MDM BANK : Interim Consolidated Condensed Financial Statements for the Nine-Month Period Ended 30 September 2013

6 December 2013

MDM Bank announces Financial Results for 9M 2013

Continued growth in operating income, robust capital and liquidity position

MDM Bank (MDM) today released its interim consolidated condensed financial statements in accordance with International Financial Standards (IFRS) for the nine month period ended 30 September 2013.

The Bank generated operating (pre provision) income of RUB 4 billion in the first nine months of 2013, representing a more than 70% increase compared to RUB 2.3 billion for the first nine months of 2012. Contributing to these results were the Bank's continued focus on higher yielding business (on a risk-adjusted basis) and ongoing funding cost optimization, which resulted in an expansion of the Bank's net interest margin to 4.2% for the reporting period, compared to 3.9% for the same period of 2012.

The continued focus on strict cost control led to a reduction in operating expenses of 5% in the first nine months of 2013 compared to the first nine months of 2012, whilst the Bank's cost / income ratio improved by 11 percentage points to 67% vs. 78% in the same period of 2012.

In the first nine months of 2013, net income was marginally positive (RUB 43 million) compared to a net loss of RUB 4.8 billion for the first nine months of 2012.

The Bank leads its peer group in terms of its Tier 1 (Basel I) capital adequacy ratio, which stood at 17.7% as at 30 September 2013. MDM's CBR N1 capital adequacy ratio was 11.9% as at 30 September 2013, in line with the Bank's peer group.

As at the end of the reporting period, the total net loan portfolio was RUB 174 billion. The Bank continued its policy of decreasing concentration in the corporate loan portfolio and deliberately exited a number of large exposures during the first nine months of 2013. This contributed to a reduction in the exposure to the top 20 borrowers as a share of Tier 1 capital (Basel) to 137% as at 30 September 2013, compared to an industry average of circa 230%. Within the retail loan portfolio, the medium term focus remains on more profitable consumer loans (cash loans and credit cards).

Asset quality remains a key challenge, particularly in the context of a deteriorating macroeconomic and market environment and during Q3 2013 the NPL ratio increased marginally to 10.1% from 9.7% as at end H1 2013, mainly as a result of a limited number of corporate loans, managed by the Bank's specialized recovery unit, becoming overdue. These exposures are currently undergoing restructuring, and actively working through the NPL portfolio remains a key priority for the Bank. The NPL coverage ratio stood at 111% as at 30 September 2013.

The Bank maintains a very strong funding base with a net loan to deposit ratio of 90% as at 30 September 2013, whilst the share of interest-free current accounts has increased to 20% over the same period (from 18.8% at YE 2012). In addition, the Bank continues to maintain a healthy liquidity position, with the share of liquid assets in total assets at 30% as at 30 September 2013.