llc deutsche bank kpmg 10 presnenskaya naberezhnaya moscow, russia 123317 telephone +7 (495) 937...

LLC Deutsche Bank

Financial Statements

for the year ended 31 December 2013

and Auditors’ Report

Contents

Auditors’ Report .............................................................................................................................. 3

Statement of profit or loss and other comprehensive income .......................................................... 5

Statement of financial position ........................................................................................................ 6

Statement of cash flows ................................................................................................................... 7

Statement of changes in equity ........................................................................................................ 9

Notes to the financial statements

1 Background ............................................................................................................................ 10 2 Basis of preparation ............................................................................................................... 10 3 Significant accounting policies .............................................................................................. 12 4 Cash and cash equivalents ...................................................................................................... 22 5 Financial instruments held for trading ................................................................................... 23 6 Transfers of financial assets ................................................................................................... 24 7 Placements with banks ........................................................................................................... 25 8 Loans to customers................................................................................................................. 25 9 Other assets ............................................................................................................................ 28 10 Property, equipment and intangible assets ............................................................................. 29 11 Deposits and balances from banks ......................................................................................... 30 12 Current accounts and deposits from customers ...................................................................... 30 13 Other liabilities ....................................................................................................................... 31 14 Equity ..................................................................................................................................... 31 15 Net interest (expense) income ................................................................................................ 31 16 Net fee and commission income ............................................................................................ 32 17 Net gain on financial instruments held for trading ................................................................. 32 18 Other income .......................................................................................................................... 32 19 General administrative expenses ............................................................................................ 33 20 Provision for impairment other than on loans ........................................................................ 33 21 Income tax expense ................................................................................................................ 33 22 Risk management, corporate governance and internal control .............................................. 35 23 Capital management ............................................................................................................... 54 24 Contingencies ......................................................................................................................... 55 25 Related party transactions ...................................................................................................... 57 26 Financial assets and liabilities: fair values and accounting classifications ............................ 61

ZAO KPMG

10 Presnenskaya Naberezhnaya

Moscow, Russia 123317

Telephone +7 (495) 937 4477

Fax +7 (495) 937 4400/99

Internet www.kpmg.ru

Audited entity: LLC Deutsche Bank.

Registered by the Central Bank of the Russian Federation on 9 October

2003, Registration No. 3328.

Registered in the Unified State Register of Legal Entities on 14

October 2002 by Moscow Inter-Regional Tax Inspectorate No. 39 of

the Ministry of Taxes and Duties of the Russian Federation,

Registration No. 1027739369041, Certificate series 77 No. 004814544.

Address of the audited entity: Bld 2, 82, Sadovnicheskaya Street,

Moscow, 115035, Russian Federation.

Independent auditor: ZAO KPMG, a company incorporated under the

Laws of the Russian Federation, a part of the KPMG Europe LLP group,

and a member firm of the KPMG network of independent member firms

affiliated with KPMG International Cooperative (“KPMG International”), a

Swiss entity.

Registered by Moscow Registration Chamber on 25 May 1992,

Registration No. 011.585.

Included in the Unified State Register of Legal Entities on 13 August 2002

by Moscow Inter-Regional Tax Inspectorate No. 39 of the Ministry of

Taxes and Duties of the Russian Federation, Registration No.

1027700125628, Certificate series 77 No. 005721432.

Member of the Non-commercial Partnership “Chamber of Auditors of

Russia”. The Principal Registration Number of the Entry in the State

Register of Auditors and Audit Organisations: No.10301000804.

Auditors’ Report

To the Council of LLC Deutsche Bank

We have audited the accompanying financial statements of LLC Deutsche Bank (the Bank),

which comprise the statement of financial position as at 31 December 2013, and the statements of

profit and loss and other comprehensive income, changes in equity and cash flows for 2013, and

notes, comprising a summary of significant accounting policies and other explanatory

information.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements

in accordance with International Financial Reporting Standards, and for such internal control as

management determines is necessary to enable the preparation of financial statements that are free

from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on the fair presentation of these financial statements

based on our audit. We conducted our audit in accordance with Russian Federal Auditing

Standards and International Standards on Auditing. Those standards require that we comply with

ethical requirements and plan and perform the audit to obtain reasonable assurance about whether

the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and

disclosures in the financial statements. The procedures selected depend on the auditor’s judgment,

including the assessment of the risks of material misstatement of the financial statements, whether

due to fraud or error. In making those risk assessments, the auditor considers internal control

relevant to the entity’s preparation and fair presentation of the financial statements in order to

design audit procedures that are appropriate in the circumstances, but not for the purpose of

expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes

evaluating the appropriateness of accounting policies used and the reasonableness of accounting

estimates made by management, as well as evaluating the overall presentation of the financial

statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to express an

opinion on the fair presentation of these financial statements.

Auditors’ Report to the Council of LLC Deutsche Bank

Page 2

Opinion

In our opinion, the financial statements present fairly, in all material respects, the financial

position of the Bank as at 31 December 2013, and its financial performance and its cash flows for

2013 in accordance with International Financial Reporting Standards.

Lukashova N.V.

Director

Power of attorney dated 1 October 2013 No. 64/13

ZAO KPMG

Moscow, Russian Federation

31 March 2014

LLC Deutsche Bank

Statement of Profit or Loss and Other Comprehensive Income for the year ended 31 December 2013

The statement of profit or loss and other comprehensive income is to be read in conjunction with the notes

to, and forming part of, the financial statements.

5

2013 2012

Notes RUB’000 RUB’000

Interest income 3,228,061 3,895,997

Interest expense (4,831,983) (3,159,920)

Net interest (expense) income 15 (1,603,922) 736,077

Provision for loan impairment 8 6,402 (421)

Net interest (expense) income after provision for

loan impairment (1,597,520) 735,656

Fee and commission income 1,610,682 1,346,738

Fee and commission expense (259,878) (205,235)

Net fee and commission income 16 1,350,804 1,141,503

Net gain on financial instruments held for trading 17 79,069 4,355,095

Net loss from financial assets available-for-sale (7,113) (8,445)

Net foreign exchange income 5,990,186 884,418

Other income 18 4,498,552 4,906,099

Operating income 10,313,978 12,014,326

General administrative expenses 19 (7,601,687) (7,488,989)

Profit before other provisions and income tax 2,712,291 4,525,337

Provision for impairment other than on loans 20 39,185 21,740

Profit before income tax 2,751,476 4,547,077

Income tax expense 21 (636,267) (894,711)

Profit for the year 2,115,209 3,652,366

Other comprehensive income for the year, net of

income tax

Items that are or may be reclassified subsequently to

profit or loss:

Revaluation reserve for financial assets available-for-

sale:

- Net change in fair value - (530)

- Net change in fair value transferred to profit or loss 5,388 -

Other comprehensive income (loss) for the year, net

of income tax 5,388 (530)

Total comprehensive income for the year 2,120,597 3,651,836

The financial statements were approved by the Board of Management on 31 March 2014 and were signed

on its behalf by:

________________________________ _____________________________

Joerg Bongartz Alexander Kirejev

Chairman of the Management Board Chief Accounant

LLC Deutsche Bank

Statement of Financial Position as at 31 December 2013

The statement of financial position is to be read in conjunction with the notes to, and forming part of, the

financial statements.

6

2013 2012 2011

Notes

RUB’000 RUB’000

(reclassified)

RUB’000

(reclassified)

Assets

Cash and cash equivalents 4 15,852,657 14,156,230 17,661,060

Mandatory reserve deposit with the Central

Bank of the Russian Federation 1,173,620

1,358,449

1,785,712

Financial instruments held for trading

- Held by the Bank 5 11,995,255 16,876,060 22,088,618

- Pledged under sale and repurchase

agreements 5, 6 7,557,489

39,104,217

-

Placements with banks 7 97,561,400 90,700,261 50,932,119

Loans to customers 8 7,161,229 8,849,410 3,500,651

Financial assets available-for-sale 1,524 1,698 407,418

Deferred tax asset 21 385,179 347,411 138,780

Other assets 9 4,097,921 2,143,421 3,450,821

Property, equipment and intangible assets 10 557,968 824,911 905,275

Total assets 146,304,242 174,362,068 100,870,454

Liabilities

Financial instruments held for trading 5 1,235,710 246,734 644,650

Deposits and balances from banks 11 65,258,082 67,052,581 44,375,089

Amounts payable under repurchase agreements

with the Central Bank of the Russian Federation

6 6,588,588 37,673,369 -

Current accounts and deposits from customers 12 54,170,249 48,713,225 39,469,404

Other liabilities 13 3,250,560 3,929,189 3,074,042

Total liabilities 130,503,189 157,615,098 87,563,185

Equity

Charter capital 14 1,237,450 1,237,450 1,237,450

Additional paid-in capital 557,276 557,276 557,276

Revaluation reserve for available-for-sale

financial assets (504)

(5,892)

(5,362)

Retained earnings 14,006,831 14,958,136 11,517,905

Total equity 15,801,053 16,746,970 13,307,269

Total liabilities and equity 146,304,242 174,362,068 100,870,454

________________________________ _____________________________


Chairman of the Board Chief Accounant

LLC Deutsche Bank

Statement of Cash Flows for the year ended 31 December 2013

The statement of cash flows is to be read in conjunction with the notes to, and forming part of, the financial

statements.

7

2013 2012

Note RUB’000 RUB’000

(reclassified)

Cash flows from operating activities

Profit before income tax 2,751,476 4,547,077

Provision for impairment (45,587) (21,319)

Unrealized loss (gain) on financial instruments held for trading 479,076 (925,253)

Depreciation and amortization 320,017 324,480

Unrealized foreign exchange gain (5,990,186) (884,418)

Interest income (3,228,061) (3,895,997)

Interest expense 4,831,983 3,159,920

Loss from disposal of property and equipment 3,802 2,896

Losses from available-for-sale securities 7,113 8,445

Change in accruals in other income (391,731) 549,535

Change in accruals in general administrative expenses 51,047 (399,975)

Operating cash flows before changes in operating assets and

liabilities

(1,211,051) 2,465,391

Changes in operating assets and liabilities

Mandatory reserve deposit in the Central Bank of the Russian

Federation

184,829

427,263

Financial instruments held for trading 36,655,040 (33,338,712)

Placements with banks (538,699) (38,976,927)

Loans to customers 2,006,799 (5,297,369)

Other assets (1,358,482) 814,577

Deposits and balances from banks (2,254,091) 22,717,023

Amounts payable under repurchase agreements with the Central Bank

of the Russian Federation

(31,061,678)

37,644,976

Current accounts and deposits from customers 4,708,541 9,285,595

Other liabilities (305,175) 699,208

Net cash provided from (used in) operating activities before

income tax and interest

6,826,033 (3,558,975)

Interest paid (4,876,539) (3,114,922)

Interest received 3,662,820 3,877,639

Income tax paid (1,110,034) (537,023)

Net cash provided from (used in) operating activities 4,502,280 (3,333,281)

Cash flows from investing activities

Net cash used in operations with property, plant and equipment (70,391) (247,012)

Net cash provided from operations with available-for-sale securities 2 675 397,450

Net cash (used in) provided from investing activities (67,716) 150,438

Cash flows from financing activities

Distributions to the participant (3,066,514) (212,135)

Net cash used in financing activities (3,066,514) (212,135)

LLC Deutsche Bank

Statement of Cash Flows for the year ended 31 December 2013

The statement of cash flows is to be read in conjunction with the notes to, and forming part of, the financial

statements.

8

2013 2012

Note RUB’000 RUB’000

(reclassified)

Net increase (decrease) in cash and cash equivalents 1,368,050 (3,394,978)

Effect of changes in exchange rates on cash and cash equivalents 328 377 (109,852)

Cash and cash equivalents at the beginning of the year 14,156,230 17,661,060

Cash and cash equivalents at the end of the year 4 15,852,657 14,156,230

________________________________ _____________________________



LLC Deutsche Bank

Statement of Changes in Equity for the year ended 31 December 2013

The statement of changes in equity is to be read in conjunction with the notes to, and forming part of, the financial statements.

9

RUB’000 Charter capital

Additional paid-in

capital

Revaluation

reserve for

available-for-sale

financial assets Retained earnings Total equity

Balance as at 1 January 2012 1,237,450 557,276 (5,362) 11,517,905 13,307,269

Profit for the year - - - 3,652,366 3,652,366

Other comprehensive income


profit or loss:

Revaluation of financial assets available-for-sale, net of

deferred tax of RUB 133 thousand - - (530) - (530)

Total comprehensive income for the year - - (530) 3,652,366 3,651,836

Transactions with owners, recorded directly in equity

Distributions to the participant (note 14) - - - (212,135) (212,135)

Total transactions with owners - - - (212,135) (212,135)

Balance as at 31 December 2012 1,237,450 557,276 (5,892) 14,958,136 16,746,970

Profit for the year 2,115,209 2,115,209

Other comprehensive income - - - - -


profit or loss:

Revaluation of financial assets available-for-sale, net of

deferred tax of RUB 1 346 thousand - - 5,388 - 5,388

Total comprehensive income for the year 5,388 2,115,209 2,120,597

Transactions with owners, recorded directly in equity

Distributions to the participant (note 14) - - - (3,066,514) (3,066,514)

Total transactions with owners - - - (3,066,514) (3,066,514)

Balance as at 31 December 2013 1,237,450 557,276 (504) 14,006,831 15,801,053

___________________ _____________________________



LLC Deutsche Bank

Notes to, and forming part of, the financial statements for the year ended 31 December 2013

10

1 Background

(a) Organization and operations

LLC Deutsche Bank (the Bank) was established in the Russian Federation as a limited liability

company and was granted a general banking license in April 1998. The principal activities of the Bank

are interbank lending and borrowing, deposit taking, commercial lending, transactions with securities

and foreign exchange. The activities of the Bank are regulated by the Central Bank of the Russian

Federation (the CBR).

The address of the Bank’s registered office is Bld 2, 82, Sadovnicheskaya Street, Moscow, 115035,

Russian Federation. The average number of persons employed by the Bank during 2013 was 1,148

(2012: 1,003).

The Bank is owned by the Deutsche Bank Group, which operates in the global banking market. A large

amount of the Bank’s funding is from, and credit exposures are to, the Deutsche Bank Group. The

activities of the Bank are closely linked with the requirements of the Deutsche Bank Group and the

policies of the Deutsche Bank Group are determined for all Deutsche Bank Group members.

(b) Russian business environment

The Bank’s operations are primarily located in the Russian Federation. Consequently, the Bank is

exposed to the economic and financial markets of the Russian Federation, which display characteristics

of an emerging market. The legal, tax and regulatory frameworks continue development, but are

subject to varying interpretations and frequent changes which together with other legal and fiscal

impediments contribute to the challenges faced by entities operating in the Russian Federation. In

addition, the contraction in the capital and credit markets and its impact on the Russian economy have

further increased the level of economic uncertainty in the environment. The financial statements reflect

management’s assessment of the impact of the Russian business environment on the operations and the

financial position of the Bank. The future business environment may differ from management’s

assessment.

2 Basis of preparation

(a) Statement of compliance

The accompanying financial statements are prepared in accordance with International Financial

Reporting Standards (IFRS).

(b) Basis of measurement

The financial statements are prepared on the historical cost basis except that financial instruments held

for trading and available-for-sale financial assets are stated at fair value.

(c) Functional and presentation currency

The functional currency of the Bank is the Russian Rouble (RUB) as, being the national currency of

the Russian Federation, it reflects the economic substance of the majority of underlying events and

circumstances relevant to them.

RUB is also the presentation currency for the purposes of these financial statements.

Financial information presented in RUB is rounded to the nearest thousand.

(d) Use of estimates and judgments

The preparation of financial statements in conformity with IFRS requires management to make

judgments, estimates and assumptions that affect the application of accounting policies and the

LLC Deutsche Bank


11

reported amounts of assets, liabilities, income and expenses. Actual results could differ from those

estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting

estimates are recognized in the period in which the estimates are revised and in any future periods

affected.

Information about significant areas of uncertainty and critical judgments in applying accounting

policies is described in the following notes:

loan impairement estimates – note 8

estimates of fair value of financial instruments – note 26.

(e) Changes in accounting policies

The Bank has adopted the following new standards and amendments to standards, including any

consequential amendments to other standards, with a date of initial application of 1 January 2013:

IFRS 13 Fair Value Measurements (see (i))

Presentation of Items of Other Comprehensive Income (Amendments to IAS 1 Presentation of

Financial Statements) (see (ii))

Financial Instruments: Disclosures - Offsetting Financial Assets and Financial Liabilities

(Amendments to IFRS 7) (see (iii)).

(i) Fair value measurement

IFRS 13 establishes a single framework for measuring fair value and making disclosures about fair

value measurements, when such measurements are required or permitted by other IFRS requirements.

In particular, it unifies the definition of fair value as the price that would be received to sell an asset or

paid to transfer a liability in an orderly transaction between market participants at the measurement

date. It also replaces and expands the disclosure requirements about fair value measurements in other

IFRS requirements, including IFRS 7 Financial Instruments: Disclosures (see note 26).

As a result, the Bank adopted a new definition of fair value, as set out in note 3(c)(v). The change had

no significant impact on the measurements of assets and liabilities. However, the Bank included new

disclosures in the financial statements that are required under IFRS 13. Comparatives not restated.

(ii) Presentation of items of other comprehensive income

As a result of the amendments to IAS 1, the Bank modified the presentation of items of other

comprehensive income in its statement of profit or loss and other comprehensive income, to present

separately items that would be reclassified to profit or loss in the future from those that would never

be. Comparative information is also re-presented accordingly.

The adoption of the amendment to IAS 1 has no impact on the recognized assets, liabilities or

comprehensive income.

(iii) Financial instruments: Disclosures – Offsetting financial assets and financial liabilities

Amendments to IFRS 7 Financial Instruments: Disclosures - Offsetting Financial Assets and

Financial Liabilities introduced new disclosure requirements for financial assets and liabilities that are

offset in the statement of financial position or subject to master netting arrangements or similar

agreements.

The Bank included new disclosures in the financial statements that are required under amendments to

IFRS 7 and provided comparative information for new disclosures.

http://www.iasplus.com/en/standards/standard47

LLC Deutsche Bank


12

3 Significant accounting policies

The accounting policies set out below are applied consistently to all periods presented in these

financial statements, unless otherwise stated.

(a) Foreign currency

Transactions in foreign currencies are translated to the respective functional currency of the Bank at

exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign

currencies at the reporting date are retranslated to the functional currency at the exchange rate at that

date. The foreign currency gain or loss on monetary items is the difference between amortized cost in

the functional currency at the beginning of the period, adjusted for effective interest and payments

during the period, and the amortized cost in foreign currency translated at the exchange rate at the end

of the reporting period. Foreign currency differences arising on retranslation are recognized in profit or

loss, except for differences arising on the retranslation of available-for-sale equity instruments which

are recognized in other comprehensive income unless the difference is due to impairment in which

case foreign currency differences that have been recognized in other comprehensive income are

reclassified to profit or loss. As at 31 December 2013, the exchange rates used for translation of

balances in foreign currencies are 32.7292 USD/RUB and 44.9699 EUR/RUB (31 December 2012:

30.3727 USD/RUB and 40.2286 EUR/RUB).

(b) Cash and cash equivalents

Cash and cash equivalents include notes and coins on hand, unrestricted balances (nostro accounts)

held with the CBR and other banks.

The mandatory reserve deposit with the CBR is not considered to be a cash equivalent due to

restrictions on its withdrawability. Cash and cash equivalents are carried at amortised cost in the

statement of financial position.

(c) Financial instruments

(i) Classification

Financial instruments at fair value through profit or loss are financial assets or liabilities that are:

- acquired or incurred principally for the purpose of selling or repurchasing in the near term

- part of a portfolio of identified financial instruments that are managed together and for which there is

evidence of a recent actual pattern of short-term profit-taking

- derivative financial instruments (except for derivative that is a financial guarantee contract or a

designated and effective hedging instruments) or,

- upon initial recognition, designated as at fair value through profit or loss.

The Bank may designate financial assets and liabilities at fair value through profit or loss where either:

- the assets or liabilities are managed, evaluated and reported internally on a fair value basis

- the designation eliminates or significantly reduces an accounting mismatch which would otherwise

arise or,

- the asset or liability contains an embedded derivative that significantly modifies the cash flows that

would otherwise be required under the contract.

All trading derivatives in a net receivable position (positive fair value), as well as options purchased,

are reported as assets. All trading derivatives in a net payable position (negative fair value), as well as

options written, are reported as liabilities.

LLC Deutsche Bank


13

Management determines the appropriate classification of financial instruments in this category at the

time of the initial recognition. Derivative financial instruments and financial instruments designated as

at fair value through profit or loss upon initial recognition are not reclassified out of at fair value

through profit or loss category. Financial assets that would have met the definition of loan and

receivables may be reclassified out of the fair value through profit or loss or available-for-sale category

if the Bank has an intention and ability to hold it for the foreseeable future or until maturity. Other

financial instruments may be reclassified out of at fair value through profit or loss category only in rare

circumstances. Rare circumstances arise from a single event that is unusual and highly unlikely to

recur in the near term.

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are

not quoted in an active market, other than those that the Bank:

- intends to sell immediately or in the near term

- upon initial recognition designates as at fair value through profit or loss

- upon initial recognition designates as available-for-sale or,

- may not recover substantially all of its initial investment, other than because of credit deterioration.

Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments

and fixed maturity that the Bank has the positive intention and ability to hold to maturity, other than

those that:

- the Bank upon initial recognition designates as at fair value through profit or loss

- the Bank designates as available-for-sale or,

- meet the definition of loans and receivables.

Available-for-sale financial assets are those non-derivative financial assets that are designated as

available-for-sale or are not classified as loans and receivables, held-to-maturity investments or

financial instruments at fair value through profit or loss.

(ii) Recognition

Financial assets and liabilities are recognized in the statement of financial position when the Bank

becomes a party to the contractual provisions of the instrument. All regular way purchases of financial

assets are accounted for at the settlement date.

(iii) Measurement

A financial asset or liability is initially measured at its fair value plus, in the case of a financial asset or

liability not at fair value through profit or loss, transaction costs that are directly attributable to the

acquisition or issue of the financial asset or liability.

Subsequent to initial recognition, financial assets, including derivatives that are assets, are measured at

their fair values, without any deduction for transaction costs that may be incurred on sale or other

disposal, except for:

- loans and receivables which are measured at amortised cost using the effective interest method

- held to maturity investments that are measured at amortised cost using the effective interest method

- investments in equity instruments that do not have a quoted market price in an active market and

whose fair value cannot be reliably measured, which are measured at cost.

All financial liabilities, other than those designated at fair value through profit or loss and financial

liabilities that arise when a transfer of a financial asset carried at fair value does not qualify for

derecognition, are measured at amortised cost.

LLC Deutsche Bank


14

(iv) Amortized cost

The amortized cost of a financial asset or liability is the amount at which the financial asset or liability

is measured at initial recognition, minus principal repayments, plus or minus the cumulative

amortization using the effective interest method of any difference between the initial amount

recognized and the maturity amount, minus any reduction for impairment. Premiums and discounts,

including initial transaction costs, are included in the carrying amount of the related instrument and

amortised based on the effective interest rate of the instrument.

(v) Fair value measurement principles

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly

transaction between market participants at the measurement date in the principal, or in its absence, the

most advantageous market to which the Bank has access at that date. The fair value of a liability

reflects its non-performance risk.

When available, the Bank measures the fair value of an instrument using quoted prices in an active

market for that instrument. A market is regarded as active if transactions for the asset or liability take

place with sufficient frequency and volume to provide pricing information on an ongoing basis.

When there is no quoted price in an active market, the Bank uses valuation techniques that maximise

the use of relevant observable inputs and minimise the use of unobservable inputs. The chosen

valuation technique incorporates all the factors that market participants would take into account in

these circumstances.

The best evidence of the fair value of a financial instrument at initial recognition is normally the

transaction price, i.e., the fair value of the consideration given or received. If the Bank determines that

the fair value at initial recognition differs from the transaction price and the fair value is evidenced

neither by a quoted price in an active market for an identical asset or liability nor based on a valuation

technique that uses only data from observable markets, the financial instrument is initially measured at

fair value, adjusted to defer the difference between the fair value at initial recognition and the

transaction price. Subsequently, that difference is recognized in profit or loss on an appropriate basis

over the life of the instrument but no later than when the valuation is supported wholly by observable

market data or the transaction is closed out.

If an asset or a liability measured at fair value has a bid price and an ask price, the Bank measures

assets and long positions at the bid price and liabilities and short positions at the ask price.

The Bank recognizes transfers between levels of the fair value hierarchy as of the end of the reporting

period during which the change has occurred.

(vi) Gains and losses on subsequent measurement

A gain or loss arising from a change in the fair value of a financial asset or liability is recognized as

follows:

- a gain or loss on a financial instrument classified as at fair value through profit or loss is recognized

in profit or loss

- a gain or loss on an available-for-sale financial asset is recognized as other comprehensive income in

equity (except for impairment losses and foreign exchange gains and losses on debt financial

instruments available-for-sale) until the asset is derecognized, at which time the cumulative gain or

loss previously recognized in equity is recognized in profit or loss. Interest in relation to an available-

for-sale financial asset is recognized in profit or loss using the effective interest method.

For financial assets and liabilities carried at amortised cost, a gain or loss is recognized in profit or loss

when the financial asset or liability is derecognized or impaired, and through the amortization process.

LLC Deutsche Bank


15

(vii) Derecognition

The Bank derecognizes a financial asset when the contractual rights to the cash flows from the

financial asset expire, or when it transfers the financial asset in a transaction in which substantially all

the risks and rewards of ownership of the financial asset are transferred or in which the Bank neither

transfers nor retains substantially all the risks and rewards of ownership and it does not retain control

of the financial asset. Any interest in transferred financial assets that qualify for derecognition that is

created or retained by the Bank is recognized as a separate asset or liability in the statement of

financial position. The Bank derecognizes a financial liability when its contractual obligations are

discharged or cancelled or expire.

The Bank enters into transactions whereby it transfers assets recognized on its statement of financial

position, but retains either all risks and rewards of the transferred assets or a portion of them. If all or

substantially all risks and rewards are retained, then the transferred assets are not derecognized.

In transactions where the Bank neither retains nor transfers substantially all the risks and rewards of

ownership of a financial asset, it derecognizes the asset if control over the asset is lost.

In transfers where control over the asset is retained, the Bank continues to recognize the asset to the

extent of its continuing involvement, determined by the extent to which it is exposed to changes in the

value of the transferred assets.

If the Bank purchases its own debt, it is removed from the statement of financial position and the

difference between the carrying amount of the liability and the consideration paid is included in gains

or losses arising from early retirement of debt.

The Bank writes off assets deemed to be uncollectible.

(viii) Repurchase and reverse repurchase agreements

Securities sold under sale and repurchase agreements are accounted for as secured financing

transactions, with the securities retained in the statement of financial position and the counterparty

liability included in amounts payable under repurchase agreements with the Central Bank of the

Russian Federation. The difference between the sale and repurchase prices represents interest expense

and is recognized in profit or loss over the term of the repurchase agreement using the effective interest

method.

Securities purchased under agreements to resell are recorded as amounts receivable under reverse

repurchase transactions within placements with banks or loans to customers, as appropriate. The

difference between the purchase and resale prices represents interest income and is recognized in profit

or loss over the term of the reverse repurchase agreement using the effective interest method.

If assets purchased under an agreement to resell are sold to third parties, the obligation to return

securities is recorded as a trading liability and measured at fair value.

(ix) Derivative financial instruments

Derivative financial instruments include swaps, forwards, futures, spot transactions and options in

interest rates, foreign exchanges, and stock markets, and any combinations of these instruments.

Derivatives are initially recognized at fair value on the date on which a derivative contract is entered

into and are subsequently remeasured at fair value. All derivatives are carried as assets when their fair

value is positive and as liabilities when their fair value is negative.

Changes in the fair value of derivatives are recognized immediately in profit or loss.

LLC Deutsche Bank


16

Derivatives may be embedded in another contractual arrangement (a host contract). An embedded

derivative is separated from the host contract and is accounted for as a derivative if, and only if the

economic characteristics and risks of the embedded derivative are not closely related to the economic

characteristics and risks of the host contract, a separate instrument with the same terms as the

embedded derivative would meet the definition of a derivative; and the combined instrument is not

measured at fair value with changes in fair value recognized in profit or loss. Derivatives embedded in

financial assets or financial liabilities at fair value through profit or loss are not separated.

Although the Bank trades in derivative instruments for risk hedging purposes, these instruments do not

qualify for hedge accounting.

(x) Offsetting

Financial assets and liabilities are offset and the net amount reported in the statement of financial

position when there is a legally enforceable right to set off the recognized amounts and there is an

intention to settle on a net basis, or realize the asset and settle the liability simultaneously.

(d) Property, equipment and intangible assets

(i) Owned assets and intangible assets

Items of property and equipment are stated at cost less accumulated depreciation and impairment

losses.

Where an item of property and equipment comprises major components having different useful lives,

they are accounted for as separate items of property and equipment.

Acquired intangible assets are stated at cost less accumulated amortization and impairment losses.

Acquired computer software licenses are capitalized on the basis of the costs incurred to acquire and

bring to use the specific software.

(ii) Leased assets

Operating leases, the terms of which the Bank does not assume substantially all the risks and rewards

of ownership, are expensed over the term of the lease.

(iii) Depreciation and amortization

Depreciation and amortization is charged to profit or loss on a straight-line basis over the estimated

useful lives of the individual assets. Depreciation and amortization commences on the date of

acquisition or, in respect of internally constructed assets, from the time an asset is completed and ready

for use. The estimated useful lives are as follows:

- leasehold improvements 3 - 15 years

- equipment 3 - 7 years

- computer software 1 - 3 years

(e) Impairment

The Bank assesses at the end of each reporting period whether there is any objective evidence that a

financial asset or group of financial assets is impaired. If any such evidence exists, the Bank

determines the amount of any impairment loss.

A financial asset or a group of financial assets is impaired and impairment losses are incurred if, and

only if, there is objective evidence of impairment as a result of one or more events that occurred after

the initial recognition of the financial asset (a loss event) and that event (or events) has had an impact

on the estimated future cash flows of the financial asset or group of financial assets that can be reliably

estimated.

LLC Deutsche Bank


17

Objective evidence that financial assets are impaired can include default or delinquency by a borrower,

breach of loan covenants or conditions, restructuring of financial asset or group of financial assets that

the Bank would not otherwise consider, indications that a borrower or issuer will enter bankruptcy, the

disappearance of an active market for a security, deterioration in the value of collateral, or other

observable data relating to a group of assets such as adverse changes in the payment status of

borrowers in the group, or economic conditions that correlate with defaults in the group.

In addition, for an investment in an equity security available-for-sale a significant or prolonged decline

in its fair value below its cost is objective evidence of impairment.

(i) Financial assets carried at amortized cost

Financial assets carried at amortized cost consist principally of loans and other receivables (loans and

receivables). The Bank reviews its loans and receivables to assess impairment on a regular basis.

The Bank first assesses whether objective evidence of impairment exists individually for loans and

receivables that are individually significant, and individually or collectively for loans and receivables

that are not individually significant. If the Bank determines that no objective evidence of impairment

exists for an individually assessed loan or receivable, whether significant or not, it includes the loan in

a group of loans and receivables with similar credit risk characteristics and collectively assesses them

for impairment. Loans and receivables that are individually assessed for impairment and for which an

impairment loss is or continues to be recognized are not included in a collective assessment of

impairment.

If there is objective evidence that an impairment loss on a loan or receivable has been incurred, the

amount of the loss is measured as the difference between the carrying amount of the loan or receivable

and the present value of estimated future cash flows including amounts recoverable from guarantees

and collateral discounted at the loan or receivable’s original effective interest rate. Contractual cash

flows and historical loss experience adjusted on the basis of relevant observable data that reflect

current economic conditions provide the basis for estimating expected cash flows.

In some cases the observable data required to estimate the amount of an impairment loss on a loan or

receivable may be limited or no longer fully relevant to current circumstances. This may be the case

when a borrower is in financial difficulties and there is little available historical data relating to similar

borrowers. In such cases, the Bank uses its experience and judgment to estimate the amount of any

impairment loss.

All impairment losses in respect of loans and receivables are recognized in profit or loss and are only

reversed if a subsequent increase in recoverable amount can be related objectively to an event

occurring after the impairment loss was recognized.

When a loan is uncollectable, it is written off against the related allowance for loan impairment. The

Bank writes off a loan balance (and any related allowances for loan losses) when management

determines that the loans are uncollectible and when all necessary steps to collect the loan are

completed.

(ii) Financial assets carried at cost

Financial assets carried at cost include unquoted equity instruments included in available-for-sale

financial assets that are not carried at fair value because their fair value cannot be reliably measured. If

there is objective evidence that such investments are impaired, the impairment loss is calculated as the

difference between the carrying amount of the investment and the present value of the estimated future

cash flows discounted at the current market rate of return for a similar financial asset.

All impairment losses in respect of these investments are recognized in profit or loss and cannot be

reversed.

LLC Deutsche Bank


18

(iii) Available-for-sale financial assets

Impairment losses on available-for-sale financial assets are recognized by transferring the cumulative

loss that is recognized in other comprehensive income to profit or loss as a reclassification adjustment.

The cumulative loss that is reclassified from other comprehensive income to profit or loss is the

difference between the acquisition cost, net of any principal repayment and amortization, and the

current fair value, less any impairment loss previously recognized in profit or loss. Changes in

impairment allowance attributable to time value are reflected as a component of interest income.

If, in a subsequent period, the fair value of an impaired available-for-sale debt security increases and

the increase can be objectively related to an event occurring after the impairment loss was recognized

in profit or loss, the impairment loss is reversed, with the amount of the reversal recognized in profit or

loss. However, any subsequent recovery in the fair value of an impaired available-for-sale equity

security is recognized in other comprehensive income.

(iv) Non financial assets

Other non financial assets, other than deferred taxes, are assessed at each reporting date for any

indications of impairment. The recoverable amount of non financial assets is the greater of their fair

value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are

discounted to their present value using a pre-tax discount rate that reflects current market assessments

of the time value of money and the risks specific to the asset. For an asset that does not generate cash

inflows largely independent of those from other assets, the recoverable amount is determined for the

cash-generating unit to which the asset belongs. An impairment loss is recognized when the carrying

amount of an asset or its cash-generating unit exceeds its recoverable amount.

All impairment losses in respect of non financial assets are recognized in profit or loss and reversed

only if there has been a change in the estimates used to determine the recoverable amount. Any

impairment loss reversed is only reversed to the extent that the asset’s carrying amount does not

exceed the carrying amount that would have been determined, net of depreciation or amortization, if no

impairment loss had been recognized.

(f) Provisions

A provision is recognized in the statement of financial position when the Bank has a legal or

constructive obligation as a result of a past event, and it is probable that an outflow of economic

benefits will be required to settle the obligation. If the effect is material, provisions are determined by

discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of

the time value of money and, where appropriate, the risks specific to the liability.

(g) Credit related commitments

In the normal course of business, the Bank enters into credit related commitments, comprising

undrawn loan commitments, letters of credit and guarantees, and provides other forms of credit

insurance.

Financial guarantees are contracts that require the Bank to make specified payments to reimburse the

holder for a loss it incurs because a specified debtor fails to make payment when due in accordance

with the terms of a debt instrument.

A financial guarantee liability is recognized initially at fair value net of associated transaction costs,

and is measured subsequently at the higher of the amount initially recognized less cumulative

amortization or the amount of provision for losses under the guarantee. Provisions for losses under

financial guarantees and other credit related commitments are recognized when losses are considered

probable and can be measured reliably.

Financial guarantee liabilities and provisions for other credit related commitments are included in other

liabilities.

LLC Deutsche Bank


19

Loan commitments are not recognized.

(h) Distributions to the participant

Distributions to the participant are recorded in the period in which they are declared. Distributions to

the participant declared after the reporting date are disclosed as a subsequent event. The Bank

distributes profits on the basis of financial statements prepared in accordance with Russian Accounting

Rules.

(i) Taxation

Income tax comprises current and deferred tax. Income tax is recognized in profit or loss except to the

extent that it relates to items of other comprehensive income or transactions with the participant

recognized directly in equity, in which case it is recognized within other comprehensive income or

directly within equity.

Current tax expense is the expected tax payable on the taxable profit for the year, using tax rates

enacted or substantially enacted at the reporting date, and any adjustment to tax payable in respect of

previous years.

Deferred tax assets and liabilities are recognized in respect of temporary differences between the

carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for

taxation purposes. Deferred tax assets and liabilities are not recognized for the temporary differences

arisen from the initial recognition of assets or liabilities that affect neither accounting nor taxable

profit.

The measurement of deferred tax assets and liabilities reflects the tax consequences that would follow

the manner in which the Bank expects, at the end of the reporting period, to recover or settle the

carrying amount of its assets and liabilities.

Deferred tax assets and liabilities are measured at the tax rates that are expected to be applied to the

temporary differences when they reverse, based on the laws that have been enacted or substantively

enacted by the reporting date.

Deferred tax assets are recognized only to the extent that it is probable that future taxable profits will

be available against which the temporary differences, unused tax losses and credits can be utilised.

Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit

will be realised.

(j) Income and expense recognition

Interest income and expense are recognized in profit or loss using the effective interest method.

Loan organization fees, loan servicing fees and other fees that are considered to be integral to the

overall profitability of a loan, and together with the related transaction costs, are deferred and

amortized to interest income over the estimated life of the financial instrument using the effective

interest method.

Other fees, commissions and other income and expense items are recognized in profit or loss when the

corresponding service is provided.

Dividend income is recognized in profit or loss on the date that the dividend is declared.

Payments made under operating leases are recognized in profit or loss on a straight-line basis over the

term of the lease. Lease incentives received are recognized as an integral part of the total lease

expense, over the term of the lease.

LLC Deutsche Bank


20

(k) Comparative information

Certain comparative amounts in the statement of financial position have been reclassified to conform

with the current year’s presentation, which was changed for better disclose the nature of the assets. The

effects of these reclassifications on amounts presented in the statement of financial position as at 31

December 2012 were as follows:

RUB’000

As originally

presented Reclassification As reclassified for 2012

Cash 63,607 (63,607) -

Cash and cash equivalents - 14,156,230 14,156,230

Mandatory reserve deposit with

the Central Bank of the Russian

Federation

- 1,358,449 1,358,449

Placements with banks 89,354,950 1,345,311 90,700,261

Due from the Central Bank of

the Russian Federation

11,043,854 (11,043,854) -

Other assets 7,895,950 (5,752,529) 2,143,421

The effects of these reclassifications on amounts presented in the statement of financial position as at

31 December 2011 were as follows:

RUB’000

As originally


Cash 196,970 (196,970) -

Cash and cash equivalents - 17,661,060 17,661,060

Mandatory reserve deposit

with the Central Bank of the

Russian Federation

- 1,785,712 1,785,712

Placements with banks 54,289,788 (3,357,669) 50,932,119

Due from the Central Bank of

the Russian Federation

10,635,333 (10,635,333) -

Other assets 8,707,621 (5,256,800) 3,450,821

Certain comparative amounts in the statement of profit or loss and other comprehensive income have

been reclassified to conform with the current year’s presentation, which was changed to better reflect

the underlying activity. The effects of these reclassifications on amounts presented in the statement of

profit or loss and other comprehensive income as at 31 December 2012 were as follows:

RUB’000

As originally


Net gain on financial

instruments held for trading

2,177,467

2,177,628

4,355,095

Net foreign exchange income 3,062,046 (2,177,628) 884,418

The respective reclassifications have been made in the statement of cash flows as at

31 December 2012:

LLC Deutsche Bank


21

RUB’000

As originally


Unrealized gain on financial

instruments held for trading

(593,587) (331,666) (925,253)

Change in accruals in other

income

-

549,535

549,535

Change in accruals in general

administrative expenses

-

(399,975)

(399,975)

Financial instruments held for

trading

(33,670,378)

331,666

(33,338,712)

Placements with banks (34,388,618) (4,588,309) (38,976,927)

Other assets 876,593 (62,016) 814,577

Other liabilities 299,233 399,975 699,208

Net cash provided from

(used in) operating activities

767,509

(4,100,790)

(3,333,281)

Effect of changes in exchange

rates on cash and cash

equivalents

(3,391)

(106,461)

(109,852)

Cash and cash equivalents at

the beginning of the year

9,046,591

8,614,469

17,661,060

Cash and cash equivalents

at the end of the year

9,749,012

4,407,218

14,156,230

The respective amounts in the notes to these financial statements were modified accordingly.

(l) New standards and interpretations not yet adopted

The following new standards, amendments to standards and interpretations are not yet effective as at

31 December 2013, and are not applied in preparing these financial statements. The Bank plans to

adopt these pronouncements when they become effective.

IFRS 9 Financial Instruments is to be issued in phases and is intended ultimately to replace IAS 39

Financial Instruments: Recognition and Measurement. The first phase of IFRS 9 was issued in

November 2009 and relates to the classification and measurement of financial assets. The second

phase regarding classification and measurement of financial liabilities was published in October

2010. The third phase of IFRS 9 was issued in November 2013 and relates to general hedge

accounting. The final standard is expected to be issued in 2014 and will be effective for annual

periods beginning on or after 1 January 2018. The Bank recognizes that the new standard

introduces many changes to the accounting for financial instruments and is likely to have a

significant impact on the financial statements. The impact of these changes will be analyzed during

the course of the project as further phases of the standard are issued. The Bank does not intend to

adopt this standard early.

Amendments to IAS 32 Financial Instruments: Presentation - Offsetting Financial Assets and

Financial Liabilities do not introduce new rules for offsetting financial assets and liabilities; rather

they clarify the offsetting criteria to address inconsistencies in their application. The amendments

specify that an entity currently has a legally enforceable right to set-off if that right is not

contingent on a future event; and enforceable both in the normal course of business and in the

event of default, insolvency or bankruptcy of the entity and all counterparties. The amendments are

effective for annual periods beginning on or after 1 January 2014, and are to be applied

retrospectively. The Bank has not yet analyzed the likely impact of the amendments on its financial

position or performance.

LLC Deutsche Bank


22

Various Improvements to IFRS are dealt with on a standard-by-standard basis. All amendments,

which result in accounting changes for presentation, recognition or measurement purposes, will

come into effect not earlier than 1 January 2014. The Bank has not yet analyzed the likely impact

of the improvements on its financial position or performance.

4 Cash and cash equivalents

2013 2012

RUB’000 RUB’000

Cash on hand 134,000 63,607

Nostro accounts with the CBR 10,281,432 9,685,405

Nostro accounts at Moscow Exchange 2,737,921 1,740,889

Nostro accounts with other banks 2,699,304 2,666,329

- Rated from iAA- to iAA+ 287,205 298,223

- Rated from iA to iA+ 2,399,458 2,161,414

- Rated iBB+ - 206,287

- Not rated 12,641 405

Total cash and cash equivalents 15,852,657 14,156,230

No cash and cash equivalents are past due or impaired.

Concentration of cash and cash equivalents

As at 31 December, cash equivalents that individually comprised more than 10% of cash and cash

equivalents are as follows:

2013 2012

Balance Percentage Balance Percentage

RUB’000 % RUB’000 %

The Central Bank of the Russian

Federation 10,281,432 65% 9,685,405 68%

Moscow Exchange 2,737,921 17% 1,740,889 12%

Deutsche Bank Group 2,397,683 15% 2,366,151 17%

Total 15,417,036 97% 13,792,445 97%

LLC Deutsche Bank


23

5 Financial instruments held for trading

2013 2012

RUB’000 RUB’000

ASSETS

Held by the Bank

Debt and other fixed-income instruments

Russian Government OFZ bonds 4,797,745 7,795,773

Russian municipal and regional authorities bonds 702,926 -

Corporate bonds 3,315,665 6,333,015

- Rated from iBBB- to iBBB+ 2,115,308 5,865,566

- Rated from iBB- to iBB+ 1,200,357 117,612

- Not rated - 349,837

Promissory notes 1,565,900 2,380,262

- Rated iBBB+ - 2,380,262

- Rated iBB- 1,565,900 -

Derivative financial instruments

Foreign currency contracts 758,714 367,010

- Rated from iA+ to iA- 84,053 68,094

- Rated from iBBB+ to iBB- 674,661 288,356

- Rated from iB+ to iB- - 3,922

- Not rated - 6,638

Structured derivatives contracts 814,305 -

- Rated from iA+ to iA- 492,620 -

- Rated from iBBB+ to iBB- 321,685 -

Total financial instruments held by the Bank 11,955,255 16,876,060

Pledged under sale and repurchase agreements

Debt and other fixed-income instruments

Russian Government OFZ bonds 4,339,353 32,254,808

Russian municipal and regional authorities bonds 200,836 -

Corporate bonds 3,017,300 6,849,409

- Rated from iBBB- to iBBB+ 3,017,300 6,643,665

- Rated from iBB- to iBB+ - 205,744

Total financial instruments pledged under sale and

repurchase agreements 7,557,489 39,104,217

LLC Deutsche Bank


24

2013 2012

RUB’000 RUB’000

LIABILITY

Derivative financial instruments

Foreign currency contracts 424,232 246,734

Structured derivative contracts 811,478 -

1,235,710 246,734

No financial instruments held for trading are past due or impaired.

Structured derivative contracts represent target profit forwards, cross currency interest rate swap with

cap, cross currency swap with knock-out and binary options.

The Bank uses the Deutsche Bank Group’s internal credit ratings system to rate the credit quality of

financial instruments. A detailed description of the internal credit ratings system is presented in note

22 “Risk management, corporate governance and internal control”.

6 Transfers of financial assets

Transferred financial assets that are not derecognized in their entirety

2013

RUB’000

Financial intruments held for

trading

Carrying amount of assets 7,557,489

Carrying amount of associated liabilities (6,588,588)

2012

RUB’000

Financial intruments held for

trading

Carrying amount of assets 39,104,217

Carrying amount of associated liabilities (37,673,369)

Securities

The Bank has transactions to sell securities under agreements to repurchase. Sale and repurchase

agreements are transactions in which the Bank sells a security and simultaneously agrees to repurchase

it (or an asset that is substantially the same) at a fixed price on a future date.

The securities sold under agreements to repurchase are transferred to a third party and the Bank

receives cash in exchange. These financial assets may be repledged or resold by counterparties in the

absence of default by the Bank, but the counterparty has an obligation to return the securities at the

maturity of the contract. The Bank has determined that it retains substantially all the risks and rewards

of these securities and therefore has not derecognized them. These securities are presented as “pledged

under sale and repurchase agreements” in note 5. The cash received is recognized as a financial asset

and a financial liability is recognized for the obligation to repay the purchase price for this collateral,

and is included in amounts payable under repurchase agreements with the Central Bank of the Russian

Federation. Because the Bank sells the contractual rights to the cash flows of the securities it does not

have the ability to use the transferred assets during the term of the agreement.

These transactions are conducted under terms that are usual and customary to standard lending

activities, as well as requirements determined by exchanges where the Bank acts as intermediary.

LLC Deutsche Bank


25

7 Placements with banks

2013 2012

RUB’000 RUB’000

Placements with Moscow Exchange 6,173,380 4,011,740

Loans and deposits 91,388,020 86,688,521

- Rated from iAA- to iAA+ 89,956,875 82,960,321

- Rated iBBB+ 1,428,229 3,728,200

- Not rated 2,916 -

Total placements with banks 97,561,400 90,700,261

No placements with banks are past due or impaired.

Placements with Moscow Exchange represent guarantee deposits and unsettled transacations at

CJSC ACB National Clearing Centre which are subject to certain restrictions on withdrawability.

Concentration of placements with banks

As at 31 December, placements with banks that individually comprised more than 10% of placements

with banks, are as follows:

2013 2012

Balance Percentage Balance Percentage

RUB’000 % RUB’000 %


8 Loans to customers

2013 2012

RUB’000 RUB’000

Loans to legal entities 7,166,041 8,860,624

Impairment allowance (4,812) (11,214)

7,161,229 8,849,410

Movements in the loan impairment allowance for the years ended 31 December 2013 and 2012 are as

follows:

2013 2012

RUB’000 RUB’000

Balance as at the beginning of the year (11,214) (10,793)

Net reversal (charge) 6,402 (421)

Balance as at the end of the year (4,812) (11,214)

LLC Deutsche Bank


26

Credit quality of loans to customers

The following table provides information on the credit quality of the loans to legal entities as at

31 December 2013:

Gross loans

Impairment

allowance Net loans

Impairment

to gross loans

RUB’000 RUB’000 RUB’000 %

Loans to legal entities

Rated from iAAA- to iAA- 198,998 (29) 198,969 0.01%

Rated from iA+ to iA- 1,088,518 (438) 1,088,080 0.04%

Rated from iBBB+ to iBB- 5,836,413 (4,239) 5,832,174 0.07%

Not rated 42,112 (106) 42,006 0.25%

Total loans to legal entities 7,166,041 (4,812) 7,161,229 0.07%

The following table provides information on the credit quality of the loans to legal entities as at

31 December 2012:

Gross loans

Impairment

allowance Net loans

Impairment

to gross loans

RUB’000 RUB’000 RUB’000 %


Rated from iAAA- to iAA- 160,072 (52) 160,020 0.03%

Rated from iA+ to iA- 580,170 (77) 580,093 0.01%

Rated from iBBB+ to iBB- 5,977,420 (7,365) 5,970,055 0.12%

Rated from iB+ to iB- 1,105,571 (37) 1,105,534 0.00%

Not rated 1,037,391 (3,683) 1,033,708 0.36%

Total loans to legal entities 8,860,624 (11,214) 8,849,410 0.13%

Management has not identified any specific loans that display indicators of impairment. There are no

loans that are past due or that have been restructured. In addition, the Bank historically has not

incurred impairment losses on loans and has received guarantees from Deutsche Bank AG and other

Deutsche Bank Group companies that, as at 31 December 2013, cover 23% (31 December 2012: 12%)

of loans to customers. The Bank created a 0.07% collective impairment allowance on loans to

customers, based on historical experience and its assessment of the risks in the loan portfolio as at 31

December 2013 (31 December 2012: 0.13%).

Analysis of collateral

The following table provides the analysis of loans to customers, net of impairment, by types of

collateral as at 31 December 2013 and 31 December 2012:

31 December 2013

RUB’000


Guarantees of Deutsсhe Bank Group companies 1,660,642

Corporate guarantees 4,205,466

No collateral or fair value not assessed 1,295,121

Total loans to legal entities 7,161,229

LLC Deutsche Bank


27

31 December 2012

RUB’000


Guarantees of Deutsсhe Bank Group companies 1,088,087

Corporate guarantees 6,623,580

No collateral or fair value not assessed 1,137,743

Total loans to legal entities 8,849,410

The amounts shown in the table above represent the carrying value of the loans and do not necessarily

represent the fair value of the collateral.

Management estimates that the impairment allowance on loans to legal entities secured by guarantees

would not change without the respective guarantees as at 31 December 2013 and 31 December 2012.

During the year ended 31 December 2013 the Bank did not obtain any assets by repossessing of

collateral securing loans to customers (31 December 2012: nil).

Industry analysis of the loan portfolio

Loans were issued primarily to customers located within the Russian Federation who operate in the

following economic sectors:

2013 2012

RUB’000 RUB’000

Manufacturing 4,817,134 2,816,707

Real estate 1,082,718 1,082,710

Trade 812,165 4,667,815

Transport and logistics 190,998 160,072

Other 263,026 133,320


7,161,229 8,849,410

Significant credit exposures

As at 31 December 2013 and 2012, loans to customers, which individually comprised more than 10%

of gross loans to customers, are as follows:

2013 2012

Balance

% of loan

portfolio Balance

% of loan

portfolio

RUB’000 % RUB’000 %

OJSC “Rudnik imeni Matrosova” 3,700,618 51.7% 1,071,619 12.1%

LLC “Ikea Mos” 1,081,962 15.1% 1,082,710 12.2%

OJSC “TENEX” - - 3,212,775 36.3%

OJSC “Volzhskiy Orgsintes” - - 918,892 10.4%

Total gross value 4,782,580 66.8% 6,285,996 71.0%

Loan maturities

The maturity of the loan portfolio is presented in note 22 “Risk management, corporate governance

and internal control”, which shows the remaining period from the reporting date to the contractual

maturity date. It is likely that many of the loans to customers will be prolonged on maturity.

Accordingly, the effective maturity of the loan portfolio may be significantly longer than the

classification indicated based on contractual terms.

LLC Deutsche Bank


28

9 Other assets

2013 2012

RUB’000 RUB’000

Settlements on conversion deals 1,636,400 -

Receivables for commissions, corporate finance and underwriting

services 40,981 90,705


Total other financial assets 1,664,769 40,664

Receivable for services rendered to Deutsche Bank Group

companies 1,953,136 1,495,798

Income tax prepayment 311,586 382,795

Guarantee deposits for rented objects 84,726 82,025

Prepayments 44,392 101,287

Other tax prepayments 31,567 34,633

Other 7,745 6,219

Total other non-financial assets 2,433,152 2,102,757

Total other assets 4,097,921 2,143,421

Settlements on conversion deals represent receivables of currency from a counterparty on a spot

transaction with a valuation date on 27 December 2013. The cash was received on 9 January 2014.

Movements in the other assets impairment allowance for the years ended 31 December 2013 and 2012

are as follows:

2013 2012

RUB’000 RUB’000

Balance at the beginning of the year (50,041) (53,648)

Write-offs 264 -

Net reversal 37,165 3,607

Balance at the end of the year (12,612) (50,041)

LLC Deutsche Bank


29

10 Property, equipment and intangible assets

The roll-forward of property, equipment and intangible assets from 1 January 2013 to 31 December

2013 is as follows:

RUB’000 Leasehold

improvements Equipment

Computer

software Total

Cost

Balance at 1 January 2013 1,034,260 711,289 124,172 1,869,721

Additions 4,682 54,407 12,785 71,874

Disposals (13,129) (145,842) (47,637) (206,608)

Balance at 31 December 2013 1,025,813 619,854 89,320 1,734,987

Depreciation

Balance at 1 January 2012 630,190 335,890 78,730 1,044,810

Depreciation and amortization 169,241 123,269 27,507 320,017

Disposals (7,066) (133,105) (47,637) (187,808)

Balance at 31 December 2013 792,365 326,054 58,600 1,177,019

Carrying value

Balance at 31 December 2013 233,448 293,800 30,720 557,968

The roll-forward of property, equipment and intangible assets from 1 January 2012 to 31 December

2012 is as follows:

RUB’000 Leasehold

improvements Equipment

Computer

software Total

Cost

Balance at 1 January 2012 1,010,143 562,343 98,123 1,670,609

Additions 24,482 196,481 26,049 247,012

Disposals (365) (47,535) - (47,900)

Balance at 31 December 2012 1,034,260 711,289 124,172 1,869,721

Depreciation

Balance at 1 January 2012 459,666 254,208 51,460 765,334

Depreciation and amortization 170,889 126,321 27,270 324,480

Disposals (365) (44,639) - (45,004)

Balance at 31 December 2012 630,190 335,890 78,730 1,044,810

Carrying value

Balance at 31 December 2012 404,070 375,399 45,442 824,911

LLC Deutsche Bank


30

11 Deposits and balances from banks

2013 2012

RUB’000 RUB’000

Vostro accounts 43,055,949 28,494,490

Loans and deposits from banks 22,202,133 38,558,091

65,258,082 67,052,581

Concentration of deposits and balances from banks

As at 31 December, deposits and balances from banks, which individually comprised more than 10%

of deposits and balances from banks, are as follows:

2013 2012

Balance % of Balance % of

RUB’000 portfolio RUB’000 portfolio


12 Current accounts and deposits from customers

2013 2012

RUB’000 RUB’000

Current accounts and demand deposits 24,535,662 20,780,407

Corporate customers 22,325,854 18,535,166

Individuals 2,209,808 2,245,241

Term deposits 29,634,587 27,932,818

Corporate customers 29,430,001 27,659,757

Individuals 204,586 273,061

54,170,249 48,713,225

As at 31 December 2013, the Bank has no customers whose balances individually comprised more

than 10% of total current accounts and deposits from customers (31 December 2012: no customers).

LLC Deutsche Bank


31

13 Other liabilities

2013 2012

RUB’000 RUB’000

Settlements payable 68,693 39,140

Total other financial liabilities 68,693 39,140

Employee compensation payable 1,680,032 1,798,096

Payables for services rendered by Deutsche Bank Group companies 1,194,517 1,251,650

Taxes other than on income payable 214,799 245,684

Income tax payable 80,631 586,493

Provision for guarantees and letters of credit issued 4,938 3,163

Other liabilities 6,950 4,963

Total other non-financial liabilities 3,181,867 3,890,049

Total other liabilities 3,250,560 3,929,189

14 Equity

Charter capital represents contributions made by the sole participant of the Bank. Under Russian

legislation the sole participant in a Russian limited liability company does not have the unilateral right

to withdraw his capital from the company. Accordingly charter capital is classified as equity.

As at 31 December 2013, the charter capital consists of the registered unit with a par value of

RUB 1,237,450 thousand (31 December 2012: RUB 1,237,450 thousand).

Distributions to participants are restricted to the maximum retained earnings of the Bank, which are

determined according to legislation of the Russian Federation. In accordance with the requirements of

the legislation of the Russian Federation as of the reporting date the amount available for distribution

to the participant constitutes RUB 13,443,872 thousand (31 December 2012: RUB 14,818,961

thousand).

During 2013 a distribution of RUB 3,066,514 thousand (2012: RUB 212,135 thousand) was declared

and paid to the participant.

15 Net interest (expense) income

2013 2012

RUB’000 RUB’000

Interest income

Financial instruments held for trading 2,364,443 3,025,642

Placements with banks 451,981 571,049

Loans to customers 411,637 299,306

Total interest income 3,228,061 3,895,997

Interest expense

Deposits and balances from banks (2,546,979) (1,929,928)

Term deposits from legal entities (2,285,004) (1,229,992)

Total interest expense (4,831,983) (3,159,920)

Net interest (expense) income (1,603,922) 736,077

LLC Deutsche Bank


32

16 Net fee and commission income

2013 2012

RUB’000 RUB’000

Fee and commission income

Brokerage fees 844,682 635,274

Custodian and trust management fees 233,245 230,757

Settlement fees 192,756 176,018

Foreign exchange fees 147,127 148,908

Commissions on guarantees issued 94,875 85,073

Commissions on letters of credit 94,599 65,844

Consultancy fees 3,398 4,864

Total fee and commission income 1,610,682 1,346,738

Fee and commission expense

Custodian fees (81,893) (80,343)

Foreign exchange fees (73,508) (48,336)

Brokerage fees (39,777) (32,123)

Settlement fees (27,701) (25,588)

Commissions on guarantees received (24,464) (1,893)

Other (12,535) (16,952)

Total fee and commission expense (259,878) (205,235)

Net fee and commission income 1,350,804 1,141,503

17 Net gain on financial instruments held for trading

2013 2012

RUB’000 RUB’000

Net realized gain on financial instruments held for trading 558,145 3,429,842

Net unrealized (loss) gain on financial instruments held for trading (479,076) 925,253

Net gain on financial instruments held for trading 79,069 4,355,095

18 Other income

Other income represents mainly income from consultancy and information technology services

rendered to Deutsche Bank Group companies.

LLC Deutsche Bank


33

19 General administrative expenses

2013 2012

RUB’000 RUB’000

Employee compensation 4,702,238 4,625,807

Communications and information services 439,039 570,756

Allocation of overhead expenses of Deutsche Bank Group companies 690,279 535,053

Occupancy 398,769 335,579

Depreciation and amortization 320,017 324,480

Professional services 274,605 295,541

Taxes other than on income 236,756 293,706

Office maintenance costs 196,660 145,536

Travel 107,759 110,864

Advertising and marketing 63,245 74,365

Other 172,320 177,302

Total general administrative expenses 7,601,687 7,488,989

20 Provision for impairment other than on loans

2013 2012

RUB’000 RUB’000

Available-for-sale securities 3,795 512

Other assets 37,165 3,607

Guarantees and letters of credit (1,775) 17,621

Total reversal of provision for impairment other than on loans 39,185 21,740

21 Income tax expense

2013 2012

RUB’000 RUB’000

Current year tax expense 669,416 1,103,209

Current tax underprovided in prior years 5,965 -

Deferred taxation (39,114) (208,498)

Total income tax expense 636,267 894,711

In 2013 the applicable tax rate for current and deferred tax is 20% (2012: 20%)

A reconciliation of effective tax rate for the year ended 31 December is as follows:

LLC Deutsche Bank


34

2013 2012

RUB’000 % RUB’000 %

Profit before tax 2,751,476 4,547,077

Income tax expense at 20% 550,295 20.0% 909,415 20.0%

Non-deductible costs 140,803 5.1% 132,783 2.9%

Income taxed at lower tax rates (60,796) (2.2%) (140,453) (3.1%)

Current tax underprovided in prior years 5,965 0.2% - -

Non-taxable income - - (7,034) (0.2%)

Total income tax expense 636,267 23.1% 894,711 19.%

Deferred tax asset

Temporary differences between the carrying amounts of assets and liabilities for financial reporting

purposes and the amounts used for taxation purposes give rise to net deferred tax assets as at

31 December 2013 and 2012.

Movements in temporary differences during the years ended 31 December 2013 and 2012 are

presented as follows.

RUB’000

Balance

1 January 2013

Recognized

in profit

or loss

Recognized

in other

comprehensive

income

Balance

31 December

2013

Financial instruments held for trading (assets) (196,731) (135,714) - (332,445)

Loans to customers 2,243 (1,293) - 950

Available-for-sale financial assets 1,470 - (1,346) 124

Property and equipment 90,717 27,079 - 117,796

Financial instruments held for trading (liabilities) 41,350 205,794 - 247,144

Other assets 8,670 (8,370) - 300

Other liabilities 399,692 (48,382) - 351,310

347,411 39,114 (1,346) 385,179

RUB’000

Balance

1 January 2012

Recognized

in profit

or loss

Recognized

in other

comprehensive

income

Balance

31 December

2012

Financial instruments held for trading (assets) (86,819) (109,912) - (196,731)

Loans to customers 2,158 85 - 2,243

Available-for-sale financial assets (80,258) 81,595 133 1,470

Property and equipment 33,494 57,223 - 90,717

Financial instruments held for trading (liabilities) 122,933 (81,583) - 41,350

Other assets (21,430) 30,100 - 8,670

Other liabilities 168,702 230,990 - 399,692

138,780 208,498 133 347,411

LLC Deutsche Bank


35

Income tax recognized in other comprehensive income

The tax effects relating to components of other comprehensive income for the years ended 31

December 2013 and 2012 comprise the following:

2013 2012

RUB’000

Amount

before tax

Tax

expense

Amount

net-of-tax

Amount

before tax

Tax

benefit

Amount

net-of-tax

Net change in fair value of financial

assets available-for-sale - - - (663) 133 (530)

Net change in fair value of financial

assets available-for-sale transferred to profit or loss

6,734 (1,346) 5,388 - - -

Other comprehensive income (loss)

for the year 6,734 (1,346) 5,388 (663) 133 (530)

22 Risk management, corporate governance and internal

control

(a) Corporate governance framework

The Bank is established as a limited liability company in accordance with Russian legislation. The

Bank is governed by the Sole participant. The Sole participant makes strategic decisions on the Bank’s

operations.

The Sole participant elects the Supervisory Board. The Supervisory Board is responsible for overall

governance of the Bank's activities.

Russian legislation and the charter of the Bank define certain decisions that are exclusively approved

by the Sole participant and that are approved by the Supervisory Board.

As at 31 December 2013, the Supervisory Board includes:

Stephan Leithner – Chairman of the Supervisory Board

Marco Francesco Bizzozero, Ahmet Arinc, Stefan Gernot Bender, Peter Johannes Maria Tils, Jeremy

William Bailey, Murray Roos – members of the Supervisory Board.

During the year ended 31 December 2013, the following changes occurred in composition of the

Supervisory Board:

- 3 June 2013: Peter Johannes Maria Tils, Jeremy William Bailey and Murray Roos were elected

as members of the Supervisory Board;

- 30 July 2013: Philip Richard Girzevald resigned.

General activities of the Bank are managed by the sole executive body of the Bank (Chairman of the

Management Board) and collective executive body of the Management Board. The Supervisory Board

meeting elects the Chairman of the Management Board and the Management Board. The executive

bodies of the Bank are responsible for implementation of decisions of the Sole participant and the

Supervisory Board. Executive bodies report to the Supervisory Board and to the Sole participant.

As at 31 December 2013, the Management Board includes:

Joerg Bongartz – Chairman of the Management Board

Batubay Ozkan, Alexander Kirejev, Yaroslav Lisovolik, Pavel Kushnir, Ekaterina Seredinskaya –

members of the Management Board.

LLC Deutsche Bank


36

During the year ended 31 December 2013, the following changes occurred in composition of the

Management Board:

- 17 October 2013: Ekaterina Seredinskaya was elected as a member of Management Board.

(b) Internal control policies and procedures

The Supervisory Board and the Management Board have responsibility for the development,

implementation and maintaining of internal controls in the Bank that are commensurate with the scale

and nature of operations.

The purpose of internal controls is to ensure:

proper and comprehensive risk assessment and management

proper business and accounting and financial reporting functions, including proper

authorization, processing and recording of transactions

completeness, accuracy and timeliness of accounting records, managerial information,

regulatory reports, etc.

reliability of IT-systems, data and systems integrity and protection

prevention of fraudulent or illegal activities, including misappropriation of assets

compliance with laws and regulations.

Management is responsible for identifying and assessing risks, designing controls and monitoring their

effectiveness. Management monitors the effectiveness of the Bank’s internal controls and periodically

implements additional controls or modifies existing controls as considered necessary.

The Bank developed a system of standards, policies and procedures to ensure effective operations and

compliance with relevant legal and regulatory requirements, including the following areas:

requirements for appropriate segregation of duties, including the independent authorization

of transactions

requirements for the recording, reconciliation and monitoring of transactions

compliance with regulatory and other legal requirements

documentation of controls and procedures

requirements for the periodic assessment of operational risks faced, and the adequacy of

controls and procedures to address the risks identified

requirements for the reporting of operational losses and proposed remedial action

development of contingency plans

training and professional development

ethical and business standards and

risk mitigation, including insurance where this is effective.

There is a hierarchy of requirements for authorization of transactions depending on their size and

complexity. A significant portion of operations are automated and the Bank put in place a system of

automated controls.

LLC Deutsche Bank


37

Compliance with the Bank’s standards is supported by a program of periodic reviews undertaken by

the Internal Audit function. The Internal Audit function is independent from management and reports

directly to the Supervisory Board. The results of the Internal Audit reviews are discussed with relevant

business process managers, with summaries submitted to the Supervisory Board and senior

management of the Bank.

The internal control system in the Bank comprises:

the Supervisory Board

the Chairman of the Management Board and the Management Board

the Chief Accountant

the risk management function

the security function, including IT-security

the human resource function

the Internal Audit function

other employees, division and functions that are responsible for compliance with the

established standards, policies and procedures, including:

heads of business-units

business processes managers

the compliance officer and the compliance function, including the division responsible

for compliance with anti-money laundering and anti-corruption requirements

professional securities market participant controller – an executive office responsible for

compliance with the requirements for securities market participants

the legal officer – an employee and a division responsible for compliance with the legal

and regulatory requirements

other employees/divisions with control responsibilities.

Russian legislation, including Federal Law dated 2 December 1990 No. 395-1 On Banks and Banking

Activity, establishes the professional qualifications, business reputation and other requirements for

members of the Supervisory Board, the Management Board, the Head of the Internal Audit function

and other key management personnel. All members of the Bank’s governing and management bodies

meet with these requirements.

Management believes that the Bank complies with the CBR requirements related to risk management

and internal control systems, including requirements related to the Internal Audit function, and that

risk management and internal control systems are appropriate for the scale, nature and complexity of

operations.

(c) Risk management policies and procedures

Risk and capital are managed through a framework of principles, organizational structures as well as

measurement and monitoring processes that are closely aligned with the activities of the Bank’s

divisions. The importance of a strong focus on risk management and the continuous need to refine risk

management practice have become particularly evident during the financial market crisis.

The organizational risk management and functions, tasks and authorities of the employees, committees

and departments involved in the management of risk are clearly and unambiguously defined. All

principles and guidelines are reviewed regularly and adapted and enhanced in line with internal and

external developments.

LLC Deutsche Bank


38

The Supervisory Board appoints, supervises and advises the Management Board and is directly

involved in decisions of fundamental importance to the Bank. The Management Board regularly

informs the Supervisory Board of the intended business policies and other fundamental matters relating

to assets, liabilities, financial and profit situation as well as its risk situation, risk management and risk

controlling.

The Bank has a dedicated risk management function on a global level to ensure that oversight and

monitoring of risk is achieved in a robust manner. This function is performed by the Risk Division

under the lead of the Chief Risk Officer, who is a member of the Management Board, and is

responsible for the identification, assessment, management and reporting of risks arising within

operations across all businesses and risk types.

Credit, market, liquidity, operational, business, legal and reputational risks as well as capital are

managed in a coordinated manner at all relevant levels within the Bank.

Risk management and risk monitoring are an established part of all organizational processes. The aim

of risk management policies and procedures is to ensure that all risks assumed in the context of the

Bank are recognized at an early stage, and that they are specifically managed in line with the Bank’s

risk appetite.

Risk management and in particular the risk limitation processes are closely linked to Bank-wide

management processes such as strategic planning, annual earnings, cost and risk budgeting, and

performance measurement within the Bank.

The Management Board provides overall risk and capital management supervision for the Bank.

Treasury is responsible for identification, measurement, monitoring and management of the Bank’s

liquidity risk profile. It implements Deutsche Bank Group policies and has the authority to issue local

policies and executes measures required to keep the Bank’s liquidity risk profile within the risk

tolerance defined by the Management Board.

Under the stewardship of Treasury, the Asset and Liability Committee (the ALCO) provides the forum

for managing capital, funding and liquidity risk of the Bank.

The main objectives of the ALCO are:

review the usage of capital liquidity and funding to ensure it is employed in the most efficient

way

ensure compliance with Deutsche Bank Group policies and procedures as well as external

rules and regulations

establish a link between the local, regional and Deutsche Bank Group perspective on capital,

liquidity and funding.

The Operating Committee (the OpCo) is the main decision and policy making body on all operational

issues. The purpose of the OpCo is to organize efficient support for all businesses and reliable control

environment.The OpCo approves relevant policies and procedures, decides on infrastructure projects,

budgets and cost containment issues and staffing issues, ensures that the implementation of the global

strategies of Business Divisions and Infrastructure/Control Functions is consistent with local

requirements.

Market risk

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate

because of changes in market prices. Market risk comprises currency risk, interest rate risk and other

price risks. Market risk arises from open positions in interest rate and equity financial instruments,

which are exposed to general and specific market movements and changes in the level of volatility of

market prices and foreign currency rates.

LLC Deutsche Bank


39

The objective of market risk management is to manage and control market risk exposures within

acceptable parameters, whilst optimizing the return on risk. The Global Market Risk Limits Policy

describes the requirements for the Bank in the setting, monitoring, management and reporting of

market risk limits.

The Bank manages its market risk by setting managing open position limits in relation to financial

instrument, interest rate maturity and currency positions. Currency positions are subject to the CBR

regulations.

Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will

fluctuate because of changes in market interest rates.

The Bank is exposed 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 result of such changes but may

also reduce or create losses in the event that unexpected movements occur.

The Bank’s interest rate policy is reviewed and approved by the Management Board.

Interest rate gap analysis

Interest rate risk is managed principally through monitoring interest rate gaps. A summary of the

interest gap position as at 31 December for major financial instruments is as follows:

RUB ’000

Demand and

less than 1

month

From 1 to

6 months

From 6 to

12

months 1-5 years

More than

5 years

Non-interest

bearing

Carrying

amount

31 December 2013

Assets

Financial

instruments held for trading 896,879 3,894,000 626,934 6,589,303 5,932,609 1,573,019 19,512,744

Placements with

banks 89,940,535 1,444,570 - - - 6,176,295 97,561,400

Loans to customers 103,150 2,159,419 1,901,780 2,996,880 - - 7,161,229

Total assets 90,940,564 7,497,989 2,528,714 9,586,183 5,932,609 7,749,314 124,235,373

Liabilities

Deposits and

balances from banks 22,202,133 - - - - 43,055,949 65,258,082

Amounts payable

under repurchase

agreements with the

CBR 6,588,588 - - - - - 6,588,588

Current accounts

and deposits from

customers 27,869,743 1,726,153 25,022 - - 24,549,331 54,170,249

Total liabilities 56,660,464 1,726,153 25,022 - - 67,605,280 126,016,919

Net position 34,280,100 5,771,836 2,503,692 9,586,183 5,932,609 (59,855,966) (1,781,546)

LLC Deutsche Bank


40

RUB ’000

Demand and

less than 1

month

From 1 to

6 months

From 6 to

12

months 1-5 years

More than

5 years

Non-interest

bearing

Carrying

amount

31 December 2012

Assets

Financial

instruments held for trading - 1,255,530 1,478,182 25,777,519 27,102,036 367,010 55,980,277

Placements with

banks 85,101,474 1,587,047 - - - 4,011,740 90,700,261

Loans to customers 96,555 1,512,022 6,158,123 1,082,710 - 8,849,410

Total assets 85,198,029 4,354,599 7,636,305 26,860,229 27,102,036 4,378,750 155,529,948

Liabilities

Deposits and

balances from banks 35,335,645 598,696 3,681,607 - - 27,436,633 67,052,581

Amounts payable

under repurchase

agreements with the CBR 37,673,369 - - - - - 37,673,369

Current accounts

and deposits from customers 26,568,106 1,342,786 17,976 3,949 - 20,780,408 48,713,225

Total liabilities 99,577,120 1,941,482 3,699,583 3,949 - 48,217,041

153,439,175

Net position (14,379,091) 2,413,117 3,936,722 26,856,280 27,102,036 (43,838,291) 2,090,773

Interest rate sensitivity analysis

An analysis of sensitivity of profit or loss and equity (net of taxes) as a result of changes in the fair

value of financial instruments held for trading due to changes in the interest rates based on positions

existing as at 31 December 2013 and 2012 and a simplified scenario of a 100 bp symmetrical fall or

rise in all yield curves is as follows:

2013

RUB’000

2012

RUB’000

100 bp parallel rise (434,284) (1,029,548)

100 bp parallel fall 471,020 1,030,577

An analysis of sensitivity of profit or loss and equity (net of taxes) to changes in interest rates

(repricing risk) based on a simplified scenario of a 100 basis point (bp) symmetrical fall or rise in all

yield curves and positions of interest-bearing assets and liabilities existing as at 31 December 2013 and

2012 is as follows:

2013

RUB’000

2012

RUB’000

100 bp parallel rise 321,450 (70,240)

100 bp parallel fall (321,450) 70,240

LLC Deutsche Bank


41

Average interest rates

The table below displays average effective interest rates for interest bearing assets and liabilities as at

31 December 2013 and 2012. These interest rates are an approximation of the yields to maturity of

these assets and liabilities, except for overdrafts included in loans to customers, which are variable rate

contracts.

2013

Average effective interest rate, %

2012

Average effective interest rate, %

RUB EUR USD

RUB EUR

USD

Interest bearing assets

Financial instruments

held for trading 7.45% 3.46% -

7.41% - 3.91%

Placements with banks 6.60% - 0.30% 5.84% 0.50%

0.37%

Loans to customers 8.12% 1.93% 1.90% 8.11% 2.56% 2.33%

Interest bearing

liabilities

Deposits and balances

from banks 6.04% - 0.82% 6.15% 0.74% 1.79%

Amounts payable under

repurchase agreements

with the CBR

5.51% - - 5.51% - -

Current accounts and

deposits from customers 5.80% 0.01% 0.01% 5.61% 0.01% 0.12%

Currency risk

The Bank has assets and liabilities denominated in several foreign currencies.

Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate

because of changes in foreign currency exchange rates. Although the Bank hedges its exposure to

currency risk, such activities do not qualify as hedging relationships in accordance with IFRS.

The following table shows the foreign currency exposure structure of assets and liabilities as at

31 December 2013:

RUB’000 RUB EUR USD Other Total

Assets

Cash and cash equivalents 11,653,885 2,172,710 1,970,338 55,724 15,852,657 Mandatory reserve deposit with

the CBR 1,173,620 - - - 1,173,620


trading net of currency derivatives

16,373,825 1,565,900 - - 17,939,725

Placements with banks 1,447,486 5,846,087 90,267,827 - 97,561,400

Loans to customers 2,525,039 3,959,481 676,709 - 7,161,229

Financial assets

available-for-sale 1,524 - - - 1,524

Deferred tax asset 385,179 - - - 385,179

Other assets 479,879 1,965,031 1,653,011 - 4,097,921

Property, equipment and

intangible assets 557,968 - - - 557,968

Total assets 34,598,405 15,509,209 94,567,885 55,724 144,731,223

LLC Deutsche Bank


42


Liabilities

Deposits and balances from banks 58,003,868 3,229,521 4,020,368 4,325 65,258,082


repurchase agreements with the

CBR 6,588,588 - - - 6,588,588

Current accounts and deposits from customers 42,738,681 7,451,935 3,920,230 59,403 54,170,249

Other liabilities 2,045,045 1,204,362 399 754 3,250,560

Total liabilities 109,376,182 11,885,818 7,940,997 64,482 129,267,479

Net recognized position (74,777,777) 3,623,391 86,626,888 (8,758) 15,463,744

Unrecognized position 89,098,347 (2,400,206) (86,802,033) 103,892 -

Net position 14,320,570 1,223,185 (175,145) 95,134 15,463,744

The following table shows the foreign currency exposure structure of financial assets and liabilities as

at 31 December 2012:


Assets

Cash and cash equivalents 11,560,172 1,843,662 561,559 190,837 14,156,230

Mandatory reserve deposit with the CBR 1,358,449 - - - 1,358,449


trading net of currency derivatives

52,307,764 - 3,305,503 - 55,613,267

Placements with banks 3,826,742 6,838,996 80,034,523 - 90,700,261

Loans to customers 2,711,023 4,182,064 1,956,323 - 8,849,410

Financial assets

available-for-sale 1,698 - - - 1,698

Deferred tax asset 347,411 - - - 347,411

Other assets 474,035 1,447,999 221,387 - 2,143,421

Property, equipment and intangible assets 824,911 - - - 824,911

Total assets 73,412,205 14,312,721 86,079,295 190,837 173,995,058

Liabilities

Deposits and balances from

banks 62,266,063 2,354,838 2,431,680 - 67,052,581


repurchase agreements with the CBR

37,673,369 - - - 37,673,369

Current accounts and deposits from customers 40,793,638 5,029,910 2,839,099 50,578 48,713,225

Other liabilities 2,586,175 1,262,099 58,820 22,095 3,929,189

Total liabilities 143,319,245 8,646,847 5,329,599 72,673 157,368,364

Net recognized position (69,907,040) 5,665,874 80,749,696 118,164 16,626,694

Unrecognized position 86,432,441 (5,505,702) (80,682,787) (243,952) -

Net position 16,256,401 160,172 66,909 125,788 16,626,694

LLC Deutsche Bank


43

A strengthening of RUB, as indicated below, against the following currencies at 31 December 2013

and 2012 would have increased (decreased) equity and profit or loss by the amounts shown below.

This analysis is on net of tax basis and is based on foreign currency exchange rate variances that the

Bank considered to be reasonably possible at the end of the reporting period. The analysis assumes that

all other variables, in particular interest rates, remain constant.

2013

RUB’000

2012

RUB’000

10% appreciation of RUB against EUR (97,855) (12,814)

10% appreciation of RUB against USD 14,012 (5,353)

A weakening of RUB against the above currencies at 31 December 2013 and 2012 would have had the

equal but opposite effect on the above currencies to the amounts shown above, on the basis that all

other variables remain constant.

Other price risk

Other price risk is the risk that the fair value or future cash flows of a financial instrument will

fluctuate because of changes in market prices (other than those arising from interest rate risk or

currency risk), whether those changes are caused by factors specific to the individual financial

instrument or its issuer, or factors affecting all similar financial instruments traded in the market. Other

price risk arises when the Bank takes a long or short position in a financial instrument.

An analysis of sensitivity of profit or loss and equity to changes in securities prices based on positions

existing as at 31 December 2013 and 2012 and a simplified scenario of a 10% change in all securities

prices is as follows:

2013 2012

Profit

or loss

RUB’000

Equity

RUB’000

Profit

or loss

RUB’000

Equity

RUB’000

10% increase in securities prices 1,435,178 1,435,178 4,449,061 4,449,061

10% decrease in securities prices (1,435,178) (1,435,178) (4,449,061) (4,449,061)

Credit risk

Credit risk is the risk of financial loss to the Bank if a customer or counterparty to a financial

instrument fails to meet its contractual obligations.

Credit risk arises from all transactions that give rise to actual, contingent or potential claims against

any counterparty, borrower or obligor (which are collectively referred to as counterparties). Three

kinds of credit risk are monitored: default risk, country risk and settlement risk. The Bank has policies

and procedures for the management of credit exposures (both for recognized and unrecognized

exposures), including guidelines to limit portfolio concentration and the establishment of a Credit and

Policy Committee, which actively monitors credit risk of the Bank. The key credit risk related policies

are reviewed and approved by the Management Board’s Risk Executive Committee.

Monitoring tasks are primarily performed by the Divisional Risk Units in close cooperation with

Portfolio Management. Both also interact with other portfolio functions such as Loan Exposure

Management Group (LEMG), Credit Portfolio Management, Traded Credit Products as well as Market

Risk Management to ensure a complete and efficient monitoring and risk management.

To ensure a complete and comprehensive overview of the Bank’s credit portfolio, Credit Risk

Management operates a fully integrated Risk Management platform incorporating information from

various front and back office systems.

LLC Deutsche Bank


44

Acting as a central pricing reference, LEMG provides the respective Corporate and Investment Bank

Group Division businesses with an observed or derived capital market rate for loan applications;

however, the decision of whether or not the business can enter into the loan remains with Credit Risk

Management.

The Bank continuously monitors the performance of individual credit exposures and regularly

reassesses the creditworthiness of its customers. The review is based on the customer’s most recent

financial statements and other information submitted by the borrower, or otherwise obtained by the

Bank.

The Bank uses the internal credit ratings system to rate the credit quality of financial instruments. A

broad range of methodologies for the assessment of the credit risk is applied, such as expert opinions,

expert systems, score cards and econometric approaches.

The Bank’s internal rating system uses a granular, transparent 26-grade rating scale, which is similar to

S&P’s rating scale. The Credit Rating Policy describes the principals for credit ratings.

Deutsche Bank’s rating Assigned probability of default S&P’s rating

iAAA 0.01% AAA

iAA+ 0.02% AA+

iAA 0.03% AA

iAA- 0.04% AA-

iA+ 0.05% A+

iA 0.07% A

iA- 0.09% A-

iBBB+ 0.14% BBB+

iBBB 0.23% BBB

iBBB- 0.39% BBB-

iBB+ 0.64% BB+

iBB 1.07% BB

iBB- 1.76% BB-

iB+ 2.92% B+

iB 4.82% B

iB- 7.95% B-

iCCC+ 13.00% CCC+

iCCC 22.00% CCC

iCCC- 31.00% CCC-, CC, C

iCC+ 100.00%

iCC 100.00%

iCC- 100.00%

iC+ 100.00%

iC 100.00%

iC- 100.00%

iD 100.00% D

The maximum exposure to credit risk is generally reflected in the carrying amounts of financial assets

on the statement of financial position. The impact of possible netting of assets and liabilities to reduce

potential credit exposure is not significant.

Collateral generally is not held against claims under derivative financial instruments, investments in

securities, and loans and advances to banks, except when securities are held as part of reverse

repurchase and securities borrowing activities.

For the analysis of collateral held against loans to customers and concentration of credit risk in respect

of loans to customers refer to note 8.

The maximum exposure to unrecognized credit risk is presented in note 24.

LLC Deutsche Bank


45

Offsetting financial assets and financial liabilities

The Bank has no financial assets and financial liabilities that are offset in the statement of financial

position.

The disclosures set out in the tables below include financial assets and financial liabilities that are

subject to an enforceable master netting arrangement or similar agreement that covers similar financial

instruments, irrespective of whether they are offset in the statement of financial position.

The similar agreements include derivative clearing agreements, global master repurchase agreements.

Similar financial instruments include derivatives, sales and repurchase agreements. Financial

instruments such as loans and deposits are not disclosed in the table below unless they are offset in the

statement of financial position.

The Bank’s derivative transactions that are not transacted on the exchange are entered into under

International Derivative Swaps and Dealers Association (ISDA) Master Netting Agreements. In

general, under such agreements the amounts owed by each counterparty that are due on a single day in

respect of transactions outstanding in the same currency under the agreement are aggregated into a

single net amount being payable by one party to the other. In certain circumstances, for example when

a credit event such as a default occurs, all outstanding transactions under the agreement are terminated,

the termination value is assessed and only a single net amount is due or payable in settlement

transactions.

The Bank’s sale and repurchase transactions are covered by master agreements with netting terms

similar to those of ISDA Master Netting Agreements.

The above ISDA and similar master netting arrangements do not meet the criteria for offsetting in the

statement of financial position. This is because they create a right of set-off of recognized amounts that

is enforceable only following an event of default, insolvency or bankruptcy of the Bank or the

counterparties. In addition the Bank and its counterparties do not intend to settle on a net basis or to

realise the assets and settle the liabilities simultaneously.

The table below shows financial assets and financial liabilities subject to enforceable master netting

arrangements and similar arrangements as at 31 December 2013:

LLC Deutsche Bank


46

RUB’000

Types

of financial

assets/liabilities

Gross amounts

of recognized

financial

asset/liability

Gross amount

of recognized

financial

liability/asset

offset in the

statement of

financial

position

Net amount of

financial

assets/liabilities

presented in the

statement of

financial

position

Related amounts subject

to offset under specific

conditions

Financial

instruments

Impact of

Master

Netting

Agreement

Net

amount

Derivatives

trading assets

990,634

-

990,634

-

(74,873)

915,761

Total

financial

assets

990,634

-

990,634

-

(74,873)

915,761

Derivatives

trading

liabilities

(560,758)

-

(560,758)

-

74,873

(485,885)

Sale and

repurchase

agreements

(6,588,588)

-

(6,588,588)

6,588,588

-

-

Total

financial

liabilities

(7,149,346)

-

(7,149,346)

6,588,588

74,873

(485,885)

The table below shows financial assets and financial liabilities subject enforceable master netting

arrangements and similar arrangements as at 31 December 2012:

RUB’000

Types

of financial

assets/liabilities

Gross amounts

of recognized

financial

asset/liability

Gross amount

of recognized

financial

liability/asset

offset in the

statement of

financial

position

Net amount of

financial

assets/liabilities

presented in the

statement of

financial

position

Related amounts subject

to offset under specific

conditions

Financial

instruments

Impact of

Master

Netting

Agreement

Net

amount

Derivatives

trading assets

78,274 -

78,274 -

(7,071)

71,203

Total

financial

assets

78,274

-

78,274

-

(7,071)

71,203

Derivatives

trading

liabilities

(78,969) -

(78,969) -

7,071

(71,898)

Sale and

repurchase

agreements

(37,673,369)

- (37,673,369)

37,673,369

-

-

Total

financial

liabilities

(37,752,338) -

(37,752,338)

37,673,369

7,071

(71,898)

The amounts of financial assets and financial liabilities that are disclosed in the above tables are

measured in the statement of financial position on the following basis:

derivative assets and liabilities – fair value

assets and liabilities resulting from sale and repurchase agreements – amortized cost.

LLC Deutsche Bank


47

The table below reconciles the “Net amounts of financial assets and financial liabilities presented in

the statement of financial position”, as set out above, to the line items presented in the statement of

financial position as at 31 December 2013.

RUB’000

Net

amounts

Line item in the

statement of

financial position

Carrying amount

in the statement of

financial position

Financial

asset/liability not

in the scope of

offsetting

disclosure

Note

Types of

financial

assets/liabilities

Derivatives

trading assets

990,634

Financial

instruments held for

trading (assets)

19,512,744

18,522,110

5

Derivatives

trading

liabilities

(560,758)

Financial


trading (liabilities)

(1,235,710)

(749,825)

5

Sale and

repurchase

agreements

(6,588,588)

Amounts payable

under repurchase

agreements with the

CBR

(6,588,588)

-

6

The table below reconciles the “Net amounts of financial assets and financial liabilities presented in

the statement of financial position”, as set out above, to the line items presented in the statement of

financial position as at 31 December 2012.

RUB’000

Net

amounts

Line item in the

statement of

financial position

Carrying amount

in the statement of

financial position

Financial

asset/liability not

in the scope of

offsetting

disclosure

Note

Types of

financial

assets/liabilities

Derivatives

trading assets

78,274

Financial


trading (assets)

55,980,277

55,902,003

5

Derivatives

trading

liabilities

(78,969)

Financial


trading (liabilities)

(246,734)

(167,765)

5

Sale and

repurchase

agreements

(37,673,369)

Amounts payable

under repurchase

agreements with the

CBR

(37,673,369)

-

6

LLC Deutsche Bank


48

Liquidity risk

Liquidity risk is defined as the risk that the Bank will not be able to meet its current and future

payment obligations in full, or on time. It also includes the risk that, in the case of a liquidity crisis,

refinancing may only be obtained at higher market rates (funding risk) and/or that assets may only be

liquidated at a discount to market rates (market liquidity risk). Liquidity risk is not backed by risk

capital, since it is a payment risk that must be covered by assets and not a risk of loss to be covered by

capital and reserves.

The Treasury in collaboration with the Finance and Global Markets carry out daily analysis of current

liquidity which is based on exception clearing reports of the Cash and Banking Operations on cash

inflows and estimated payments. A check before the closing of the operational day of whether the

amount of liabilities on demand compared to the amount of assets on demand and the open borrowing

limit with Deutsche Bank Group provides confidence in the balance between assets and liabilities by

maturities. Analysis of changes in customer account balances and calculation of currency structure of

average constant customer accounts balance on demand are provided at the meetings of the ALCO on

a monthly basis. The ALCO also analyzes usage of the borrowing limit with the Bank.

Liquidity outflows from contingent liabilities and increased draws down on committed credit lines, as

well as claims on guarantees, are also taken into consideration.

To minimize liquidity risk the Bank takes actions to maintain a balance between the assets and

liabilities with different maturities that will allow it to achieve the liquidity level adequate to meet

obligations to clients without a negative impact on profitability. Liquidity management is performed in

accordance with the liquidity policy based on both the Deutsche Bank Group standards and Russian

legislation including control over compliance with prudential ratios set by the CBR and control over

internal liquidity limits set by Deutsche Bank Group and approved by the Supervisory Board.

Several tools have been implemented to measure liquidity risk and evaluate short and long-term

liquidity position locally.

The following tables show the undiscounted cash flows on financial assets and liabilities and credit-

related commitments on the basis of their earliest possible contractual maturity. The total gross inflow

and outflow disclosed in the tables is the contractual, undiscounted cash flow on the financial asset,

liability or commitment. The expected cash flows on these financial assets and liabilities and

unrecognized loan commitments can vary significantly from this analysis. For issued financial

guarantee contracts, the maximum amount of the guarantee is allocated to the earliest period in which

the guarantee can be called.

LLC Deutsche Bank


49

The liquidity position as at 31 December 2013 is as follows:

RUB’000

Demand and

less than

1 month

From 1 to 6

months

From 6 to 12

months

More than

1 year

Total gross

amount

inflow

(outflow)

Carrying

amount

Non-derivative assets

Cash and cash

equivalents 15,852,657 - - - 15,852,657 15,852,657

Mandatory reserve

deposit with the CBR 1,173,620 - - - 1,173,620 1,173,620


held for trading net of derivatives

17,939,725 - - - 17,939,725 17,939,725

Placements with banks 96,123,471 1,464,746 - - 97,588,217 97,561,400

Loans to customers 127,055 2,250,716 1,969,939 3,089,591 7,437,301 7,161,229

Financial assets

available-for-sale - - - 1,524 1,524 1,524

Other financial assets 1,641,154 10,491 10,410 2,714 1,664,769 1,664,769

Derivative assets

Net settled derivatives - - 55,712 - 55,712 55,712

Gross settled derivatives 1,517,307

- Inflow 210,330,369 4,315,498 1,146,615 23,410,413 239,202,895

- Outflow (209,586,519) (4,316,038) (1,230,325) (22,552,706) (237,685,588)

Total assets 133,601,532 3,725,413 1,952,351 3,951,536 143,230,832 142,927,943

Non-derivative

liabilities


from banks (65,512,760) - - - (65,512,760) (65,258,082)



(6,602,686) - - - (6,602,686) (6,588,588)


deposits from customers (52,571,796) (1,652,028) (10,440) (3,749) (54,238,013) (54,170,249)

Other financial

liabilities (4,718) (51,357) (1,937) (10,681) (68,693) (68,693)

Derivative liabilities

Net settled derivatives - - (55,712) - (55,712) (55,712)

Gross settled derivatives (1,179,998)

- Inflow 96,957,794 5,930,051 1,274,047 22,552,706 126,714,598

- Outflow (97,227,968) (6,065,340) (1,190,875) (23,410,413) (127,894,596)

Total liabilities (124,962,134) (1,838,674) 15,083 (872,137) (127,657,862) (127,321,322)

Net position 8,639,398 1,886,739 1,967,434 3,079,399 15,572,970 15,606,621

Credit related

commitments (34,462,176) - - - (34,462,176) (34,462,176)

LLC Deutsche Bank


50

The liquidity position as at 31 December 2012 is as follows:

RUB’000

Demand and

less than

1 month

From 1 to 6

months

From 6 to 12

months

More than

1 year

Total gross

amount

inflow

(outflow)

Carrying

amount

Non-derivative assets

Cash and cash

equivalents 14,156,230 - - - 14,156,230 14,156,230

Mandatory reserve

deposit with the CBR 1,358,449 - - - 1,358,449 1,358,449


held for trading net of derivatives

55,613,267 - - - 55,613,267 55,613,267

Placements with banks 89,276,504 1,465,939 - - 90,742,443 90,700,261

Loans to customers 116,132 1,657,198 6,192,470 1,259,611 9,225,411 8,849,410

Financial assets

available-for-sale - - - 1,698 1,698 1,698

Other financial assets 37,042 3,622 - - 40,664 40,664

Derivative assets

Net settled derivatives - 44,147 - - 44,147 44,147

Gross settled derivatives 322,863

- Inflow 45,089,166 7,468,265 2,552,921 - 55,110,352

- Outflow (44,973,684) (7,279,693) (2,534,112) - (54,787,489)

Total assets 160,673,106 3,359,478 6,211,279 1,261,309 171,505,172 171,086,989

Non-derivative

liabilities


from banks (62,824,224) (598,696) (3,713,991) - (67,136,911) (67,052,581)



(37,724,567) - - - (37,724,567) (37,673,369)


deposits from customers (47,463,907) (1,281,364) (18,719) (3,980) (48,767,970) (48,713,225)

Other financial

liabilities (39,140) - - - (39,140) (39,140)

Derivative liabilities

Net settled derivatives - (45,078) - - (45,078) (45,078)

Gross settled derivatives (201,656)

- Inflow 69,320,161 2,731,135 701,936 - 72,753,232

- Outflow (69,471,170) (2,777,137) (706,581) - (72,954,888)

Total liabilities (148,202,847) (1,971,140) (3,737,355) (3,980) (153,915,322) (153,725,049)

Net position 12,470,259 1,388,338 2,473,924 1,257,329 17,589,850 17,361,940

Credit related

commitments (27,512,639) - - - (27,512,639) (27,512,639)

Under Russian law, individuals can withdraw their term deposits at any time, forfeiting in most of the

cases the accrued interest. Accordingly, these deposits, excluding accrued interest, are shown in the

table above in the category of “Demand and less than 1 month”. The classification of these deposits in

accordance with their stated maturity dates as at 31 December is presented below:

LLC Deutsche Bank


51

2013

RUB’000

2012

RUB’000

Demand and less than 1 month 90,311 200,121

From 1 to 6 months 97,499 72,940

From 6 to 12 months 16,776 -

204,586 273,061

The gross nominal inflow (outflow) disclosed in the tables above represents the contractual

undiscounted cash flows related to derivative financial assets and liabilities held for risk management

purposes. The disclosure shows a net amount for derivatives that are net settled, but a gross inflow and

outflow amount for derivative financial assets and liabilities that have simultaneous gross settlement

(e.g., forward exchange contracts and currency swaps).

The following tables show the expected maturities of assets and liabilities. Management expects that

the cash flows from certain financial assets and liabilities will be different from their contractual terms,

either because management has the discretionary ability to manage the cash flows. Management holds

a portfolio of securities that are readily marketable and can be used to meet outflows of financial

liabilities. Cash flow from these trading securities are included in the “Demand and less than 1 month”

category in liquidity and maturity analysis.

Contractual maturities of these trading securities as at 31 December are as follows:

2013

RUB’000

2012

RUB’000

Demand and less than 1 month 896,879 -

From 1 to 6 months 3,894,000 1,255,530

From 6 to 12 months 626,934 1,478,182

More than 1 year 12,521,912 52,879,555

17,939,725 55,613,267

LLC Deutsche Bank


52

The table below shows an analysis, by expected maturities, of the amounts recognized in the statement of financial position as at 31 December 2013:

RUB’000 Demand and less

than 1 month From 1 to 6

months From 6 to 12

months More than

1 year No maturity Total

Assets

Cash and cash equivalents 15,852,657 - - - - 15,852,657

Mandatory reserve deposit with the CBR - - - - 1,173,620 1,173,620

Financial instruments held for trading 18,676,254 50,873 58,706 726,911 - 19,512,744

Placements with banks 96,116,830 1,444,570 - - - 97,561,400


Financial assets available-for-sale - - - - 1,524 1,524

Deferred tax asset - - - - 385,179 385,179

Other assets 1,635,524 2,341,164 32,432 88,801 - 4,097,921

Property, equipment and intangible assets - - - - 557,968 557,968

Total assets 132,384,415 5,996,026 1,992,918 3,812,592 2,118,291 146,304,242

Liabilities

Financial instruments held for trading 265,588 186,722 59,316 724,084 - 1,235,710

Deposits and balances from banks 65,258,082 - - - - 65,258,082

Amounts payable under repurchase

agreements with the CBR 6,588,588 - - - - 6,588,588

Current accounts and deposits from customers 52,529,599 1,628,655 8,246 3,749 - 54,170,249

Other liabilities 24,995 2,052,960 1,040,945 131,660 - 3,250,560


Net position 7,717,563 2,127,689 884,411 2,953,099 2,118,291 15,801,053

LLC Deutsche Bank


53

The table below shows an analysis, by expected maturities, of the amounts recognized in the statement of financial position as at 31 December 2012:

RUB’000 Demand and less

than 1 month From 1 to 6

months From 6 to 12

months More than

1 year No maturity Total

Assets

Cash and cash equivalents 14,156,230 - - - - 14,156,230

Mandatory reserve deposit with the CBR - - - - 1,358,449 1,358,449

Financial instruments held for trading 55,730,908 231,478 17,891 - - 55,980,277

Placements with banks 89,264,988 1,435,273 - - - 90,700,261


Financial assets available-for-sale - - - - 1,698 1,698

Deferred tax asset - - - - 347,411 347,411

Other assets 75,753 1,457,614 520,273 89,781 - 2,143,421

Property, equipment and intangible assets - - - - 824,911 824,911

Total assets 159,324,434 4,636,386 6,696,287 1,172,492 2,532,469 174,362,068

Liabilities

Financial instruments held for trading 151,125 90,601 5,008 - - 246,734

Deposits and balances from banks 62,772,278 598,696 3,681,607 - - 67,052,581

Amounts payable under repurchase

agreements with the CBR 37,673,369 - - - - 37,673,369

Current accounts and deposits from customers 47,348,514 1,342,786 17,976 3,949 - 48,713,225

Other liabilities 217,163 626,941 2,891,333 193,752 - 3,929,189


Net position 11,161,985 1,977,362 100,363 974,791 2,532,469 16,746,970

LLC Deutsche Bank


54

The Bank also calculates mandatory liquidity ratios on a daily basis in accordance with the

requirements of the CBR. These ratios include:

- instant liquidity ratio (N2), which is calculated as the ratio of highly liquid assets to

liabilities payable on demand

- current liquidity ratio (N3), which is calculated as the ratio of liquid assets to liabilities

maturing within 30 calendar days

- long-term liquidity ratio (N4), which is calculated as the ratio of assets maturing after 1

year to the equity and liabilities maturing after 1 year.

The following table shows the mandatory liquidity ratios calculated as at 31 December 2013 and

2012.

Requirement

2013, %

2012, %

Instant liquidity ratio (N2) Not less than 15%

163.6%

188.2%

Current liquidity ratio (N3) Not less than 50%

175.9%

155.8%

Long-term liquidity ratio (N4) Not more than 120%

7.3%

6.7%

23 Capital management

The Bank’s lead regulator, the CBR, sets and monitors capital requirements for the Bank.

The Bank defines as capital those items defined by statutory regulation as capital. Under the

current capital requirements set by the CBR banks have to maintain a ratio of capital to risk

weighted assets (statutory capital ratio) above the prescribed minimum level. As at 31 December

2013, this minimum level is 10%. The ratio is calculated based on financial statements prepared in

accordance with Russian Banking Accounting Standards and the risk weighting is determined in

accordance with the CBR’s credit risk ratios specific for individual classes of assets. In

accordance with statutory regulations capital includes charter capital, reserve funds, retained

earnings less net book value of intangible assets and deferred expenses.

The calculation of capital adequacy based on requirements set by the CBR as at 31 December is

as follows:

2013

2012

RUB’000

RUB’000

Primary capital 13,135,378

13,135,378

Additional capital 1,617,949 2,930,717

Total capital 14,753,327 16,066,095

Risk weighted assets 77,156,408 80,260,153

Capital adequacy ratio 19.1% 20.0%

Starting from 1 April 2013 the Bank calculates the amount of capital and capital adequacy ratios

in accordance with the CBR requirements based on Basel III requirements. The amount of capital

and capital adequacy ratios were used by the CBR in 2013 for information purposes and not for

supervision purposes. Beginning 1 January 2014 the new ratios will be used for supervision

purpose. The calculation of capital adequacy ratios (N1.0, N1.1, N1.2) based on requirements set

by the CBR using Russian Banking Accounting Standards as at 31 December 2013 is as follows:

LLC Deutsche Bank


55

2013

RUB’000

Core capital 13,135,396

Additional capital -

Tier I capital 13,135,396

Unaudited profit for the period 1,617,949

Tier II capital 14,753,345

Risk weighted assets 80,693,639

Base capital adequacy ratio (N1.1, not less than 5%) 16.3%

Primary capital adequacy ratio (N1.2, not less than 6%) 16.3%

Equity capital adequacy ratio (N1.0, not less than 6%) 18.3%

The comparative information is not presented because the ratios were not calculated for periods

earlier than 1 April 2013.

24 Contingencies

Litigation

Management is unaware of any significant actual, pending or threatened claims against the Bank.

Taxation contingencies

The taxation system in the Russian Federation continues to evolve and is characterised by

frequent changes in legislation, official pronouncements and court decisions, which are sometimes

contradictory and subject to varying interpretation by different tax authorities. Taxes are subject to

review and investigation by a number of authorities who have the authority to impose severe

fines, penalties and interest charges. A tax year remains open for review by the tax authorities

during the three subsequent calendar years; however, under certain circumstances a tax year may

remain open longer. Recent events within the Russian Federation suggest that the tax authorities

are taking a more assertive position in their interpretation and enforcement of tax legislation.

These circumstances may create tax risks in the Russian Federation that are substantially more

significant than in other countries. Management believes that it has provided adequately for tax

liabilities based on its interpretations of applicable Russian tax legislation, official

pronouncements and court decisions. However, the interpretations of the relevant authorities

could differ and the effect on the financial position of the Bank, if the authorities were successful

in enforcing their interpretations, could be significant.

Starting from 1 January 2012 new transfer pricing rules came into force in Russia. These provide

the possibility for tax authorities to make transfer pricing adjustments and impose additional tax

liabilities in respect of controllable transactions if their prices deviate from the market range or

profitability range. According to the provisions of transfer pricing rules, the taxpayer should

sequentially apply five market price determination methods prescribed by the Tax Code.

Tax liabilities arising from transactions between companies are determined using actual

transaction prices. It is possible, with the evolution of the interpretation of transfer pricing rules in

the Russian Federation and changes in the approach of the Russian tax authorities, that such

transfer prices could be challenged. Since the current Russian transfer pricing rules became

effective relatively recently, the impact of any such challenge cannot be reliably estimated;

however, it may be significant to the financial position of the Bank and/or the overall operations

of the Bank.

LLC Deutsche Bank


56

Based on the facts available, no provision for potential tax liabilities is made in these financial

statements, as management believes it is not likely that an outflow of funds will be required to

settle such obligations.

Operating leases

Future lease payments (net of VAT and operating costs) under operating leases are detailed

below:

2013 2012

RUB’000 RUB’000

Less than 1 year 448,214 490,861

Between 1 and 5 years 1,959,969 1,976,130

More than 5 years - 274,685

Total operating lease rentals payable 2,408,183 2,741,676

The Bank leases a number of premises under operating leases. The leases typically run for an

initial period of one to six years, with an option to renew the lease after that date. Lease payments

are usually increased annually to reflect market rentals.

During 2013 RUB 398,769 thousand is recognized as an expense in profit or loss in respect of

operating leases (2012: RUB 335,579 thousand).

Credit related commitments

The Bank issues guarantees and letters of credit on behalf of its customers. These instruments bear

a credit risk similar to that of loans granted. The amounts outstanding are as follows:

2013 2012

RUB’000 RUB’000

Guarantees issued maturing within 12 months 8,969,567 8,158,123

Rated from iAAA to iAAA- 67,454 7,025

Rated from iAA+ to iAA- 500,396 4,399,858

Rated from iA+ to iA- 1,335,649 1,304,147

Rated from iBBB+ to iBBB- 4,262,791 1,489,773

Rated from iBB+ to iBB- 946,534 488,507

Rated from iB+ to iB- 591,783 394,815

Rated below iCCC+ 1,257,505 67,935

Individuals 2,455 1,063

Not rated 5,000 5,000

Guarantees issued maturing after 12 months 4,915,833 3,700,825

Rated from iAAA to iAAA- - 76,673

Rated from iAA+ to iAA- 128,955 277,827

Rated from iA+ to iA- 867,678 331,779

Rated from iBBB+ to iBBB- 593,458 2,667,650

LLC Deutsche Bank


57

2013 2012

RUB’000 RUB’000

Rated from iBB+ to iBB- 3,294,212 265,734

Rated from iB+ to iB- 31,531 28,482

Rated below iCCC+ - 50,000

Individuals - 2,680

Import letters of credit maturing within 12 months 8,643,561 5,432,902

Rated from iAA+ to iAA- 16,089 76,966

Rated from iA+ to iA- 844,387 240,989

Rated from iBBB+ to iBBB- 247,796 -

Rated from iBB+ to iBB- 471,261 263,418

Rated from iB+ to iB- 6,933,299 4,805,636

Rated below iCCC+ 130,729 45,893

Import letters of credit maturing after 12 months 46,074 846,791

Rated from iA+ to iA- - 758,908

Rated from iBBB+ to iB- 46,074 87,883

22,575,035 18,138,641

As at 31 December 2013, the Bank had RUB 11,887,140 thousand (31 December 2012:

RUB 9,373,998 thousand) in undrawn loan commitments.

The total outstanding contractual amount of undrawn loan lines, undrawn guarantee lines,

gurantees and import letter of credit does not necessarily represent future cash requirements, as

many of these commitments may expire or terminate without being funded.

Custody activities

The Bank provides custody services to its customers, whereby it holds securities on behalf of

customers and receives fee income for providing these services. These securities are not assets of

the Bank and are not recognized in the statement of financial position.

Trust activities

The Bank provides trust services to individuals, trusts, retirement benefit plans and other

institutions, whereby it holds and manages assets or invests funds received in various financial

instruments at the direction of the customer. The Bank receives fee income for providing these

services. Trust assets are not assets of the Bank and are not recognized in the statement of

financial position. The Bank is not exposed to any credit risk relating to such placements, as it

does not guarantee these investments.

25 Related party transactions

Deutsche Bank AG Frankfurt is the sole participant of the Bank and the party with ultimate

control over the Bank. Deutsche Bank AG Frankfurt prepares publicly available financial

statements.

For the purposes of these financial statements the following are considered to be related parties:

LLC Deutsche Bank


58

the Bank’s participant

key management of the Deutsche Bank Group and the Bank and their immediate families

enterprises in which the participant, Deutsche Bank Group companies, management of

Deutsche Bank Group and the Bank or their immediate families have control or significant

influence (Deutsche Bank Group companies).

In considering each possible related party relationship, attention is directed to the substance of the

relationship, not merely the legal form.

Related party transactions are based on market prices.

The outstanding balances and the related average effective interest rates as at 31 December 2013

and related profit or loss amounts of transactions for the year ended 31 December 2013 with

related parties are as follows:

Participant Deutsche Bank Group companies

RUB’000

Average effective

interest rate, % RUB’000

Average effective

interest rate, %

Statement of financial position

Assets


- RUB 61,279 - - -

- EUR 2,130,536 - - -

- USD 160,443 - 208,512 -

- other 43,021 - - -


- RUB - - 277,586 -

- EUR - - 34,849 -

- USD - - 258,377 -

Placements with banks

- USD - - 89,940,591 0.30%

Other assets

- RUB - - 4,457 -

- EUR 100,025 - 1,847,087 -

- USD 941 - 626 -

Liabilities


trading

-- RUB - - 44,100 -

- EUR - - 340,986 -

-- USD - - 145,397 -

Deposits and balances from banks

-- RUB 4 010 382 2.85% 34,867,704 0.00%

-- EUR - - 3,302,557 -

LLC Deutsche Bank


59


RUB’000

Average effective


Average effective

interest rate, %

- USD - - 3,868,427 -

Other liabilities

- EUR 175,273 - 1,018,490 -

- other - - 754 -

Items not recognized in the

statement of financial position

-- Guarantees issued 17,388 - 2,203,253 -

-- Guarantees received 403,101 - 7,728,022 -

Profit (loss)

Interest income 6 190 - 312 402 -

Interest expense (59 727) - (23 113) -

Net gain on financial instruments

held for trading 235 - (2,350,122) -

Fee and commission income 25 206 - 889 564 -

Fee and commission expense (21 988) - (22 633) -

Other income 216,026 - 4,031,514 -

General and administrative

expenses (84,516) - (621,321) -

LLC Deutsche Bank


60

The outstanding balances and the related average effective interest rates as at 31 December 2012

and related profit or loss amounts of transactions for the year ended 31 December 2012 with

related parties are as follows:


RUB’000

Average effective


Average effective

interest rate, %

Statement of financial position

Assets


- RUB 60,696 - - -

- EUR 1,822,908 - 161 -

- USD 83,698 - 2,064 -

- other 190,337 - - -


- RUB - - 52,917 -

- EUR - - 128 -

- USD - - 5,434 -

Placements with banks

- RUB - - - -

- EUR - - 3,218,422 0.50%

- USD - - 79,732,860 0.37%

- other - - - -

Other assets

- RUB - - 1,304 -

- EUR 21,142 - 1,414,392 -

- USD 18 - 58,942 -

Liabilities


trading

-- RUB - - 43,664 -

- EUR - - 499 -

-- USD - - 82,830 -

Deposits and balances from banks

-- RUB 3,425,922 2.85% 25,632,908 -

-- EUR - - 2,218,175 0.74%

- -USD 45,306 - 396,177 1.02%

LLC Deutsche Bank


61


RUB’000

Average effective


Average effective

interest rate, %

Other liabilities

- EUR 188,651 - 982,085 -

-- USD - - 58,819 -

- other - - 22,095 -

Items not recognized in the

statement of financial position

-- Guarantees issued 16,090 3,898,268

-- Guarantees received 147,258 5,423,157

Profit (loss)

Interest income - - 399,263 -

Interest expense (185) - (81,616) -

Net gain on financial instruments

held for trading 715 - 1,461,393 -

Fee and commission income 28,691 - 617,480 -

Fee and commission expense 7,977 - 5,364 -

Other income 135,322 - 3,980,558 -

General and administrative

expenses (259,491) - (468,951) -

Transactions with the members of the Supervisory Board and the Management

Board

Total remuneration included in personnel expenses for the years ended 31 December 2013 and

2012 is as follows:

2013

RUB’000

2012

RUB’000

Short-term employee benefits 878,744 857,313

Long-term benefits 335,526 373,042

1,214,270 1,230,355

26 Financial assets and liabilities: fair values and

accounting classifications

As at 31 December 2013 and 2012, management concluded that the fair values of all financial

assets and financial liabilities are not materially different from their carrying values because of

their short term nature and market interest rates.

The estimates of fair value are intended to approximate the price that would be received to sell an

asset or paid to transfer a liability in an orderly transaction between market participants at the

measurement date. However given the uncertainties and the use of subjective judgment, the fair

value should not be interpreted as being realisable in an immediate sale of the assets or transfer of

liabilities.

Fair values of financial assets and financial liabilities that are traded in active markets are based

on quoted market prices or dealer price quotations.

LLC Deutsche Bank


62

The Bank uses valuation techniques to establish the fair value of instruments where prices, quoted

in active markets, are not available. Valuation techniques used for financial instruments include

modeling techniques, the use of indicative quotes for proxy instruments, quotes from less recent

and less regular transactions and broker quotes.

For some financial instruments a rate or other parameter, rather than a price, is quoted. Where this

is the case then the market rate or parameter is used as an input to a valuation model to determine

fair value. For some instruments, modeling techniques follow industry standard models for

example, discounted cash flow analysis and standard option pricing models. These models are

dependent upon estimated future cash flows, discount factors and volatility levels.

Frequently, valuation models require multiple parameter inputs. Where possible, parameter inputs

are based on observable data or are derived from the prices of relevant instruments traded in

active markets. Where observable data is not available for parameter inputs then other market

information is considered, for example, indicative broker quotes and consensus pricing

information.

Fair value hierarchy

The Bank measures fair values using the following fair value hierarchy that reflects the

significance of the inputs used in making the measurements:

Level 1: quoted market price (unadjusted) in an active market for an identical instrument.

Level 2: inputs other than quotes prices included within Level 1 that are observable either

directly (i.e, as prices) or indirectly (i.e, derived from prices). This category includes

instruments valued using: quoted market prices in active markets for similar instruments;

quoted prices for similar instruments in markets that are considered less than active; or

other valuation techniques where all significant inputs are directly or indirectly

observable from market data.

Level 3: inputs that are unobservable. This category includes all instruments where the

valuation technique includes inputs not based on observable data and the unobservable

inputs have a significant effect on the instrument’s valuation. This category includes

instruments that are valued based on quoted prices for similar instruments where

significant unobservable adjustments or assumptions are required to reflect differences

between the instruments.

The table below analyses financial instruments measured at fair value on reccuring basis at

31 December 2013, by the level in the fair value hierarchy into which the fair value measurement

is categorized. The amounts are based on the values recognized in the statement of financial

position:

RUB ’000 Level 1 Level 2 Level 3 Total

Assets


- Debt and other fixed income

instruments 16,373,825 1,565,900 - 17,939,725

- Derivative assets - 1,573,019 - 1,573,019

16,373,825 3,138,919 - 19,512,744

LLC Deutsche Bank


63


Liabilities


- Derivative liabilities - 1,235,710 - 1,235,710

- 1,235,710 - 1,235,710

The table below analyses financial instruments measured at fair value on recurring basis at

31 December 2012, by the level in the fair value hierarchy into which the fair value measurement

is categorized. The amounts are based on the values recognized in the statement of financial

position:


Assets


- Debt and other fixed income

instruments 53,233,005 2,380,262 - 55,613,267

- Derivative assets - 367,010 - 367,010

53,233,005 2,747,272 - 55,980,277

Liabilities


- Derivative liabilities - 246,734 - 246,734

- 246,734 - 246,734

For all financial instruments measured at fair value categorized in Level 2, discounted cash flow

techniques are used to estimate fair values, except for structured derivatives contracts included in

derivative assets and liabilities. Fair values for these instruments are estimated using stochastic

volatility option pricing models. All inputs to the valuation models are directly observable or

derived from similar traded contracts.

The carrying values of all financial instruments not measured at fair value on a recurring basis

approximates their fair values.

________________________________ _____________________________



llc deutsche bank kpmg 10 presnenskaya naberezhnaya moscow, russia 123317 telephone +7 (495) 937...

Documents