ANNUAL REPORT - Credit Agricole · 2019-05-27 · 4 JSC “CREDIT AGRICOLE BANK” / ANNUAL REPORT 2018 Translation from Ukrainian original ANNUAL REPORT 2018 / JSC “CREDIT AGRICOLE

ANNUAL REPORT 2018 / JSC “CREDIT AGRICOLE BANK”JSC “CREDIT AGRICOLE BANK” / ANNUAL REPORT 2018 103102 Translation from Ukrainian original Translation from Ukrainian original

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ANNUAL REPORT 2018 / JSC “CREDIT AGRICOLE BANK” 3Translation from Ukrainian original

Address by the Chairman of the Supervisory Board ....................................4

Address by the Chairman of the Management Board ..................................6

MANAGEMENT REPORT FOR THE YEAR 2018

1. Nature of Business ...........................................................................10

Macroeconomic Overview,

Key Trends of the Ukrainian Economy in 2018 .............................12

Credit Agricole Group ..........................................................................16

Credit Agricole Bank ............................................................................18

Executives and Officials

Supervisory Board ..........................................................................20

Management Board ........................................................................22

Organizational Structure .......................................................................24

Current Business Model .......................................................................26

Corporate Business ........................................................................26

Retail Business and Network ..........................................................32

Ratings and Awards .............................................................................38

2. Management Goals and Strategy for Their Achievement ...........42

Existing Priorities, Criteria for Measuring Success

and Assessing Achievements, Significant Changes in goals

During the Reporting Period ........................................................44

Digital Banking and Other Research and Development Activities .........46

3. Resources, Risks and Relationships .............................................50

Risk Management System ...................................................................52

Key Financial and Non-financial Resources

and Their Use for Goal Achievement ...............................................60

Conclusion of Derivatives or Transactions in Derivative Securities ........61

Compliance .........................................................................................62

Relations with shareholders and related parties ...................................64

4. Results of Activity and Prospects for Further Development ......66

5. Analysis of Key Performance Indicators .......................................72

6. HR Policy ........................................................................................... 74

7. Corporate Social Responsibility .....................................................80

8. Statement of Corporate Governance .............................................86

ANNUAL FINANCIAL STATEMENTS

WITH INDEPENDENT AUDITOR’S REPORT

Independent Auditor’s Report .................................................................106

Statement of Financial Position ................................................................ 112

Statement of Profit and Loss and Other Comprehensive Income ............ 113

Statement of Changes in Equity .............................................................. 114

Statements of Cash Flows ....................................................................... 115

Notes to the Annual Financial Statements ............................................... 116

CONTENTS

JOINT STOCK COMPANYCREDIT AGRICOLE BANKMANAGEMENT REPORT

FOR THE YEAR ENDED DECEMBER 31, 2018


A history of growth. Credit Agri-

cole Ukraine has achieved consis-

tent growth. As well as expanding

in terms of size, we have achieved

a far-reaching transformation. In

2018 Credit Agricole celebrated a

25th anniversary of Group’s pres-

ence in Ukraine. Over this quarter

of the century the bank grew into a

large universal bank serving all mar-

ket segments. Our business model

proved to be resilient to the difficul-

ties caused by the crisis in Ukraine

faced over the last 5 years and to

the significant changes in banking

regulation. Our actions will continue

to be guided by our long-term vision

combining confidence and caution.

Record result for Credit Agricole

Ukraine in 2018. The year regis-

tered a positive evolution on almost

all the macroeconomic indicators

in Ukraine (GDP growth +3.2 % as

compared to 2017) and the banking

system showed more sound funda-

mentals, even though it is still in the

process of deep transformation and

concentration.

In this context, Credit Agricole

Ukraine continued supporting the

real economy through loans to

households and businesses, with a

recognized leadership by the market

for cash loans, car loans and agri-

agro. The excellence achieved has

been substantiated by the Credit

Agricole Ukraine’s capital and in-

come ratios (2018 net result is the

highest in the bank’s history), which

once again allowed it to rank at the

top of the sector and to obtain the

highest possible national long-term

rating in Ukraine by the international

rating agency Fitch (AAA).

This performance was achieved

thanks to a commercial policy fo-

cused on combining customer sat-

isfaction and profitability, as well

as to a financial management that

ensured adequate liquidity, thus

allowing lending expansion to be

sustained, through an effective cost

control and careful risk measure-

ment. On the other hand, a high in-

vestment rate has been kept to gear

control systems to the changed re-

quirements resulting from the bank’s

larger size.

Synergy with Credit Agricole

Group. Finally, another great ad-

vantage is belonging to a leading in-

ternational Group, which is present

worldwide and has been operating

in Ukraine for many years offering

high-quality products that allow pro-

viding all services that can be inter-

esting for our customers.

Challenges for the coming

years. 2019 will bring a fur-

ther challenge to Credit Agricole

Ukraine: in a still uncertain eco-

nomic situation, we will continue

to grow on the sound basis set in

the past years. Our ambitions and

development programmes will be

defined and set forth in the three-

year business plan, which is now

being completed and which will be

our model for the near future in a

deeply-changing market.

We will meet this new challenge

with the eagerness stemming from

our cohering structure and from the

motivation of all the people working

in this structure and representing a

true strong point and the basis of

our performance.

All the solid results and continuous

growth of the bank became possi-

ble thanks to our professional and

dedicated employees. Our team is

a heart of the bank, it serves as a

driver of innovations and it allows us

to be confident while contemplating

the 25 years to come.

Stanislas Ribes Chairman of the Supervisory Board

A HISTORYOF GROWTH

ADDRESS BY THE CHAIRMANOF THE SUPERVISORY BOARD


ADDRESS BY THE CHAIRMANOF THE MANAGEMENT BOARD


MACROECONOMICCONTEXT

BANKING CONTEXT

2018 was marked by a generally sta-

ble geopolitical environment, albeit

with rising tension between Ukraine

and Russia in the Azov sea and re-

forms implemented less efficiently

than was expected by the interna-

tional community, especially in the

anti-corruption area. The progress

achieved in a more favorable eco-

nomic environment resulted in the

confirmation of the IMF’s and the

European Union’s financial support

to Ukraine through new programs.

Over the past year, the macroeco-

nomic indicators were rather posi-

tive, including the acceleration of the

Ukrainian economy, as evidenced by

more than 3.2 % GDP growth YoY.

This is the best performance since

2012, and this dynamic was driven

by the continued development of

the Ukrainian agriculture and a good

recovery of household consumption

due to a significant increase in sala-

ries (real nominal wage +20.5 %).

Inflation dropped significantly to

9.8 % YoY in 2018, as compared to

13.7 % in 2017. This improvement is

the direct consequence of the NBU’s

new currency policy providing for the

adjustments to the policy rate.

The foreign exchange market per-

formed well with an exchange rate

of about 27.8 UAH/USD, which re-

mained globally stable YoY. The

volatility of the local currency was

limited, especially when compared

to other emerging countries.

Foreign direct investment (FDI) in-

creased thanks to a more favo-

rable regulatory environment (VAT

reimbursement, repatriation of di-

vidends, gradual deregularization of

the foreign exchange market), even

if its level is still insufficient given the

country’s potential.

The banking sector performed better

and returned to profit (+21.7 bn UAH)

after being in deficit last year

(–24.4 bn UAH). This gradual im-

provement is the result of the NBU’s

active clean-up policy carried out for

several years, which let the banking

sector better support the develop-

ment of the Ukrainian economy. It

should be noted that competition

between banks grew in a more in-

novative environment. The introduc-

tion of new requirements to the Risk

Management System (RMS), which

is relevant in all respects, will be a

challenge for many banks still weak-

ened by the very high level of NPLs.

For Credit Agricole Bank, 2018 was

marked by a very good commer-

cial dynamics in all activities, record

levels of car and cash loans, more

than 2,400 new corporate custo-

mers, and accelerated development

of synergies with Credit Agricole

Group at the level of international

clients. Credit Agricole Bank has

confirmed its leadership in the area

of agri-agro financing with the best

customer satisfaction index in the

market. The bank was also deep-

ly involved in flagship projects in

aeronautics and renewable energy

finance, and pursued partnerships

aimed at supporting SME as well as

Midcorp development. Thus, Credit

Agricole has contributed to the de-

velopment of the local economy.

This strong commercial momentum

enabled Credit Agricole to achieve

significant growth in 2018 as com-

pared to the previous year. The

NBI increased by 23 %, and the

expenses were under control given

the sustainable growth of salaries

due to labor market tensions, which

allowed to maintain a good cost/

income ratio and improve it against

2017. At the same time, the prudent

credit risk policy allowed Credit Ag-

ricole Bank to reduce its COR YoY.

The combination of these factors re-

sulted in a significant increase of the

bank’s NR (+32 %) as compared to

the results of the previous year.

Credit Agricole Bank also accelera-

ted the implementation of its Client

project in three priority areas: ex-

tending the product offer and creat-

ing added value for our customers,

providing accessibility through a

multichannel distribution model, and

setting up customer relations based

on transparency and accountability.

The deployment of our new model

branch concept continues in big

cities and is highly appreciated by

our customers. FinAwards 2018

recognized this concept as The

Best Branch in Ukraine. In summer

2018, Credit Agricole Bank presen-

ted AgriSchool, a platform where

agri intelligence is concentrated.

This six-module program was highly

evaluated by the market, and 40 agri

experts graduated in April 2019.

Credit Agricole Bank has been very

active in the area of corporate social

responsibility, especially in terms

of green initiatives as it successful-

ly completed the first stage of the

IQ energy project sponsored by

the EBRD and held two dedicated

Tree for Car Loan campaigns. The

bank continued to take care of its

employees by providing health and

life insurance for all staff as well as

training opportunities in Ukraine and

abroad, and by organizing corpo-

rate events. Charity activities were

expanded to support seven regional

orphanages, reconstruct the swim-

ming pool in the Sportium children

camp, and purchase medical equip-

ment for the Center for Pediatric

Cardiology and Cardiac Surgery.

We are proud of our success and

happy to share it with our customers.

We appreciate their trust and our em-

ployees’ contribution to the develop-

ment of Credit Agricole in Ukraine.

Jean-Paul Piotrowski Chairman of the Management Board



The general economic mood in

Ukraine over 2018 is moderate-

ly positive. In fact, GDP has been

growing for eleven quarters in a

row. The bank estimates for eco-

nomic development over 2018 re-

veal quite a moderate GDP growth

of 3.2 % as compared with 2017.

Nevertheless, this is the best figure

since 2011, i.e. a few years before

the economic and political crises

happened. This upturn has not yet

compensated for all the losses that

the Ukrainian economy suffered

from the 2014/2015 crisis. Geopo-

litical risks, slow structural reforms,

high corruption levels and volatile

global markets brought about rath-

Last year, domestic investments

(estimated at 13.0 % YoY) and pri-

vate consumption (6.1 %) were the

core driving forces of growth among

expenditure components of GDP. In

fact, the government’s doubling the

minimum wage in 2017, its addition-

al increase in 2018, higher transfers

from workers abroad, as well as the

growing domestic average wages

due to the economic upturn and

leakage of workforce from the coun-

try have mostly supported private

consumption. On the other hand,

the necessity of the renovation of

existing facilities, implementation of

energy-saving technologies and the

government’s heavy investments in

infrastructure (mostly capital repairs

of road networks) supported do-

mestic investments last year.

As can be seen from the growth

recorded in 2018, net exports were

the worst-performing expenditure

component of GDP last year (esti-

mated at –2.6 % over 2018). In par-

ticular, exports demonstrated just a

small decline due to volatile global

commodity prices (including a sol-

id hike in crude price in the middle

of the year) and logistic problems

er modestly growing Ukrainian GDP

last year. GDP per capita in USD is

on the upturn for the third year run-

ning (3.0 kUSD in 2018), while still

remaining well below the pre-crisis

level of 2013. The bank believes that

solid UAH devaluation in 2014/2015

made this figure worse.

in the Azov. On the other hand, im-

ports maintain strong growth due to

the high domestic consumer and in-

vestment demand.

In spite of the moderate GDP

growth, domestic economy sectors

recorded a rather mixed dynamic

last year. Undoubtedly, the most in-

fluential sector supporting economic

growth in 2018 was agriculture, but

some seasonal shifts in active har-

vesting resulted in a rather volatile

agriculture dynamics in the second

half of the year. In any case, a record

high grain harvest of 70.1 mn tons

(or by 14 % higher YoY) influenced

the performance of agriculture most

of all, recording 7.8 % YoY upturn for

the whole year (comparing to a drop

by 2.7 % over 2017).

Continuing economic upturn, im-

proving financial results of compa-

nies, further hike in the minimum

wage (16.0 % YoY), gradual removal

of wages from the shadows as well

as the threat of labor migration kept

the wage growth in the 2018 econ-

omy at a high level. In particular, the

average monthly wage in Decem-

ber exceeded 10 k UAH for the first

time, thus demonstrating a 20.5 %

YoY growth in nominal terms. This

figure is slightly worse than a year

ago (36 %), when the economy ful-

ly enjoyed the effect of the doubling

minimum wage. But it is still solid

enough to demonstrate consumers’

growing income and demand.

Contrary to almost all market fore-

casts stipulating moderate hryvnia

weakening, the USD/UAH rate fin-

ished the year with a small decline

(by 1.3 %) in YoY terms. The great-

est difference was recorded be-

tween the actual USD/UAH rate and

the level forecasted by the budget

(30.1 by the end of the year). This

was one of the solid factors for the

shortfall in actual budget revenues

compared to the planned level. As

expected, the dynamics of the USD/

UAH was not uniform throughout

the year, thus following certain pat-

terns in different periods of the year

mostly backed by seasonal factors.

As soon as the parliament ap-

proved the new Law On the Cur-

rency Market, the NBU decided

to make significant changes in the

corresponding regulation, effective

MACROECONOMICOVERVIEW, KEY TRENDSOF THE UKRAINIANECONOMY IN 2018

GDP DYNAMIC BY EXPENDITURE COMPONENTS, %, YOY

Sources: State Statistics Committee, Credit Agricole


since February 7 already. In partic-

ular, the new regulation removes a

bulk of capital control, thus allowing

more FX market liberalization and its

greater volatility in case of solid and

sudden imbalances. Yet not all lim-

itations are abolished. In particular,

preservation of mandatory FC sale

(albeit declining to 30 % instead of

50 % since March) would allow

NBU to partially control the market.

Besides, NBU retained the right to

impose additional restrictions, if

needed.

Solid inflow of foreign currency in

November/December after the issu-

ance of Eurobonds and the receipt

of loans from international donors

considerably corrected NBU FC

reserves upwards in 2018 (by 11 %

YoY) to the five-year maximum of

20.8 bn UAH. The bank also con-

siders net positive NBU market

interventions of 1.4 bn USD as a sig-

nificant supporting factor for stron-

ger reserves by the end of 2018. A

hike in reserves improved their cov-

erage of imports from 2.9 months

in Q3 2018 to quite sustainable

3.5 months by the end of the year.

The bank believes this supports

NBU’s ability to keep the exchange

rate stable at least in the short term.

Year-end inflation in 2018 (9.8 % YoY)

was lower than both bank (10.0 %)

and NBU (10.1 %) forecasts, thus

dropping to the minimum over the

last five years. The bank considers

the high grain harvest, tight mone-

tary policy of the NBU, postpone-

ment in hiking residential gas tariffs

and the growing share of savings as

the core factors behind the declining

inflation dynamic last year.

The bank’s net profit over 2018 (21.7

bn UAH) has visibly improved com-

pared to 2017 (-24.4 bn UAH), thus

reaching the maximum over ten

years. Net interest income remained

the core source of banking income

last year. The bank thinks it has im-

proved mostly because of the grow-

ing interest rates’ margin caused by

the hike in the NBU policy rate.

The bank keeps its own view on

further positive development in the

banking system this year. However,

the profitability of its operations may

be reduced due to the potential re-

duction in interest rates’ margin and

the growing competition in the sec-

tor. The bank also expects gradual

improvement in the quality of banks’

assets as well as preservation of

strong support of banks’ capital by

their owners. Western banks will re-

main the most profitable group in

the sector.

CPI BY ITS COMPONENTS, %

BANKS’ NET INCOMEUSD/UAH EXCHANGE RATE OVER RECENT 12 MONTHS

Sources: State Statistics Committee, Credit Agricole

Sources: NBU, Credit AgricoleSources: NBU


52

139,000

30,000

49

9.7

MILLIONCUSTOMERS

MILLION MUTUAL SHAREHOLDERS

DIRECTORS OF LOCALAND REGIONAL BANKS

COUNTRIES

EMPLOYEES

CREDITAGRICOLE GROUP

With 139,000 engaged employees,

the bank forges genuine partnerships

with its customers.

Thanks to its universal customer-ori-

ented banking model based on close

cooperation between its retail banks

and specialized business lines and

reaffirmed with the “A whole bank just

for you” motto, Credit Agricole helps

its customers realize all their perso-

nal and business projects. It does so

by offering them an extensive range

of services, including day-to-day

banking, loans, savings products,

insurance, asset management, real

estate, leasing and factoring, corpo-

rate and investment banking as well

as issuer and investor services.

Credit Agricole’s corporate social re-

sponsibility policy lies at the heart of

its identity.

It is reflected in its products and ser-

vices, guiding all its business lines.

This commitment is the key factor

contributing to overall performance –

and a powerful innovation driver.

Built on strong cooperative founda-

tions and led by its 9.7 million mutual

shareholders and more than 30,000

directors of its local and regional

banks, Credit Agricole’s robust orga-

nizational model gives it stability and

staying power as a European group

open to the wider world.

Credit Agricole Group extends its

leadership year after year. It is the

number one provider of financing to

the French economy and the num-

ber one insurer in France. It is also

the leading bancassurer in Europe, a

top-ranked European asset manager

and the world’s largest green, social

and sustainability bonds bookrunner.

GROUP ORGANIZATION

9.7 million mutual shareholders un-

derpin Credit Agricole’s cooperative

organizational structure.

They own the capital of 2,447 local

banks in the form of mutual shares

and elect their representatives each

year. More than 30,000 directors

work in their best interests.

The local banks own the majority of

39 regional banks’ share capital.

Together, the regional banks own the

majority (56.6 %) of the share capital

of Credit Agricole S.A. via SAS Rue

La Boetie. Working with its specialist

subsidiaries, Credit Agricole S.A. co-

ordinates its various business lines’

strategies in France and abroad.

CREDIT AGRICOLE GROUP SERVES 52 MILLION CUSTOMERS WORLDWIDE, ADHERING TO CUSTOMER FOCUS, ACCOUNTABILITY AND COMMUNITY SUPPORT, THE ENDURING VA- LUES THAT HAVE BEEN ITS HALLMARK FOR OVER 120 YEARS.


Credit Agricole Bank has been oper-

ating in the financial market of Ukraine

for 25 years.

Nowadays, the bank offers the entire

range of banking services to private

individuals, including premium cli-

ents, and corporate customers.

Credit Agricole Bank belongs to the

group of the largest banks accord-

ing to the classification of the Natio-

nal Bank of Ukraine. The bank ranks

tenth in terms of assets among the

Ukrainian banks.

With 150 outlets, the regional net-

work of the bank covers all regions of

Ukraine. Credit Agricole Bank’s ATM

network comprises 310 ATMs.

The reliability and business repu-

tation of Credit Agricole Bank are

confirmed by the highest possible

Fitch’s ratings, leading positions in

the ratings of bank stability, reliability

of bank deposits and the most prof-

itable banks, as well as honors from

the leading Ukrainian media.

Over 300,000 active private and

18,000 corporate customers (includ-

ing more than 1,000 international

corporations and large local corpo-

CREDITAGRICOLE BANK

rate customers, more than 1,500 me-

dium-size corporate companies and

more than 15,000 representatives

of small and medium business) en-

trusted Credit Agricole Bank with the

handling of their financial issues. This

confirms the reliability and business

reputation of the bank.

The bank renders the full range of

services to business, paying special

attention to cooperation with agricul-

tural companies. Being a strategic

partner of the agri-agro segment,

Credit Agricole Bank provides a com-

bination of strong financial and agri-

agro expertise as well as innovative

solutions for the Ukrainian market.

Credit Agricole Bank holds solid po-

sitions and has sound expertise in

the car lending market. It was the first

bank in Ukraine to launch partnership

programs with car manufacturers

back in 2008. The bank cooperates

with more than 400 car dealers and

has exclusive partnerships with car

manufacturers. Credit Agricole Bank

is the only bank in Ukraine holding

an ISO 9001 certificate in the area of

car loans.

Credit Agricole Bank serves pre-

mium customers, the total number

of which exceeds 10,000. They are

offered exclusive service at the pre-

mium branch in the center of Kyiv as

well as in premium service centers in

the regions.

Credit Agricole Bank aims to be

among the TOP-10 digital banks in

Ukraine and makes a special focus

on IT innovations. The bank offers

its customers a wide range of digital

solutions, such as Internet and mo-

bile banking, contactless payments

and online transactions. 72 % of

customers are registered as internet

banking users.

Corporate social responsibility pro-

gram We Сare! launched in 2016 is

focused on green initiatives, charity

projects, employees’ welfare, and

ethical business.

The strong team of Credit Agricole

Bank consists of 2,315 employees

who share the bank’s values. All of

them are true professionals willing to

provide high-quality service to cus-

tomers.

Credit Agricole Bank did not acquire

shares in 2018.

150

300,000

10,0002,315

310

18,000

OUTLETS

CORPORATECUSTOMERS

ACTIVEPRIVATECUSTOMERS

OVER

PREMIUM-CUSTOMERS

EMPLOYEES

ATMs

CREDIT AGRICOLE BANK IS A MODERN UNIVERSAL BANK AND THE OLDEST ESTABLISHED FOREIGN BANK IN UKRAINE. THE BANK IS OWNED BY THE LEADING FINANCIAL GROUP IN EUROPE, CREDIT AGRICOLE GROUP (FRANCE).


Memberof the Supervisory Board

GERARDMARCHAND

Independent Memberof the Supervisory Board

KARLHEPP


LAURENTBENNET


SERGIIFEOFILOV


VOLODYMYRPAVELKO


FRANKSCHONHERR


VERONIQUEBRILLAUD

Chairman of the Supervisory Board

STANISLAS RIBES

In view of bringing the activities of

joint-stock companies into compli-

ance with the Law of Ukraine “On

Amendments to Some Legislative

Acts of Ukraine on Simplification of

Running Business and Raising In-

vestments by Securities Issuers”,

the composition of the Superviso-

ry Board was updated by Decision

of the sole shareholder of the bank

No. 4 dated December 3, 2018 to

comprise eight persons (five repre-

sentatives of the shareholder and

three independent members).

EXECUTIVES AND OFFICIALS. AS AT 31.12.2018,THE COMPOSITION OF THE SUPERVISORY BOARD OF THE BANK IS AS FOLLOWS:

As of December 31, 2018, the Chair-

man of the Supervisory Board is

Stanislas Gerard Mari George Ribes,

who also holds the position of the

Deputy General Director in charge

of international retail business

and commercial banking, Credit

Agricole S.A., France.

The members of the Superviso-

ry Board are Gerard Marcel Lucien

Marchand, Frank Schonherr, Ve-

ronique Francoise Brillaud (Maire),

Laurent Pierre Henry Bennet, Karl

Marcus Sittikus Luis Hepp, Sergii

Leonidovych Feofilov, and Volody-

myr Anatoliiovych Pavelko.

The role of the Supervisory Board is

to represent the interests of share-

holders, protect their rights and exe-

rcise control over the activities of the

Management Board of the bank.


Deputy CEO in chargeof Corporate Businessand Capital Markets

LARYSABONDARIEVA

Deputy CEO,Chief Operational

Officer

JEAN-PIERREPALLARD

ManagementBoard Member,

Chief Risk Officer

HANSFERM

Deputy CEO in chargeof Retail Business

and Network

GALYNAZHUKOVA


Compliance Officer

GUNTHERKOLLER


Head of Developmentand Innovation

STEPHANEFALLICK*


Chief Financial Officer

GIORGIOSOPRANZI*

Since 2015, the Management Board of the bank has been chaired by the CEO

JEAN-PAUL PIOTROWSKI

EXECUTIVES AND OFFICIALS. AS AT 31.12.2018, THE COMPOSITION OF THE MANAGEMENT BOARD OF THE BANK IS AS FOLLOWS:

The Management Board is the bank’s executive body managing its current activities and responsible

for its performance in line with the principles and procedures established by the Charter, decisions of

the General Shareholders Meeting and Supervisory Board of the bank.

* Decision on appointment was made on December 28, 2018.


ORGANIZATIONAL STRUCTURE



CORPORATEBUSINESS

In the corporate segment, Credit

Agricole Bank covers all legal enti-

ties all over Ukraine, except those

on the occupied territories. Credit

Agricole Bank serves and cooper-

ates with multinational corporations,

medium corporate business, agri-

business, and small and medium

business segment. Credit Agricole

Bank offers different products and

services: cash and current account

servicing, loans, trade finance trans-

actions, etc. At the end of 2018, the

loan portfolio for the Corporate seg-

ment was 20.1 bn UAH (increasing

by 10 % vs. 2017), and the deposit

portfolio was 20.1 bn UAH (increas-

ing by 4 % vs. 2017).

The target audience for the multina-

tional corporations (MNC) segment

is international companies and large

businesses with annual revenues

from 200 mn USD equivalent.

It is made up of more than 1,000 ac-

tive customers.

During 2018, the bank saw an in-

crease of operational volumes for

many of its clients, and new invest-

ment projects in several directions,

namely in agro, logistics, renewable

energy, and fast-moving consumer

goods (FMCG).

The target audience for the medium

corporate segment (MCC) is more

than 1,500 customers with annual

revenues from 10 mn USD equiva-

lent all over Ukraine, except the oc-

cupied territories.

After recovering in 2017, the medium

corporate sector demonstrated nat-

ural growth in 2018. The bank sup-

ported its existing customers and

also attracted new names, focusing

on transparent, reputable and sound

companies majorly from the agri-

agro, FMCG, retail and pharmaceu-

tical sectors, with the best profiles, a

low level of credit risk and zero com-

pliance risk as a target.

Focusing on customer needs, the

bank continued to improve its cur-

rent products and services, which

gave us an opportunity to gener-

ate a high level of commissions (the

highest level of commission income

in the last 5 years).

One of the key targets for us was

the development of trade finance

and documentary business, which

represented almost 20 % of the to-

tal business line assets in the high

season during the year.

The profitability of the bank’s me-

dium corporate business has in-

creased significantly, driven by an

18 % increase of the net banking

income in this sector in 2018 to

2017, and minus 20 % cost of risk

decrease in 2018 to 2017.

Customers appreciated a lot our ser-

vice offers, which lead to the high-

est level of net commission income

over the past 5 years in 2018. It is

necessary to note that over these

5 years, the share of net commission

income has increased significantly

and equals almost 20 % of the busi-

ness line net banking income.

Despite the stern competition in the

market of liabilities, MCC was able

even to improve the loan/deposit ra-

tio in local currency.

The bank provided a universal scope

of products, including (as corporate

products):

> current accounts and cash

management, with pay-

ments in local and foreign

currency;

> forex on spot and forward

terms;

> fixed deposits;

> loans;

> trade finance (letters of

guarantee, letters of credit,

operations with Promissory

notes, documentary collec-

tion (inkaso));

> i nves tment /d i ves tment

transactions (custody, bro-

kerage, escrow accounts,

squeeze-out).

Our successful cooperation with

partners was reflected in the busi-

ness segment results: 22 % growth

of net income YoY and low costs

of risk, and a significant increase

of the customer portfolio with

112 new legal entities, 85 of which

are international. Our customers

can benefit from the global offers

and presence of Credit Agricole

Group, and 16 of our new custom-

ers are also clients of other entities

of Credit Agricole Group.

FOCUS ON AGRO SECTOR

51 %SHARE

MCC:132NEW ACCOUNTS

FOR LEGAL ENTITIESWERE OPENED,

MNC:112NEW ACCOUNTS

FOR LEGAL ENTITIESOPENED, INCLUDING

65 %SHARE OF AGRI-AGROLOANS IN THE MEDIUMCORPORATE BUSINESS

LOANS PORTFOLIO

85FOR INTERNATIONAL

ONES

The current business model of

the bank is a harmonious combina-

tion of two directions:

close collaboration with

corporate business and

customer orientation and

the development of retail

business.


Agricultural Bank in Ukraine. The solid

achievements of Credit Agricole Bank

in this segment are based on the ex-

perience of Credit Agricole Group and

the dedicated agro team that has a

deep understanding of the agricultur-

al production specifics, development

strategy of the agricultural business

and the conditions in which the cus-

tomers operate, including climate,

economic and technological ones.

As a reference bank for market play-

ers, Credit Agricole Bank is fully

engaged in agro conferences and

agro forums. It participates in agro

exhibitions together with partners

(6 events in 2018) to stay close to real

businesses and their current needs.

During summer of 2018, Credit Agri-

cole Bank took an active part in the

so-called “field days” with its part-

ners, namely KUHN, EURALIS, local

John Deere dealers, etc.

Partnership programs allow the bank

and its partners to provide attractive

financing conditions to their clients.

In 2018, the bank signed 6 new part-

nership programs. As of the end of

2018, Credit Agricole Bank had 39

programs for working capital financ-

ing and investment needs. Within

partnership programs, working cap-

ital financing increased by 80 %, and

investment financing increased by

41 % during 2018.

SMALL

AND MEDIUM BUSINESS

For the small and medium busi-

ness segment, 2018 was the year

of further sustainable development

and enhancement. Despite the sig-

nificant toughening of the market

competition, the SME business line

greatly increased its loan portfolio

due to both existing and new cus-

tomers. The strategic focus was on

financing the target sector, agribusi-

ness. Combining classic and docu-

mentary finance, the bank was able

to satisfy individual working capital

needs of its customers, while the de-

velopment of partner relations with

the best manufacturers of agricul-

tural machinery ensured attractively

priced long-term financial support

for the investment plans of enterpris-

es. Through high service standards

and close cooperation with cus-

tomers, the business line ensured

stable deposit raising and became

the second biggest liquidity provider

in the bank. Dedicated teams in all

regional centers of Ukraine allowed

the bank to be as close to small and

medium-size customers as possible

and to promptly satisfy their needs.

Further business process optimiza-

tion, improvement of the car lending

platform, and the launch of modern

Internet banking not only positively

influenced the results of 2018 but

also created a sound foundation for

future development.

AGRIBUSINESS

Agribusiness is one of the stra-

tegic sectors for Credit Agricole

Bank, which is a visible player in the

Ukrainian agro market. Credit Agri-

cole Bank is a reference bank and

opinion leader on the banking mar-

ket for agricultural clients. The bank

is involved in numerous Ukrainian

agrarian projects and supports de-

velopment and innovations in the

agrarian sector.

The bank cooperates with multina-

tional corporations (inputs suppliers,

traders, agro processing compa-

nies), large and highly efficient agri-

cultural holdings, medium-sized agro

enterprises and small farming entities

that have a good reputation and pro-

fessional management teams. Credit

Agricole Bank is servicing all players

of the agro value chain: input supply,

production, trade, processing and

export. Credit Agricole Bank offers a

wide range of products to agro cli-

ents, such as seasonal pre-crop and

stock financing, investment loans (fi-

nancing of storage and drying facili-

ties, agro machinery, etc.)

According to a GFC Ukraine (a

Ukrainian research company) survey,

Credit Agricole Bank has a 68 % cus-

tomer recommendation index (CRI) in

the agri sector, which is the highest in

the market. In 2018, the bank won Fi-

nancial Oscar Awards as the Leading

6 NEWPARTNERSHIP

PROGRAMSSIGNED IN 2018

2.5 BN UAH

LOAN PORTFOLIO

3.2 BN UAH

LIABILITIES

141 MN UAH

LEVEL OF COMMISSIONS

+38 %INCREASE OF SME LOANS NET

OF PROVISIONS VS. 2017

+19 %INCREASE OF SME DEPOSITSIN ALL CURRENCIES VS. 2017

+8 %VS. 2017

OVER 20AGRO EVENTS

SUPPORTEDBY THE BANK

IN 2018

15,600SME CUSTOMERS

8 %MARKET SHAREIN AGRI LOANS

OVER

3,000ACTIVE AGRI AGRO

CLIENTS



In 2018, the key tasks for the retail

business were:

Focus on acquisition of af-

fluent and mass affluent

customers

Confirmation of leading po-

sitions in the car lending

market

Increase in cash loan port-

folio amount, in particular

by optimizing product and

distribution channels

Strengthening the bank’s

position in the premium

banking market

Transformation of the

bank’s branch network

Optimization of the retail

product range, transfer to

packaged customer service

Implementation of projects

aimed at digital banking de-

velopment

LENDING

Leading position in car lending

In 2018, Credit Agricole Bank re-

mained the leader in the car loan

market, which is confirmed by the

following results:

About 30 % market share.

2.2 bn UAH total loans issued over

the year.

Successful cooperation with over

400 car dealers and 16 car brands,

ongoing improvement of partnership

programs, transparent lending terms

and high level of customer service

allow us to positively evaluate the ac-

tivities in 2018 and to feel optimistic

about the future.

RETAIL BUSINESSAND NETWORK

Strengthening of the lending

position of our customers

This area was a priority for Credit

Agricole Bank in 2018. Key prod-

uct parameters were modified for a

substantial loan portfolio increase:

the maximum loan amount was in-

creased to 500 k UAH, and the pric-

ing was revised.

It stands to mention the bank’s ac-

tive participation in the IQ ENERGY

program that brought about a posi-

tive effect. As a result of its success-

ful operation, the bank reached the

record amount of cash loan produc-

tion (almost 950 mn UAH at the end

of the year).

Increased credit card issue

A positive trend of credit cards

number increase recorded in 2017

continued in 2018. More than

20,000 customers received this

product via the bank’s outlets.

Packaged services

In 2018, the customers of Credit Ag-

ricole Bank could enjoy the benefits

of the new packaged offers. The key

packages – Light, Smart and Premi-

um – were developed to satisfy the

needs of both individual customers

(including salary projects) and pri-

vate entrepreneurs. Since the start

of the program, the bank has sold

more than 21,000 packages.

Premium banking

The development of premium bank-

ing began 6 years ago. Nowadays,

more than 10,000 premium custom-

ers can be sure of the quality of pre-

mium services from Credit Agricole

Bank.

In 2018, Credit Agricole Bank was

fourth in the overall ranking and won

the Social Impact Investing nomina-

tion, according to the Private Bank-

ing and Wealth Management Survey

in EUROMONEY 2019.

According to banking sector ex-

perts, premium banking service from

Credit Agricole Bank also confirmed

its position among the TOP 3 banks,

as reported by Ernst & Young Ukraine.

These acknowledgements have rein-

forced the ongoing implementation of

Credit Agricole Group’s international

standards of service, as well as care-

ful attention paid to every customer.

The bank believes that saving and in-

creasing the customers’ capital is not

only closely linked to the diversity of

financial instruments but also a deriv-

ative of risk and compliance culture.

The year end was marked by some

cheering news for premium banking

customers: the launch of the exclu-

sive Sommelier package that com-

bines the best financial solutions and

fine wine philosophy.

292,000INDIVIDUAL CLIENTS,

OVER 10,000PREMIUM-CUSTOMERS

4 %MARKET SHAREOF RETAIL LOANS

310 ATMs

150 OUTLETS

THROUGHOUT UKRAINE

944 MN UAH

CASH LOANS ISSUED IN 2018


2018 was marked by a significant in-

crease in the number of digital service

users, especially through the mobile

channel. Moreover, it became much

easier to begin using i-Bank with

the new registration procedure that

does not require a personal visit. The

customers’ wish to receive remote

services is evidenced by figures: the

number of online transaction users in-

creased 1.5 times, while the amount

of products ordered online exceeded

100 mn UAH. However, the “classic”

branches were not overlooked either:

the bank kept equipping them with

latest online service devices and fully

upgraded the Wi-Fi network.

Proactive approach, convenience

and comfort. The customer does not

need to move around or wait in the

queue to get a product or a service

since managers use laptops and can

consult them and perform fast trans-

actions anywhere.

Confidentiality. Separate negotiation

rooms that provide full confidentiality

when consulting customers.

Expertise. The team created togeth-

er with the bank’s senior manage-

ment includes specialists with vast

experience both at Credit Agricole

and other institutions.

Zoning and space arrangement

The customer service area is

equipped only with items designed to

be used by customers. The self-ser-

vice zone operates 24/7. Most sim-

ple and common transactions can

be performed via self-service ter-

minals and cash-in ATMs. The In-

ternet banking zone has tablets and

state-of-the-art touchscreens for

free access to Internet banking as

well as for obtaining information on

products and services on the official

website of Credit Agricole Bank. The

waiting area has comfortable de-

signer armchairs that make custom-

ers almost invisible while getting fast

consultations.

Insurance products

Year on year, Credit Agricole Bank

confirms its high performance in

various retail business areas. Insur-

ance products are among the most

appraised: the bank sold more than

76,000 insurance policies through its

network.

New network philosophy

2018 confirmed the relevance of the

bank’s strategy for branch network

transformation. The new branch

concept is based on the wishes and

needs of customers. Upgraded out-

lets offer a completely new approach

to customer service through internal

zoning and space arrangement as

well as innovations in the proposed

services and work processes.

Credit Agricole Bank continues to

deepen its relations with target cus-

tomer segments by opening new

model branches. They combine digi-

tal technologies and employees’ high

expertise. The concept is based on

the following key principles:

Personalized service. Each custom-

er is allocated to a personal manager

who can provide the entire range of

services and advice. Each manager

is universal, i.e. has sufficient knowl-

edge to provide basic services in any

customer segment. Therefore, there

is no classic zone segregation for

serving individuals and legal entities

in the new model branch.

Premium zones

Some branches have special zones

that provide the highest level of

comfort and privacy for premium

clients. Successful implementa-

tion of the network transformation

project did not only positively influ-

ence the financial result of the bank

but was also highly appreciated by

Credit Agricole Group experts. New

model branch of the bank was rec-

ognized as the Best Branch 2018

in Ukraine at the international Open

Fintech Forum 2018. In 2018, the

bank transformed 9 branches and

started the transformation of the

corporate center in Lviv. 15 more

new model branches are expected

in 2019 (including 5 premium zones

and 2 corporate centers in different

regions of Ukraine).

Credit Agricole Bank continues to

upgrade its sales network and we

are happy that 9 outlets of the bank

were successfully transformed in

2018. Credit Agricole Bank wants to

be where its clients are, so it strives

to ensure high-quality service and

comfort not only in Kyiv but in the re-

gions as well. Today, the bank keeps

implementing the concept of a mod-

ern, comfortable and reliable bank in

the new branches. Credit Agricole

Bank combines an individual ap-

proach, confidentiality and unchal-

lengeable expertise. Credit Agricole

Bank is not ready to rest yet and is

preparing new branches to open in

different regions of Ukraine.

30 %MARKET SHAREOF CAR LOANS

51,000CUSTOMERS RECEIVED CAR

LOANS (ACCUMULATED VALUE)

76,000INSURANCE CERTIFICATES

/48,000,000

INSURANCE PREMIUMS

2.2 BN UAH

CAR LOANS ISSUED IN 2018

OVER 400PARTNER CAR DEALERS

DIGITAL:

211,000INTERNET BANKING USERS

DIGITAL BANKING DEVELOPMENT AND TECHNOLOGICAL INNOVATIONS



RATINGS AND AWARDS

HIGHEST POSSIBLENATIONAL LONG-TERM

RATING IN UKRAINE,

AAALONG-TERM ISSUERDEFAULT STABILITY

RATING (IDR) IN FOREIGNCURRENCY: B-,

THE OUTLOOK IS STABLE(MAY, 2018)

STRONG TEAM OF TOP MANAGERS:

JEAN-PAUL PIOTROWSKI

TOP 10IN THE BEST TOP-

MANAGER OF THE BANK(TOP-50 LEADING BANKS

RATING BY FINCLUB)

TOP 20MOST INFLUENTIAL

PERSONS IN UKRAINE’S FINANCIAL SECTOR

(VLAST DENEG)

LARYSA BONDARIEVA

TOP 5THE BEST

CORPORATE BANKER(TOP-50 LEADING BANKS

RATING BY FINCLUB)

TOP 20THE MOST

SUCCESSFUL WOMENOF UKRAINE

(VLAST DENEG)

TOP 50LADIES OF THE FINANCIAL

SPHERE (BUSINESSMAGAZINE RATING)

GALYNA ZHUKOVA

TOP 5IN THE BEST RETAIL

BANKER NOMINATION(TOP-50 LEADING BANKS

RATING BY FINCLUB)

68 %CLIENT RECOMMENDATIONINDEX (CRI) IN AGRI/AGRO, WHICH IS THE HIGHEST IN UKRAINE (ACCORDING TO

GFK-UKRAINE)

The Best Branch(FIRST NEW MODEL BRANCH IN PODIL)

ACCORDINGTO FINAWARDS 2018

BUSINESSMAGAZINE RATINGS

FINANCIAL OSCAR

The BestAGRARIAN BANK

TOP 5SME SUPPORT

NOVOIE VRIEMIA(TOGETHER WITH DRAGON

CAPITAL INVESTMENTCOMPANY)

TOP 3MOST RELIABLE

FINANCIAL INSTITUTIONS

TOP 50 LEADING BANKING RATINGS (FINCLUB

INFORMATION AGENCY)

FIRST IN CAR LOANS

TOP 5IN SERVICING

OF LEGAL ENTITIES,LOANS FOR SME, CASH LOANS,

MORTGAGE LOAN

TOP 10IN PREMIUM BANKING,

SALARY PROJECTS,SERVICING OF INDIVIDUALS

IN OFFICES, SAVING DEPOSITS,OVERDRAFTS

VLAST DENEG RATING

TOP 20FOREIGN INVESTORS

IN UKRAINE

REPUTABLEACTIVISTS RATING

TOP 5BANKS WITH THE BEST

REPUTATION

LAUREATEPROSTOBANKAWARDS 2018

The BestIN THE MARKET

OF THE ACCOUNTINGAND CASH SERVICES

(CLASSIC)

3rdAMONG THE PROGRAMS

OF SETTLEMENTAND CASH SERVICES

(BUSINESS)



MANAGEMENTGOALSAND STRATEGYFOR THEIRACHIEVEMENT

EXISTING PRIORITIES, CRITERIA FOR MEASURING SUCCESS AND ASSESSING

ACHIEVEMENTS, SIGNIFICANT CHANGES IN GOALS DURING THE REPORTING PERIOD

and highest-rated banks in Ukraine

as it supports a high level of returns

based on the controlled cost of risk.

All this allows the bank to offer the

best service to its customers where

and when they need it the most by

adding new communication chan-

nels and expanding the range of its

modern digital services.

Annually the bank’s consistent goal

is to remain a trusted partner for cli-

ents by supporting their plans and

needs based on full transparency

and unquestionable ethics.

In the medium term, Credit Agricole

Bank is aiming to be among the

TOP 3 international banks recog-

nized by clients as an expertise ref-

erence in sectors with high growth

potential.

In order to achieve these strategic

goals, the bank will be focused on

balanced development in all busi-

ness segments.

1. THE MAIN FOCUSES IN CORPORATE

AND AGRO PERIMETERS:

Further strengthening of the bank’s position as the mar-

ket leader for multinational and large corporate clients,

including through deeper cooperation with foreign mem-

bers of Credit Agricole Group.

Dissemination of advanced banking experience in for-

eign investments and trade finance, as well as expertise

in the capital markets area.

Enriching customer service via specialized solutions and

expanding the range of daily digital and online services.

Keeping of opinion-maker position and expertise leader

in agricultural sector, which is confirmed by the highest

index of consumer recommendations.

2. MAIN DEVELOPMENT DIRECTIONS IN RETAIL

BUSINESS AND PREMIUM-BANKING:

Strengthening the client-oriented model of cooperation

with private individuals for an impeccable client experi-

ence (including by the results of verified polls).

Creation the most comfortable service for premium cli-

ents, which corresponds to their sophisticated needs.

Becoming a simple and clear partner for private entre-

preneurs and micro-business.

Maintaining the leading position in car financing and be-

ing recognized in the field of consumer finance.

Creating a benchmark for the market in the field of cash

loans, credit cards, salary projects and bancassurance.

Being a modern, universal and

the oldest foreign bank in Ukraine,

Credit Agricole Bank offers a full

range of banking services to all cus-

tomers: from individuals and pre-

mium clients to large multinational

businesses.

The key factor of success for Credit

Agricole Bank is further support and

development of a solid and sustain-

able business model enriched with

the best practices of Credit Agri-

cole Group. Today, Credit Agricole

Bank is one of the most profitable



In 2018, the Ukrainian banking mar-

ket was marked by the rapid de-

velopment of digital technologies,

improvement of remote customer

service, and increased number of

digital users. Credit Agricole Bank

proceeded with the strategy it start-

ed implementing two years ago to

let its customers perform their daily

transactions simply and with com-

fort, and to manage funds from a

smartphone or a PC in a few clicks.

Thus, in 2018, the Internet Banking

(i-Bank) functionality expanded sig-

nificantly. New options include bill

payment services, setting an individ-

ual login and opening deposits on-

line, and there is a new registration

procedure that does not require a

branch visit. As a result, the number

of i-Bank users has increased a third

as compared to the previous year.

Mobile services and applications

become more and more popu-

lar with customers. To make them

more convenient, the bank add-

ed advanced mobile authenti-

cation methods – Touch ID and

Face ID – and contactless payments

via Google Pay. The number of CA

Mobile application users more than

doubled in 2018.

The digital transformation of branch-

es started by the bank two years ago

is gaining momentum: 9 new model

branches were opened this year, and

15 more are expected in 2019. More-

over, the bank continued to equip the

existing branches with modern digital

tools. Thus, one-third of the branch

network provides customers with ac-

cess to digital services through Inter-

net Banking Zones and an upgraded

Wi-Fi network.

DIGITAL BANKING AND OTHER RESEARCH AND DEVELOPMENT ACTIVITIES

to other staff by organizing internal

express training, and it keeps intro-

ducing the novelties of digital tech-

nologies to their colleagues and

holds educational events.

In 2018, the bank visibly enhanced

its positions as a partner to the IT

industry and a startup ecosystem.

It was Credit Agricole Bank that be-

came a financial partner of Lviv IT

Arena, the biggest IT event in East-

ern Europe. Representatives of the

bank acted as experts and honor-

ary jury members at several startup

competitions in Lviv and Kyiv. Next

year, Credit Agricole plans to con-

tinue to support innovative projects

and to take part in the most ambi-

tious IT events, conferences and

startup competitions.

TECHNOLOGICALRESOURCES USED BY THE BANK:

BUILDING AND MAINTENANCE OF TECHNOLOGICAL EQUIPMENT OF THE BACKUP SITE, REGULAR DRP (DISASTER RECOVERY TEST) AND BCP (BUSINESS CONTINUITY PLAN) TESTS.

SCHEDULED UPGRADING OF NETWORK AND WORKSTATION IT EQUIPMENT.

IN-HOUSE DEVELOPMENT AND ONGOING UPGRADING OF THE CORE BANKING SYSTEM.

MAINTENANCE AND UPGRADE OF INFORMATION MODULES USING NEW COMMUNICATION CHANNELS.

TRANSPARENT SUPPLIERSELECTION POLICY.

FULL COMPLIANCEWITH LICENSING POLICIES.

BUILDING NEW MODEL BRANCHES USING THE LATEST TECHNOLOGIES, MODERN EQUIPMENT AND COMMUNICATION CHANNELS.

COMPREHENSIVE MEASURES FOR ACQUISITION AND BUILDING THE INFORMATION SECURITY SYSTEM TO MITIGATE THE RISK OF EXTERNAL INTRUSION INTO THE NETWORK.

Among the bank’s important new

projects is the RPA (process au-

tomation and robotization) project

that allows significantly improving

the efficiency of banking process-

es by replacing human labor with a

robotized algorithm. The project is

aimed not only at speeding up data

processing but also at enabling the

bank staff to focus on more diverse

and important tasks.

Not only the technologies but also

practices of the bank were subject

to transformation. This year, Credit

Agricole Bank has officially started

to employ “agile” practices. For that

end, project participants and Board

Members took a prior training course

with certified SCRUM trainers. More-

over, the Digital Community, which is

an action group of bank employees,

passed the obtained knowledge



RISK MANAGEMENT FRAMEWORK AND ITS MAIN PRINCIPLES

RISKMANAGEMENTSYSTEM

Risk Management Framework in

Credit Agricole Bank is as follows.

Bank Strategy

The Strategy fixes the bank’s Me-

dium-Term Development Plan. To-

gether with the bank’s budget, the

Risk Policy is structured to align with

the Strategy.

Risk Appetite framework

The risk appetite framework (RAF)

consists of all bylaws, procedures,

processes, controls and systems

which are used to formulate, apply,

communicate and oversee the risk ap-

petite of the bank in accordance with

the National and European regulator.

In particular, the Risk Appetite

framework is expressed through the

Risk Appetite Statement (RAS).

The RAS sets the level and types

of risks that the bank is willing to

accept or avoid in order to achieve

its business objectives. It includes

qualitative statements as well as

quantitative measures expressed

relative to capital, risk measures, li-

quidity and other relevant measures

as appropriate.

The RAS is closely integrated into

the bank’s other structural process-

es, such as risk strategy drafting

and the budget process.

The RAS is aligned with the bank’s

global strategy and provides a com-

mon framework and comparable

measures for the Management

Board to communicate, under-

stand, and assess the types and

level of risk that the bank is willing

to accept. The RAS includes the key

indicators required by CASA and

those that the bank deems neces-

sary to define the risk appetite. The

RAS covers the whole scope of

risks types, such as credit, liquidity,

market, operational and compliance

risks, and sets out the key risk indi-

cators (with an essential impact on

bank’s activity) and other limits and

thresholds (minor impact). The risk

appetite, risk tolerance and risk ca-

pacity levels must be determined in

this statement.

Risk Appetite is the level of risk that

the bank is willing to accept in order

to achieve its strategic objectives,

given its overall financial capacity

and its scarce resources (liquidity,

solvency, etc.).

Risk Tolerance is the budget target

for the entities for which such a tar-

get is set, or less subject to CASA

approval supporting the entity’s jus-

tification.

Risk Capacity is the maximum level

of risk the bank can assume given

its current level of resources before

breaching the constraints deter-

mined by the regulatory capital and

liquidity needs. Corresponds to min-

imum CET 1 regulatory levels and to

stressed liquidity below the limits

approved by CASA.

BANKSTRATEGY

BYLAWS,PROCEDURES, PROCESS MAPS,

INSTRUCTIONS AND OTHER GUIDELINES

RISK POLICY

RISK STRATEGY

RISK APPETITE


RISK STRATEGY

The Risk Strategy sets out the ap-

proved CRG limits, caps, operation-

al limits and other constraints set

up by CRG based on the CRG pre-

sentation made by the CA-Ukraine

Lines of Business (LoB) and ALM/

Treasury, in an operational context.

It also provides an overview of the

risk management & monitoring

mechanism, delegations, and the

current risk profile of CA Ukraine’s

credit portfolios.

The Risk Strategy defines:

> Target markets and their

general characteristics.

> Target lending areas by

the economic sector, geo-

graphic regions, and cur-

rencies.

> General acceptability crite-

ria for lending.

> Collection approaches.

> Principles of concentration

risk management.

The Risk Strategy is based on the

CRG presentation, drafted and ap-

proved on an annual basis accord-

ing to the rules set by CASA.

CRG presentation is approved once

per year (usually in Q3/4) and re-

viewed if needed.

Risk Strategy Manual is the opera-

tional guidance approved once per

year and reflecting the approved

CRG limits and other operational

rules to follow when performing risk

operations.

RISK POLICY

The Risk policy defines the main ob-

jectives and tasks as well as the Risk

Management Framework in Credit

Agricole Bank, main approaches

and basic ways for its realization.

The purpose is to set out high-level

principles for the bank’s risk man-

agement. The covered risks are

credit, financial and operational

risks. The high-level principles for

the bank’s risk management are

subject to regular review and ap-

proval by the Management Board

and the Supervisory Board.

The high-level principles of risk man-

agement are implemented through

bylaws, procedures, instructions

and other internal methodology ac-

cording to the risk type.

CREDIT RISK

Credit risk is incurred when granting

credits to counterparties or groups of

counterparts. Its key components are

market, counterpart and facility risks.

The purpose of credit risk manage-

ment is to establish a sound asset

portfolio, and the main tasks are:

Credit risk assessment by the deals

with a Client/Group of Clients (new

credit limits, annual reviews, modi-

fications request, etc.) and prepa-

ration of the risk opinions with a

summary and risk recommenda-

tions for the Credit Risk Committee.

Improvement of the defined portfo-

lio quality via proactive identification

of sensitive cases, and predicative

definition of action plans (individ-

ual strategies) targeted to reduce

watchlisted clients.

> Proactive identification of

sensitive/distressed clients.

> The following internal docu-

ments are developed to de-

tect, measure, monitor and

control credit risk:

> Bylaws for assessing finan-

cial standing of the PI, PE

and LE Borrowers.

> Procedure for the assess-

ment of the bank’s counter-

parties’ financial conditions.

> Indirect credit risk: proce-

dure for assessing insur-

ance companies’ financial

conditions and liability limits

calculation.

> Procedure for control over

credit risk concentration.

> Bylaws on Credit Risk Mea-

suring.

> Bylaws on provisioning to

IFRS.

Credit risk management is regulated

by the following documents:

> Risk Strategy Manual.

> Lending bylaws, proce-

dures and methodological

recommendations per each

business line define the dis-

tribution of the participants’

functional duties in the pro-

cess, their authority, respon-

sibility and the coordinated

actions, the main approach

to the lending activities.

> Credit Committee Bylaws

outline the credit deci-

sion-making procedure and

different delegation levels.

> Rules of procedure on the

Scorecards and Business

logics Backtesting Commis-

sion. Product Standards for

each business line describe

the general loan, documen-

tary operations and for-

wards conditions, the list

of documents for a client’s

financing, loan review ap-

proaches, and the main ex-

ceptions of financing.

> Procedures for pledge as-

sessment and monitoring

and procedures for other

types of collateral outline

the general requirements to

the collateral.

> Watchlist procedure, pro-

cedures for working with

distressed clients (LE, PI,

PE) with regard to early

detection and managing

non-performing loans.

During the crisis of 2014–2016, the

Risk Strategy of the bank was to

centralize decision-making from

lower committees, focus on key

sectors, and to introduce tight re-

quirements to clients and products

in order to secure a good risk pro-

file of the bank. In the post-crisis

2017/2018, the Risk Strategy pro-

gressively made decision-making

easier by delegating back to lower

committees and reducing the risk

requirements to a client’s profile

(though still keeping them high),

allowing cautious growth in some

sectors/segments. However, de-

spite adopting the Risk Strategy for

the recovering economic environ-

ment, the general risk approach re-

mained cautious.

The RAS is reviewed and approved

once a year (or more frequently, if

there are any changes) and is subject

to the Supervisory Board’s approval.

The follow-up on the risk appetite

level within the Risk Appetite Dash-

board (RAD) is given on a regular

basis (usually quarterly). It implies

regular reporting on the achieved

level of risk appetite (within the

reporting period) in comparison

with the RAS to the relevant deci-

sion-making body. The RAD is con-

sidered by the Management Board

and Supervisory Board to monitor

the level of risk appetite and ensure

the availability of efficient and com-

prehensive action plans proposed

for degraded indicators (if required),

in respect to the approved RAS.

The Risk Appetite is based on the

color range with the following scale:

Green (appetite level) usually reflects

the budget risk level.

Yellow (tolerance) and Red (capac-

ity) mean that the management

should be informed during the next

committee meeting, and corrective

measures/action plan are required.


FINANCIAL RISK

Financial risks follow from market or

liquidity risks:

Market risk

The main purpose of market risk

management (particularly, currency

risk, interest rate risk, price risk) is to

maintain it at an acceptable level op-

timal for the bank’s strategic goals.

Liquidity risk

The purpose of liquidity risk man-

agement is to maintain an accept-

able level of the aforesaid risk, which

is determined by the bank pursuant

to strategic goals.

The bank is committed to the prin-

ciples of a double-level system of

financial risk management based

on the correspondence of the risk

management system to the risk es-

sence:

Level 1: trading portfolio risk man-

agement. A portfolio of the bank’s

positions that are most sensitive to

daily market fluctuations and could

generate essential losses even by in

one banking day. Trading portfolio

risks management is performed on

a daily basis via an extended system

of indicators calculated by special

mathematical tools.

The bank’s positions in the trading

portfolio are defined by standalone

internal documents of the bank and

approved by the Market Risks Com-

mission (MARCO).

Level 2: global risk management of

the bank. Methods, instruments and

a system of limits used at this lev-

el are applied to the measurement/

limitation of market risks inherent to

all open positions of the bank in ag-

gregated form (banking book). The

management of such risks is related

to the inertia (low speed of essential

changes) of the banking book, and

therefore it is performed via strate-

gic actions.

Core decision-makers are the As-

sets and Liabilities Management

Committee (primary body for deci-

sion making), the Treasury Commis-

sion and MARCO, each in their own

powers.

The process of detection, mea-

surement, monitoring and control

of financial risks is ensured by the

following departments according to

their main functions:

Assets and Liabilities Management

Department: monitoring the bank’s

balance sheets, carrying out finan-

cial modeling, stress-testing of li-

quidity, IRR and capital, strategies

and tactics on assets and liabilities

management, calculation and anal-

ysis of liquidity and IRR, long-term

liquidity planning, planning of capital

and obligatory ratios in the part of

capital adequacy, liquidity and open

currency position.

Financial Risks Department: recon-

ciliation of recommendations and

action plans relative to minimizing

market and liquidity risks, approving

methodologies and internal models

of market and liquidity risk manage-

ment, organizing process of design-

ing/updating limits and their size on

market risks, liquidity risks, and their

conformance by the respective units

of the bank and the holding compa-

ny Credit Agricole S.A.

Treasury Department: short-term

and instant liquidity management,

adherence to the NBU ratios and

adjustment thereof using treasury

instruments, management of open

currency position of the bank within

the established limits and in coordi-

nation with the ALM Department.

Methodologically financial risks

management is also supported by

the following documents:

> Bylaws on market risks

management.

> Bylaws on liquidity risk

management.

> Rules of interbank limits

post-control.

> Rules of Procedure of Mar-

ket Risks Commission.

> Financial Policy.

> Group documentation.

OPERATIONAL RISK

The risk of losses resulting from

inadequate or failed internal pro-

cesses, human errors, or systems,

or from external events, including

legal risk; operational risk includes

risks associated with low-probabili-

ty, high-impact events.

Operation risk management in

Credit Agricole Bank is well orga-

nized and has the following phases:

1. Identification. Operational risks

are identified within operational risk

mapping exercise, loss data collec-

tion process, and permanent con-

trol system roll-out.

2. Assessment. Operational risks

are assessed by means of analysis

and forecasting of the risk prob-

ability and consequences of their

realization. The risk sensitivity of

the bank is defined by the aversion

matrix which describes a graduated

scale of risk consequences by fi-

nancial and non-financial impact.

3. Mitigation. Operational risks are

mitigated through the avoidance (re-

designing and optimization of pro-

cesses), limitation (implementation

of controls, establishment of limits

or indicators), transfer (insurance) or

acceptance of risks.

4. Monitoring. Operational risks are

monitored through the observation

of limits (for instance, BIN limits for

payment cards), key risk indicators

and follow-up action plans.

5. Reporting. Operational risk

management results are quarter-

ly reported to the Internal Control

Committee (ICC) responsible for op-

erational risk oversight. Reporting is

based on operational risk mapping

results, loss data collections results,

results of permanent controls’ indi-

cators calculation and results of ac-

tion plan monitoring.

6. OR Risks Appetite analysis based

on the OR threshold calculation. The

main are sensitive and significant in-

cident, pure OR cost of risk/NBI.

7. Insurance coverage is used by the

bank to mitigate operational risks

(the most sensitive ones).

Methodologically, operational risk

management is supported by the

following documents:

> Operational risk manage-

ment bylaws.

> Procedure for collecting

data on operational events.

> Operational risk stress test

procedure.

> Internal order documents.

> Group documentation.


PERMANENT CONTROL SYSTEM

AS A PART OF INTERNAL CONTROL SYSTEM ORGANIZATION

According to the standards of the

Group, the internal control system of the

bank consists of three lines of defense.

In general, the areas of responsibility

for operational risk management are

organized on the effective second

line of defense and keep under con-

trol the first one.

A permanent control system is

rolled out in the Credit Agricole

Bank to organize the second line

of defense and to keep the first

one under observation. The per-

manent control system covers

the main bank activities such as

credit activity, operational ac-

tivity, financial risk, accounting

transactions, operational risks,

compliance, information security

and business continuity, physical

security, OES activity, recovery

processes, etc.

CRO is responsible for the effec-

tive functioning of the permanent

control system. The Risk Control

3rd LINEOF DEFENCEAudit

3rd LEVEL

2nd DEGREE2nd LEVEL

2nd DEGREE1st LEVEL

1st DEGREE

Staff independentof the entitiesand servicesthey are monitoring

Staff with no commitment-related duties

Different stafffrom those who madethe commitmentto the transaction

Staff at the inseptionof the transaction(self-monitoring)

Department and Compliance are

responsible for its maintenance and

completeness in accordance with

the Group’s methodology and local

requirements.

In the case of negative control re-

sults, an action plan is launched

in order to correct the deviations

DATA COLLECTION ON OPERATIONAL RISK (OR) INCIDENTS

Collection and analysis of data on operational risk incidents are one of the

areas of operational risk management (ORM), implying the organization of

the system of collection, registration, analysis of operational risk realization/

potential realization incidents (including fraud risk) and development of the

respective action plans to mitigate the identified risks.

In 2018, the main loss-generating categories were execution delivery and

process management; clients, products and business practices.

OPERATIONAL RISKS MAPPING CAMPAIGN

Mapping of operational risks in the bank’s processes (mapping) is a cam-

paign on periodic identification and assessment of operational risks and

process controls of the bank. Mapping is performed based on the list of

business processes approved in the bank and the risk categories proved by

the Group. The number of sensitive/critical processes was relatively stable in

the last ORM campaigns.

2nd LINEOF DEFENCERisk management business lineCompliance business line

1st LINEOF DEFENCEOperational business line

and improve process controls.

In the course of operational risk

management and in order to keep

the operational risk level on the

first line of defense under control,

Credit Agricole Banks’ Operation-

al Risk Team participates in ana-

lyzing the processes (including

deployment of new IT systems,

products, projects, etc.) and inter-

nal documents of the bank, gives

recommendations on operational

risk mitigation, and participates in

working groups as operational risk

experts.


CAPITAL

At the end of December 2018, the reg-

ulatory capital, including the earning

of the year, came to over 4.7 bn UAH,

increasing by 1.1 bn UAH vs. the end

of 2017. The main driver of the cap-

ital increase was the shareholders’

support: they decided to leave a part

of the profit at the bank’s dispos-

al (by increasing reserves’ funds by

0.7 bn UAH). Due to that, the weight

of Tier 1 in capital structure reached

55 % (+3 p.p. vs. December 2017).

Other factors that influenced the

change of the regulatory capital were:

> Profit increase.

> Decrease of NCR (non-cov-

ered credit risk).

> Sub-debt amortization.

At the same time, the amount of Risk

Weighted Assets (RWA) increased by

5,5 bn UAH up to 25 bn UAH, main-

ly due to loans to customers. As the

result, the capital adequacy ratio (N2)

increased by 0.27 p.p. up to 19.4 %

(minimum regulatory level is 10 %),

and the bank continues to demon-

strate a strong capital position.

LIQUIDITY

Customer deposits are the basis of

the comfortable level of liquidity of the

bank, both in hryvnia and in foreign cur-

rency. Credit Agricole Bank’s deposits

portfolio amounted to 27.1 bn UAH by

the end of December 2018, having in-

creased by +4 %, or by +1.0 bn UAH

in comparison with the end of 2017.

Credit Agricole Bank’s liquidity excess

in FCY is kept on on-call accounts in

foreign banks with investment class.

The available liquidity buffer in hryvnia

is placed in liquid instruments of the

NBU and the Ministry of Finance of

Ukraine (CDs and T-bills).

The main objective of short-term li-

quidity management is to ensure that

the bank is able to meet its on-bal-

ance-sheet payment commitments,

expected and unexpected, so as not

to prejudice its normal business, daily

operations and financial position. The

key condition for achieving this objec-

tive is the constant maintenance of a

sufficient balance between incoming

and outgoing liquidity flows in the

perspective of continuously support-

ing normal banking operations.

The bank keeps all obligatory liquidity

ratios at a high level, including the new

one, liquidity coverage ratio (LCR)

(137 % in total currencies and 181 %

in FC). LCR calculated according

to the Group’s methodology is also

maintained at a high level (178 %).

The bank has established itself as

an active market participant for both

foreign exchange and money market

trading and short-term liquidity man-

agement purposes, as well as for sales

activities, where it offers a wide range

of financial products to its customers.

The bank’s corporate and private cli-

ents are offered financial products to

meet their needs related to money

market and foreign exchange (both in

spot and in forward markets).

Human resources and intellectual capital

are described in section 6 “HR Policy”.

Technological resources are disclo-

sure in section 2 “Management Goals

and Strategy of Their Achievement /

Digital Banking and Other Research

and Development Activities”.

KEY FINANCIALAND NON-FINANCIALRESOURCES ANDTHEIR USE FOR GOAL ACHIEVEMENT

CONCLUSIONOF DERIVATIVESOR TRANSACTIONSIN DERIVATIVESECURITIES

As of December 31, 2018, in view

of the restrictions established by

Credit Agricole Group, the bank

does not conclude derivatives or en-

ter into derivative securities deeds,

and therefore there is no information

on the potential impact of the above

activities on the evaluation of its as-

sets, liabilities, financial position, in-

come and expenses.

The risk management policy of

the bank defines transactions with

derivatives and derivative secu-

rities as significant risk transac-

tions. Due to the lack of tools for

hedging such risks, the bank and

Credit Agricole S.A. have forbidden

the performance of such transac-

tions. Respectively, no other types

of risk (credit, interest rate, price

or liquidity risks) are measured for

such transactions either.


As part of Credit Agricole Group,

Credit Agricole Bank is committed

to compliance as the heart of its

development. Servicing our clients

in full compliance with legal regu-

lations and in accordance with the

highest ethical standards of cus-

tomer protection and transparen-

cy are the pillars of Credit Agricole

Bank’s strategy.

The Credit Agricole Group Code of

Ethics published in 2017 emphasiz-

es the Group’s values of customer

focus, responsibility and solidarity

for any Credit Agricole Group en-

tity in the world. This reference

document sets out actions and

behavior principles to be followed

vis-a-vis our customers and all our

stakeholders including employees,

suppliers, service providers, state

representatives, associations and

NGOs, shareholders and investors.

COMPLIANCE

Following the principles established

in the Group Code of Ethics, the Su-

pervisory Board of Credit Agricole

Bank approved a new Code of Con-

duct in 2018. It puts into practice the

commitments set out in the Code

of Ethics, which is the foundation of

the ethical and professional conduct

to be respected by every employee

of the Credit Agricole Group. The

Code of Conduct is designed to

provide guidance in everyday ac-

tions, decisions and behavior.

Moreover, new Conflict of Interest

Bylaws were also approved in 2018

by the Supervisory Board of the

bank. They define the rules applica-

ble to the bank’s employees to avoid

situations of conflict of interest.

Such bylaws aim at ensuring proper

governance of the bank as well as

protecting the client’s interests.

Several training sessions were held in

2018 to consolidate the knowledge of

the bank’s staff on compliance mat-

ters. Among other things, the bank’s

staff was trained in financial monitor-

ing, compliance culture, conflict of in-

terests, and fraud prevention.

Credit Agricole Bank, like Credit

Agricole Group itself, is ISO 37001

certified by an independent exter-

nal company for its anti-corruption

system. This highlights the Group’s

and the bank’s determination and

the quality of its anti-corruption

program (identification and analysis

of corruption risks, and measures

to reduce those risks). Credit Ag-

ricole Bank maintains an anti-cor-

ruption policy which defines the

general measures to be applied by

all units of the bank. The anti-cor-

ruption system is regularly updated

to adapt to the environment. For

instance, in 2018, Credit Agricole

Bank took specific actions to in-

crease the global knowledge of its

suppliers and partners (KYB, Know

Your Business). In that respect, new

clauses in agreements with suppli-

ers and partners were added. Credit

Agricole Bank has a zero-tolerance

policy for corruption and expects

the same from all third parties inter-

acting with it.

FOR THE VERY FIRST TIME, CREDIT AGRICOLE GROUP HAS SET UP A GROUP-WIDE ETHICS CHARTER TO COVER ALL THE GROUP ENTITIES. THIS CHARTER SIGNED BY THE GROUP’S TOP MANAGEMENT SETS OUT THE CREDIT AGRICOLE’S CORE VALUES OF ACTING RESPONSIBLY, LOCALLY, AND WITH SOLIDARITY, FORCEFULLY RESTATING THESE VALUES FOR CREDIT AGRICOLE GROUP, WHICH IS OPERATING ITS BUSINESS LINES ACROSS 50 COUNTRIES, OFTEN IN COMPLEX ENVIRONMENTS.

GUNTHER KOLLER / MEMBER OF THE MANAGEMENT BOARD


RELATIONSWITH SHAREHOLDERSAND RELATED PARTIES

The priorities of the bank’s cor-

porate conduct are transparency,

financial stability and profitability,

and respect for the rights and le-

gitimate interests of shareholders

and other stakeholders of the

bank. As of December 31, 2018,

the sole shareholder of the bank is

CREDIT AGRICOLE S.A., located at

12, Place des Etats Unis, Montrouge

Cedex, France 92127 and owning

100 % of the bank’s shares (herein-

after the shareholder).

The relations with the sharehold-

er are built in compliance with the

Corporate Governance Principles

(Code) of the bank. The revised ver-

sion of the Principles was adopted

by Resolution of the Sole Sharehold-

er of the bank No. 5 dated Decem-

ber 4, 2018. The bank provides the

shareholder with a real possibility to

exercise its rights stipulated by the

Charter and the Ukrainian law, as well

as with effective remedy in the case

of rights violation. The shareholder

is entitled to manage the shares at

its own discretion, and take any ac-

tions in respect of them unless they

are in breach of the law or infringe

on the rights and interests of others.

In its turn, the bank guarantees the

shareholder’s right to prompt receipt

of full and reliable information on the

financial and economic position of

the bank. The relations between the

bank and the shareholder are based

on the principles of cooperation,

transparency, effective management

and control, social responsibility and

compliance with the laws, which

allows the shareholder to make in-

formed decisions.

To ensure stable operations of

JSC “CREDIT AGRICOLE BANK”

and to avoid risks of non-compli-

ance with the NBU requirements to

credit risk concentration standards,

an effective credit risk concentration

control system was implemented in

the bank, including with respect to

related parties transactions (in ac-

cordance with the Resolution of the

Board of Directors of NBU No. 315).

In view of the above,

Internal bylaws on defining

the related parties of the

bank, keeping and using

their list and performing as-

set transactions with them

were drafted and adopted.

Separate modules for the

registration and processing

of the obtained information

on related parties of the

bank were developed in the

bank’s software for correct

grouping of related parties.

An automated control sys-

tem providing for related

parties identification and

control over their transac-

tions was implemented.

Data analysis and control of

compliance with the max-

imum level of credit risk

arising from transactions

with related parties of the

bank (N9) are carried out

on a daily basis.

The bank complies with the Law

of Ukraine “On Banks and Banking

Activity” and the regulations of the

National Bank of Ukraine concern-

ing control over transactions with

related parties. In 2018, there were

no violations of the N9 ratio.

The list of related parties includes

about 4.2 thousand entities, includ-

ing 3.5 thousand (83 %) companies

of Credit Agricole Group and their

managers who are non-residents,

not customers of the bank and do

not reside in Ukraine. Only about

700 persons (17 %) are related par-

ties of the bank located in Ukraine;

about 100 of them are the bank’s

employees, and 550 its associates.

Asset transactions are run with 2 %

of the total number of related parties.

The bank was not involved in high-

risk asset transactions with related

parties, namely in the amount ex-

ceeding 1 % of the regulatory cap-

ital of the bank (for individuals) or

3 % of the regulatory capital of the

bank (for legal entities).

As of December 31, 2018, the maxi-

mum credit risk arising from transac-

tions with related parties represents

0.74 % of the regulatory capital of

the bank, while the total amount of

liabilities under the related parties’

transactions is 35.2 mn UAH.

Interest rates on loans granted to

related parties and funds attracted

from related parties match the stan-

dard interest rates for respective

loan/deposit product for the respec-

tive client segment (individuals or

legal entities).



RESULTS OF ACTIVITYAND PROSPECTSFOR FURTHERDEVELOPMENT

RESULTS OF ACTIVITY

Credit Agricole Bank finished 2018

with a record net result of 1,463 mn

UAH due to strong commercial mo-

mentum and the increasing contri-

bution of all business lines into net

banking income.

Performing loan portfolio (net of pro-

visions) showed a steady growth of

+12 %, or +2.3 bn UAH in compari-

son with the previous year. The qual-

ity of the loan portfolio is maintained

at a high level, while loan provision

increased by 11 %, or 0.2 bn UAH in

comparison with 2017.

The bank’s NPL ratio is one of the

lowest among banks in Ukraine. At

the end of December 2018, the NPL

coverage ratio grew by +1 % and

reached 97.0 % in comparison with

the end of December 2017.

As of the end of December 2018,

the bank’s RWA increased by 28 %

up to 24.5 bn UAH in comparison

with December 2017 (RWA were

19.2 bn UAH). The bank continues

to demonstrate a strong capital po-

sition with a capital adequacy ratio

(N2) of 19.4 % as of the end of De-

cember 2018 (minimum regulatory

level is 10 %).

Credit Agricole Bank’s depos-

its portfolio amounted to 27.1 bn

UAH at the end of December 2018,

having increased by +4 %, or by

+1.0 bn UAH in comparison with the

end of 2017. The deposits increased

on all business lines, but mainly on

the corporate side. Customer de-

posits provide a comfortable level of

liquidity to the bank, both in hryvnia

and in foreign currency. Credit Ag-

ricole Bank’s liquidity excess in FC

represents the equivalent of 41 % of

its customer deposits at the end of

2018. The available liquidity buffer

in hryvnia is placed in liquid instru-

ments of the NBU and the Ministry of

Finance of Ukraine (CDs and T bills).

Net Banking Income

The increasing trend of net bank-

ing income persists. In 2018, NBI

amounted to 3,426 mn UAH, which is

+23 % or +635 mn UAH more than in

2017. The bank demonstrated growth

in all components of net banking in-

come, which confirms the efficiency

of its business model and consisten-

cy of strategy implementation.

Net Interest Income

Net interest income came to

2,330 mn UAH, essentially in-

creased by +20 % or 383 mn UAH.

This performance was mainly due to

higher loans and higher short-term

UAH interest rates.

Net Fee

and Commission Income

Net fee and commission income,

which accounted for 21 % of net

banking income (23 % in 2017),

came to 703.4 mn UAH, significantly

increasing vs. the previous year (up

by 9 %) on loan-related fees (linked

with higher activity and higher vola-

tility on the FX market).


Net Income

from Other Banking Activities

Other NBI increased by +99 %, or

196 mn UAH on higher trading vol-

umes as well.

Operating Expenses

Operating expenses came to

1,382 mn UAH, increasing by

223 mn UAH, or +19 % vs. 2017:

Personnel expenses increased by

129 mn UAH, or +19 % vs. 2017

(806 mn UAH vs. 677 mn UAH) as a

result of pressure on the labor market.

Other administrative expenses in-

creased by 59 mn UAH, or 16 % vs.

2017 due to an increase in the cost of

advertising & other external services.

Depreciation and amortization:

growth by 35 mn UAH, or 33 %

was mainly due to an increase in

depreciation, evidencing visible in-

vestments into the bank’s transfor-

mation (including processes and

digital development). The amount

of investments in 2018 increased by

40 % up to 256 mn UAH vs. 2017.

The cost-to-income ratio of Credit

Agricole Bank remains one of the

lowest among Ukrainian universal

banks; it did not deteriorate in the

context of pressure on general ex-

penses and investments.

Net Provisions

for Risks and Charges

The cost of risk is maintained at

a low level following the improve-

ment of economic environment and

successful management of bad

debts, and it is by 13 % better than

in 2017: –236 mn UAH in 2018 vs.

–270 mn UAH in 2017. Positive chang-

es are due to active work on non-per-

forming loans, prudent risk policy and

efficient collection of debts.

Net Result

The Net Result for the financial year

came to 1,463 mn UAH, increasing

by 32 % vs. 2017, with a 55 % return

on equity. Such a result confirms the

adequacy of the chosen business

strategy and sustainability of its im-

plementation.

PROSPECTS FOR FURTHER DEVELOPMENT

growth. The bank also keeps a cau-

tious view on the influence of po-

tential volatility in global commodity

markets regarding the performance

of domestic economic sectors.

This year could be the hardest for

the government in terms of exter-

nal debt repayments in the medium

term. First, the election year and the

corresponding reluctance to deal

with social issues may postpone

the provision of new IMF tranches

(scheduled at 2.6 bn USD). Second,

considering the moderate chances

of refinancing redemption of local

bonds in foreign currency (FC), the

government would still have no oth-

er way than to enter external capital

markets with new Eurobond issues

of around 3.0 bn USD. Therefore,

the potential turmoil in global finan-

cial markets as well as elevated do-

mestic risks due to elections may

raise the cost of issuing new debt

on global financial markets.

The bank foresees the preservation

of growth in the majority of econo-

mic sectors this year. In particular, it

expects a higher upturn in the indus-

trial sector for the restoration of pro-

duction in its core segments, while

strong demand and investments

would preserve a positive dynamic

in both trade and construction. At

the same time, the grain harvest

may be slightly lower this year, thus

undermining agriculture’s slight con-

tribution to the general economic

MAJOR EXTERNAL PUBLIC DEBT PAYMENTS IN 2015 – 2021, USD BN

Sources: Credit Agricole


ANALYSIS OF KEYPERFORMANCEINDICATORS

ANALYSISOF KEYPERFORMANCEINDICATORS

The management of Credit Agricole Bank regularly assesses the bank’s performance in accordance with

the established objectives. Particular attention is paid to the following indicators:

Key Performance Indicators 2017 2018 2018 vs. 2017

Net banking income, mn UAH 2,787 3,426 639 23%

Cost to Income Ratio (CIR) 42% 40% -1% -

Cost of risk, mn UAH -270 -236 34 -13%

Risk Weighted Assets, mn UAH EoY 19,496 24,952 5,455 28%

OPEX, mn UAH -1,159 -1,382 -223 19%

Return On Net Equity (RONE) 47% 55% 8% -

Synergies Result, mn UAH 592 655 63 11%

Net result, mn UAH 1,110 1,463 353 32%



HR POLICY

IN 2018, THE HR MANAGEMENT POLICY OF CREDIT AGRI-COLE BANK WAS DEVELOPED IN LINE WITH THE BANK’S STRATEGY. AS OF DECEMBER 31, 2018, THE NUMBER OF ACTIVE EMPLOYEES WAS 2,315, 71 % OF THEM WOMEN AND 29 % MEN. THE AVERAGE AGE OF THE BANK’S EM-PLOYEES IS 39 YEARS OLD, AND THE AVERAGE DURATION OF EMPLOYMENT AT CREDIT AGRICOLE BANK IS 5 YEARS 9 MONTHS.

HUMAN RIGHTS

In terms of human rights, Credit Ag-

ricole Bank is governed by the Uni-

versal Declaration of Human Rights

adopted by the United Nations

General Assembly, the Internatio-

nal Covenant on Civil and Political

Rights, the International Convention

on Elimination of All Forms of Racial

Discrimination, the Constitution of

Ukraine and other international and

Ukrainian legislative and internal

regulatory documents.

As people have to provide their

personal data in electronic form

more and more often, the bank

complies with the law on personal

data protection based on five prin-

ciples – integrity and reliability, eth-

ics, transparency and education,

safety, and client control of data us-

age – and guarantees the security of

personal data of its employees and

respects their privacy.

The bank improves the awareness

of discrimination prevention among

its executives, managers and em-

ployees. To work towards gender

equality and diversity means to

make the employees feel they are

treated fairly from the very first day

and throughout their whole career at

the bank. Working conditions where

each and every one feels respect-

ed improve performance and make

people more motivated.

Apart from its legal obligations, the

bank believes that diversity improves

efficiency and attractiveness. Facili-

tating gender diversity means devel-

oping a transparent and responsible

corporate culture that contributes to

internal unity and progress.

The bank ensures prevention, de-

tection and resolution of illegal acts.

No employee, trainee or apprentice

can be punished, fired or discrimi-

nated against for suffering from or

refusal to tolerate sexual or moral

harassment, as well as for claiming

or disclosing such actions.

Corporate foreign language cours-

es. The bank helps its staff reach

the required level of language skills

by organizing regular lessons with

professional teachers and maintain

and improve the skills through par-

ticipation in weekly speaking clubs.

About 190 employees attend such

corporate courses.

In 2018, training and development

expenses constituted 1.21 % of the

overall staff expenses. On average,

an employee takes 7 or 8 training

courses for professional knowledge

improvement per year.

Credit Agricole Bank systemically

invests into staff training and de-

velopment and actively uses its

internal succession pool to fill man-

agerial positions. For this purpose,

the bank runs the TOP Talents de-

velopment program aimed at pre-

paring potential senior managers

able to occupy managerial positions

at the bank as well as to take part in

the international mobility programs

within Credit Agricole Group.

COMPENSATION POLICY

The general principles of remu-

neration management are set out

in the Compensation Policy of

Credit Agricole Bank. The Policy is

approved by Credit Agricole Group

and meets the European standards.

The level of salary of employees is

established according to the posi-

tion, qualification and complexity

of the job. The bank refers to labor

market indicators to define the level

of remuneration for the staff. In par-

ticular, an overview of salaries in the

Ukrainian banking sector was made

together with EY and KornFerry in

2018. For Credit Agricole Bank, the

target level of salary shall not be

lower than the market midpoint.

Salaries are revised on an annual ba-

sis. The annual revision approach is

based on the level of inflation, bud-

get indicators and market forecasts.

In 2018, the revision was made in

April, and the increase was 11 %.

To raise the staff’s motivation, bo-

nuses are paid on an annual, quar-

terly or monthly basis depending on

the position and organizational unit.

The conditions of bonus payment

are set out in the respective internal

regulations that are updated on a

regular basis to expand the range of

staff incentives.

PROFESSIONAL DEVELOPMENT

Credit Agricole Bank provides op-

portunities for professional and

personal development for its em-

ployees by ensuring access to a

comprehensive educational envi-

ronment that consists of:

Internal training programs. Inter-

nal training includes more than

15 programs for the development of

key competencies and profession-

al skills of the staff. In 2018, about

130 internal training sessions were or-

ganized for almost 2,530 participants.

E-learning courses. Employees

can learn the standards, internal

rules and procedures of the bank

through distant electronic cours-

es. Useful skills and professional

expertise training and courses are

also available for the staff in the

e-learning format. The total number

of electronic courses participants is

20,000 per year.

Internal workshops and conferences.

Such events involve the experts of

Credit Agricole Bank and Credit Ag-

ricole Group and provide new knowl-

edge and practical experience in an

easy and interactive format.

External educational programs and

events. The bank encourages its em-

ployees to develop their field-specific

skills and knowledge, and thus gives

them the opportunity to attend exter-

nal training events at the expense of

the bank. As a result, 260 employees

took part in 150 external events.

SOCIAL SECURITY

Credit Agricole Bank cares about

the health of its employees and their

families: in 2018, over 2,800 em-

ployees of the bank and their family

members were covered by health

insurance programs free of charge

all over Ukraine.

The bank covers 100 % of the health

insurance policy cost for employees

and for children of employees who

have the confirmed status of single

parents, for employees’ children un-

der custody and for children from

multi-child families.

There is also a life and critical dis-

ease insurance program that covers

the risks of critical diseases, disabil-

ity and fatality for whatever reason

for all employees and their children.

The program is developed in ac-

cordance with the norms of Credit

Agricole Group and in compliance

with the European standards, and

is effective since an employee’s first

working day at the bank.

The share of expenses for social

programs for the staff amounted to

3.6 % in the total staff costs in 2018,

which according to non-public re-

search is one of the highest indica-

tors in the Ukrainian banking sector.

Social security for the staff is guar-

anteed by the Collective Agreement

in Credit Agricole Bank. Its perfor-

mance is monitored at the level of

staff representatives and Adminis-

tration of the bank.


CARING ABOUT STAFF

Credit Agricole Bank values its em-

ployees and makes all efforts to

make each of them feel that they are

cared for, supported by the team

and contribute to the future. This is

confirmed by a number of personnel

oriented programs implemented by

the bank in 2018.

Maintaining the image of a socially

responsible employer, the bank co-

operates with universities in various

areas.

3 projects involving students and

graduates were implemented in 2018:

CASERS. Digital case solution com-

petition for university students with

more than 200 participants from

all over Ukraine, 25 selected case

solutions. 11 shortlisted teams (17

participants) presented their solu-

tions, and 3 winning teams (4 par-

ticipants) were determined. Two

students-winners were employed.

Code of Cooperation Rules is a

set of internal cooperation rules for

compliance with six key corporate

values on a daily, weekly and month-

ly basis. The Code was supplement-

ed with the rules of email exchange,

conducting meetings and business

courtesy. The purpose of the rules

is to make cooperation within the

company more effective, simpler

and nicer. They were formulated by

working groups from different units

of the bank with the support and as-

sistance of the management.

In 2018, a set of cooperation rules

was developed for each corporate

value (printed booklet Code of Co-

operation).

Together With a Colleague. This

project allows the employees to get

an insight into the work of their col-

leagues from other organizational

units, obtain new knowledge and

meet interesting people. It also en-

courages them to adopt effective

business practices and to make

their personal contribution to resolv-

ing work issues and improving com-

mon processes. Result: 69 visits,

33 organizational units. The pro-

gram will be continued in 2019.

Together With Branch. The project

allows employees to plunge into the

life of a bank branch, work shoulder

to shoulder with managers, learn

special aspects of banking prod-

ucts sale, and to personally take

part in the process of customer ser-

vice. Head Office employees spend

several days in a branch working

together with their colleagues from

the network. This is the way to see

the real work with customers, feel

all the processes and better under-

stand the needs of clients and col-

leagues.

Results: 100 % participation of

HO employees (according to the

project concept), 22 HO repre-

sentatives, more than 100 recom-

mendations, 30 of which will be

implemented in 2019.

Make It Smart. Competition of inno-

vative ideas for bank employees. The

core idea is to engage as many em-

ployees as possible in the process

of changes and innovations through

encouraging idea generation for the

improvement of the bank’s work.

New ideas will help the bank be-

come more modern and dynamic.

Result: 190 ideas, 67 employees,

2 winning ideas. 59 ideas were

shortlisted for introducing innova-

tions into business processes and

improvement of the atmosphere and

working conditions in the bank.

Shared Missions and Values. The

project is aimed at raising aware-

ness of and developing missions

by each organizational unit. The

project will help the employees

know and understand the missions

of their units, refer to them in their

daily work, understand the position

of the unit in the company, and the

unique contribution of each unit to

the general strategy of the bank. In

the course of workshops, 38 mis-

sion statements were made by the

organizational units of the bank, and

an information campaign was devel-

oped and scheduled.

Collaboration Survey. A survey

aimed to evaluate the level of inter-

action between the units of the bank

in terms of compliance with corpo-

rate values: customer orientation,

professional competence, sustain-

able responsibility. The methodolo-

gy and the toolkit were developed in

2018, and the survey will be carried

out in early 2019.

Let’s Start Here two-month trainee

program for 3–5 year students of

economic and financial departments

of Kyiv universities. The program

lets them obtain basic knowledge of

banking products and services, sale

and customer service skills, and get

soft skills of effective communica-

tion and negotiations.

Results of 2018: pilot program

launched, 4 students employed.

Standing undergraduate program

for 4–5 year students. Over 2018,

the bank hosted 72 students from

23 universities.

As part of staff search and selection,

the bank takes an active part in job

fairs and uses social networks, such

as its corporate page on Facebook.

KEY PROJECTS

CODE OF COOPERATION

(2016–2018)

2016 saw the beginning of a new

stage of the bank’s HR strategy

reflected in the motto “Everything

starts here!” The strategy was sup-

ported by the development of new

corporate values: customer orienta-

tion, team spirit, professional com-

petence, dynamism, and ethical and

long-term responsibility. To animate

these values and make them a part

of daily lives of our employees, the

HR team together with the Man-

agement Board Members and rep-

resentatives of all head Office and

Network business lines developed

the Code of Cooperation.

Code of Cooperation is a compre-

hensive program for the support of

corporate values implementation in

daily work through certain rules and

projects.

Idea and concept: setting certain

benchmarks (rules) of behavior and

encouraging and involving employ-

ees to implement values in daily ac-

tivities. The objective is to support

corporate values implementation in

daily work by establishing certain

rules and implementing projects.

Two concurrent vectors were im-

plemented as part of program

realization: development and com-

munication of cooperation rules,

and implementation of five unique

projects to support specific corpo-

rate values.



CORPORATESOCIALRESPONSIBILITY

GREEN INITIATIVES

Credit Agricole Bank donated

12,000 pine seedlings to the Holo-

siivskyi National Park. The initiative

was dedicated to the global Earth

Hour campaign. More than 15 bank

employees accompanied by their

families planted several hundred of

pine seedlings, and the rest of the

seedlings were planted by the em-

ployees of the Holosiivskyi NNP in

the problem areas of the park. The

April tree planting was the first wave

of the bank’s traditional Trees for

Car Loans initiative.

The second initiative under the Trees

for Car Loans project was held in

the Pozniaky park in Kyiv. A team

of Credit Agricole Bank employees

planted 50 hawthorns, mountain

ashes, pea shrubs, larches and ap-

ple trees. Aware of its responsibility

for the growing number of cars on

the Ukrainian roads, Credit Agricole

seeks to contribute to the protec-

tion of the environment. The bank

continuously expands the scope of

the green initiatives and increases

the number of planted areas in the

Before the New Year, the team

of Credit Agricole Bank raised

70 k UAH for M. Amosov National

Institute of Cardiovascular Surgery.

The money was used to purchase

Custodiol medicament used for

heart surgery. This medicine makes

it possible to preserve a heart for

2 hours during hypothermic storage.

The project was delivered with the

support of the Tvoya Opora chari-

ty fund, a consistent partner of the

bank’s charitable initiatives.

11 Donor’s Days. During 2018, the

bank has held 11 traditional month-

ly Donor’s Days. Over this period,

more than 70 employees visited the

Pediatric Cardiology and Cardiac

Surgery Center and donated blood

for its little patients who regularly re-

quire blood components.

Insurance for Charity. A charity ini-

tiative that was held at the bank in

July and August. Thanks to the pur-

chased insurance policies, the bank

transferred 300 k UAH to buy medi-

cal equipment, namely 5 blood pres-

sure sensors and 85 consumable

items, for the Pediatric Cardiology

and Cardiac Surgery Center (Kyiv)

last September. This equipment is

necessary for the effective treatment

of young patients of the Center.

Credit Agricole supports Ukrainian

healthcare and contributes to its de-

velopment and improvement. The

project is implemented with the as-

sistance of Tvoya Opora.

Another incredibly important project

implemented in 2018 was the recon-

struction of the children’s swimming

pool of the Sportium sports center

in Mykolaiv Region at the expense of

the bank. The opening of the swim-

ming pool was devoted to the Chil-

dren’s Day and the beginning of the

summer season. From June 2 to 4,

CHARITY

Credit Agricole Bank donated three

complete monitor sets for the Cen-

ter for Pediatric Cardiology and Car-

diac Surgery, which needed them

to provide quality treatment of chil-

dren’s hearts. These high-quality

devices allow monitoring the heart

rate, blood oxygen levels, blood

pressure, mechanics, respiratory

rate, body temperature, and many

other important indicators.

Employees of Credit Agricole Bank

also purchased medical equipment

for the M. Amosov National Institute

of Cardiovascular Surgery. During

the corporate cycle race on June 16,

the bank staff raised 35 k UAH,

which was used for the purchase

of a fetal monitor necessary for pre-

natal care as it enables monitoring

the cardiac contractions of the fetus

and mother, blood pressure, and

blood saturation. It was transferred

to the institute on July 3.

CREDIT AGRICOLE BANK CONTINUES DOING GOOD DEEDS AS PART OF THE CORPORATE SOCIAL RESPONSIBILITY PRO-GRAM WE CARE! BY IDENTIFYING NEW AREAS OF CHARITY AND EXPANDING THE SCOPE OF EXISTING PROJECTS. IN 2018, THE BANK DOUBLED THE BUDGET FOR SOCIAL PRO- JECTS AND INCREASED THE EMPLOYEES’ INVOLVEMENT IN THE INITIATIVES, THUS RAISING 100 K UAH FOR CHARITY.

capital. The event was arranged and

held through the active assistance

of Kyivzelenbud Utility Company

and personnel of Municipal Green

Planting Enterprise of the Darnytskyi

District of Kyiv.

The bank joined the Clean My City

Challenge, a clean-up initiative tar-

geting streets and parks of our city.

25 bank employees together with

their families took part in the initia-

tive and cleaned the Dorohozhychi

Park in Kyiv.


CARING ABOUT EMPLOYEES

On April 22, the team of Credit Agri-

cole Bank covered the individual, re-

lay and charity distances of the 8th

Nova Poshta Kyiv Half Marathon.

This time, the bank was represent-

ed by about 130 employees, which

is twice as much as last year. The

scale of our intentions was appreci-

ated by the organizers of the mar-

athon, and the bank got an award

in the Largest Corporate Team cate-

gory at the grand closing event.

The sixth traditional corporate cycle

race of Credit Agricole Bank start-

ed in 2018 in seven cities: Kyiv, Lviv,

Dnipro, Kharkiv, Poltava, Vinnytsia,

and Odessa. The main objective

is to promote environmentally sus-

tainable transport. Driving down the

main streets of the largest Ukrainian

cities, the employees of the bank in-

spire people to follow their example.

Sporting and team spirit joined to-

gether in the traditional summer

football tournament. It is a good tra-

dition and a large-scale event aimed

at enhancing corporate culture,

mutual support between the em-

ployees, and promotion of a healthy

lifestyle. This year’s tournament was

held in two phases and hosted in

two cities, gathering 700 employees

of the bank from all over Ukraine.

an All-Ukrainian open swimming

competition took place at Spor-

tium, and the renovated swimming

pool was tested by little sportsmen

for the first time. Galyna Nechaie-

va, HR Director, represented

Credit Agricole Bank at the event and

gave the well-deserved rewards to

the winners of various age categories.

On July 11, a renovated football

ground was opened at 142 Trakto-

robudivnykiv St. in Kharkiv. The field

was restored jointly by Credit Agricole

Bank and Mastercard under the Pass

the ball all-Ukrainian social initiative.

The field has an area of 924 m2 and

is open to everyone. During the re-

construction work, the foundation of

the field was replaced, artificial grass

was put on the field, and new fences

were installed as well as the sports

equipment that meets the interna-

tional requirements to minifootball.

On October 7, a team of

Credit Agricole Bank employees

joined a large-scale running event,

the 9th Wizz Air Kyiv City Marathon.

The anniversary Fundraising mar-

athon was held to raise funds to

support the projects of 15 charita-

ble foundations on the platform of

Ukrainian philanthropic marketplace

and the Tabletochki fund. The mar-

athon was attended by 90 of our

employees, among which 18 are

fundraisers.

Credit Agricole supported the Char-

ity Weekend. Healthy Day charity

festival as a partner, and donated

50 k UAH. The purpose of the event

was to raise funds for the purchase

of an innovative X-ray machine re-

quired by the Institute of Pediat-

rics, Obstetrics and Gynecology

of Ukraine. The equipment costs

approximately 4 mn UAH. Thanks

to the X-ray machine, thousands of

newborns can be diagnosed faster

and more accurately. This equip-

ment is a chance to save little lives.

The bank is taking care of children’s

homes for the 2nd year in a row. In

2017, it launched a large-scale ini-

tiative called Supporting Children’s

Homes and took six orphanages

from different regions of Ukraine

under its wing. In 2018, the bank

expanded the scope of the initia-

tive and included Luhansk Oblast

Children’s Home No. 2. There are

seven institutions under the bank’s

wing today.

11«DONOR’S DAYS»

DURING THE YEAR

5GREEN

INITIATIVES

8PROJECTS

FOR EMPLOYEES

12CHARITY PROJECTS

TWOFOLD INCREASEOF CHARITABLE

INITIATIVE BUDGET

OVER UAH

100,000EMPLOYEES DONATIONS

FOR CHARITY

12,000PINE SEEDLINGS AND

50TREES

WERE PLANTEDWITHIN THE «TREE FORCAR LOAN» CAMPAIGN

7ORPHANAGES

UNDER THE WINGOF CREDIT

AGRICOLE BANK

OVER

75EMPLOYEES DONATED

BLOOD WITHINTHE «DONOR’S DAY»

PROJECT



1) REFERENCE TO THE CORPORATE GOVERNANCE CODE

STATEMENTOF CORPORATEGOVERNANCE

The bank has implemented the sys-

tem of corporate governance and

approved the internal document

governing this area of the bank’s ac-

tivity, namely Corporate Governance

Principles (Code) of JSC Credit

Agricole Bank adopted by Resolu-

tion of the Shareholder No. 5 dated

December 4, 2018. The document is

available online at https://credit-agri-

cole.ua/o-banke/dokumenti-ta-zviti.

The Corporate Governance practice

is carried out in strict compliance

with the regulatory requirements.

2) DEVIATIONS FROM/NON-APPLICATION OF THE PROVISIONS

OF THE CORPORATE GOVERNANCE CODE

In its activity, the bank does not de-

viate from and fully complies with all

provisions of the internal Corporate

3) INFORMATION ON GENERAL SHAREHOLDERS’ (PARTICIPANTS’) MEETING

Type of General Meeting ordinary extraordinary

Х

Date of the meeting 30.04.2018

Quorum of the meeting 99.9961 %

Description 1. Consideration and approval of statements and annual performance of the bank for 2017. 2. Decisions on the approval and distribution of profit and loss of the bank for 2017. 3. Decisions on the amendments to the number of Supervisory Board members of the bank. 4. Decisions on the approval of regulatory documents of the bank, etc.


Х



Description 1. Decisions on the allocation of a part of the retained earnings of the bank for 2017. 2. Decisions on the approval of regulatory documents of the bank.


Х



Description 1. Decisions on endorsement of resolutions of the Supervisory Board and confirmation of powers of Supervisory Board members.


Х



Description 1. Decisions on the amendments to the number of Supervisory Board members of the bank. 2. Decisions on the approval of the terms of civil contracts entered into with the Supervisory Board members of the bank.


Х



Description 1. Decisions on the change of the type of the Joint-Stock Company. 2. Decisions on the change of the name of the Joint-Stock Company. 3. Decisions on the amendments of regulatory documents of the bank. 4. Decisions on the approval of regulatory documents of the bank, etc.

Governance Principles (Code) of

JSC Credit Agricole Bank.


Yes No

Reorganization Х

Additional share issue Х

Amendments to the Charter Х

Decision on increase the share capital of the company Х

Decision on decrease the share capital of the company Х

Election or termination of powers of the Chairman and members of the Supervisory Board Х

Election or termination of powers of the executive body members Х

Election or termination of powers of Revision Commission members (Inspector) Х

Delegation of additional powers to the Supervisory Board Х

Other (specify) –

Information on the General Shareholders’ Meeting held in the form of absentee vote in the reporting year – no.

Information on calling the extraordinary General Meeting and its initiators:

Yes No

Supervisory Board Х

Executive body Х

Revision commission (Inspector) Х

Shareholder(s) that at the day of demand submission hold(s) in total 10 and more per cent of ordinary shares of the company Х

Other (specify) –

Information on calling but not holding ordinary General Meeting – not applicable.

Information on calling but not holding extraordinary General Meeting – not applicable.

Yes No

National Commission for Securities and Stock Market Х

Shareholders owning in total more than 10 per cent Х

The issues submitted for consideration by the General Meeting or the Share-

holder were approved unanimously. The issues of the agenda were consid-

ered by the General Meeting upon the presentation of the Chairman of the

Supervisory Board and/or Corporate Secretary.

Information on the authority that registered shareholders for participation in

the latest General Shareholders’ Meeting

Information on the main reasons for calling the latest extraordinary meeting

Yes No

Registration Commission appointed by the person who called the General Meeting Х

Shareholders Х

Depositary institution Х

Other (specify) Most recently, issues in the scope of the General Meeting were considered in the form of sole shareholder’s decision (according to art. 49 of the Law of Ukraine «On Joint-Stock Companies», decisions of the shareholder have the status of the General Meeting minutes).

Information on the authority that exercised control (if any) over the status

of shareholders’ or their representatives’ registration for participation in the

latest General Meeting

Information on the way of voting on the issues of the agenda at the latest

General Meeting

Yes No

By raising cards Х

By ballots (ballot voting) Х

By raising hands Х

Other (specify) Most recently, issues in the scope of the General Meeting were considered in the form of sole shareholder’s decision (according to art. 49 of the Law of Ukraine «On Joint-Stock Companies», decisions of the shareholder have the status of the General Meeting minutes).


Composition of the Supervisory Board as of December 31, 2018

Full name Position Independent Member

Yes No

Ribes Stanislas Gerard Marie Georges Chairman of the Supervisory Board Х

Marchand Gerard Marcel Lucien Member of the Supervisory Board Х

Hepp Karl Marcus Sitticus Louis Member of the Supervisory Board Х

Feofilov Sergii Leonidovych Member of the Supervisory Board Х

Pavelko Volodymyr Anatoliiovych Member of the Supervisory Board Х

Schonherr Frank Member of the Supervisory Board Х

Brillaud (en.Maire) Veronique Francoise Member of the Supervisory Board Х

Bennet Laurent Pierre Henri Member of the Supervisory Board Х

Composition of the Supervisory Board before December 3, 2018

Full name Position Independent Member

Yes No

Pinchon Francois Alfred Marie Chairman of the Supervisory Board Х

Guidez Philippe Etienne Henry Member of the Supervisory Board Х

Marchand Gerard Marcel Lucien Member of the Supervisory Board Х

Leonnard Philippe Alain Member of the Supervisory Board Х

Bennet Laurent Pierre Henri Member of the Supervisory Board Х

4) INFORMATION ON THE SUPERVISORY BOARD

AND EXECUTIVE BODY OF THE ISSUER

Composition of the Supervisory Board on December 31, 2018

Number of persons

Supervisory Board members – shareholders 0

Supervisory Board members – shareholders’ representatives 5

Supervisory Board members – independent directors 3

Committees of the Supervisory Board (if available)

Yes No

For audit Х

For nomination Х

For remuneration Х

Other (specify) –

Board was evaluated based on the

outcome of responses of the Super-

visory Board members.

Each independent member of the

Supervisory Board meets the re-

quirements for independent mem-

bers of the Supervisory Board set by

the effective legislation of Ukraine.

Information on assessment of

work of the committees (the in-

formation on their competence

and performance should be

specified, as well as the informa-

tion on the number of meetings

of particular committees of the

Supervisory Board): the Remu-

neration Committee operates as a

standing committee of the Supervi-

sory Board of the bank. It ensures

that compensation practices and

motivation programs are in line with

the strategy of the bank and create

value for the bank, allowing it to en-

gage and attract the best qualified

professionals and to ensure the pro-

motion of smart and effective risk

management. In 2018, there were

9 meetings of the Remuneration

Committee. As of December 31,

2018, the Remuneration Commit-

tee of the bank consisted of three

members – Ribes Stanislas Gerard

Marie Georges, Bennet Laurent

Pierre Henri, Schonherr Frank –

and the secretary Nechaieva Ga-

lyna Mykhailivna. Until October 3,

2018, the Remuneration Commit-

tee included Pinchon Francois Al-

fred Marie, Bennet Laurent Pierre

Henri, Leonnard Philippe Alain, and

the secretary Nechaieva Galyna

Mykhailivna. Over the reporting pe-

riod, decisions were taken on issues

of bonus payment to the members

of the executive body and Internal

Audit employees.

The Supervisory Board of the bank

carries out its activities in accor-

dance with the effective legislation of

Ukraine, Charter of the bank and the

Bylaws on the Supervisory Board.

The decisions of the Supervisory

Board shall be taken by a majority

of votes of the Supervisory Board

members present at the meetings

and having the right to vote. One

member of the Supervisory Board

shall have one vote. If the votes are

equally divided, the Chairman of the

Supervisory Board shall give the

casting vote. The decisions of the

Supervisory Board may be taken by

polling (absentee voting), according

to the procedure stipulated by the

Bylaws on the Supervisory Board.

In 2018, the members of the Super-

visory Board exercised their duties

by devoting enough time and at-

tention to their work notwithstand-

ing their participation in other legal

entities and other activities. The

performance of the Supervisory

Major goals achieved by the Super-

visory Board of the bank in 2018

were control over the financial and

economic performance of the bank

and the bank’s compliance with the

legal requirements and its internal

documents of the bank in process

of conducting financial and eco-

nomic activity. At year-end 2018, net

profit of the bank amounted to UAH

1,462,649 thousand versus UAH

1,109,501 thousand of net profit re-

ceived in 2017, which proves the ef-

ficiency of the strategy and reliable

performance of the bank’s govern-

ing and control bodies in a complex

environment.


Information on determination of the Supervisory Board members’ remuneration

Yes No

Remuneration is a fixed amount Х

Remuneration is the percentage of the net profit or increase in the market value of shares Х

Remuneration is paid in the form of the company’s securities Х

Supervisory Board members get no remuneration Х

Other (specify) Only Independent Supervisory Board members get remuneration

Information on the requirements to the Supervisory Board members and the

internal documents where such requirements are specified

Yes No

Industry knowledge and job experience in the industry Х

Knowledge of finance and management Х

Personal qualities (integrity, responsibility) Х

No conflict of interests Х

Min/max age Х

No requirements Х

Other (specify) –

Information on the way of familiarization of newly elected Supervisory Board

members with their rights and responsibilities

Yes No

New Supervisory Board member studied internal documents of the Joint-Stock Company on his/her own Х

There was a meeting of the Supervisory Board where the new member was informed on his/her rights and responsibilities Х

A special training was organized for the new Supervisory Board member (on corporate governance or financial management) Х

All Supervisory Board members were reelected or no new members were elected Х

Other (specify) –

General description of the decisions made by the Supervisory Board

Over 2018, the Supervisory Board

held 16 meetings where issues in

the scope of the Supervisory Board

were considered. Inter alia, these is-

sues concerned:

changes in the composition of

the Management Board of the

bank, approval of the number of

Management Board members;

assessment of performance

of the bank’s strategy and ap-

proval of amendments thereto;

changes in the organizatio-

nal chart of the bank;

consideration and approval

of the statements and per-

formance of the bank and

its separate units;

definition of the date of listing

persons entitled to dividends

within the maximum term

set out by the effective law;

approval of the Remunera-

tion Committee of the bank;

approval of new internal

documents and amend-

ments to the existing ones,

including in terms of risk

management, etc.

Information on the executive body of December 31, 2018

The bank’s collegial executive body

is the Management Board, which

manages the current activity of the

bank and is responsible for its per-

formance in line with the principles

and procedure stipulated by the

Charter of the bank, decisions of the

General Shareholders’ Meeting, and

the Supervisory Board of the bank.

In the course of 2018, the Manage-

ment Board adopted 56 decisions

on issues that fall within its compe-

tence as determined by the Charter

of the bank and the Bylaws on the

Management Board. The issues

concerned the current activities of

the bank.

Composition of the executive body Functional duties

Piotrowski Jean-Paul Chairman of the Management Board

Bondarieva Larysa Valeriivna Deputy Chairman of the Management Board in charge of Corporate and Capital Markets

Zhukova Galyna Valentynivna Deputy Chairman of the Management Board in charge of Retail and Network

Pallard Jean-Pierre Deputy Chairman of the Management Board in charge of Operations

Ferm Hans Management Board Member, Chief Risk Officer

Koller Hunther Management Board Member, Chief Compliance Officer

Sopranzi Giorgio* Management Board Member, Chief Financial Officer

Fallick Stephane* Management Board Member, Head of Development and Innovations

Description Over 2018, the Management Board made 56 decisions on the issues in its scope as defined by the Charter of the bank and the Bylaws on the Management Board. The issues concerned current operations of the bank.

* Decision on the appointment was made on December 28, 2018, assumed office upon obtaining the employment permit (January 9, 2019).


Over 2018, Lefevre Regis Christian

Maurice and Ganah Vadym were re-

moved from the Management Board

of the bank; the decision №13. on

the appointment of three Deputy

Chairmen of the Management Board

from among the above persons was

made on October 11, 2018.

The Chairman of the Management

Board exercises the function of the

head of the collegial executive body

of the bank and manages its activ-

ities. The Management Board con-

sists of the following positions: the

Chairman of the Management Board

and Members of the Management

Board (including Deputy Chairman

of the Management Board if the lat-

ter is appointed by the Supervisory

Board). Members of the Supervisory

Board or the Revision Commission

may not be appointed Members

of the Management Board. The

rights, duties and responsibility of

the Chairman and members of the

Management Board are determined

by the provisions of the law, Charter,

Bylaws on the Management Board

and also by civil contracts, labor

agreements (contracts) concluded

with each of them.

At the end of 2018, the bank’s net pro-

fit amounted to UAH 1,462,649 thou-

sand vs. UAH 1,109,501 thousand

in 2017, which proves the efficiency

of the strategy and reliable perfor-

mance of the bank’s management

and control bodies in a complex en-

vironment.

5) KEY CHARACTERISTICS OF INTERNAL CONTROL

AND ISSUER RISK MANAGEMENT SYSTEMS

Information on the establishment of the revision Commission or introduction

of Inspector position:

Yes, the Revision Commission was established, the number of its members

is 3 persons and it met on average 4 times per year over the last three years.

Information on the responsibilities of management bodies

General Supervisory Executive Not Shareholders’ Board Body in the scope Meeting of any body

Definition of the key activity areas (strategy) Yes No No No

Approval of action plans (business plans) No No Yes No

Approval of annual financial statements, or balance sheet, or budget Yes Yes No No

Election and termination of powers of the Chairman and members of Executive Body No Yes No No

Election and termination of powers of the Chairman and members of Supervisory Board Yes No No No

Election and termination of powers of the Chairman and members of the Revision Commission Yes No No No

Definition of the amount of remuneration for the Chairman and members of the Executive Body No Yes No No

Definition of the amount of remuneration for the Chairman and members of the Supervisory Board Yes No No No

Decision on imposing liability on the members of the Executive Body No Yes No No

Decision on additional share issue Yes No No No

Decision on buying back, selling and placing of own shares Yes No No No

Approval of external auditor No Yes No No

Approval of agreements involving a conflict of interests No Yes No No

Information on the existence of

a clause that limits the Executive

Body’s powers to make decisions on

entering into agreements, given their

amount, on behalf of the Joint-Stock

Company in the Charter: YES.

Information on the existence of a

clause on the conflict of interests,

i.e. a controversy between personal

interests of an officer or their relat-

ed parties and the obligation to act

in the interests of the Joint-Stock

Company, in the Charter or internal

documents of the Joint-Stock Com-

pany: YES.


Information on average frequency of audits carried out by an independent auditor over the reporting period

Yes No

Never Х

Less than once a year Х

Once a year Х

More than once a year Х

Information on the authority that made the decision on the approval of an independent auditor

Yes No

General Shareholders’ Meeting Х

Supervisory Board Х

Executive Body Х

Other (specify) –

Information on the initiator of the latest inspection by the Revision Commission

Yes No

Own initiative Х

Upon instruction of the General Meeting Х

Upon instruction of Supervisory Board Х

Upon request of the executive body Х

Upon demand of shareholders owning in total more than 10 per cent of votes Х

Other (specify) –

Information on documents available in the bank

Yes No

Bylaws on the General Shareholders’ Meeting Х

Bylaws on the Supervisory Board Х

Bylaws on the Executive Body Х

Bylaws on the Officers of Joint-Stock Company Х

Bylaws on the Revision Commission (or Inspector) Х

Bylaws on the Shares of Joint-Stock Company Х

Bylaws on the Profit Distribution Procedure Х

Other (specify) –

Information on the ways of shareholders’ access to information on the bank’s activities

Information Information Information is disclosed Documents Copies Informationon the activities is communicated in the public database of are provided of documents is posted onof the Joint-Stock at General the National Commission for directly in are available the web pageCompany Meetings Securities and Stock Market the Joint-Stock upon request of the Joint- on the market of securities Company of shareholder Stock or through a person in charge Company of disclosing settled information on behalf of stock market participants

Financialstatements, P&L Yes Yes Yes Yes Yes

Informationon shareholdersowning 10 andmore percentof the share capital Yes Yes Yes Yes Yes

Information onthe compositionof managementbodiesof the company Yes Yes Yes Yes Yes

Charterand internaldocuments Yes No Yes Yes Yes

Minutesof the GeneralShareholders’Meetings upontheir holding Yes No Yes Yes No

Amountof remunerationfor officersof the Joint-StockCompany Yes No Yes Yes No

Information on preparing financial statements under International Financial Reporting Standards: YES.


According to the Group’s standards,

the system of internal control of JSC

“Credit Agricole Bank” relies upon

three lines of defense: the first line

is operational business lines, the

second line is risk management and

compliance business lines, and the

third line is audit.

A permanent control system is rolled

out in the Credit Agricole Bank to

organize the second line of defense

and to keep the first one under

observation. The permanent con-

trol system covers the main bank

activities such as credit activity,

operational activity, financial risk,

accounting transactions, operational

risks, compliance, information secu-

rity and business continuity, physical

security, OES activity, recovery pro-

cesses, etc.

In the case of negative control re-

sults, an action plan is launched in

order to correct the deviations and

improve process controls.

Like Credit Agricole Group, Credit

Agricole Bank’s anti-corruption

system is ISO 37001 certified by

an independent external company.

This highlights the Group’s and the

bank’s determination and the quali-

ty of its program for preventing cor-

ruption (identification and analysis of

corruption risks, and mitigation mea-

sures to reduce them).

The risk management system of

Credit Agricole Bank is character-

ized by the bank’s medium-term

development strategy. Together with

the bank’s budget, its risk manage-

ment policy is structured to align with

the Strategy. In line with the Strategy,

the Risk Appetite Statement sets the

level and types of risks that the bank

is willing to accept or avoid in order to

achieve its business objectives. It in-

cludes qualitative statements as well

as quantitative measures expressed

relative to capital, risk measures, li-

quidity and other relevant measures

as appropriate. The Risk Appetite

Statement covers the whole scope

of risk types, such as credit, liquidity,

market, operational and compliance

risks, and sets out the key risk indi-

cators (with an essential impact on

the bank’s activity) and other limits

and thresholds (minor impact). The

Risk Appetite Statement is reviewed

and approved once a year (or more

frequently if there are any changes)

and is subject to the Supervisory

Board’s approval.

The Risk Strategy sets out the ap-

proved CRG (Group Risk Com-

mittee) limits, caps, operational

limits and other constraints set up by

CRG, based on the CRG presenta-

tion made by the CA-Ukraine Lines

of Business and ALM/Treasury, in an

operational context. It also describes

an overview of the risk management

& monitoring mechanism, dele-

gations as well as the current risk

profile of credit portfolios of Credit

Agricole Bank.

The high-level principles of risk man-

agement are implemented through

bylaws, procedures, instructions

and other internal methodology in

reference to the risk type.

6) LIST OF PERSONS WHO HAVE A SUBSTANTIAL HOLDING OF ISSUER’S SHARES,

WHETHER DIRECTLY OR INDIRECTLY

No. Full name of a legal entity, Identification number according to the Unified Amount or surname, name State Register of Legal Entities, Individual of shareholder’s and patronymic (if any) Entrepreneurs and Public Organizations (owner’s) share of an individual that is (are) (for resident legal entities), registration (percentage the owner (owners) code/number with trade, banking or court to the authorized of a substantial shareholding register, legal entity registration certificate capital ratio) of a foreign local authority (for non-resident legal entities)

1 CREDIT AGRICOLE S.A. (France), Nanterre Commerce and Companies Registry 100 % Place des Etats-Unis, 12, registration number: 784608416 Montrouge Сedex, France, 92127

7) INFORMATION ON ANY RESTRICTIONS OF PARTICIPATION OR VOTING RIGHTS

OF SHAREHOLDERS (PARTICIPANTS) IN THE ISSUER’S GENERAL MEETING

Total number of shares Number Grounds for Date of restriction of restricted shares restriction origination

– – – –

Information on the restriction of participation or voting rights of shareholders (participants) in the issuer’s General

Meeting: not applicable.

8) PROCEDURE FOR APPOINTMENT AND DISMISSAL OF ISSUER OFFICERS.

INFORMATION ON ANY REMUNERATIONS OR COMPENSATIONS DUE TO ISSUER

OFFICERS IN CASE OF THEIR DISMISSAL:

The procedure for appointment, dis-

missal, remunerations or compen-

sations to the officers of collegial

management and control bodies of

banks is implemented in compliance

with the requirements of the law of

Ukraine “On Joint Stock Companies”,

the Law of Ukraine “On Banks and

Banking”, Charter of the bank and the

Bylaws on the Supervisory Board and

Management Board, contracts (if any).

The composition of the Supervisory

Board is determined by the Gen-

eral Shareholders’ Meeting. The

members of the Supervisory Board

are elected from among the bank’s

shareholders or their representatives

and/or independent members in the

number determined by the general

Shareholders’ Meeting, however, not

less than 5 (five) persons.

The members of the Management

Board of the bank are appointed

by the decision of the Supervisory

Board of the bank in the number of at

least 3 persons for a five-year term.

Other officers of the bank are ap-

pointed and dismissed by order of

the Chairman of the Management

Board.

9) AUTHORITY FOR ISSUER OFFICERS

The authorities for the officers of the issuer are determined by the Law of

Ukraine “On Joint Stock Companies” , the Law of Ukraine “On Banks and

Banking”, the Bank’s Charter, Bylaws on the Supervisory Board, Bylaws on

the Management Board and their job descriptions.