 31 March 2012 (2011: 12.0%). The Group’s total equity was RUB 80.0 billion, including RUB 14.3 billion of non-controlling interest. The total capital adequacy ratio was 16.7% as of 31 March 2012 excluding the impact of the new subordinated debt issued in the second quarter of 2012.

Financial Results for the I quarter of 2012