i sberbank (switzerland) ag i annual report 2017 · sberbank (switzerland) ag i annual report 2017...

Sberbank (Switzerland) AG I Annual Report 2017 I 1

2 I Sberbank (Switzerland) AG I Annual Report 2017


Board of Directors 2017 2

Executive Board 3

Organisation Chart 4

External Auditors 5

Internal Auditors 5

Foreword by the Chairman of the Board of Directors and the CEO 6

Report by the Board of Directors 8

Management Report 2017 9

Balance Sheet 13

Income Statement 14

Statement of Cash Flows 15

Appropriation of Profit 16

Statement of Changes in Equity 16

Notes to the Financial Statements 2017 17

Report of the Statutory Auditor on the Financial Statements 38

Additional Disclosure of Capital and Liquidity Information According to FINMA Circular 2008/22 and 2016/1 41

Contents


Igor BulantsevSenior Vice President Head of Sberbank CIB, (subsidiary of Sberbank of Russia, Moscow) Studies at the Moscow State Technical University and Finance Academy under the Government of Russia

Moscow Russian Federation

Chairman of the Boardof Directors

Dr. Thomas Frick1)

Dr. iur LL.M. Attorney at law

Zollikon Switzerland

Deputy Chairman of the Board of Directors (Independent Member)

Bruno Battaini Consultant

Zurich Switzerland

Deputy Chairman of the Board of Directors (Independent Member)

Retired as of 28 April 2017

Alexander Morozov1) Chief Financial Officer, Deputy Chairman of the Executive Board, Sberbank of Russia, MoscowMaster in economic at LomonosovMoscow State University andAdvanced Management Program, Executive Education at HarvardBusiness School


Member of the Board of Directors

Roland Müller-Ineichen1)

Senior Banking Consultant,Swiss Fiduciary Expert and Swiss,Public Accountant

RainSwitzerland

Member of the Boardof Directors(Independent Member)

Martin Gut Senior Relationship ManagerMaster in business KSZ

Oberägeri Switzerland

Member of the Board of Directors (Independent Member)

Andrey Ivanov Global Head of Trade Financeand Correspondent Banking,Sberbank of Russia, Moscow


Member of the Board of Directors

Retired as of 16 March 2017

Dr. Giuseppe Benelli Senior Financial Consultant

Bülach Switzerland

Member of the Board of Directors (Independent Member)

Retired as of 28 April 2017

1) The Board of Directors has established an Audit and Risk Committee in accordance with the FINMA Circular 2017/1 and elected Dr. Thomas Frick and Roland Müller-Ineichen as independent members, as well as Alexander Morozov as an additional member. Roland Müller-Ineichen was elected Chairman of the Audit and Risk Committee.

In all cases the whole Board of Directors is collectively responsible for the delegated tasks of the Audit and Risk Committee or tasks delegated to individual persons within the Audit and Risk Committee.

Board of Directors 2017


Annett ViehwegMaster of economics at Universityof Saarland and Academy ofEconomy “F. Plekhanov” in Moscow

Chairman of the Executive Board From 15 August 2017

Peter McNulty Chairman of the Executive Board Until 15 August 2017

Irina KalininaMaster of mathematics and natural sciences and master of economics at Peoples' Friendship University of Russia

Member of the Executive BoardChief Risk Officer

Rudolf MüllerDr. oec. et lic.iur. HSG, attorney at law

Member of the Executive BoardGeneral Counsel

Igor UkrasinMaster in Science at Moscow Institute of Physics and Technology and Master of Business Administration at Wharton Scholl of the Universityof Pennsilvenia

Member of the Executive BoardHead of Corporate Bank-ing and Coverage

Ekaterina EmelianovaMaster of Management at Lomonosov Moscow State University

Member of the Executive BoardChief Financial Officer

From 1 October 2017

Paul Hawkes Member of the Executive BoardChief Financial Officer

Until 31 May 2017

Martin BeinhoffMaster degree at the University of St. Gallen (HSG)

Member of the Executive BoardChief Operating Officer

From 1 December 2017

Executive Board


Board of Directors

Internal Audit

ALM Committee

Risk Committee

Audit and Risk Committee

Executive Board

General Assembly

Risk

Finance HRLegal and ComplianceITSales and

Structuring

ALM

MIS

OperationsTrading

Document Business

COOGlobal Markets CFO GC

CTF (Origination)

CTF (Transaction)

Credit

Collateral

Coverage

Business Management

Corporate Banking and Coverage

CEO

Risk

Administration

NPA

Organisation ChartSberbank (Switzerland) AG


On 28 April 2017 the Annual General Meeting re-elected Ernst & Young AG, Zurich as statutory auditors for financial year 2017. Audit work includes financial and regulatory audits, as well as other assurance services that can be provided by the statutory auditor.

External Auditors

Internal AuditorsInternal audit provides an independent objective assurance and consulting activity designed to add value and improve the Bank's operations. It helps the Bank accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control and governance processes.

The internal audit function is currently outsourced to PricewaterhouseCoopers AG.


Foreword by the Chairman of the Board of Directors and the CEOto the Annual General Meeting of Shareholders on 23 March 2018


IntroductionFor Sberbank (Switzerland) AG, the year 2017 was marked by continuous development and significant revenue growth of core business areas. The Bank has further strengthened its position as international commodity hub for the Group. Despite the external challenges, mainly the current geopolitical situation, the business was profitable and even improved over-all profitability.

Similarly to previous periods, investments in devel-oping the Bank’s platform were one of the key prior-ities in 2017. The Bank has started the major project to replace its legacy core banking system. New core system is expected to lay a solid basis for deployment of scalable infrastructure and allow the Bank to ac-commodate substantial trading flows.

In late 2017, the main shareholder of SBS support-ed the business by increasing Tier 1 capital in the amount of 366 million Swiss francs. With a current level of Tier I capital of 550 million Swiss francs, the Bank is able to meet the client demand, be compet-itive in large-size transactions and be an attractive counterparty in global markets and commodity trade finance transactions.

2017 year in reviewThe global markets business has shown an enormous growth in revenues, profitability and further expand-ed its product range. In 2017, focus was on tailoring of

commodity-related product offering. As part of stra-tegy, the Bank successfully launched and developed its physical gold trading activities. In this respect, mem-bership in the Shanghai Gold Exchange was rather fruitful. Alongside, the Bank has diversified the trad-ing revenue base by adding other precious and base metals. Besides, the Bank has completed a number of sizable structured deals with interest rates derivatives, which were important revenue contributors for the whole Bank.

The commodity trade finance business, which had its third year of operation since launch in 2015, advanced on its development path and the Bank proved itself as a credible market player. During 2017, the number of clients working with the Bank in Commodity Trade Fi-nance increased further and the volume of funding to clients exceeded CHF 3 billion, up from CHF 1.8 billion in 2016. The Bank holds a diversified portfolio across various industries, products and financing stages and is looking forward to strengthen its role in the Russian /CIS export trade financing chain.

In 2017, Sberbank (Switzerland) AG has significantly strengthened its management team in business sup-port functions.

In September, Fitch affirmed Sberbank (Switzerland) AG’s rating as BBB– and revised the outlook from “stable” to “positive”. The rating and the outlook are aligned with the credit rating and the outlook of Sberbank of Russia.

Foreword by Igor Bulantsev, Chairman of the Board of Directors, and Annett Viehweg, Chairman of the Executive Board and CEO


Going forwardSberbank (Switzerland) AG remains committed to further growth. Implementation of robust infra-structure platform and scalable business model will be the main priorities for the management in 2018.

Being an attractive employer and development of the team will remain one of the main priorities of the Management. Bank’s ability to attract, retain and motivate highly qualified personnel with right competencies mix is essential to achieve our ambi-tious targets going forward.

Thank youWe would like to thank our clients for the contin-ued trust and loyalty that they have placed in us. Building long-term solid partnerships is at the very core of our business model.

The development of the Bank has been driven by the hard work and dedication of our employees and we would like to thank them for their continuing efforts and commitment.

We would also like to thank our major shareholder, Sberbank, for its on-going support of our develop-ment plans.

Igor Bulantsev Chairman of the Board of Directors

Annett Viehweg CEO and Chairman of the Executive Board

Report by the Board of Directorsto the Annual General Meeting of Shareholders on 23 March 2018

The Board of Directors proposes to the Annual Gen-eral Meeting to apply the net profit for the year 2017 of CHF 0.2 million to the net loss brought forward from the previous year of CHF 40.7 million result-ing in a balance sheet net loss carry forward of CHF 40.5 million.

Events to be reported after the closing of the business year 2017No events required to be reported have taken place since the closing of the business year 2017.


Financial performance

2017 continues to be the year of challenging envi-ronment for banking industry and Sberbank Swit-zerland in particular due to geopolitical, economic and regulatory environment. Financial markets re-mains highly volatile and unpredictable. At the same time Russian economy started recovering in 2017 after declining in 2015-16. GDP increased 1.5%, and the growth was generally balanced. The European banking system is increasingly benign as economic conditions in Europe continue to improve, with the IMF recently upgrading Eurozone GDP growth fore-casts. Generally the outlook for Bank lending is one of modest growth amidst improving macro trends, which will be supportive for revenues. Another pos-itive driver for Banks’ revenues is the normalising yield curve as the market expects rates to gradually rise. Another factor is asset quality, with trends con-tinuing to improve (i.e. falling cost of risk) on macro improvement.

During 2017 the Bank has managed to improve its financial performance delivering strong operation-al results and creating solid background for futher business growth.

As of 31 December 2017 total assets of the Bank in-creased over 30% in comparison with 31 December 2016, which was mainly driven by growing business resulting in material increase both loans to customers and trading portfolio assets. Loan to customers con-sititutes 42% of total assets and together with traing portfolio over 55% of total assets. Growth in interest earning assets were mainly driven by commodities related transactions both physical and structured.

Overall result of operating income prior to provisions and operating expenses is stable year-of-the-year and stays above CHF 55 million. In 2017 Bank has managed to extend its products range and launch new type of deals as well as improve income from commissions, which is one of the focus area for the Bank’s strategy.

Operational expenses on a like-to-like basis, i.e. ex-cluding one off stamp tax related to capital increase were CHF 35 million, which is CHF 2 million less than 2016. Such optimization of cost basis is a result of cost management and optimization performed by Bank.

During 2017 Bank’s capital was increased by CHF 366 million, which together with increased funding base from both financial institutions and corporate client deposits created solid funding bases for future busi-ness expansion.

Net income for 2017 exlcuding stamp tax, which is one-off cost, is CHF 3.86 million, which is almost 8 times higher than comparative result of 2016. Total profit for 2017 is CHF 0.2 million in comparison with CHF 0.5 million the year before.

Risk assessment

Risk management The Bank establishes its own Risk Management framework, in accordance with these Group- level policies and methodologies and with regulatory requirements set by the applicable Swiss Banking Laws, the principles issued by the Basel Commit-tee on Banking Supervision and FINMA Circulars. The Bank’s risk management policies are designed to identify and analyze risks, to set appropriate risk limits and controls, and to monitor the risks and ad-herence to limits by means of reliable and up-to date administrative and information systems. The Bank regularly reviews its risk management framework to reflect changes in markets, products and emerging best practice. Individual responsibility and account-ability, instilled through training, are designed to deliver a disciplined, conservative and constructive culture of risk management and control.

The Bank has several management layers that pro-vide cohesive and effective internal risk governance:

Management Report 2017


• The Board of Directors bears the ultimate respon-sibility for the Bank’s proper management of risks, including through setting the level of the Bank’s risk appetite. It delegates the execution responsi-bilities of the risk management tasks to the Execu-tive Board and other committees.

• The Executive Board monitors and manages overall the aggregate risk exposure of the Bank, including through setting detailed policies for its manage-ment, determining the impact of the Bank’s risk appetite on the implementation of strategic and immediate business targets. The Executive Board is responsible for executing, operating and super-vising the risk management function, as well as re-porting to the Board of Directors. In addition, the Executive Board ensures on behalf of the Board of Directors that all the Bank’s material risks are properly identified, assessed and reported through periodic risk analysis.

• The Bank’s “Risk Committee” consists of Credit, Mar-ket and Operational Risk Chambers. The Commit-tee Chambers oversee the respective risk areas. The Risk Committee is a governing body that regulates risk management decisions across the Bank and is independent of Coverage (client relationship man-agement), Corporate Banking and Lending division, and other departments (Trading/Trade Finance). The Risk Committee is chaired by the CEO and is represented by the Bank’s most senior profession-als. The Risk Committee has unrestricted access to information and documents within the scope of its function to ensure execution of its tasks.

• The Asset and Liability Committee is monitoring the interest rate and foreign currency risks in the banking book, as well as liquidity risk, funding and regulatory capital management.

The Risk Committee as well as the Asset and Liability Committee report directly to the Executive Board.

The day to day risk controlling is performed by the 2nd line risk management function and is independ-

ent from all business and support units of the Bank. The risk controlling department’s main responsibili-ties are monitoring and controlling of all risk-taking activities and all risks in the Bank’s portfolio, as well as active communication and reporting directly to the CRO of the Bank.

The Bank’s CRO informs the Company’s CEO, the Audit and Risk Committee of the BoD, as well as the Board of Directors and, based on a functional reporting line to the Group, the Risk Management of the Group, about the results of the work of the independent risk controlling functions of the Bank.

The risk management function within the Bank is carried out in respect of financial risks (liquidity, credit and market risks) and operational risks. 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 risks management functions, addressing all inherent risks of business operating, such as ex-ecution, settlement, transfer, legal, compliance and regulatory risks, are intended to ensure proper func-tioning of internal policies and procedures to mini-mize operational risks.

Liquidity risk Liquidity risk is the risk that an entity will encoun-ter difficulty in meeting obligations associated with financial liabilities. The liquidity risk is managed to ensure that the Bank always has sufficient liquidity to be able to fulfil its payment obligations, even in stress scenarios. The liquidity risk framework com-prises functional risk measurement and control systems to ensure the Bank is continuously able to pay its obligations at any time. It also defines strat-egies and requirements for the management of li-quidity risk under stress conditions as part of the defined liquidity risk tolerance. They mainly include risk mitigation measures, the holding of highly liq-uid assets as a liquidity buffer, and a contingency plan to manage liquidity shortfalls. The Bank’s li-


quidity is managed, monitored, reported and as-sured on a daily basis.

Credit riskThe Bank applies high standards to assess the credit risk of its counterparties. For commercial loans and bonds (issuer risk) the requirements are particularly high and therefore the assess-ment also takes into account stressed economic conditions to simulate the impact on the individ-ual counterparty. All credit exposures are limited and monitored using a differentiated limit system that also includes the credit documentation terms (covenants). Concentration risk is countered by limiting the credit risk per counterparty and its re-lated group.

Market riskThe Bank takes on exposure to market risks. Market risks arise from open positions in interest rate and, currency and commodity products, all of which are exposed to general and specific market movements. The Risk Management function, an independent unit, develops the Bank’s market risk management policies and measurement techniques. Each major operating entity has an independent market risk control function which is responsible for measuring market risk exposures in accordance with the poli-cies defined by the Risks Department, and monitor-ing and reporting these exposures against the pre-scribed limits on a regular basis.

• Currency risk. The Bank takes on exposure to ef-fects of fluctuations in the prevailing foreign cur-rency exchange rates on its financial position and cash flows. The Bank actively trades securities and other financial instruments denominated and settled in different currencies and provides its cli-ents access to foreign exchange markets. For the purpose of controlling these currency exposures the Bank enters into foreign exchange derivative transactions.

• Interest rate risk. The Bank takes on exposure to the effects of fluctuations in the prevailing levels of market interest rates on its financial position and cash flows. Interest margins may increase as a re-sult of such changes but may reduce or create loss-es in the event that unexpected movements arise. Management of interest rate risk is performed by ALM/Treasury Management function, with inde-pendent control by Risk Management function.

• Other market risk. The Bank’s exposure to equity price risk is not material.

Operational riskOperational risks are identified, monitored and lim-ited by implementing appropriate mitigating factors such as internal control systems (ICS) and proper compliance functions in place, as well as by train-ing and instructing of employees within the depart-ments. At the quantitative and qualitative levels, risk thresholds (risk tolerances) are defined and moni-tored where appropriate. The identification, analysis and measurement of operational risks are managed as an iterative, ongoing process that is conducted throughout the Bank. The qualitative risk assess-ment method takes account of risks that are diffi-cult or impossible to quantify. This method is based on the view that the most accurate picture can be obtained primarily through subjective evaluations by internal specialists in the relevant fields. Subjec-tive estimates are produced using various methods of data collection. The assessment and qualitative evaluation of risks is founded on the Key Risk Indi-cator (KRI) process.

The quantitative risk assessment is performed to record actual or potential operational risks that occur in the Bank in the form of numerical values. The primary objective of this assessment is to create transparency and expertise regarding the Bank’s op-erational risk situation and its active management of risks as well as to ensure compliance with regulatory and legislative requirements.


The Bank mitigates operational risks through its ICS and an iterative process to ensure that the ICS func-tions effectively and that it is kept up to date. The re-porting procedure provides Executive Management with support in the early identification of operation-al risks and in implementing appropriate mitigation measures.

Regulatory ratios

Capital adequacy and liquidity ratios were at com-fortable level throughout whole 2017 year. Com-pared to the minimum regulatory requirements the Bank is well capitalized and has healthy liquidity profile. Current level of regulatory ratios provides solid ground for the further business growth.

Employees

As of 31 December 2017 the full-time equivalent number of employees as of 31 December 2017 was 86.6 (2016: 88.5).

Key regulatory ratios Minimum requirement 31/12/2017 31/12/2016

Total capital ratio 14.0% 30.88% 26.05%

Liquidity coverage ratio (average Q4) 80% (2017); 70% (2016) 210.82% 124.89%


31/12/2017 31/12/2016 ChangeNote CHF 1,000 CHF 1,000 CHF 1,000

AssetsLiquid assets 763,143 989,965 –226,822Amounts due from banks 295,287 177,177 118,110Amounts due from customers 3.1 1,078,444 604,318 474,126Trading portfolio assets 3.2 331,292 10,737 320,555Positive replacement values of derivative financial instruments 3.3 51,803 74,983 –23,180Financial investments 3.4 43,121 56,786 –13,665Accrued income and prepaid expenses 7,127 8,054 –927Tangible fixed assets 3.5 5,119 6,722 –1,603Other assets 3.6 2,107 805 1,302Total assets 2,577,443 1,929,547 647,896

Total subordinated claims 0 5,282 –5,282 of which subject to mandatory conversion and/or debt waiver 0 0 0

Liabilities Amounts due to banks 1,354,690 1,179,203 175,487Amounts due in respect of customer deposits 616,038 506,739 109,299Negative replacement values of derivative financial instruments 3.3 32,354 46,508 –14,154Accrued expenses and deferred income 14,141 11,602 2,539Other liabilities 3.6 4,654 705 3,949Provisions 3.9 5,081 509 4,572Bank's capital 3.10 484,751 118,750 366,001Statutory capital reserve 106,251 106,251 0 of which tax-exempt capital contribution reserve 106,251 106,251 0Profit/loss (–) brought forward –40,720 –41,215 495Profit/loss (–) for the year 203 495 –292Total liabilities 2,577,443 1,929,547 647,896

Total subordinated liabilities 75,000 75,000 0 of which subject to mandatory conversion and/or debt waiver 75,000 75,000 0

Off-balance sheet transactions Contingent liabilities 190,868 76,233 114,635Irrevocable commitments 122 100 22

Balance Sheet


2017 2016 ChangeNote CHF 1,000 CHF 1,000 CHF 1,000

Result from interest operations Interest and discount income 5.2 69,561 37,256 32,305Interest and dividend income on trading portfolios –1 135 –136Interest and dividend income on financial investments 2,563 1,462 1,101Interest expense 5.2 –53,523 –19,790 –33,733Gross result from interest operations 18,600 19,063 –463

Changes in value adjustments for default risks and losses from interest operations –15,602 –13,505 –2,097

Subtotal net result from interest operations 2,998 5,558 –2,560

Result from commission business and services Commission income from securities trading and investment activities 20 20 0Commission income from lending activities 7,769 7,790 –21Commission income from other services 6,328 4,019 2,309Commission expense –507 –27 –480Subtotal result from commission business and services 13,609 11,802 1,807

Result from trading activities and the fair value option 5.1 25,272 25,153 119

Other result from ordinary activities Other ordinary income 0 0 0Subtotal other result from ordinary activities 0 0 0

Operating expenses Personnel expenses 5.3 –24,533 –26,814 2,281General and administrative expenses 5.4 –10,556 –12,156 1,600Stamp tax 5.4 –3,660 0 –3,660Subtotal operating expenses (excluding stamp tax) –35,089 –38,970 –3,881Subtotal operating expenses –38,749 –38,970 221

Value adjustments on participations and depreciation and amortisation of tangible fixed assets and intangible assets 3.5 –2,183 –1,745 –438

Changes to provisions and other value adjustments and losses –341 –972 631Operating result (excluding stamp tax) 4,266 826 3,440Operating result 606 826 –220

Extraordinary income 5.5 0 4 –4Extraordinary expenses 5.5 –43 –11 –32Taxes 5.7 –360 –324 –36Profit/loss (–) for the year (excluding stamp tax) 3,863 495 3,368Profit/loss (–) for the year 203 495 –292

Income Statement


2017 2016Cash inflow Cash outflow Cash inflow Cash outflow

CHF 1,000 CHF 1,000 CHF 1,000 CHF 1,000

Cash flow from operating activities (internal financing)Profit/loss (–) for the year 203 0 495 0Value adjustments on participations, depreciation and amortisation of tangible fixed assets and intangible assets 2,183 0 1,745 0Changes in value adjustments for default risks and losses 15,602 0 13,513 0Provisions and other value adjustments 4,572 0 0 115Accrued income and prepaid expenses 927 0 0 5,816Accrued expenses and deferred income 2,539 0 2,808 0Other assets 0 1,302 1,673 0Other liabilities 3,949 0 487 0Subtotal 29,975 1,302 20,721 5,931

Cash flow from shareholders' equity transactionsBank's capital 366,001 0 0 0Statutory capital reserve 0 0 0 0Changes in reserves from capital contributions 0 0 0 0Subtotal 366,001 0 0 0

Cash flow from transactions in respect of participa-tions, tangible fixed assets and intangible assetsTangible fixed assets 121 700 0 2,343Subtotal 121 700 0 2,343

Cash flow from banking operationsMedium- and long-term business (> 1 year)Amounts due to banks 47,957 0 0 90,611Amounts due from customers 0 330,415 261,839 0

Short-term businessAmounts due to banks 127,529 0 853,136 0Amounts due in respect of customer deposits 109,299 0 199,067 0Negative replacement values of derivative financial instruments 0 14,153 0 19,345Amounts due from banks 0 118,110 0 126,228Amounts due from customers 0 159,314 0 360,534Trading portfolio assets 0 320,555 0 6,199Positive replacement values of derivative financial instruments 23,180 0 0 7,870Financial investments 13,665 0 0 56,784

LiquidityChange in liquid assets 226,822 0 0 658,918Subtotal 548,452 942,547 1,314,042 1,326,489

Total 944,549 944,549 1,334,763 1,334,763

Statement of Cash Flows


Appropriation of Profit

Statement of Changes in Equity

31/12/2017 31/12/2016 ChangeCHF 1,000 CHF 1,000 CHF 1,000

Appropriation of profit/coverage of loss Profit/loss (–) brought forward –40,720 –41,215 495Profit/loss (–) for the year 203 495 –292Distributable profit/accumulated loss (–) –40,517 –40,720 203

Transfer from statutory capital reserve (tax-exempt capital contribution reserve) 0 0 0Total available for appropriation –40,517 –40,720 203

Appropriation of profit/coverage of lossAllocation to statutory retained earnings reserve 0 0 0Allocation to voluntary retained earnings reserves 0 0 0Distributions from distributable profit 0 0 0Other appropriation of profit 0 0 0Profit/loss (–) carried forward –40,517 –40,720 203

Bank’s capital

Capital reserve

Voluntary retained earnings reserves and profit/loss (–)

carried forwardProfit/loss (–)

for the year TotalCHF 1,000 CHF 1,000 CHF 1,000 CHF 1,000 CHF 1,000

Equity at start of current period 118,750 106,251 –41,215 495 184,281 Capital increase/(decrease) 366,001 0 0 0 366,001 Other contributions/other capital paid in 0 0 0 0 0 Dividends and other distributions 0 0 0 0 0 Other allocations to (transfers from) the reserves for general banking risks 0 0 0 0 0 Other allocations to (transfers from) the other reserves 0 0 495 –495 0 Profit/loss (–) for the year 0 0 0 203 203 Equity at end of current period 484,751 106,251 –40,720 203 550,485


1. Corporate and General Information

Sberbank (Switzerland) AG (hereinafter Bank) is in-corporated and domiciled in Switzerland and has its registered office at Gartenstrasse 24, CH-8027 Zurich, Switzerland. During 2017 Sberbank (Switzer-land) AG has closed its Representative office in Mos-cow, Russia.

Main activitiesDuring 2017 the Bank focused on development of its commodity related business in both commodity trade finance business and global markets business, last includes derivative trading as well as physical commodity trading. The above were two main fo-cus areas of the Bank which were supplemented by corporate lending arrangements as well as transac-tional banking service.

2. Accounting and Valuation Principles

Accounting, reporting and valuations are based on the provisions of the Swiss Code of Obligations, the Swiss Federal Banking Law and its Ordinance as well as the statutes and the guidelines of the Swiss Fi-nancial Market Supervisory Authority (FINMA) con-cerning the preparation of financial statements for banks (FINMA Circular 2015/1).

Sberbank (Switzerland) AG standalone financial statements are prepared in the form of reliable as-sessment statutory single-entity financial state-ments in accordance with the regulations of the Swiss Code of Obligations, the Swiss Federal Bank-ing Law and its Ordinance as well as the statutes and the guidelines of the Swiss Financial Market Su-pervisory Authority (FINMA) concerning the prepa-

ration of financial statements for banks (FINMA Circular 2015/1). Financial statements are stated in Swiss francs (CHF) as it is functional currency of Sberbank (Switzerland) AG. The financial year ends on 31 December.

Recording of transactionsTransactions are generally recognized on a trade date basis at the point of time when they become legally binding unless specific guidance is provided for settlement date accounting, such as corporate loans and similar type of transactions.

Foreign currency translationTransactions denominated in foreign currency are translated into Swiss francs at the market spot ex-change rate on the date of transaction. All curren-cy translation effects are recognized in the income statement.

The following foreign currency exchange rates were used for translation as per the relevant balance sheet dates:

2017 2016

USD/CHF 0.97557 1.01868

EUR/CHF 1.19770 1.07364

GBP/CHF 1.34943 1.25904

100 RUB/CHF 1.57651 1.66929

Amounts due from banks, amounts due from customersThese items are recognized at their nominal value less any necessary value adjustments.

Notes to the Financial Statements 2017


Trading portfolios in securities, precious metals and commoditiesTrading portfolios, which includes securities, precious metals and commodities are valued and shown in the balance sheet at their fair value. Fair value is consid-ered to be the price quoted in an efficient and liquid market or the value resulting from the calculation us-ing an appropriate valuation model. Trading portfolios, for which, as an exception, no fair value is available, are recorded in the balance sheet according to the princi-ple of lower of cost or market. Any gains or losses re-sulting from the valuation are recorded under “results from trading activities and the fair value option”.

Financial investmentsFixed income debt securities, which were acquired with the intention of holding them till maturi-ty are valued using accrual method, i.e. a premium or a discount arising on acquisition amortized over the remaining term and recorded accordingly. Any interest- related profit or loss realized on premature sale or repayment is accrued over the residual term, i.e. to the original maturity.

Shares and similar securities are valued according to the principle of lower of cost or market.

Tangible fixed assets and intangible assetsNew investments in fixed assets and software are capitalised and valued at cost provided they are used for more than one accounting period and the value exceeds CHF 5,000. Investments in existing fixed as-sets and software are capitalised if this investment enhances the market or utilisation value or extend estimated useful life time significantly.

Tangible fixed assets and intangible assets are re-corded in the balance sheet at cost less accumulat-ed depreciation. Straight-line depreciation method is applied and it is applied over the estimated useful

life period of the asset. Depreciation is recorded in the income statement under the heading “Value adjust-ments on participations and depreciation and amor-tisation of tangible fixed assets and intangible assets”.

The value of fixed assets is re-evaluated whenever exceptional events or circumstances indicate that the book value of the asset is no longer warranted.

The estimated utilisation terms for different fixed assets are as follows:

Software 60 months

Fixtures, fittings and installations 60 months

Computer and communication equipment 36 months

Other 60 months

Realised profits or losses from the disposal of fixed assets are recorded as “Extraordinary income” or “Extraordinary expense” accordingly.

Liabilities to pension planThe Bank does not have its own pension plan. The employees of the Bank are insured in the pension fund of Swiss Life. The pension fund of Swiss Life is a defined contribution scheme. All employees are in-sured against death and invalidity, and in addition, all employees who have reached the age of 24 are insured against old age from the start of the next calendar year. The pension age for men and women is as set by law. The Bank includes the employer con-tributions in “Personnel expenses”. The Bank has no further pension liabilities even in the case of the pen-sion fund having an under coverage of its liabilities.

TaxesProvisions have been made for all Federal, Cantonal and Communale taxes. Current taxes on profits for the period are determined in accordance with the


local discal provisions on the determination of prof-its and recognised as expense in the same account-ing period at which profit has arised. Regular capital and income taxes payable are disclosed under “Ac-crued expenses and deferred income”. Stamp tax on capital increase is not included to current taxes and reflected under General and Administrative Expens-es. Indirect taxes due/subject to refund such as VAT are disclosed under “Other liabilities”/”Other assets” accordingly.

Valuation adjustments and provisionsValuation adjustments and provisions are prudently made for all risks identifiable at the balance sheet date. The Bank uses a loan loss provision meth-odology based on individual credit ratings driven by probability of default (PD), exposure at default (EAD), loss given default (LGD), credit conversion factor (CCF). Since November 2017 the loan loss pro-vision methodology was further enhanced and loss identification period (LIP) was added to the calcula-tion, the values of CCF were amended in accordance with FINMA circular “Ordinance on Capital Ade-quacy and Risk Diversification for Banks and Secu-rities Dealers”. For 2016 and 2017, general valuation adjustments and provisions cover latent risks have been calculated and booked.

Changes in comparison to the previous yearIn November 2017, methodology for loan loss provi-sion (LLP) calculation has been further enchanced in order to accommodate new type of business, which Sberbank Switzerland was about to launch. As a re-sult of the above mentioned development in meth-odology loss identification period (LIP) has been introduced and was applied for the whole existing portfolio of loans, which has similar nature to com-modity prepays type of transactions. For the com-parison purpose we present below the effect of the change in methodology for financial year 2016, if we

had already used the same methodology for 31 De-cember 2016 as for 31 December 2017:

31/12/2016New

methodology

31/12/2016Old

methodologyTotal loan loss provisions in CHFk 14,778 16,003

Total reversal of loan loss provisions if new methodology had been used for 31.12.2016 in CHFk 1,225

No other changes to the accounting methodolo-gy and valuation principles were introduced during 2017 compared to the previous year.

Contingent liabilities and irrevocable commitments Contingent liabilities and irrevocable commitments are recorded at its nominal value under section “Off-balance-sheet transactions”. Risk Participa-tion Agreements (RPA) based on which Sberbank (Switzerland) AG sold protection on credit risk to its counterparty are also included into this line item. Provisions for foreseeable risks are established under liabilities section in the balance sheet.

Derivative financial instrumentsDerivative financial instruments for trading purpos-es are valued at fair value and the results are pre-sented in “Result from trading activities”. Fair value is the price on the measurement date that would be received on the sale of an asset or paid to transfer a liability in an orderly transaction between market participants in the principal market, or in the most advantageous market in the absence of principal market. The fair value of derivatives defined either based on quoted prices in active markets or based on valuation models for which observable market data are used as significant input.


Events after the Balance Sheet dateNo events occurred after the balance sheet date that could have a significant impact on the equity, finan-cial state or results of the Bank with regard to the year under review.


3.1 Presentation of collateral for loans/receivables and off-balance-sheet transactions, as well as impaired loans/receivables

Type of collateral

Secured by mortgage

Other collateral (cash and

commodities*) Unsecured TotalCHF 1,000 CHF 1,000 CHF 1,000 CHF 1,000

Loans (before netting with value adjustments) Amounts due from customers 0 357,926 739,315 1,097,241Total loans (before netting with value adjustments) Current year 0 357,926 739,315 1,097,241

Previous year 0 556,411 63,913 620,324Total loans (after netting with value adjustments) Current year 0 343,784 734,660 1,078,444

Previous year 0 540,405 63,913 604,318

Off-balance-sheetContingent liabilities 0 76 190,792 190,868Irrevocable commitments 0 0 122 122Credit commitments 0 0 0 0

Total off-balance-sheet Current year 0 76 190,914 190,990Previous year 0 72 76,261 76,333

Gross debtamount

Estimated liquidation value

of collateralNet debt amount

Individual valueadjustments

CHF 1,000 CHF 1,000 CHF 1,000 CHF 1,000

Impaired loans/receivables Current year 21,907 5,033 16,874 16,874Previous year 39,725 25,773 13,952 13,952

*Commodities collateralThe Bank benefits from collateral for the Commodity Trade Finance business being physical commodities themselves or rights under purchase and sales contracts for underlying commodities. The Bank has in its portfolio all types of regular CTF physical goods: soft (grains, seeds, edible oils, fertilizers, etc.), energy (oil products, petrochemicals, synthetic rubber, etc.) and metals (nickel, aluminum, etc.).

Impaired loans and non-performing receivables

As at 31 December 2017 the Bank had made value adjustments amounting to CHF 16.874 million (2016: CHF 13.952 million) for customer loans which are considered as impaired or defaulted.

The loan for which an value adjustment has been booked as of 31 December 2016 could be sold In the course of March 2017 with no material impact on the income statement 2017.

Value adjustments for latent default risksAs at 31 December 2017 the Bank had value adjustments for latent default risks amounting to CHF 1.923 million (2016: CHF 2.054 million).

3. Information on the Balance Sheet


3.2 Breakdown of trading portfolios and other financial instruments at fair value (assets and liabilities)

31/12/2017 31/12/2016CHF 1,000 CHF 1,000

AssetsTrading portfolio assetsDebt securities, money market securities/transactions 0 5,282 of which listed 0 5,282Precious metals and commodities 331,292 5,455Total trading portfolio assets 331,292 10,737

Total assets 331,292 10,737 of which determined using a valuation model 81,904 0 of which securities eligible for repo transactions in accordance with liquidity requirements 0 0

LiabilitiesTrading portfolio liabilitiesDebt securities, money market securities/transactions* 0 0 of which listed 0 0Total trading portfolio liabilities 0 0

Total liabilities 0 0 of which determined using a valuation model 0 0

* For short positions (booked using the trade date accounting principle)


3.3 Presentation of derivative financial instruments (assets and liabilities)

Own trading contracts Hedging instruments

Positive replacement

values

Negative replacement

valuesContract

volume

Positive replacement

values

Negative replacement

valuesContract

volumeCHF 1,000 CHF 1,000 CHF 1,000 CHF 1,000 CHF 1,000 CHF 1,000

Interest rate instrumentsSwaps 8,167 168 4,225,669 0 0 0Interest options (OTC) 1,202 1,145 123,546

Foreign exchange/precious metalsForward contracts 5,739 1,209 362,860 0 0 0Combined interest rate currency swaps 21,843 19,458 4,511,347 0 0 0Futures 0 4,829 82,975Options (OTC) 5,363 5,511 767,192 0 0 0

Credit derivativesCredit default swaps 9,489 34 43,901 0 0 0

Total before netting agreements Current year 51,803 32,354 10,117,491 0 0 0 of which determined using a valuation model 51,803 32,354 10,117,491 0 0 0

Previous year 74,983 46,508 7,414,665 0 0 0 of which determined using a valuation model 67,211 46,478 7,247,635 0 0 0

Positivereplacement

values

Negativereplacement

valuesCHF 1,000 CHF 1,000

Total after netting agreementsCurrent year 36,737 17,288Previous year 74,983 46,508

Central clearing houses

Banks and securities dealers

Other customers

CHF 1,000 CHF 1,000 CHF 1,000Breakdown by counterpartyPositive replacement values (after netting agreements) 140 27,586 9,010


3.4 Breakdown of financial investments Book value Fair value

31/12/2017 31/12/2016 31/12/2017 31/12/2016CHF 1,000 CHF 1,000 CHF 1,000 CHF 1,000

Financial investmentsDebt securities 43,119 56,784 47,145 63,210 of which intended to be held to maturity 43,119 56,784 47,145 63,210 of which not intended to be held to maturity (available for sale) 0 0 0 0Equity securities 2 2 2 2 of which, qualified participations (at least 10% of capital or votes) 0 0 0 0

Precious metals 0 0 0 0Real estate, commodities and motor vehicles 0 0 0 0Total 43,121 56,786 47,147 63,212 of which securities eligible for repo transactions in accordance with liquidity requirements 0 0 0 0

* At least 10% of capital or votes

Fitch BB+ to B– Fitch A+ to A–Breakdown of counterparties by rating Debt and equity securities: book values 43,119 2


3.6 Breakdown of other assets and other liabilities31/12/2017 31/12/2016

Otherassets

Otherliabilities

Otherassets

Otherliabilities

CHF 1,000 CHF 1,000 CHF 1,000 CHF 1,000

Transit account 88 172 797 2 Indirect taxes 1,473 730 0 0 Other assets and liabilities 545 3,751 8 703 Total 2,107 4,654 805 705

3.5 Presentation of tangible fixed assets31/12/2017

Acqui-sition

cost

Accumu-lated

depreci-ation

Book valueas at end of previ-ous year

Reclassi-fications Additions Disposals

Depre-ciation Reversals

Book valueas at end of

current year

CHF 1,000 CHF 1,000 CHF 1,000 CHF 1,000 CHF 1,000 CHF 1,000 CHF 1,000 CHF 1,000 CHF 1,000

Proprietary or separately aquired soft-ware 5,200 –2,647 2,554 221 683 0 –1,010 0 2,448

Other tan-gible fixed assets 7,978 –3,809 4,168 –221 17 –121 –1,173 0 2,671Total tan-gible fixed assets 13,178 –6,455 6,722 0 700 –121 –2,183 0 5,119


3.8 Disclosure of liabilities relating to pension schemes, and number and nature of equity instruments of the Bank held by own pension schemes

The Bank has no own pension scheme. The employees of the Bank are insured under an occupational defined contribution plan with an independent pension company (Swiss Life). The last audited financial statements of this independent pension company (31 December 2016) showed a coverage of 100%. There are no economic benefits or economic costs attributable to the Bank.

3.9 Presentation of value adjustments and provisions, reserves for general banking risks, and changes therein during the current year

31/12/2017

Previousyear end

Use in conform-

ity with designated

purposeReclassi-fications

Currency differences

Past due interest,

recoveries

New creations

charged to income

Release to income

Balance at current

year endCHF 1,000 CHF 1,000 CHF 1,000 CHF 1,000 CHF 1,000 CHF 1,000 CHF 1,000 CHF 1,000

Provisions for default risks 149 –149 0 0 0 48 0 48Provisions for contingent liabilities and for base metal contracts 0 0 0 0 0 4,187 0 4,187Other provisions 360 0 0 0 0 486 0 846Total provisions 509 –149 0 0 0 4,721 0 5,081

Value adjustments for default and country risk 16,006 –13,952 0 0 0 16,874 –131 18,797 of which, value adjust-ments for default risk in respect of impaired loans/receivables 13,952 –13,952 0 0 0 16,874 0 16,874

of which, value adjust-ments for latent default risk 2,054 0 0 0 0 0 –131 1,923

The amount of the value adjustments for default and country risks was determined based upon the requirements that an ade-quate amount has to be provided for risks which will likely be a liability for the Bank.

The amount of the provisions is based upon information available to the Bank taking into account positive and negative factorsknown at the time these financial statements have been prepared.

3.7 Disclosure of assets pledged or assigned to secure own commitments and of assets under reservation of ownership

31/12/2017 31/12/2016Collateral

book valueEffective

commitmentsCollateral

book valueEffective

commitmentsCHF 1,000 CHF 1,000 CHF 1,000 CHF 1,000

Pledged/assigned assetsDue from banks (margin deposits FX forward contracts)

20,353 107,589

12,710 0

Due from banks (rent deposits) 26 0 26 0Total of pledged assigned assets 20,379 107,589 12,736 0

Neither in the year under review nor in the previous years there were assets subject to ownership reservation. At the balance sheet date there were no securities lending and borrowing transactions or repo transactions outstanding.


3.10 Presentation of the Bank's capital31/12/2017 31/12/2016

Total par value

Number of shares

Capital eligible for dividend

Total par value

Number of shares

Capital eligible for dividend

CHF 1,000 CHF 1,000 CHF 1,000 CHF 1,000Bank's capitalShare capital/cooperative capital 484,751 1,700,879

484,751

118,750

416,668 118,750

of which paid up 484,751 1,700,879 484,751 118,750 416,668 118,750 Total Bank's capital 484,751 1,700,879 484,751 118,750 416,668 118,750

3.11 Number and value of equity securities or options on equity securities held by all executives and directors and by employees

The Bank does not have equity securities or option on equity securities scheme for members of the board of directors, members of executive bodies or employees.

3.12 Disclosure of amounts due from/to related partiesAmounts due

from related partiesAmounts due

to related parties31/12/2017 31/12/2016 31/12/2017 31/12/2016CHF 1,000 CHF 1,000 CHF 1,000 CHF 1,000

Holders of qualified participations 42,450 29,133 1,324,501 829,202Group companies 0 0 0 0Linked companies 8,261 14,983 113,995 377,300Other related parties 0 0 0 0Transactions with members of governing bodies 0 0 0 0Total 50,711 44,116 1,438,496 1,206,502

Amounts due from and due to related parties represent holdings on current accounts as well as loans, which are granted at the same conditions as for independent third parties. The Bank does not grant loans to the Bank’s governing bodies.


3.13 Disclosure of holders of significant participations31/12/2017 31/12/2016

Nominal % of equity Nominal % of equityCHF 1,000 CHF 1,000

Significant shareholders of Sberbank (Switzerland) AG

Voting shareholdersSB Finance Holding LLC (former Joint-Stock Company SIB Financial Broker) 483,896 99.82 117,895 99.28

The State Corporation "Bank for Development and Foreign Economic Affairs (Vnesheconombank)", Moscow 855 0.18 855 0.72 Total Bank's capital 484,751 100 118,750 100

SB Finance Holding LLC (former Joint-Stock Company SIB Financial Broker) is owned 100% by Open Joint Stock Company "Sberbank of Russia" in which the following shareholders held more than 5% as at 31 December 2017:

Share capitalin %

Voting sharesin %

NameCentral Bank of Russia, Moscow(share capital owned is 50% plus 1 share of the issued and outstanding ordinary and preferred shares) 50.00 52.30


3.14 Presentation of the maturity structure of financial instruments Due

At sightCancel-

lablewithin

3 monthswithin 3 to 12 months

within 1 to 5 years

after 5 years

nomaturity Total

CHF 1,000 CHF 1,000 CHF 1,000 CHF 1,000 CHF 1,000 CHF 1,000 CHF 1,000 CHF 1,000Assets/financial instruments Liquid assets 763,143 0 0 0 0 0 0 763,143Amounts due from banks 58,685 0 146,434 90,168 0 0 0 295,287Amounts due from customers 7,816 0 627,869 237,335 205,424 0 0 1,078,444Trading portfolio assets 331,292 0 0 0 0 0 0 331,292Positive replacement val-ues of derivative financial instruments 51,803 0 0 0 0 0 0 51,803Financial investments 0 0 0 0 40,330 2,789 2 43,121Total current year 1,212,739 0 774,303 327,503 245,754 2,789 2 2,563,090Total previous year 1,139,585 0 366,875 304,612 88,395 14,497 2 1,913,966

Debt capital/financial instruments Amounts due to banks 166,079 0 924,185 126,197 63,229 75,000 0 1,354,690Amounts due in respect of customer deposits 368,275 1 247,762 0 0 0 0 616,038Negative replacement values of derivative financial instruments 32,354 0 0 0 0 0 0 32,354Total current year 566,708 1 1,171,947 126,197 63,229 75,000 0 2,003,082Total previous year 927,450 5,000 365,378 344,350 15,272 75,000 0 1,732,450


3.15 Presentation of assets and liabilities by domestic and foreign origin in accordance with the domicile principle

31/12/2017 31/12/2016Domestic Foreign Domestic ForeignCHF 1,000 CHF 1,000 CHF 1,000 CHF 1,000

AssetsLiquid assets 763,143 0 989,965 0Amounts due from banks 11,374 283,913 15,140 162,037Amounts due from customers 563,528 514,916 201,771 402,547Trading portfolio assets 73,123 258,169 5,455 5,282Positive replacement values of derivative financial instruments 522 51,281 2,281 72,702Financial investments 0 43,121 0 56,786Accrued income and prepaid expenses 5,416 1,711 6,600 1,453Tangible fixed assets 5,119 0 6,722 0Other assets 2,107 0 444 362Total assets 1,424,332 1,153,111 1,228,378 701,169

31/12/2017 31/12/2016Domestic Foreign Domestic ForeignCHF 1,000 CHF 1,000 CHF 1,000 CHF 1,000

LiabilitiesAmounts due to banks 889 1,353,801 5,030 1,174,173Amounts due in respect of customer deposits 145,732 470,306 131,506 375,233Negative replacement values of derivative financial instruments 7,889 24,465 17,279 29,230Accrued expenses and deferred income 10,440 3,701 8,110 3,491Other liabilities 4,638 16 705 0Provisions 5,081 0 506 3Bank’s capital 484,751 0 118,750 0Capital reserve 106,251 0 106,251 0Retained earnings reserve –40,720 0 –41,215 0Group profit/Group loss 203 0 495 0Total liabilities 725,154 1,852,289 347,417 1,582,130


3.16 Breakdown of total assets by country or group of countries (domicile principle)31/12/2017 31/12/2016

Amount Share Amount ShareCHF 1,000 in % CHF 1,000 in %

AssetsSwitzerland 1,424,332 55.3 1,228,378 63.7EuropeRussian Federation 421,225 16.4 235,013 12.2Turkey 83,181 3.2 53,654 2.8United Kingdom 54,174 2.1 30,611 1.6Malta 48,355 1.9 49,888 2.6Bosnia-Herzegovina 28,920 1.1 13,502 0.7Italy 8,441 0.3 0 0.0Cyprus 6,260 0.2 3,636 0.2Belarus 3,920 0.2 4,239 0.2Ireland 2,915 0.1 9,487 0.5France 1,690 0.1 0 0.0Netherlands 1,653 0.1 3 0.0Germany 475 0.0 845 0.0Luxembourg 4 0.0 18,680 1.0Greece 0 0.0 25,769 1.3AmericasUnited States 66,493 2.6 88,483 4.6Virgin Islands 318 0.0 220 0.0AsiaUnited Arab Emirates 145,074 5.6 122,569 6.4China 112,716 4.4 0 0.0Singapore 40,154 1.6 24,053 1.2India 11,043 0.4 0 0.0Hong Kong 1,199 0.1 20,291 1.1AfricaEgypt 32,742 1.3 0 0.0OthersOthers 255 0.0 226 0.0In international waters 81,904 3.2 0 0.0Total assets 2,577,443 100.0 1,929,547 100.0


3.17 Breakdown of total foreign assets by credit rating of country groups (risk domicile view)

Net foreign exposure 31/12/2017

Net foreign exposure 31/12/2016

CHF 1,000 Share in % CHF 1,000 Share in %Fitch external ratingAAA to A– 362,009 37.8 365,133 52.1BBB+ to BBB– 441,107 46.1 0 0.0BB+ to BB– 35,180 3.7 292,203 41.7B+ to B– 36,662 3.8 43,733 6.2CCC+ to D 0 0.0 0 0.0Without rating 82,477 8.6 0 0.0Total net foreign exposure 957,435 100.0 701,069 100.0

The country rating is based on Fitch external ratings. The Bank does not have its own country ratings. Base metals and commod-ities located in international waters as of balance sheet date are in category “without rating”.


3.18 Presentation of assets and liabilities broken down by the most significant currencies for the Bank

CHF EUR USD RUB XAU Other TotalCHF 1,000 CHF 1,000 CHF 1,000 CHF 1,000 CHF 1,000 CHF 1,000 CHF 1,000

AssetsLiquid assets 763,143 0 0 0 0 0 763,143Amounts due from banks 11,609 611 220,247 244 59,893 2,683 295,287Amounts due from customers 13 27,477 904,327 2,832 143,785 10 1,078,444Trading portfolio assets 81,904 0 7 0 227,640 21,741 331,292Positive replacement values of derivative financial instruments 140 410 47,668 3,583 0 2 51,803

Financial investments 0 2 43,119 0 0 0 43,121Accrued income and prepaid expenses 846 46 6,227 8 0 0 7,127Tangible fixed assets 5,119 0 0 0 0 0 5,119Other assets 476 5 1,590 29 0 7 2,107Total assets shown in balance sheet 863,249 28,551 1,223,185 6,696 431,318 24,443 2,577,443Delivery entitlements from spot exchange, forward forex and forex options transactions*

298,291 152,774 1,957,079 2,348,052 106,110 32,351 4,894,657

Total assets 1,161,540 181,325 3,180,264 2,354,748 537,428 56,794 7,472,100LiabilitiesAmounts due to banks 238,431 4,288 18,415 1,093,556 0 0 1,354,690Amounts due in respect of customer deposits 32,498 124,653 441,818 12,896 0 4,173 616,038Negative replacement values of derivative financial instruments 140 346 30,343 1,525 0 0 32,354Accrued expenses and deferred income 9,118 11 1,178 3,834 0 0 14,141Other liabilities 1,102 213 3,268 64 0 7 4,654Provisions 846 0 4,235 0 0 0 5,081Bank’s capital 484,751 0 0 0 0 0 484,751Capital reserve 106,251 0 0 0 0 0 106,251Retained earnings reserve –40,720 0 0 0 0 0 –40,720Group profit/Group loss 203 0 0 0 0 0 203Total liabilities shown in the balance sheet 832,620 129,511 499,257 1,111,875 0 4,180 2,577,443

Delivery obligations from spot exchange, forward forex and forex options trans actions* 258,456 58,282 2,755,707 1,231,088 526,786 52,636 4,882,955Total liabilities 1,091,076 187,793 3,254,964 2,342,963 526,786 56,816 7,460,398Net position per currency 70,464 –6,469 –74,699 11,785 10,642 –22

* Options are delta-weighted.


4.1 Breakdown of contingent liabilities and contingent assets31/12/2017 31/12/2016 ChangeCHF 1,000 CHF 1,000 CHF 1,000

Guarantees to secure credits and similar 136,580 49,640 86,940Performance guarantees and similar 46,846 1,393 45,453Irrevocable commitments arising from documentary letters of credit 7,443 25,200 –17,758Total contingent liabilities 190,868 76,233 114,635

4. Information on off-balance sheet transactions

5.1 Breakdown of the result from trading activities and the fair value option2017 2016

CHF 1,000 CHF 1,000a) Breakdown by business area Global markets 26,256 6,921Treasury –984 18,232Total result from trading activities 25,272 25,153

b) Breakdown by underlying riskResult from trading activities from:Interest rate instruments (including funds) –6,679 1,136Foreign currencies 34,104 13,096Commodities/precious metals –2,153 10,921Total result from trading activities 25,272 25,153 of which from fair value option 0 0 of which from fair value option on assets 0 0 of which from fair value option on liabilities 0 0

5. Information on the income statement


5.2 Disclosure of material refinancing income in the item Interest and discount income as well as material negative interest

2017 2016CHF 1,000 CHF 1,000

Negative interestNegative interest included in interest and discount income (part of CHFk 69,561) –4,136 –4,361Negative interest included in interest expense (part of CHFk –53,523) 1,054 2,123

Interest income and interest expenses from SWAP transactionsInterest income on SWAP transactions included in interest and discount income (part of CHFk 69,561) 47,020 14,500Interest expense on SWAP transactions included in interest expense (part of CHFk –53,523) –3,346 0

Trading result of SWAP transactions will be recorded in results from trading activities and the fair value options. The interest portion of these transcations will be reallocated to interst income and interest expenses.

5.3 Breakdown of personnel expenses 2017 2016 Change

CHF 1,000 CHF 1,000 CHF 1,000Personnel expensesSalaries (meeting attendance fees and fixed compensation to members of the Bank's governing bodies, salaries and benefits) 19,863 19,587 276 of which expenses relating to share-based compensation and alternative forms of variable compensation 0 0 0

Social insurance benefits 4,046 2,969 1,077 Changes in book value for economic benefits and obligations arising from pension schemes 0 1,266 –1,266 Other personnel expenses 624 2,992 –2,368 Total personnel expenses 24,533 26,814 –2,281

5.4 Breakdown of general and administrative expenses2017 2016 Change

CHF 1,000 CHF 1,000 CHF 1,000General and administrative expensesOffice space expenses 1,279 1,275 4 Expenses for information and communications technology 3,518 4,210 –692 Expenses for vehicles, equipment, furniture and other fixtures, as well as operating lease expenses 5 163 –158

Fees of audit firm (Art. 961a no. 2 CO) 853 467 386 of which for financial and regulatory audits 417 467 –50 of which for other services 436 0 436Other operating expense 4,901 6,041 1,080 Stamp tax 3,660 0 3,660 Total general and administrative expenses 14,216 12,156 2,060

* of which CHFk 330 relates to internal audit services and other services provided by PWC for 2017.


5.5 Explanations regarding material losses, extraordinary income and expenses, as well as material releases of hidden reserves, reserves for general banking risks, and value adjustments and provisions no longer required

2017 2016 ChangeCHF 1,000 CHF 1,000 CHF 1,000

Extraordinary incomeProfit on sale of fixed assets 0 4 –4Total extraordinary income 0 4 –4

Extraordinary expenseLoss on sale of fixed assets 43 0 43Other expenses related to the previous business year 0 11 –11Total extraordinary expense 43 11 32

5.6 Disclosure of and reasons for revaluations of participations and tangible fixed assets up to acquisition cost at maximum

There were no revaluations of tangible fixed assets during the year under review in the previous year.

5.7 Presentation of current taxes, deferred taxes, and disclosure of tax rate 2017 2016 Change

CHF 1,000 CHF 1,000 CHF 1,000Expenses for current income taxes* 0 0 0Expenses for current capital taxes 360 324 36Expenses for deferred taxes 0 0 0Total taxes 360 324 36Average tax rate weighted on the basis of the operating profit 0% 0%

* The Bank offsets the profit of the periods ended 31.12.2017 and 31.12.2016 against the loss carried forward and therefore no income taxes are due. The cumulated loss carry forward was originated in the 2014, 2013 and 2012 reporting years.


6. Additional Information

Extraordinary eventsNo extraordinary events have occurred during the year 2017.

Report about ParticipationsThe Bank does not own shares or participations in any company.

Outsourcing A Swiss based third party company provides the e-banking platform on a contractual basis. The Bank leverages Sberbank Group’s front to back IT systems by outsourcing trade capture, risk and col-lateral management applications. The Bank also leverages the Sberbank CIB general ledger system (Navision) which integrates with the global market business applications. In addition to the outsourc-ing of IT applications, the Bank uses services from Sberbank Group in regard to back office, bookkeep-ing and other support function services. The above outsourcing contracts are in line with regulations issued by FINMA.

The internal audit and payroll functions are out-sourced to a professional audit firm. These activities are not considered as outsourcing under the terms of the FINMA Circular 2008/7 (Outsourcing – Banks).


Report of the Statutory Auditor on the Financial Statements


Ernst & Young LtdMaagplatz 1P.O. BoxCH-8010 Zurich

Phone +41 58 286 31 11Fax +41 58 286 30 04www.ey.com/ch

To the General Meeting ofSberbank (Switzerland) Ltd, Zurich

Zurich, 23 March 2018

Report of the statutory auditor on the financial statements

As statutory auditor, we have audited the financial statements of Sberbank (Switzerland) Ltd,which comprise the balance sheet, income statement, statement of cash flows and notes(pages 13 to 36), for the year ended 31 December 2017.

Board of Directors’ responsibilityThe Board of Directors is responsible for the preparation of the financial statements inaccordance with the requirements of Swiss law and the company’s articles of incorporation.This responsibility includes designing, implementing and maintaining an internal controlsystem relevant to the preparation of financial statements that are free from materialmisstatement, whether due to fraud or error. The Board of Directors is further responsible forselecting and applying appropriate accounting policies and making accounting estimates thatare reasonable in the circumstances.

Auditor’s responsibilityOur responsibility is to express an opinion on these financial statements based on our audit.We conducted our audit in accordance with Swiss law and Swiss Auditing Standards. Thosestandards require that we plan and perform the audit to obtain reasonable assurance whetherthe financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts anddisclosures in the financial statements. The procedures selected depend on the auditor’sjudgment, including the assessment of the risks of material misstatement of the financialstatements, whether due to fraud or error. In making those risk assessments, the auditorconsiders the internal control system relevant to the entity’s preparation of the financialstatements in order to design audit procedures that are appropriate in the circumstances, butnot for the purpose of expressing an opinion on the effectiveness of the entity’s internalcontrol system. An audit also includes evaluating the appropriateness of the accountingpolicies used and the reasonableness of accounting estimates made, as well as evaluatingthe overall presentation of the financial statements. We believe that the audit evidence wehave obtained is sufficient and appropriate to provide a basis for our audit opinion.

OpinionIn our opinion, the financial statements for the year ended 31 December 2017 comply withSwiss law and the company’s articles of incorporation.


Page 2

Report on other legal requirementsWe confirm that we meet the legal requirements on licensing according to the AuditorOversight Act (AOA) and independence (article 728 CO and article 11 AOA) and that thereare no circumstances incompatible with our independence.

In accordance with article 728a paragraph 1 item 3 CO and Swiss Auditing Standard 890, weconfirm that an internal control system exists, which has been designed for the preparation offinancial statements according to the instructions of the Board of Directors.

We recommend that the financial statements submitted to you be approved.

Ernst & Young Ltd

Stefan Fuchs Christoph WeidmannLicensed audit expert Licensed audit expert(Auditor in charge)


31/12/2017 31/12/2016CHF 1,000 CHF 1,000 CHF 1,000 CHF 1,000

Total core capital (after taking account of own positions, which are to be deducted) 550,282 184,281 of which attributable to minority shareholders 991 1,327

less: regulatory deduction 0 0 less: other items that are to be

deducted from core capital 0 0 = eligible core capital 550,282 184,281 add: supplementary capital and

additional capital 75,048 77,654 less: other deductions from

supplementary capital, from additional capital and from the total capital 0 0

Total eligible capital 625,330 261,935

In respect of the qualitative information to be provided according to the FINMA circular 2008/22 (Capital Ade-quacy Disclosure – Banks) and FINMA circular 2016/1 (Disclosure – Banks), the reader should refer to the man-agement report section of these financial statements where risk management activities have been described.

For the calculation of the required capital for credit risk the Bank uses the standard approach-BIZ. The required capital for market risk has been quantified using the standard approach, and for operational risk using the basic indicator approach.

Additional Disclosures of Capital and Liquidity Information According to FINMA Circular 2008/22 and 2016/1

1. Composition of eligible capital


Methodology AppliedRequired capital

31/12/2017Required capital

31/12/2016 CHF 1,000 CHF 1,000 CHF 1,000 CHF 1,000Credit risk SA-BIZ 127,978 63,129 of which exchange risk relating to the equity/debt positions in the banking book 0 0

Non counterparty risk 409 538Securitisations/threshold 2/CCP 11 0Credit value adjustments and settlement risk Standard Approach 6,831 3,595Market risk Standard Approach (2015)/

De-minimis Approach (2014) 15,806 10,564 of which on interest and equity instruments (general and specific market risk) 9,743 3,595

of which on options risks 419 0 of which on foreign exchange 805 3,931 of which on gold and commodity positions 4,839 3,039Operational risk Basic Indicator Approach 4,648 2,268Required capital excluding buffer [8.0%] 155,683 80,093Risk weighted assets (RWA) 1,946,643 1,001,167

2. Composition of required capital

31/12/2017 31/12/2016 CHF 1,000 CHF 1,000CET 1 quota 28.28% 18.36%Tier 1 quota 28.28% 18.36%Capital Adequacy Ratio (CAR) 32.13% 26.05%

% of Risk Weighted Assets (RWA) CHF 1,000 CHF 1,000

Total required capital including buffer [10.5%] 204,335 70,082 Specific additional CET 1 buffer [3.5%] 68,112 20,115 Total required capital [14.0% for 2015 and 10.5% for 2014] 272,447 90,197 Leverage ratio 18.7% 9.2%

3. Capital ratios


BanksPublic bodies Enterprises Equity

Other exposures Total

CHF 1,000 CHF 1,000 CHF 1,000 CHF 1,000 CHF 1,000 CHF 1,000Balance sheet/ amounts due: from banks 295,287 0 0 0 0 295,287 from customers 0 0 1,078,444 0 0 1,078,444 trading portfolio assets 12,703 0 206,677 0 111,912 331,292 positive replacement values 30,673 0 21,130 0 0 51,803 financial investments 0 0 43,121 0 0 43,121 accrued income and prepaid expenses/other assets 0 0 0 0 9,234 9,234

Total – current year 338,663 0 1,349,372 0 121,146 1,809,181Total – previous year 248,830 0 675,169 2 8,859 932,860 Off balance sheet (credit equivalents)Contingent liabilities 1,269 0 189,599 0 0 190,868Irrevocable facilities granted 0 122 0 0 0 122Total – current year 1,269 122 189,599 0 0 190,990Total – previous year 13,064 100 63,169 0 0 76,333

4. Credit risk/distribution by contractor or industry


Loan business (at reporting date)

Covered by recognised

financial collateral*

Covered by guarantees

Without collateral Total

CHF 1,000 CHF 1,000 CHF 1,000 CHF 1,000Balance sheet/ amounts due: from banks 0 0 295,287 295,287 from customers 379,158 0 699,286 1,078,444 trading portfolio assets 0 0 331,292 331,292 positive replacement values 15,066 0 36,737 51,803 financial investments 0 0 43,121 43,121 accrued income and prepaid expenses/other assets 0 0 9,234 9,234

Total – current year 394,224 0 1,414,957 1,809,181Total – previous year 196,981 0 449,473 646,454 Off balance sheet (credit equivalents)Contingent liabilities 76 0 190,792 190,868Irrevocable facilities granted 0 0 122 122Total – current year 76 0 190,914 190,990Total – previous year 0 0 76,333 76,333

* including commodities collateral on CTF engagements

5. Credit risk/type of collateral


Loan business/risk weighted Regulatory risk weightscredit risk (at reporting date) 0% 20% 50% 100% 150% Total

CHF 1,000 CHF 1,000 CHF 1,000 CHF 1,000 CHF 1,000 CHF 1,000Balance sheet/ amounts due: from banks 0 139,152 80,375 9,762 65,998 295,287 from customers 0 659,021 98,019 320,994 410 1,078,444 trading portfolio assets 0 0 0 331,292 0 331,292 positive replacement values 0 0 0 51803 0 51,803 financial investments 0 2 0 43,119 43,121 accrued income and prepaid expenses/other assets 0 0 0 9,234 0 9,234

Total – current year 0 798,175 178,394 766,204 66,408 1,809,181Total – previous year 80,741 63,068 54,978 716351.57 17,722 932,860 Off balance sheet (credit equivalents)Contingent liabilities 0 188,070 1,529 1,269 0 190,868Irrevocable facilities granted 0 122 0 0 0 122Total – current year 0 188,192 1,529 1,269 0 190,990Total – previous year 0 100 0 76,233 0 76,333

6. Segmentation of the credit risk


Liquidity coverage ratioAverage

Q1Average

Q2Average

Q3Average

Q4Average

2017Total High Quality Liquid Assets (HQLA) in 1,000 CHF 650,664 683,506 714,065 493,917 635,538Total net cash outflow in 1,000 CHF 467,518 598,608 559,961 234,289 465,094Liquidity Coverage Ratio (LCR) 139.17% 114.18% 127.52% 210.82% 147.92%

8. Liquidity Coverage Ratio

Loan business(at reporting date) Switzerland

Europeincl. Russia

NorthAmerica Asia Other Total

CHF 1,000 CHF 1,000 CHF 1,000 CHF 1,000 CHF 1,000 CHF 1,000Balance sheet/ amounts due from banks 11,374 224,627 26,543 1 32,742 295,287 from customers 563,528 331,543 44,110 139,257 6 1,078,444 trading portfolio assets 73,123 6,844 0 169,421 81,904 331,292 positive replacement values 522 50,966 0 0 315 51,803 financial investments 0 43,121 0 0 0 43,121 accrued income and prepaid expenses/other assets 9,234 0 0 0 0 9,234

Total – current year . 657,101 70,653 308,679 114,967 1,809,181Total – previous year 258,564 379,100 127,476 167,496 224 932,860 Off balance sheet (credit equivalents)Contingent liabilities 45,577 137,848 1,202 6,241 0 190,868Irrevocable facilities granted 122 0 0 0 0 122Total – current year 45,699 137,848 1,202 6,241 0 190,990Total – previous year 1,520 65,012 0 0 9,804 76,336

7. Geographical credit risk

i sberbank (switzerland) ag i annual report 2017 · sberbank (switzerland) ag i annual report 2017...

Documents