Financial markets

During the reporting period, Vozrozhdenie Bank continued to work on financial markets, including transactions of securities and operations on the interbank market, while taking due account of the changing macroeconomic environment. We traditionally adhere to a conservative risk management policy and, despite the weakening of the national currency and other negative factors affecting the market dynamics during the year, we managed to retain a large share of liquid assets and maintain a high quality of our security portfolio. Vozrozhdenie Bank’s capital adequacy remained at a comfortable level. The bank’s strategy in the financial market segment is aimed at further portfolio diversification, reduction of risks assumed and an increase in the return on assets.

In 2014, Vozrozhdenie Bank continued to work on financial markets, giving priority to the diversification of the bank’s securities portfolio, minimisation of risks and an increase in return on assets. A major part of operations in the financial markets accounted for transactions with debt instruments and work in the interbank lending market.

KEY RESULTS

  • As of the end of 2014, the volume of the bank’s securities portfolio amounted to RUB 22.1 billion.
  • Interbank loans were provided within uncovered lines, open to highly-reliable banks and secured with high quality assets.
  • During the year, loan tranches under the previously signed agreements were raised, totaling approximately, EUR 4.3 million.

In the future, the bank will continue to work on portfolio diversification, risk reduction and an increase in the return on assets.

TRANSACTIONS ON SECURITIES MARKETS

In the reporting period, the bank carried out transactions with securities through CJSC Moscow Central Stock Exchange (MICEX) and on the over-the-counter market. In forming its securities portfolio, the bank takes into account the Lombard list of the Bank of Russia and aims to provide optimal balance between the profitability, safety and liquidity of its investments. During the year, the bank conducted transactions with government bonds in foreign currency, high-quality municipal and corporate bonds denominated in Russian Rubles and foreign currencies and with securities of reliable companies. In order to strengthen its liquidity position, the bank increased its investments in the short-term bonds of sovereign and quasi-sovereign issuers. The main increase fell on the trading portfolio, which was up during the year by RUB 8.6 billion and reached RUB 13.2 billion. The portfolio of available-for-sale securities increased by RUB 1.4 billion up to RUB 8.9 billion. The total share of securities in the assets increased by 3.9 pp to 9.7%.

Also in 2014, the bank carried out transactions in the REPO market with sovereign bonds, sub-Federal bonds, municipal bonds and high quality corporate bonds. In particular, in December, in order to enhance its liquidity cushion and achieve greater flexibility in case of unforeseen situations, the bank used a portion of securities worth RUB 9.2 billion as collateral for REPO transactions with the Bank of Russia. Due to the quality structure of the securities portfolio, the negative revaluation from the serious drop in the debt market in December 2014 was less than 1% of the securities value. Furthermore, the bank did not use the options provided by the Bank of Russia to mitigate the negative effect of the revaluation and to transfer trading securities to the “available-for-sale” category.

INTERBANK LENDING

The bank continued to work in the interbank lending market in 2014, allocating funds in rubles and foreign currencies. Interbank loans were provided within uncovered lines, open to highly-reliable banks and secured with high quality assets. In order to manage its liquidity position, the bank conducted REPO transactions with the Bank of Russia.

There was a high demand for liquidity from the Russian banks in the reporting period. During the year, the Bank of Russia exerted significant influence on the situation in the money market by providing funds collateralised by securities and non-market assets, expanding the range of instruments, developing lending to banks in foreign currencies collateralised by the rights of claims. In January - November 2014 the interest rate on overnight interbank loans were about 7.5%; in December 2014, the rates increased after the hike of the key rate of the Bank of Russia from 10.5% to 17%.

MARKET FUNDING AND TRADE FINANCE

In 2014, Vozrozhdenie Bank raised loans from the Bank of Russia secured by assets totalling RUB 2.1 billion for the periods from 31 to 91 days.

In the reporting period, the bank did not enter into any new agreements with foreign banks to finance foreign trade contracts of its clients, since the existing credit lines could satisfy the clients’ demand. Within the framework of cooperation with the EBRD under the Trade Facilitation Programme, the bank also did not sign any new agreements due to the sanctions against the Russian Federation.

The scheduled loan tranches under previously signed agreements were obtained during the year, approximating EUR 4.3 million for a period of up to five years. Letters of credit issued by the bank for payment under the clients’ foreign trade contracts were confirmed by foreign banks providing the credit lines. Also, foreign banks issued guarantees against counter guarantees of Vozrozhdenie Bank. During the year, the bank did not apply to foreign banks for postfinancing of the letters of credit due to sufficient liquidity cushion. In September 2014, the bank confirmed a letter of credit and provided a short-term loan to an Uzbek bank, PJSCB Invest Finance Bank in the amount of USD 2.5 million for its payment.

My Report

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